Glatfelter sees strong second quarter in tough time
August 03, 2012 - United States Of America
Glatfelter reported 2012 second quarter adjusted earnings of $5.3 million, or $0.12 per diluted share, compared with $3.1 million, or $0.07 per diluted share, in the 2011 second quarter. On a GAAP basis, second quarter 2012 net income totaled $13.4 million, or $0.31 per share, compared with $2.5 million, or $0.05 per share, in the second quarter of 2011. Consolidated net sales in the second quarter of 2012 totaled $384.7 million, a decrease of 3.3 percent from the second quarter of 2011.
“Despite the difficult, global macroeconomic conditions, we are pleased to report another quarter of strong earnings, with adjusted earnings per share increasing 71 percent compared with a year ago,” said Dante C. Parrini, chairman and chief executive officer. “Our second quarter results reflect the strategic benefits of our diversified and balanced business portfolio. The strong North American market positions across each of our businesses coupled with the success of our ongoing continuous improvement initiatives and stringent cost control more than offset the impact of the generally weak European economy. Our results also reflect the benefits from our share repurchase program and debt refinancing undertaken late last year which are contributing to year-over-year earnings-per-share growth.”
Mr. Parrini continued, “With current economic conditions expected to persist, particularly in Europe, we will remain focused on operational excellence, accelerating our continuous improvement initiatives and improving the product solutions we deliver to our customers. I expect this will allow us to continue to generate healthy earnings and cash flows in the second half of the year.”
On a year-over-year basis, Specialty Papers’ net sales decreased 1.2 percent as shipping volumes declined 2.6 percent partially offset by a $2.6 million benefit from higher selling prices.
Composite Fibers’ net sales decreased $7.7 million, or 6.7 percent, primarily due to the translation of foreign currencies which unfavorably impacted the comparison by $9.4 million while selling prices were substantially unchanged.
Composite Fibers’ second-quarter 2012 operating income decreased by $1.3 million primarily due to the negative impact from foreign currency translation totaling $1.3 million. Operating results were also negatively impacted by an aggregate $0.9 million due to start-up costs associated with the completion of machine upgrades at two facilities as well as costs associated with intermittent, external power supply interruptions at one of its facilities. The business unit was able to offset the impact of these factors with benefits from ongoing continuous improvement initiatives.
On a year-over-year basis, Advanced Airlaid Materials’ net sales decreased $2.9 million or 4.5 percent primarily due to a $4.3 million unfavorable impact from the translation of foreign currencies. Volumes shipped increased 2.0 percent and average selling prices declined slightly in the comparison.
Second-quarter 2012 operating income increased $0.9 million, or 23.8 percent, compared with the year ago quarter primarily due to a $2.0 million benefit from lower raw material and energy costs partially offset by $0.8 million from unfavorable foreign currency translations.
Pension expense totaled $2.7 million and $1.6 million for the second quarters of 2012 and 2011, respectively. Since the Company’s qualified plan remains overfunded, a cash contribution is not required to be made in 2012.
Interest expense declined $2.3 million in the year-over-year comparison primarily reflecting the redemption of $100.0 million of 7 1/8 percent bonds at the end of 2011. For the second quarter of 2012, interest expense totaled $4.2 million compared with $6.5 million in the year ago quarter.
The Company completed the sale of 3,345 acres of Pennsylvania timberlands during the second quarter of 2012 and realized a $6.4 million pre-tax gain. Aggregate cash proceeds totaled $6.6 million after closing costs.
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.
“Despite the difficult, global macroeconomic conditions, we are pleased to report another quarter of strong earnings, with adjusted earnings per share increasing 71 percent compared with a year ago,” said Dante C. Parrini, chairman and chief executive officer. “Our second quarter results reflect the strategic benefits of our diversified and balanced business portfolio. The strong North American market positions across each of our businesses coupled with the success of our ongoing continuous improvement initiatives and stringent cost control more than offset the impact of the generally weak European economy. Our results also reflect the benefits from our share repurchase program and debt refinancing undertaken late last year which are contributing to year-over-year earnings-per-share growth.”
Mr. Parrini continued, “With current economic conditions expected to persist, particularly in Europe, we will remain focused on operational excellence, accelerating our continuous improvement initiatives and improving the product solutions we deliver to our customers. I expect this will allow us to continue to generate healthy earnings and cash flows in the second half of the year.”
On a year-over-year basis, Specialty Papers’ net sales decreased 1.2 percent as shipping volumes declined 2.6 percent partially offset by a $2.6 million benefit from higher selling prices.
Composite Fibers’ net sales decreased $7.7 million, or 6.7 percent, primarily due to the translation of foreign currencies which unfavorably impacted the comparison by $9.4 million while selling prices were substantially unchanged.
Composite Fibers’ second-quarter 2012 operating income decreased by $1.3 million primarily due to the negative impact from foreign currency translation totaling $1.3 million. Operating results were also negatively impacted by an aggregate $0.9 million due to start-up costs associated with the completion of machine upgrades at two facilities as well as costs associated with intermittent, external power supply interruptions at one of its facilities. The business unit was able to offset the impact of these factors with benefits from ongoing continuous improvement initiatives.
On a year-over-year basis, Advanced Airlaid Materials’ net sales decreased $2.9 million or 4.5 percent primarily due to a $4.3 million unfavorable impact from the translation of foreign currencies. Volumes shipped increased 2.0 percent and average selling prices declined slightly in the comparison.
Second-quarter 2012 operating income increased $0.9 million, or 23.8 percent, compared with the year ago quarter primarily due to a $2.0 million benefit from lower raw material and energy costs partially offset by $0.8 million from unfavorable foreign currency translations.
Pension expense totaled $2.7 million and $1.6 million for the second quarters of 2012 and 2011, respectively. Since the Company’s qualified plan remains overfunded, a cash contribution is not required to be made in 2012.
Interest expense declined $2.3 million in the year-over-year comparison primarily reflecting the redemption of $100.0 million of 7 1/8 percent bonds at the end of 2011. For the second quarter of 2012, interest expense totaled $4.2 million compared with $6.5 million in the year ago quarter.
The Company completed the sale of 3,345 acres of Pennsylvania timberlands during the second quarter of 2012 and realized a $6.4 million pre-tax gain. Aggregate cash proceeds totaled $6.6 million after closing costs.
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.