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Glatfelter sees strong second quarter in tough time

03 Aug '12

6 min read

In March 2010, the Company was approved by the Internal Revenue Service to be registered as a producer of cellulosic biofuel under the Internal Revenue Code. The cellulosic biofuel credit was equal to $1.01 per gallon of black liquor produced in its operations during 2009. In the second quarter of 2012, the Company made the decision to convert certain of the previously utilizedd refundable alternative fuel mixture credits, which were equal to $0.50 per gallon, to the non-refundable cellulosic biofuel credit and intends to amend its 2009 federal income tax return to claim the credit for a portion of the black liquor gallons produced in 2009. This resulted in a net benefit to income taxes in the second quarter of 2012 of $4.4 million.

In the second quarter of 2012, the Company recorded an income tax provision of $2.1 million on adjusted pre-tax earnings resulting in an effective tax rate of 28.0 percent. In the comparable quarter a year ago, the Company recorded an income tax benefit of $2.8 million on adjusted pre-tax earnings of $0.3 million. The 2011-second quarter income tax benefit was primarily due to the favorable 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.

For the first six months of 2012, on a GAAP basis, the Company reported net income of $32.3 million or $0.74 per diluted share, compared with $19.9 million or $0.43 per diluted share in the same period of 2011. The results of operations for both periods include the impact of significant unusual and non-recurring items. The following table sets forth a reconciliation of results determined on a GAAP basis to adjusted earnings:

Consolidated net sales for the first half of 2012 were $782.0 million, a 1.6 percent decrease compared with $794.8 million for the same period of 2011, primarily reflecting unfavorable foreign currency translations.

For Specialty Papers, the Company expects shipping volumes to increase by approximately 5 percent in the third quarter of 2012 compared with the second quarter of 2012. The impact of selling price increases announced earlier in the year is expected to slightly outpace overall input cost increases compared to the second quarter. During the second quarter the business completed its annual maintenance outages at a cost of $19.9 million. For the third quarter, maintenance spending is expected to be approximately $2.5 million higher than normal quarterly rates due to ongoing initiatives to enhance this business unit's machine reliability and operating efficiencies.

The Company anticipates Composite Fibers' shipping volumes to be slightly higher in the third quarter compared to the second quarter while selling prices and input costs are expected to be generally in line with the second quarter of 2012. In addition, start-up issues associated with two machine upgrades completed in the first half of 2012 are expected to be resolved during the third quarter and cost control measures are expected to benefit results.

Shipping volumes for the Advanced Airlaid Materials business unit in the third quarter of 2012 are expected to be slightly higher than the second quarter of 2012, while selling prices and input cost are expected to be in-line with the second quarter. The Company expects ongoing benefits from its continuous improvement initiatives.

Glatfelter