Glatfelter's Q2 net income climbs to US$2.5M from US$103,000 in year-ago period on tax benefit; sales up 9.7% to US$398M on higher selling prices, positive currency translations, offset by higher raw material costs

Kendall Sinclair

Kendall Sinclair

Aug 2, 2011 – Business Wire

YORK, Pennsylvania , August 2, 2011 (press release) – Glatfelter (NYSE:GLT - News) today reported 2011 second quarter adjusted earnings of $3.1 million, or $0.07 per diluted share, compared with $0.9 million, or $0.02 per diluted share, in the 2010 second quarter. Adjusted earnings for the 2011 second quarter benefited $0.06 per share from favorable tax adjustments. On a GAAP basis, second quarter 2011 net income totaled $2.5 million, or $0.05 per share, compared with $0.1 million, or $0.00 per share, in the second quarter of 2010. Consolidated net sales increased 9.7 percent in the year-to-year comparison and totaled $398.0 million.

“Our businesses continue to generate strong top-line growth and we made significant progress improving Advanced Airlaid Materials’ performance with net sales increasing by 25 percent and operating profit nearly doubling in comparison to last year,” said Dante C. Parrini, chairman and chief executive officer. “While our other business units also reported higher revenue, their results were below our expectations. In Composite Fibers, we experienced operating inefficiencies resulting from downtime to manage inventory levels, opportunistic maintenance spend, and challenges qualifying new grades. We incurred higher production costs as we made changes to our machine loading to create capacity to support our customers in the growing single-serve coffee market. In Specialty Papers, results were impacted by operating difficulties in our Spring Grove pulp mill and recovery boiler as well as increased costs of the annual maintenance outages. Our focus on operational excellence has been a key driver of our earnings growth over the last several quarters and I am confident that the operational issues experienced during the second quarter have been addressed and are now behind us.

For the remainder of the year, we expect market conditions to remain generally favorable including continued growth in our tea, coffee and feminine hygiene product lines. We are also focused on improving our operating performance and executing our continuous improvement initiatives which positions us well for a solid second half of the year.”

Adjusted earnings is a non-GAAP measure that excludes from the Company’s GAAP-based results certain non-core business items. The following table sets forth a reconciliation of results determined in accordance with accounting principles generally accepted in the United States of America to non-GAAP adjusted earnings discussed herein:

2011 Second-Quarter Business Unit Results

Specialty Papers

On a year-over-year basis, Specialty Papers’ net sales increased $8.0 million primarily due to a $7.4 million benefit from higher selling prices and a 2.1 percent increase in shipping volumes. During this same period, the broader uncoated free sheet market was down 3.2 percent.

During the second quarters of 2011 and 2010, the Company completed annually scheduled maintenance outages at its Chillicothe, OH and Spring Grove, PA facilities. These maintenance outages adversely impacted operating income by $20.6 million in the second quarter of 2011, compared with $19.6 million in the same quarter a year ago. These required annual outages negatively affect second-quarter results when compared with other quarters.

Specialty Papers’ 2011 second-quarter operating income decreased $2.8 million primarily due to the unfavorable impact of higher raw material, fuel and energy costs which totaled $6.5 million and higher maintenance and other operating costs that, together, more than offset the impact of higher selling prices and shipping volumes.

Composite Fibers

Composite Fibers’ net sales increased $14.4 million, or 14.1 percent reflecting a $3.6 million benefit from higher selling prices and $10.4 million from foreign currency translation. The mix of products sold was favorable as growth in tea and coffee products offset weaker demand for metallized and composite laminate products.

Composite Fibers’ second-quarter 2011 operating income increased 3.8 percent or $0.3 million. The benefit from higher selling prices was more than offset by $4.9 million of higher raw material and energy costs, primarily related to fiber prices. In addition, operating income benefited $0.1 million from a stronger Euro. While Composite Fibers was impacted in the second quarter by a few production inefficiencies, the overall operating performance of this business was a benefit of $0.5 million when compared to the same quarter of 2010.

Advanced Airlaid Materials

Advanced Airlaid Materials’ net sales increased $12.9 million, or 24.7 percent reflecting a $3.9 million benefit from higher selling prices and $4.7 million from foreign currency translation. Net sales also benefited from a 10.8 percent increase in shipments.

Operating income was $3.7 million in the second-quarter 2011, nearly doubling results from the second quarter of 2010. During the second quarter, selling price increases slightly outpaced higher input costs of $3.5 million. In addition, this unit’s overall performance benefited from previously outlined improvement initiatives including supply chain synergies, waste reduction and higher machine output. Operating income also benefited $0.3 million from currency translation due to a more favorable Euro offset somewhat by a stronger Canadian dollar.

Other Financial Information

In the second quarter of 2011, the Company recorded a $2.9 million income tax benefit on a pretax loss of $0.4 million. The benefit was primarily due to the resolution of certain foreign tax audits, partially offset by adjustments to the carrying value of deferred taxes in connection with changes in state tax laws.

2011 First-Half Results

For the first six months of 2011, on a GAAP basis, the Company reported net income of $19.9 million or $0.43 per diluted share, compared with a loss of $0.3 million or $0.01 per diluted share in the same period of 2010. The results of operations for both periods include the impact of significant unusual and non-recurring items.

Consolidated net sales for the first half of 2011 were $794.8 million, a 13.5 percent increase compared with $700.1 million for the same period of 2010, reflecting generally stronger shipping volumes in all of our businesses, higher selling prices and a favorable impact from foreign currency translation.

Balance Sheet

Capital expenditures totaled $27.9 million in the first half of 2011 compared with $15.4 million in the same period of 2010. Capital expenditures are expected to be approximately $60 million to $65 million for 2011.

Cash and cash equivalents totaled $108.3 million at June 30, 2011 and net debt, excluding cash collateralized borrowings, was $187.6 million, a decrease of $13.0 million compared with year-end 2010. Free cash flow (cash provided by operations less capital expenditures) was $20.4 million for the first half of 2011 and $67.2 million for the first half of 2010. Free cash flow in 2011 and 2010 included $20.7 million and $54.9 million, respectively, of cash tax benefits related to cellulosic biofuel and alternative fuel mixture credits. (Net debt and free cash flow are non-GAAP measures. Refer to the calculation of these measures provided in this release).

In April 2011, the Company announced a $50 million share buyback program authorized by its Board of Directors. Through June 30, 2011, the Company repurchased 318,608 shares of common stock for approximately $4.7 million. The program does not obligate the Company to repurchase any particular amount of common stock and it may be modified or suspended at any time at the Board’s discretion.


For Specialty Papers, the Company expects shipping volumes in the third quarter of 2011 to be approximately five percent ahead of the second quarter and selling prices are expected to increase at a faster pace than input costs. During the second quarter the business completed its annual maintenance outages at a cost of $20.6 million and during the current quarter the business will complete normal third quarter maintenance outages with an estimated cost of $2.5 million.

For Composite Fibers, the Company anticipates shipping volumes to be approximately five percent higher than the second quarter including shipments of tea and coffee products increasing approximately ten percent. Selling prices for the third quarter are expected to be in-line with the second quarter with input costs rising modestly which is largely attributable to a timing lag between price realization and input cost changes.

Shipping volumes for the Advanced Airlaid Materials business unit in the third quarter of 2011 are expected to increase by approximately five percent compared with the second quarter. Selling prices and input costs are expected to be largely in-line with the second quarter levels.

During the third quarter of 2011, the Company will record a $2.0 million one-time pre-tax charge for the normal pension accounting expense associated with the retirement of the Company’s former CEO.

Conference Call

As previously announced, the Company will hold a conference call at 11:00 a.m. (Eastern) today to discuss its second-quarter results. The Company’s earnings release and an accompanying financial supplement, which includes significant financial information to be discussed on the conference call, will be available on Glatfelter’s Investor Relations web site at the address indicated below. Information related to the conference call is as follows:


Glatfelter’s 2nd Quarter 2011 Earnings Release Conference Call


Tuesday, August 2, 2011, 11:00 a.m. Eastern Time


US dial 888.335.5539
International dial 973.582.2857

Conference ID:



Rebroadcast Dates:

August 2, 2011 12:00 through August 16, 2011 11:59 p.m.

Rebroadcast Number:

Within US dial 855.859.2056
International dial 404.537.3406

Conference ID:


About Glatfelter

Headquartered in York, PA, Glatfelter is a global manufacturer of specialty papers and fiber-based engineered materials, offering over a century of experience, technical expertise and world-class service. U.S. operations include facilities in Spring Grove, PA and Chillicothe and Fremont, OH. International operations include facilities in Canada, Germany, France, the United Kingdom and the Philippines, a representative office in China and a sales and distribution office in Russia. Glatfelter’s sales approximate $1.5 billion annually and its common stock is traded on the New York Stock Exchange under the ticker symbol GLT. Additional information may be found at

Industry Intelligence Editor's Note:  In an omitted table, Glatfelter reported Q2 net income of US$2.5 million.  For the same period a year ago, the company recorded net income of US$103,000.

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