8-K
Magnera Corp (MAGN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Date of Report (Date of Earliest Event Reported): | November 2, 2021 |
|---|
Glatfelter Corporation
______________________________________________________________________
(Exact name of registrant as specified in its charter)
| Pennsylvania | 001-03560 | 23-0628360 |
|---|---|---|
| (State or other jurisdiction of<br>incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 4350 Congress Street, Suite 600, Charlotte, North Carolina | 28209 | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant’s telephone number, including area code: | 704 885-2555 |
(N/A)
______________________________________________________________________
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | GLT | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
On November 2, 2021, the Company reported its results of operations for the three months and nine months ended September 30, 2021. A copy of the press release issued by the Company is furnished herewith as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
d)Exhibits.
| 99.1 | Press release issuedNovember 2, 2021. |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
The information furnished in this Current Report on Form 8-K and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Glatfelter Corporation | ||
|---|---|---|
| November 2, 2021 | By: | /s/ David C. Elder |
| Name: David C. Elder | ||
| Title: Vice President, Finance and Chief Accounting Officer<br><br>(Principal accounting officer) |
Document
Exhibit 99.1
| N E W S R E L E A S E | |||||||
|---|---|---|---|---|---|---|---|
| Corporate Headquarters<br><br>4350 Congress Street<br><br>Suite 600<br><br>Charlotte, NC 28209<br><br>U.S.A.<br><br>www.glatfelter.com | For Immediate Release | Contacts: | |||||
| --- | --- | --- | --- | --- | |||
| Investors: | Media: | ||||||
| Ramesh Shettigar | Eileen L. Beck | ||||||
| (717) 225-2746 | (717) 225-2793 | ||||||
| ramesh.shettigar@glatfelter.com | eileen.beck@glatfelter.com |
GLATFELTER REPORTS THIRD QUARTER 2021 RESULTS
~ Completed Jacob Holm acquisition adding significant scale and diversifying engineered materials portfolio ~
~ Record quarterly operating profit in Airlaid Materials segment reflects Mount Holly acquisition ~
~ Composite Fibers' performance impacted by continued inflationary headwinds ~
CHARLOTTE, North Carolina – November 2, 2021: Glatfelter Corporation (NYSE: GLT), a leading global supplier of engineered materials, today reported income from continuing operations for the third quarter of 2021 of $8.1 million, or $0.18 per diluted share, compared with $6.5 million, or $0.15 per share, in the same period a year ago. The 2021 results include the acquisition of Georgia-Pacific’s U.S. nonwovens business (“Mount Holly”) prospectively from the May 13, 2021 acquisition date. Adjusted earnings from continuing operations for the third quarters of 2021 and 2020, were $9.5 million, or $0.21 per share, compared with $7.0 million, or $0.16 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, 2021 totaled $279.7 million, compared with $233.5 million for the same period in 2020. On a constant currency basis, net sales for Composite Fibers and Airlaid Materials (including Mount Holly) increased by 3.4% and 39.5%, respectively.
“Airlaid Materials delivered strong performance during the quarter due to improving demand for wipes and tabletop products, which exceeded expectations. Our contractual cost pass-through arrangements with customers offset most of the inflationary pressures while higher shipments, coupled with improved product mix, supported growth in operating profit and favorable margins,” said Dante C. Parrini, Chairman and Chief Executive Officer. “As inflationary headwinds dominated the global economic backdrop, our Composite Fibers segment continued to increase prices. While we successfully achieved price improvements of nearly $6 million to offset rising input costs, the third quarter brought about incremental inflation and significant increases in energy prices which negatively impacted profitability.”
Mr. Parrini added, “Heading into the third quarter, we were experiencing improved demand trends across most product categories and expected that the price increases we implemented in the Composite Fibers segment earlier in the year would be sufficient to offset the higher input costs. However, energy, raw materials, and freight prices continued to significantly escalate throughout the quarter, well beyond our expectations. In response, our commercial team took additional pricing actions in mid-September announcing an incremental 12% price increase across the Composite Fibers product portfolio. Additionally, for our Airlaid Materials' customers with no cost pass-through arrangements, we initiated a 10% price increase effective October 1. We intend to continue leveraging our global scale and integrated supply chain to manage costs and enhance manufacturing efficiencies while taking the necessary pricing actions during this dynamic and unprecedented macro-economic environment.”
Mr. Parrini concluded, “We recently executed a successful $500 million bond offering to finance the closing of the largest acquisition in Glatfelter’s history – Jacob Holm, a leading global manufacturer of premium quality spunlace nonwovens.
| Glatfelter Reports Third Quarter 2021 Results | page 2 |
|---|
This transaction marks another significant step forward in our transformation to further diversify our nonwovens portfolio and technology offerings, enhance overall innovation capabilities with a focus on sustainability and add meaningful scale to the Company. Our key near-term priorities for this acquisition are focused on successfully integrating Jacob Holm into the Glatfelter enterprise, achieving the announced $20 million synergies and actively de-levering the balance sheet.”
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, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||||
| In thousands, except per share | Amount | EPS | Amount | EPS | ||||
| Net income | $ | 7,527 | $ | 0.17 | $ | 6,527 | $ | 0.15 |
| Exclude: Loss from discontinued operations, net of tax | 532 | 0.01 | — | — | ||||
| Income from continuing operations | 8,059 | 0.18 | 6,527 | 0.15 | ||||
| Adjustments (pre-tax): | ||||||||
| Strategic initiatives | 2,773 | 843 | ||||||
| Corporate headquarters relocation | 68 | 610 | ||||||
| Restructuring charge - Metallized operations | — | 57 | ||||||
| Cost optimization actions | 687 | 1,270 | ||||||
| Pension settlement expenses, net | — | 389 | ||||||
| COVID-19 incremental costs | — | 586 | ||||||
| Timberland sales and related costs | (2,235) | (412) | ||||||
| Total adjustments (pre-tax) | 1,293 | 3,343 | ||||||
| Income taxes (1) | 18 | (375) | ||||||
| CARES Act of 2020 tax provision (2) | 112 | (2,454) | ||||||
| Total after-tax adjustments | 1,423 | 0.03 | 514 | 0.01 | ||||
| Adjusted earnings from continuing operations | $ | 9,482 | $ | 0.21 | $ | 7,041 | $ | 0.16 |
(1)Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated.
(2)Tax impact 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.
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 | 2021 | 2020 | Change | |||||||
| Tons shipped (metric) | 32,737 | 35,009 | (2,272) | (6.5) | % | |||||
| Net sales | $ | 138,118 | $ | 132,419 | $ | 5,699 | 4.3 | % | ||
| Operating income | 5,812 | 10,464 | (4,652) | (44.5) | % | |||||
| Operating margin | 4.2 | % | 7.9 | % |
Composite Fibers’ net sales increased $5.7 million or 4.3% in the third quarter of 2021, compared to the year-ago quarter, mainly driven by higher selling prices of $5.8 million and favorable currency translation of $1.2 million. Overall, shipments were 6.5% lower primarily due to wallcover products. In Q3 2020, wallcover had a strong rebound in demand after volume dropped sharply in Q2 2020 due to the pandemic, making for a challenging year-over-year comparison. In addition, a few wallcover customers took unexpected downtime in late August, 2021.
| Glatfelter Reports Third Quarter 2021 Results | page 3 |
|---|
Composite Fibers’ operating income for the third quarter of 2021 totaled $5.8 million compared with $10.5 million in the third quarter of 2020. Higher raw material and energy inflation of $12.4 million was partially offset by $5.8 million in higher selling prices, reducing earnings by net $6.6 million. Favorable mix driven by higher demand in composite laminates and food and beverage categories, coupled with strong production to meet customer demand, positively impacted results by $3.1 million. The impact of currency and related hedging activity negatively impacted earnings by $1.2 million mainly due to favorable hedging gains on our underlying positions last year.
Airlaid Materials
| Three months ended September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Dollars in thousands | 2021 | 2020 | Change | |||||||
| Tons shipped (metric) | 43,526 | 34,752 | 8,774 | 25.2 | % | |||||
| Net sales | $ | 141,533 | $ | 101,054 | $ | 40,479 | 40.1 | % | ||
| Operating income | 14,742 | 12,917 | 1,825 | 14.1 | % | |||||
| Operating margin | 10.4 | % | 12.8 | % |
Airlaid Materials’ net sales increased $40.5 million in the year-over-year comparison, driven by the first full quarter of sales from Mount Holly as well as higher selling prices from cost pass-through arrangements with customers. Shipments were 25.2% higher driven by Mount Holly as well as improvements in demand for tabletop and wipes products, slightly offset by lower shipments of hygiene products. Currency translation was $0.5 million favorable.
Airlaid Materials’ third quarter of 2021 operating income of $14.7 million was $1.8 million higher when compared to the third quarter of 2020. Higher shipments positively impacted results by $7.3 million. Selling price increases of $11.6 million, primarily due to raw material cost pass-through provisions, were more than offset by higher raw material and energy prices of $13.4 million, reducing earnings by net $1.8 million. Most pass-through contracts do not include energy inflation which was $1.3 million during the quarter. Operations were unfavorable $2.5 million mainly due to lower production compared to a strong quarter last year and higher inflationary pressures experienced in the quarter. The impact of currency and related hedging activity negatively impacted earnings by $1.2 million.
Other Financial Information
The amount of operating expense not allocated to a segment in the table of Segment Financial Information totaled $6.0 million in the third quarter of 2021 compared with $9.4 million in the same period a year ago. Excluding the items identified to present “adjusted earnings,” unallocated expenses for the third quarter of 2021 decreased $1.7 million compared to the third quarter of 2020.
In the third quarter of 2021, income from continuing operations totaled $11.6 million and income tax expense totaled $3.6 million. On adjusted pre-tax income of $12.9 million, income tax expense was $3.4 million in the third quarter of 2021. The comparable amounts in the same quarter of 2020 were $13.5 million and $6.4 million, respectively. The effective tax rate on adjusted earnings was 26.5% in the third quarter of 2021.
| Glatfelter Reports Third Quarter 2021 Results | page 4 |
|---|
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, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||||
| In thousands, except per share | Amount | EPS | Amount | EPS | ||||
| Net income | $ | 17,331 | $ | 0.39 | $ | 11,517 | $ | 0.26 |
| Exclude: Loss from discontinued operations, net of tax | 614 | 0.01 | 135 | — | ||||
| Income from continuing operations | 17,945 | 0.40 | 11,652 | 0.26 | ||||
| Adjustments (pre-tax): | ||||||||
| Strategic initiatives | 11,207 | 843 | ||||||
| Corporate headquarters relocation | 429 | 610 | ||||||
| Restructuring charge - Metallized operations | — | 11,111 | ||||||
| Cost optimization actions | 687 | 4,367 | ||||||
| Pension settlement expenses, net | — | 6,792 | ||||||
| COVID-19 incremental costs | — | 1,766 | ||||||
| Asset impairment charge | — | 900 | ||||||
| Timberland sales and related costs | (4,638) | (1,013) | ||||||
| Total adjustments (pre-tax) | 7,685 | 25,376 | ||||||
| Income taxes (1) | 49 | (4,257) | ||||||
| CARES Act of 2020 tax provision (2) | 295 | (5,023) | ||||||
| Total after-tax adjustments | 8,029 | 0.18 | 16,096 | 0.36 | ||||
| Adjusted earnings from continuing operations | $ | 25,974 | $ | 0.58 | $ | 27,748 | $ | 0.62 |
(1)Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated.
(2)Tax impact 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.
A description of each of the adjustments presented above is included later in this release.
Balance Sheet and Other Information
Cash and cash equivalents totaled $100.0 million as of September 30, 2021, and net debt was $362.1 million compared with $213.9 million at the end of 2020. Net leverage increased to 2.8 times at September 30, 2021 versus 1.7 times at December 31, 2020. (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 2021 and 2020 totaled $18.5 million and $20.2 million, respectively. Adjusted free cash flow for the first nine months of 2021 was $30.4 million compared with $21.9 million in the same period of 2020. (Refer to the calculation of this measure provided in the tables at the end of this release).
| Glatfelter Reports Third Quarter 2021 Results | page 5 |
|---|
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 that 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 2021 Earnings Release Conference Call |
|---|---|
| When: | Tuesday, November 2, 2021, 11:00 a.m. (ET) |
| Number: | US dial 888.335.5539 |
| International dial 973.582.2857 | |
| Conference ID: | 4090853 |
| Webcast: | https://www.glatfelter.com/investors/webcasts-and-presentations/ |
| Rebroadcast Dates: | Nov. 2, 2021, 2:00 p.m. through Nov. 16, 2021 12:00 p.m. |
| Rebroadcast Number: | Within US dial 855.859.2056 |
| International dial 404.537.3406 | |
| Conference ID: | 4090853 |
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 Reports Third Quarter 2021 Results | page 6 |
|---|
Glatfelter Corporation and subsidiaries
Consolidated Statements of Income
(unaudited)
| Three Months Ended<br>September 30, | Nine Months Ended<br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In thousands, except per share | 2021 | 2020 | 2021 | 2020 | ||||
| Net sales | $ | 279,651 | $ | 233,473 | $ | 750,236 | $ | 681,216 |
| Costs of products sold | 241,294 | 195,222 | 637,029 | 574,100 | ||||
| Gross profit | 38,357 | 38,251 | 113,207 | 107,116 | ||||
| Selling, general and administrative expenses | 26,066 | 24,635 | 77,877 | 72,707 | ||||
| Gains on dispositions of plant, equipment and timberlands, net | (2,235) | (413) | (4,638) | (1,010) | ||||
| Operating income | 14,526 | 14,029 | 39,968 | 35,419 | ||||
| Non-operating income (expense) | ||||||||
| Interest expense | (2,061) | (1,810) | (5,364) | (5,347) | ||||
| Interest income | 21 | 39 | 52 | 390 | ||||
| Pension settlement expenses, net | — | (389) | — | (6,792) | ||||
| Other, net | (876) | (1,728) | (1,949) | (3,243) | ||||
| Total non-operating expense | (2,916) | (3,888) | (7,261) | (14,992) | ||||
| Income from continuing operations before income taxes | 11,610 | 10,141 | 32,707 | 20,427 | ||||
| Income tax provision | 3,551 | 3,614 | 14,762 | 8,775 | ||||
| Income from continuing operations | 8,059 | 6,527 | 17,945 | 11,652 | ||||
| Discontinued operations: | ||||||||
| Loss before income taxes | (532) | — | (614) | (135) | ||||
| Income tax provision | — | — | — | — | ||||
| Loss from discontinued operations | (532) | — | (614) | (135) | ||||
| Net income | $ | 7,527 | $ | 6,527 | $ | 17,331 | $ | 11,517 |
| Basic earnings per share | ||||||||
| Income from continuing operations | $ | 0.18 | $ | 0.15 | $ | 0.40 | $ | 0.26 |
| Loss from discontinued operations | (0.01) | — | (0.01) | — | ||||
| Basic earnings per share | $ | 0.17 | $ | 0.15 | $ | 0.39 | $ | 0.26 |
| Diluted earnings per share | ||||||||
| Income from continuing operations | $ | 0.18 | $ | 0.15 | $ | 0.40 | $ | 0.26 |
| Loss from discontinued operations | (0.01) | — | (0.01) | — | ||||
| Diluted earnings per share | $ | 0.17 | $ | 0.15 | $ | 0.39 | $ | 0.26 |
| Weighted average shares outstanding | ||||||||
| Basic | 44,593 | 44,368 | 44,536 | 44,329 | ||||
| Diluted | 44,939 | 44,636 | 44,889 | 44,549 | ||||
| Glatfelter Reports Third Quarter 2021 Results | page 7 | |||||||
| --- | --- |
Segment Financial Information
(unaudited)
| Three months ended September 30,<br><br>Dollars in thousands | Composite Fibers | Airlaid Materials | Other and Unallocated | Total | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||
| Net sales | $ | 138,118 | $ | 132,419 | $ | 141,533 | $ | 101,054 | $ | — | $ | — | $ | 279,651 | $ | 233,473 | ||||||||||||||||||
| Costs of products sold | 121,028 | 112,031 | 121,102 | 83,699 | (836) | (508) | 241,294 | 195,222 | ||||||||||||||||||||||||||
| Gross profit | 17,090 | 20,388 | 20,431 | 17,355 | 836 | 508 | 38,357 | 38,251 | ||||||||||||||||||||||||||
| SG&A | 11,278 | 9,924 | 5,689 | 4,438 | 9,099 | 10,273 | 26,066 | 24,635 | ||||||||||||||||||||||||||
| Gains on dispositions of plant, equipment and timberlands, net | — | — | — | — | (2,235) | (413) | (2,235) | (413) | ||||||||||||||||||||||||||
| Total operating income (loss) | 5,812 | 10,464 | 14,742 | 12,917 | (6,028) | (9,352) | 14,526 | 14,029 | ||||||||||||||||||||||||||
| Non operating expense | — | — | — | — | (2,916) | (3,888) | (2,916) | (3,888) | ||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | 5,812 | $ | 10,464 | $ | 14,742 | $ | 12,917 | $ | (8,944) | $ | (13,240) | $ | 11,610 | $ | 10,141 | ||||||||||||||||||
| Supplementary Data | ||||||||||||||||||||||||||||||||||
| Metric tons sold | 32,737 | 35,009 | 43,526 | 34,752 | — | — | 76,263 | 69,761 | ||||||||||||||||||||||||||
| Depreciation, depletion and amortization ($ in thousands) (1) | $ | 6,904 | $ | 6,755 | $ | 7,763 | $ | 5,674 | $ | 1,043 | $ | 1,273 | $ | 15,710 | $ | 13,702 | ||||||||||||||||||
| Capital expenditures | 2,585 | 3,060 | 2,926 | 2,791 | 1,797 | 2,303 | 7,308 | 8,154 | Nine months ended September 30,<br><br>Dollars in thousands | Composite Fibers | Airlaid Materials | Other and Unallocated | Total | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||
| Net sales | $ | 420,965 | $ | 387,267 | $ | 329,271 | $ | 293,949 | $ | — | $ | — | $ | 750,236 | $ | 681,216 | ||||||||||||||||||
| Costs of products sold | 354,629 | 319,403 | 283,825 | 243,526 | (1,425) | 11,171 | 637,029 | 574,100 | ||||||||||||||||||||||||||
| Gross profit (loss) | 66,336 | 67,864 | 45,446 | 50,423 | 1,425 | (11,171) | 113,207 | 107,116 | ||||||||||||||||||||||||||
| SG&A | 33,396 | 30,811 | 15,076 | 13,192 | 29,405 | 28,704 | 77,877 | 72,707 | ||||||||||||||||||||||||||
| Gains on dispositions of plant, equipment and timberlands, net | — | — | — | — | (4,638) | (1,010) | (4,638) | (1,010) | ||||||||||||||||||||||||||
| Total operating income (loss) | 32,940 | 37,053 | 30,370 | 37,231 | (23,342) | (38,865) | 39,968 | 35,419 | ||||||||||||||||||||||||||
| Non operating expense | — | — | — | — | (7,261) | (14,992) | (7,261) | (14,992) | ||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | 32,940 | $ | 37,053 | $ | 30,370 | $ | 37,231 | $ | (30,603) | $ | (53,857) | $ | 32,707 | $ | 20,427 | ||||||||||||||||||
| Supplementary Data | ||||||||||||||||||||||||||||||||||
| Metric tons sold | 101,348 | 100,024 | 106,705 | 103,068 | — | — | 208,053 | 203,092 | ||||||||||||||||||||||||||
| Depreciation, depletion and amortization ($ in thousands) (1) | $ | 20,885 | $ | 19,652 | $ | 20,378 | $ | 16,598 | $ | 2,913 | $ | 7,060 | $ | 44,176 | $ | 43,310 | ||||||||||||||||||
| Capital expenditures | 8,240 | 9,121 | 5,962 | 6,606 | 4,317 | 4,438 | 18,519 | 20,165 |
(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 | 2021 | 2020 | |||||
| Cash Flow Data | |||||||
| Cash from continuing operations provided (used) by: | |||||||
| Operating activities | $ | 38,497 | $ | 24,539 | |||
| Investing activities | (186,003) | (19,178) | |||||
| Financing activities | 151,264 | (60,963) | |||||
| Depreciation, depletion and amortization | 44,176 | 43,310 | |||||
| Capital expenditures | 18,519 | 20,165 | |||||
| Glatfelter Reports Third Quarter 2021 Results | page 8 | ||||||
| --- | --- | September 30, 2021 | December 31, 2020 | ||||
| --- | --- | --- | --- | --- | |||
| Balance Sheet Data | |||||||
| Cash and cash equivalents | $ | 100,032 | $ | 99,581 | |||
| Total assets | 1,456,552 | 1,286,881 | |||||
| Total debt | 462,110 | 313,521 | |||||
| Shareholders’ equity | 563,304 | 577,932 |
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 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:
•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 related integrations.
•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 former corporate headquarters.
•Restructuring charge – Metallized operations. This adjustment represents charges incurred in 2020 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.
•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.
•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.
•Pension settlement expenses, net. This adjustment reflects professional fees recorded in connection with the Company’s termination of its qualified pension plan and the related actions to settle all obligations to the plan’s participants. Since the pension plan was fully funded, the settlement of pension obligations did not require the use of the Company’s cash, but instead was accomplished with plan assets.
•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 taxes recorded 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.
| Glatfelter Reports Third Quarter 2021 Results | page 9 |
|---|
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<br><br>In thousands | Nine months ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||||||||
| Cash from operations | $ | 38,497 | $ | 24,539 | ||||||||
| Capital expenditures | (18,519) | (20,165) | ||||||||||
| Free cash flow | 19,978 | 4,374 | ||||||||||
| Adjustments: | ||||||||||||
| Cost optimization actions | 2,755 | 2,934 | ||||||||||
| Strategic initiatives | 5,177 | 843 | ||||||||||
| Restructuring charge - Metallized operations | 1,013 | 5,240 | ||||||||||
| Corporate headquarters relocation | 885 | 473 | ||||||||||
| Fox River environmental matter | 1,584 | 3,156 | ||||||||||
| Pension settlement | — | 6,718 | ||||||||||
| COVID-19 incremental costs | — | 1,766 | ||||||||||
| Tax refunds on adjustments to adjusted earnings | (956) | (3,644) | ||||||||||
| Adjusted free cash flow | $ | 30,436 | $ | 21,860 | Net Debt<br><br>In thousands | September 30, 2021 | December 31, 2020 | |||||
| --- | --- | --- | --- | --- | ||||||||
| Current portion of long-term debt | $ | 27,441 | $ | 25,057 | ||||||||
| Short-term debt | 11,579 | — | ||||||||||
| Long term debt | 423,090 | 288,464 | ||||||||||
| Total | 462,110 | 313,521 | ||||||||||
| Less: Cash | (100,032) | (99,581) | ||||||||||
| Net Debt | $ | 362,078 | $ | 213,940 | ||||||||
| Glatfelter Reports Third Quarter 2021 Results | page 10 | |||||||||||
| --- | --- | Adjusted EBITDA | Pro forma Trailing twelve months ended September 30, | Year ended December 31, | ||||||||
| --- | --- | --- | --- | --- | ||||||||
| In thousands | 2021 | 2020 | ||||||||||
| Net income | $ | 27,112 | $ | 21,298 | ||||||||
| Exclude: Loss from discontinued operations, net of tax | (36) | (515) | ||||||||||
| Add back: Taxes on Continuing operations | 17,563 | 11,576 | ||||||||||
| Depreciation and amortization | 57,466 | 56,600 | ||||||||||
| Interest expense, net | 6,978 | 6,623 | ||||||||||
| EBITDA | 109,083 | 95,582 | ||||||||||
| Adjustments: | ||||||||||||
| Mount Holly (1) | 5,359 | — | ||||||||||
| Strategic initiatives | 11,931 | 1,567 | ||||||||||
| Share-based compensation (2) | 5,677 | 5,655 | ||||||||||
| Cost optimization actions | 2,299 | 5,979 | ||||||||||
| COVID-19 incremental costs | 949 | 2,715 | ||||||||||
| Corporate headquarters relocation | 881 | 871 | ||||||||||
| Restructuring charge - Metallized operations | — | 7,211 | ||||||||||
| Asset impairment charge | — | 900 | ||||||||||
| Pension settlement expenses, net | (638) | 6,154 | ||||||||||
| Timberland sales and related costs | (5,007) | (1,382) | ||||||||||
| Adjusted EBITDA | $ | 130,534 | $ | 125,252 |
(1)Represents pro forma Mount Holly EBITDA for the period October 1, 2020 through the May 13, 2021 acquisition date, adjusted to eliminated certain corporate cost overhead allocated to Mount Holly during its period of ownership by its previous parent.
(2)Adjusted EBITDA for all periods presented has been restated to add back share-based compensation consistent with our amended credit agreement. The share-based compensation adjustment represents the non-cash amount of share-based compensation expense included in results of operations.
| Leverage | September 30, | December 31, | ||||
|---|---|---|---|---|---|---|
| In thousands | 2021 | 2020 | ||||
| Net Debt | $ | 362,078 | $ | 213,940 | ||
| Divided by Adjusted EBITDA | 130,534 | 125,252 | ||||
| Net leverage | 2.8 | x | 1.7 | x |
Caution Concerning Forward-Looking Statements
Any statements included in this press release that 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. The risks, uncertainties and other unpredictable or uncontrollable factors are described in the Company’s filings with the U.S. Securities and Exchange Commission (“SEC”) in the Risk Factors section and under the heading “Forward-Looking Statements” in the Company’s most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are available on the SEC’s website at www.sec.gov. 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 the Company 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.
| Glatfelter Reports Third Quarter 2021 Results | page 11 |
|---|
About Glatfelter
Glatfelter is a leading global supplier of engineered materials with a strong focus on innovation and sustainability. The Company’s high quality, technology-driven, innovative, and customizable nonwovens solutions can be found in products that are Enhancing Everyday Life®. These include personal care and hygiene products, food and beverage filtration, critical cleaning products, medical and personal protection, packaging products, as well as home improvement and industrial applications. Headquartered in Charlotte, NC, the Company’s annualized net sales approximate $1.4 billion with over 3,300 employees worldwide. Glatfelter’s operations utilize a variety of manufacturing technologies including airlaid, wetlaid and spunlace with sixteen manufacturing sites located in the United States, Canada, Germany, the United Kingdom, France, Spain, and the Philippines. The Company has sales offices in all major geographies serving customers under the Glatfelter and Sontara brands. Additional information about Glatfelter may be found at www.glatfelter.com.