Glatfelter Reports Third Quarter 2020 Results
~ Airlaid Materials delivers another quarter of record profitability ~
CHARLOTTE, N.C., Nov. 09, 2020 (GLOBE NEWSWIRE) — Glatfelter Corporation (NYSE: GLT), a leading global supplier of engineered materials, today reported its results for the third quarter of 2020 which are summarized in the following table:
| Three months ended September 30 | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| In thousands, except per share | Amount | EPS | Amount | EPS | ||||||||||||
| Net income | $ | 6,527 | $ | 0.15 | $ | 12,224 | $ | 0.28 | ||||||||
| Income from continuing operations | 6,527 | 0.15 | 8,643 | 0.19 | ||||||||||||
| Adjusted earnings from continuing operations | 7,041 | 0.16 | 9,731 | 0.22 | ||||||||||||
On an adjusted basis, earnings from continuing operations for the three months ended September 30, 2020 and 2019, were $7.0 million, or $0.16 per share, compared with $9.7 million, or $0.22 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 for the three months ended September 30, 2020 totaled $233.5 million compared with $232.5 million during the same period in 2019. On a constant currency basis, Composite Fibers’ and Airlaid Materials’ net sales decreased by 0.5% and 6.4%, respectively.
“Glatfelter delivered another quarter of solid results as both segments continued to safely produce and deliver essential engineered materials while maintaining a focus on operational excellence and cost discipline,” said Dante C. Parrini, Chairman and Chief Executive Officer. “Airlaid Materials continued to build on its strong results from the second quarter, achieving another quarter of record profit. Sequential quarter growth in Airlaid shipments was driven by a rebound in tabletop and steady demand in feminine hygiene and home care products. Composite Fibers’ shipments were also better than expected, increasing sequentially by 21%, as wallcover demand that had fallen at the beginning of the pandemic began to recover and remained steady through the quarter. Although volume growth in wallcover improved overall shipments for Composite Fibers, operating profit was impacted due to manufacturing downtime to manage inventory levels and optimize cash flow.”
Mr. Parrini continued, “Our steady performance during these uncertain times is a testament to the resilience of our employees and the agility of our business model, which is emblematic of the New Glatfelter. We continue to maintain our vigilant efforts to keep Glatfelter PEOPLE safe and ensure the uninterrupted availability of our products despite the challenging market conditions and volatility caused by the COVID-19 pandemic. Looking ahead, we remain focused on operational excellence and continuing our positive momentum to finish the year strong.”
Third Quarter Results
The following table sets forth a reconciliation of results on a GAAP basis to an adjusted earnings basis, a non-GAAP measure:
| Three months ended September 30 | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| In thousands, except per share | Amount | EPS | Amount | EPS | ||||||||||||
| Net income | $ | 6,527 | $ | 0.15 | $ | 12,224 | $ | 0.28 | ||||||||
| Exclude: Income from discontinued operations, net of tax | — | — | (3,581 | ) | (0.09 | ) | ||||||||||
| Income from continuing operations | 6,527 | 0.15 | 8,643 | 0.19 | ||||||||||||
| Adjustments (pre-tax) | ||||||||||||||||
| Restructuring charge – Metallized operations | 57 | — | ||||||||||||||
| Cost optimization actions | 1,270 | 1,736 | ||||||||||||||
| Corporate headquarters relocation | 610 | — | ||||||||||||||
| Pension settlement expenses, net | 389 | — | ||||||||||||||
| COVID-19 incremental costs | 586 | — | ||||||||||||||
| Strategic initiatives | 843 | — | ||||||||||||||
| Timberland sales and related costs | (412 | ) | (233 | ) | ||||||||||||
| Total adjustments (pre-tax) | 3,343 | 1,503 | ||||||||||||||
| Income taxes (1) | (375 | ) | (415 | ) | ||||||||||||
| CARES Act of 2020 tax benefit (2) | (2,454 | ) | — | |||||||||||||
| Total after-tax adjustments | 514 | 0.01 | 1,088 | 0.02 | ||||||||||||
| Adjusted earnings from continuing operations | $ | 7,041 | $ | 0.16 | $ | 9,731 | $ | 0.22 | ||||||||
(1) Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated.
(2) Tax benefit recorded in connection with passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) related to provisions that modified the “net operating loss” provisions of previous law to allow certain losses to be carried back five years.
The sum of individual per share amounts set forth above may not agree to adjusted earnings per share due to rounding.
A description of each of the adjustments presented above is included later in this release.
Composite Fibers
| Three months ended September 30 | ||||||||||||||||
| Dollars in thousands | 2020 | 2019 | Change | |||||||||||||
| Tons shipped (metric) | 35,009 | 33,394 | 1,615 | 4.8 | % | |||||||||||
| Net sales | $ | 132,419 | $ | 127,704 | $ | 4,715 | 3.7 | % | ||||||||
| Operating income | 10,464 | 11,129 | (665 | ) | (6.0 | )% | ||||||||||
| Operating margin | 7.9 | % | 8.7 | % | ||||||||||||
Composite Fibers’ net sales increased $4.7 million or 3.7%, compared to the year-ago quarter driven by higher shipments in the wallcover, technical specialty, and food and beverage product categories and favorable currency translation of $5.3 million. These increases were partially offset by lower selling prices of $3.0 million as well as lower metallized shipments following our exit of the more commoditized parts of this business at our Gernsbach, Germany facility earlier this year.
Composite Fibers’ operating income of $10.5 million was $0.7 million lower, or approximately 6% unfavorable, compared to the third quarter of 2019. Higher shipping volumes in most product categories improved operating profit by $0.3 million. A benefit of $2.0 million from lower input prices, primarily wood pulp, was offset by a $3.0 million impact from lower selling prices. Improved operations and strong cost control actions were offset by machine downtime previously planned to manage inventory and reduce labor costs.
Airlaid Materials
| Three months ended September 30 | ||||||||||||||||
| Dollars in thousands | 2020 | 2019 | Change | |||||||||||||
| Tons shipped (metric) | 34,752 | 35,907 | (1,155 | ) | (3.2 | )% | ||||||||||
| Net sales | $ | 101,054 | $ | 104,811 | $ | (3,757 | ) | (3.6 | )% | |||||||
| Operating income | 12,917 | 11,595 | 1,322 | 11.4 | % | |||||||||||
| Operating margin | 12.8 | % | 11.1 | % | ||||||||||||
Airlaid Materials’ net sales decreased $3.8 million in the year-over-year comparison. Despite the 98% sequential quarter improvement in tabletop volumes, shipments overall for the segment were lower by 3.2% on a year-over-year basis due to continued softer demand for tabletop products as restaurants remained operating at dramatically limited capacity. This shortfall in demand was mostly offset by strong orders for home care, feminine hygiene and wipes products. Selling prices were $3.5 million lower due to contractual cost pass-through arrangements but mostly offset by favorable currency translation of $2.9 million.
Airlaid Materials’ third quarter 2020 operating income of $12.9 million was $1.3 million favorable, or approximately 11% higher, when compared to the third quarter of 2019. Improved sales mix favorably impacted results by $0.4 million, while price declines due to contractual raw material pass-through provisions outpaced lower raw material and energy prices, reducing operating profit by a net $0.4 million. Disciplined cost control, complemented by efficient operations, positively impacted results by $0.1 million, and a more favorable foreign exchange environment benefited results by $1.2 million.
Other Financial Information
The amount of “Other and Unallocated” operating expense in the table of Segment Financial Information totaled $9.4 million in the third 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 third quarter of 2020 decreased $0.5 million compared to the third quarter of 2019.
In the third quarter of 2020, income from continuing operations totaled $10.1 million and income tax expense totaled $3.6 million. On adjusted pre-tax income of $13.5 million, income tax expense was $6.4 million in the third quarter of 2020. The comparable amounts in the same quarter of 2019 were $13.3 million and $3.6 million, respectively. The effective tax rate on adjusted earnings was 48% in the third quarter of 2020.
Year-to-Date Results
The following table sets forth a reconciliation of results on a GAAP basis to an adjusted earnings basis, a non-GAAP measure:
| Nine months ended September 30 |
||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| In thousands, except per share | Amount | EPS | Amount | EPS | ||||||||||||
| Net income | $ | 11,517 | $ | 0.26 | $ | 23,341 | $ | 0.53 | ||||||||
| Exclude: (Income) loss from discontinued operations, net of tax | 135 | — | (3,802 | ) | (0.09 | ) | ||||||||||
| Income from continuing operations | 11,652 | 0.26 | 19,539 | 0.44 | ||||||||||||
| Adjustments (pre-tax) | ||||||||||||||||
| Restructuring charge – Metallized operations | 11,111 | — | ||||||||||||||
| Cost optimization actions | 4,367 | 7,643 | ||||||||||||||
| Corporate headquarters relocation | 610 | — | ||||||||||||||
| Pension settlement expenses, net | 6,792 | — | ||||||||||||||
| COVID-19 incremental costs | 1,766 | — | ||||||||||||||
| Asset impairment charge | 900 | — | ||||||||||||||
| Airlaid capacity expansion costs | — | 1,014 | ||||||||||||||
| Debt refinancing | — | 992 | ||||||||||||||
| Strategic initiatives | 843 | 249 | ||||||||||||||
| Fox River environmental matter | — | (2,509 | ) | |||||||||||||
| Timberland sales and related costs | (1,013 | ) | (1,114 | ) | ||||||||||||
| Total adjustments (pre-tax) | 25,376 | 6,275 | ||||||||||||||
| Income taxes (1) | (4,257 | ) | (348 | ) | ||||||||||||
| CARES Act of 2020 tax benefit (2) | (5,023 | ) | — | |||||||||||||
| Total after-tax adjustments | 16,096 | 0.36 | 5,927 | 0.13 | ||||||||||||
| Adjusted earnings from continuing operations | $ | 27,748 | $ | 0.62 | $ | 25,466 | $ | 0.57 | ||||||||
(1) Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated.
(2) Tax benefit recorded in connection with passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) related to provisions that modified the “net operating loss” provisions of previous law to allow certain losses to be carried back five years.
Balance Sheet and Other Information
Cash and cash equivalents totaled $59.2 million as of September 30, 2020, and net debt was $272.7 million compared with $233.7 million at the end of 2019. The increase in net debt primarily reflects the impact from foreign exchange and the funding of a 401(k) account to offset future company retirement contributions as part of the completion of the pension plan asset reversion. Net leverage on September 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 nine months of 2020 and 2019 totaled $20.2 million and $18.0 million, respectively. Adjusted free cash flow for the nine months of 2020 was $4.4 million compared with a use of $2.4 million in the prior year period. (Refer to the calculation of measure provided in the tables at the end of this release.)
Conference Call
As previously announced, the Company will hold a conference call today at 11:00 a.m. (Eastern) to discuss its third quarter results. The Company will make available on its Investor Relations website this quarter’s earnings release and an accompanying financial presentation which includes significant financial information to be discussed on the conference call including the Company’s outlook pertaining to financial performance. Information related to the conference call is as follows:
| What: | Glatfelter’s 3rd Quarter 2020 Earnings Release Conference Call |
| When: | Monday, November 9, 2020, 11:00 a.m. (ET) |
| Number: | US dial 888.335.5539 |
| International dial 973.582.2857 | |
| Conference ID: | 5797672 |
| Webcast: | https://www.glatfelter.com/investors/webcasts-and-presentations/ |
| Rebroadcast Dates: | November 9, 2020, 2:00 p.m. through November 23, 2020, 12:00 p.m. |
| Rebroadcast Number: | Within US dial 855.859.2056 |
| International dial 404.537.3406 | |
| Conference ID: | 5797672 |
Interested persons who wish to hear the live webcast should go to the website prior to the starting time to register and ensure any necessary audio software is installed.
Glatfelter Corporation and subsidiaries
Consolidated Statements of Income
(unaudited)
| Three months ended September 30 |
Nine months ended September 30 |
|||||||||||||||
| In thousands, except per share | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Net sales | $ | 233,473 | $ | 232,515 | $ | 681,216 | $ | 696,701 | ||||||||
| Costs of products sold | 195,222 | 194,494 | 574,100 | 585,563 | ||||||||||||
| Gross profit | 38,251 | 38,021 | 107,116 | 111,138 | ||||||||||||
| Selling, general and administrative expenses | 24,635 | 23,721 | 72,707 | 71,143 | ||||||||||||
| Gains on dispositions of plant, equipment and timberlands, net | (413 | ) | (235 | ) | (1,010 | ) | (1,327 | ) | ||||||||
| Operating income | 14,029 | 14,535 | 35,419 | 41,322 | ||||||||||||
| Non-operating income (expense) | ||||||||||||||||
| Interest expense | (1,810 | ) | (1,902 | ) | (5,347 | ) | (8,513 | ) | ||||||||
| Interest income | 39 | 185 | 390 | 931 | ||||||||||||
| Pension settlement expenses, net | (389 | ) | — | (6,792 | ) | — | ||||||||||
| Other, net | (1,728 | ) | (1,034 | ) | (3,243 | ) | (3,547 | ) | ||||||||
| Total non-operating expense | (3,888 | ) | (2,751 | ) | (14,992 | ) | (11,129 | ) | ||||||||
| Income from continuing operations before income taxes | 10,141 | 11,784 | 20,427 | 30,193 | ||||||||||||
| Income tax provision | 3,614 | 3,141 | 8,775 | 10,654 | ||||||||||||
| Income from continuing operations | 6,527 | 8,643 | 11,652 | 19,539 | ||||||||||||
| Discontinued operations: | ||||||||||||||||
| Income (loss) before income taxes | — | 1,062 | (135 | ) | 1,291 | |||||||||||
| Income tax provision (benefit) | — | (2,519 | ) | — | (2,511 | ) | ||||||||||
| Income (loss) from discontinued operations | — | 3,581 | (135 | ) | 3,802 | |||||||||||
| Net income | $ | 6,527 | $ | 12,224 | $ | 11,517 | $ | 23,341 | ||||||||
| Basic earnings per share | ||||||||||||||||
| Income from continuing operations | $ | 0.15 | $ | 0.19 | $ | 0.26 | $ | 0.44 | ||||||||
| Income from discontinued operations | — | 0.09 | — | 0.09 | ||||||||||||
| Basic earnings per share | $ | 0.15 | $ | 0.28 | $ | 0.26 | $ | 0.53 | ||||||||
| Diluted earnings per share | ||||||||||||||||
| Income from continuing operations | $ | 0.15 | $ | 0.19 | $ | 0.26 | $ | 0.44 | ||||||||
| Income from discontinued operations | — | 0.09 | — | 0.09 | ||||||||||||
| Diluted earnings per share | $ | 0.15 | $ | 0.28 | $ | 0.26 | $ | 0.53 | ||||||||
| Cash dividend declared per common share | $ | 0.135 | $ | 0.13 | $ | 0.40 | $ | 0.39 | ||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic | 44,368 | 44,171 | 44,329 | 44,113 | ||||||||||||
| Diluted | 44,636 | 44,442 | 44,549 | 44,405 | ||||||||||||
Segment Financial Information
(unaudited)
| Three months ended September 30 | ||||||||||||||||||||||||||||||||
| Dollars in thousands | Composite Fibers | Airlaid Materials | Other and Unallocated | Total | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
| Net sales | $ | 132,419 | $ | 127,704 | $ | 101,054 | $ | 104,811 | $ | – | $ | – | $ | 233,473 | $ | 232,515 | ||||||||||||||||
| Costs of products sold | 112,031 | 106,024 | 83,699 | 88,442 | (508 | ) | 28 | 195,222 | 194,494 | |||||||||||||||||||||||
| Gross profit (loss) | 20,388 | 21,680 | 17,355 | 16,369 | 508 | (28 | ) | 38,251 | 38,021 | |||||||||||||||||||||||
| SG&A | 9,924 | 10,551 | 4,438 | 4,774 | 10,273 | 8,396 | 24,635 | 23,721 | ||||||||||||||||||||||||
| Gains on dispositions of plant, equipment | ||||||||||||||||||||||||||||||||
| and timberlands, net | – | – | – | – | (413 | ) | (235 | ) | (413 | ) | (235 | ) | ||||||||||||||||||||
| Total operating income (loss) | 10,464 | 11,129 | 12,917 | 11,595 | (9,352 | ) | (8,189 | ) | 14,029 | 14,535 | ||||||||||||||||||||||
| Non operating expense | – | – | – | – | (3,888 | ) | (2,751 | ) | (3,888 | ) | (2,751 | ) | ||||||||||||||||||||
| Income (loss) before income taxes | $ | 10,464 | $ | 11,129 | $ | 12,917 | $ | 11,595 | $ | (13,240 | ) | $ | (10,940 | ) | $ | 10,141 | $ | 11,784 | ||||||||||||||
| Supplementary Data | ||||||||||||||||||||||||||||||||
| Metric tons sold | 35,009 | 33,394 | 34,752 | 35,907 | – | – | 69,761 | 69,301 | ||||||||||||||||||||||||
| Depreciation, depletion and amortization | $ | 6,755 | $ | 6,445 | $ | 5,674 | $ | 5,285 | $ | 1,273 | $ | 864 | $ | 13,702 | $ | 12,594 | ||||||||||||||||
| Capital expenditures | 3,060 | 3,995 | 2,791 | 2,869 | 2,303 | 520 | 8,154 | 7,384 | ||||||||||||||||||||||||
| Nine months ended September 30 | ||||||||||||||||||||||||||||||||
| Dollars in thousands | Composite Fibers | Airlaid Materials | Other and Unallocated | Total | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||
| Net sales | $ | 387,267 | $ | 389,002 | $ | 293,949 | $ | 307,699 | $ | – | $ | – | $ | 681,216 | $ | 696,701 | ||||||||||||||||
| Costs of products sold | 319,403 | 322,152 | 243,526 | 262,256 | 11,171 | 1,155 | 574,100 | 585,563 | ||||||||||||||||||||||||
| Gross profit (loss) | 67,864 | 66,850 | 50,423 | 45,443 | (11,171 | ) | (1,155 | ) | 107,116 | 111,138 | ||||||||||||||||||||||
| SG&A | 30,811 | 31,388 | 13,192 | 13,448 | 28,704 | 26,307 | 72,707 | 71,143 | ||||||||||||||||||||||||
| Gains on dispositions of plant, equipment | ||||||||||||||||||||||||||||||||
| and timberlands, net | – | – | – | – | (1,010 | ) | (1,327 | ) | (1,010 | ) | (1,327 | ) | ||||||||||||||||||||
| Total operating income (loss) | 37,053 | 35,462 | 37,231 | 31,995 | (38,865 | ) | (26,135 | ) | 35,419 | 41,322 | ||||||||||||||||||||||
| Non operating expense | – | – | – | – | (14,992 | ) | (11,129 | ) | (14,992 | ) | (11,129 | ) | ||||||||||||||||||||
| Income (loss) before income taxes | $ | 37,053 | $ | 35,462 | $ | 37,231 | $ | 31,995 | $ | (53,857 | ) | $ | (37,264 | ) | $ | 20,427 | $ | 30,193 | ||||||||||||||
| Supplementary Data | ||||||||||||||||||||||||||||||||
| Metric tons sold | 100,024 | 99,446 | 103,068 | 103,125 | – | – | 203,092 | 202,571 | ||||||||||||||||||||||||
| Depreciation, depletion and amortization (1) | $ | 19,652 | $ | 19,720 | $ | 16,598 | $ | 15,832 | $ | 7,060 | $ | 2,562 | $ | 43,310 | $ | 38,114 | ||||||||||||||||
| Capital expenditures | 9,121 | 8,699 | 6,606 | 7,882 | 4,438 | 1,436 | 20,165 | 18,017 | ||||||||||||||||||||||||
(1) The amount presented in 2020 in the Other and unallocated column includes accelerated depreciation incurred in connection with the restructuring of Composite Fibers’ Metallized operations.
Selected Financial Information
(unaudited)
|
Nine months ended September 30 |
||||||||
| In thousands | 2020 | 2019 | ||||||
| Cash Flow Data | ||||||||
| Cash from continuing operations provided (used) by: | ||||||||
| Operating activities | $ | 24,539 | $ | 15,594 | ||||
| Investing activities | (19,178 | ) | (18,791 | ) | ||||
| Financing activities | (60,963 | ) | (62,678 | ) | ||||
| Depreciation, depletion and amortization | 43,310 | 38,114 | ||||||
| Capital expenditures | 20,165 | 18,017 | ||||||
| September 30 | December 31 | |||||||
| 2020 | 2019 | |||||||
| Balance Sheet Data | ||||||||
| Cash and cash equivalents | $ | 59,241 | $ | 126,201 | ||||
| Total assets | 1,233,942 | 1,283,794 | ||||||
| Total debt | 331,892 | 359,859 | ||||||
| Shareholders’ equity | 558,425 | 555,959 | ||||||
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
This press release includes a measure of earnings before the effects of certain specifically identified items, which is referred to as adjusted earnings, a non-GAAP measure. The Company uses non-GAAP adjusted earnings to supplement the understanding of its consolidated financial statements presented in accordance with GAAP. Non-GAAP adjusted earnings is meant to present the financial performance of the Company’s core operations, which consist of the production and sale of composite fibers and airlaid nonwoven materials. Management and the Company’s Board of Directors use non-GAAP adjusted earnings to evaluate the performance of the Company’s fundamental business in relation to prior periods and established business plans. For purposes of determining adjusted earnings, the following items are excluded:
- Restructuring charge – Metallized operations. This adjustment represents the charges incurred in connection with the decision to restructure a portion of the Composite Fibers segment, primarily consisting of the consolidation of our metallizing operation from Gernsbach, Germany to Caerphilly, UK. The charge includes a non-cash charge of $5.0 million associated with accelerated depreciation and the write-off of inventory and spare parts in addition to cash severance costs totaling $6.1 million.
- Cost optimization actions. These adjustments reflect charges incurred in connection with initiatives to optimize the cost structure of the Company, including costs related to the organizational change to a functional operating model. The costs are primarily related to executive separations, other headcount reductions, professional fees, asset write-offs and certain contract termination costs. These adjustments, which have occurred at various times in the past, are irregular in timing and relate to specific identified programs to reduce or optimize the cost structure of a particular operating segment or the corporate function.
- Corporate headquarters relocation. These adjustments reflect costs incurred in connection with the strategic relocation of the Company’s corporate headquarters to Charlotte, NC. The costs are primarily related to employee relocation costs and exit costs at the previous corporate headquarters.
- Pension settlement expenses, net. This adjustment reflects expenses incurred in connection with the termination of the Company’s qualified pension plan in 2019 and the reversion of excess pension plan assets to the Company in the second quarter of 2020. In the fourth quarter of 2019, the Company incurred a $75.3 million pension settlement charge in connection with the termination of the plan. Since the pension plan was fully funded, the settlement of the pension obligations did not require the use of the Company’s cash, but instead was accomplished with plan assets. In connection with the reversion of excess pension plan assets in the second quarter of 2020, the Company incurred pension settlement expenses related to excise taxes, net of post settlement adjustments and certain related professional fees.
- COVID–19 incremental costs. This adjustment represents incremental cash costs incurred directly related to the COVID-19 pandemic such as mill employee incentive payments, enhanced hygiene protocols, safety and supplies and professional fees primarily associated with the CARES Act benefit.
- Asset Impairment Charge. This adjustment represents a non-cash charge recorded to reduce the carrying amount of a tradename intangible asset of the Dresden wallcover business due to the impact of the COVID 19 pandemic on the underlying forecasted revenue stream.
- Airlaid capacity expansion. These adjustments reflect non-capitalized, one-time costs incurred related to the start-up of a new airlaid production facility in Fort Smith, Arkansas and implementation of a new business system.
- Debt refinancing costs. Represents a charge to write-off unamortized debt issuance costs in connection with the redemption of the Company’s $250 million, 5.375% Notes.
- Strategic initiatives. These adjustments primarily reflect professional and legal fees incurred directly related to evaluating and executing certain strategic initiatives including costs associated with acquisitions and the related integration.
- Fox River environmental matter. This adjustment excludes a gain and reflects a decrease in the Company’s overall reserve included in income for the Fox River matter primarily due to the resolution of the litigation in the first quarter of 2019.
- Timberland sales and related costs. These adjustments exclude gains from the sales of timberlands as these items are not considered to be part of our core business, ongoing results of operations or cash flows. These adjustments are irregular in timing and amount and may benefit our operating results.
- Coronavirus Aid, Relief, and Economic Security (CARES) Act 2020. This adjustment reflects the tax benefit recognized as a result of the March 27, 2020 change in U.S. tax law which, among others, allows net operating losses to be carried back five years.
Unlike net income determined in accordance with GAAP, non-GAAP adjusted earnings does not reflect all charges and gains recorded by the Company for the applicable period and, therefore, does not present a complete picture of the Company’s results of operations for the respective period. However, non-GAAP adjusted earnings provide a measure of how the Company’s core operations are performing, which management believes is useful to investors because it allows comparison of such operations from period to period. Non-GAAP adjusted earnings should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with GAAP.
| Calculation of Adjusted Free Cash Flow |
Nine months ended September 30 |
|||||||
| In thousands | 2020 | 2019 | ||||||
| Cash from operations | $ | 24,539 | $ | 15,594 | ||||
| Less: Capital expenditures | (20,165 | ) | (18,017 | ) | ||||
| Adjusted free cash flow | $ | 4,374 | $ | (2,423 | ) | |||
| Net Debt | September 30 | December 31 | ||||||
| In thousands | 2020 | 2019 | ||||||
| Current portion of long-term debt | $ | 23,908 | $ | 22,940 | ||||
| Long term debt | 307,984 | 336,919 | ||||||
| Total | 331,892 | 359,859 | ||||||
| Less: Cash | (59,241 | ) | (126,201 | ) | ||||
| Net Debt | $ | 272,651 | $ | 233,658 | ||||
| EBITDA | Trailing twelve months ended September 30 | Year ended December 31 | ||||||
| In thousands | 2020 | 2019 | ||||||
| Net loss | $ | (33,366 | ) | $ | (21,542 | ) | ||
| Exclude: (Income) loss from discontinued operations, net of tax | 267 | (3,670 | ) | |||||
| Add back: Taxes on Continuing operations | (11,121 | ) | (9,242 | ) | ||||
| Depreciation and amortization | 56,016 | 50,820 | ||||||
| Interest expense, net | 6,660 | 9,285 | ||||||
| EBITDA | 18,456 | 25,651 | ||||||
| Adjustments: | ||||||||
| Restructuring charge – Metallized operations | 7,211 | — | ||||||
| Cost optimization actions | 5,307 | 8,583 | ||||||
| Corporate headquarter relocation | 419 | — | ||||||
| Pension settlement expenses, net | 82,118 | 75,326 | ||||||
| COVID-19 incremental costs | 1,766 | — | ||||||
| Asset impairment charge | 900 | — | ||||||
| Airlaid capacity expansion costs | — | 1,014 | ||||||
| Strategic initiatives | 843 | 249 | ||||||
| Fox River environmental matter | — | (2,509 | ) | |||||
| Timberland sales and related costs | (1,471 | ) | (1,572 | ) | ||||
| Adjusted EBITDA | $ | 115,549 | $ | 106,742 | ||||
| Leverage | Trailing twelve months ended September 30 | Year ended December 31 | |||||||
| In thousands | 2020 | 2019 | |||||||
| Net Debt | $ | 272,651 | $ | 233,658 | |||||
| Divided by Adjusted EBITDA | 115,549 | 106,742 | |||||||
| Net leverage | 2.4 | x | 2.2 | x | |||||
Caution Concerning Forward-Looking Statements
Any statements included in this press release which pertain to future financial and business matters are “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. The Company uses words such as “anticipates”, “believes”, “expects”, “future”, “intends”, “plans”, “targets”, and similar expressions to identify forward-looking statements. Any such statements are based on the Company’s current expectations and are subject to numerous risks, uncertainties and other unpredictable or uncontrollable factors that could cause future results to differ materially from those expressed in the forward-looking statements including, but not limited to, the impacts of the COVID-19 pandemic, changes in industry, business, market, and economic conditions, demand for or pricing of its products, market growth rates and currency exchange rates. In light of these risks, uncertainties and other factors, the forward-looking matters discussed in this press release may not occur and readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date of this press release and Glatfelter undertakes no obligation, and does not intend, to update these forward-looking statements to reflect events or circumstances occurring after the date of this press release. More information about these factors is contained in Glatfelter’s filings with the U.S. Securities and Exchange Commission, which are available at www.glatfelter.com.
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 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.
| Contacts: | |
| Investors: | Media: |
| Ramesh Shettigar | Eileen L. Beck |
| (717) 225-2746 | (717) 225-2793 |
| [email protected] | [email protected] |
