GlobeNewswire Inc | May 4, 2021 06:50AM EDT

May 04, 2021

CHARLOTTE, N.C., May 04, 2021 (GLOBE NEWSWIRE) -- Glatfelter Corporation (NYSE: GLT), a leading global supplier of engineered materials, today reported net income for the first three months of 2021 of $8.4 million, or $0.19 per diluted share, compared with $7.4 million, or $0.17 per diluted share, in the same period a year ago. Adjusted earnings from continuing operations for the three months ended March31, 2021 and 2020, were $8.5 million, or $0.19 per share, compared with $10.8 million, or $0.24 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 March31, 2021 totaled $225.7 million, compared with $231.6 million for the same period in 2020. On a constant currency basis, Composite Fibers and Airlaid Materials net sales decreased by 1.4% and 18.8%, respectively.

Glatfelter continued to deliver strong earnings in the first quarter of 2021 by effectively managing costs and driving operating efficiencies, despite a challenging market, said Dante C. Parrini, Chairman and Chief Executive Officer. Composite Fibers performed better than expected as volume growth in food and beverage and favorable wallcover demand improved overall product mix and asset utilization, thereby helping to drive a 6% increase in year-over-year operating profit. In Airlaid Materials, volumes were under pressure, especially in the tabletop category that was down 55% compared to last year due to the pandemic as restaurant dining remains slow to recover. We also experienced lower than anticipated demand in wipes, homecare and feminine hygiene products as customers recalibrated order levels to account for COVID-driven year-end inventory reserves. Despite the overall market volatility, both segments achieved healthy EBITDA margins in the mid-teens.

Mr. Parrini added, Our recently announced price increases in the Composite Fibers segment are contributing to offset the steep raw material, energy and logistics cost inflation we are experiencing. While we continue to navigate the dynamic demand conditions resulting from the pandemic, we remain very optimistic about the long-term growth prospects that our essential consumer staples portfolio has to offer as we focus on strong commercial execution to optimize performance in the near term.

As recently announced, the regulatory review process has concluded for our pending acquisition of Georgia-Pacific's U.S. nonwovens business. We expect this transaction will close by mid-May, building on our growth strategy and advancing our plans to expand our U.S. footprint. We are excited to begin the integration process that we expect will enable capacity optimization, improve operational enhancements and accelerate innovation efforts to better service our customers' growing needs, especially in the wipes category. Glatfelter is well-positioned to capture and service the growing demand in the broader health and hygiene categories as we continue to make meaningful and accretive investments to add further scale to our platforms, concluded Mr. Parrini.

First 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 March 31 2021 2020 In thousands, except per share Amount EPS Amount EPS Net income $ 8,394 $ 0.19 $ 7,406 $ 0.17 Adjustments (pre-tax): Strategic initiatives 603 ? Corporate headquarters relocation 155 ? Restructuring charge - Metallized ? 5,987 operationsCost optimization actions ? 1,748 Pension settlement expenses, net ? 73 Timberland sales and related costs (850 ) ? Total adjustments (pre-tax) (92 ) 7,808 Income taxes ^(1) 81 (1,835 ) CARES Act of 2020 tax provision 93 (2,569 ) (benefit) ^(2)Total after-tax adjustments 82 ? 3,404 0.07 Adjusted earnings from continuing $ 8,476 $ 0.19 $ 10,810 $ 0.24 operations

(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 March 31 Dollars in 2021 2020 Change thousands Tons shipped 34,140 35,983 (1,843 ) (5.1 )%(metric)Net sales $ 141,249 $ 132,711 $ 8,538 6.4 %Operating income 16,065 15,102 963 6.4 %Operating margin 11.4 % 11.4 %

Composite Fibers net sales increased $8.5 million or 6.4% in the first quarter of 2021, compared to the year-ago quarter, mainly driven by favorable currency translation of $10.3 million. Overall shipments, excluding metallized, which was restructured in the second quarter of 2020, were in-line with the first quarter of 2020.

Composite Fibers operating income of $16.1 million was $1.0 million higher, or approximately 6% favorable, compared to the first quarter of 2020 as a result of improved sales mix, which favorably impacted results by $1.1 million. Raw material and energy prices were $1.3 million higher than the same period last year, but mostly mitigated by improved operations of $1.2 million.

Airlaid Materials

Three months ended March 31 Dollars in 2021 2020 Change thousands Tons shipped 28,864 35,039 (6,175 ) (17.6 )%(metric)Net sales $ 84,425 $ 98,849 $ (14,424 ) (14.6 )%Operating income 7,197 12,022 (4,825 ) (40.1 )%Operating margin 8.5 % 12.2 %

Airlaid Materials net sales decreased $14.4 million in the year-over-year comparison. Shipments were 18% lower driven by continued softness in tabletop demand from delays in restaurants reopening, as well as lower shipments in the hygiene and wipes categories as customers adjusted their buying patterns following elevated year-end inventory levels maintained due to the pandemic. Currency translation was $4.2 million favorable.

Airlaid Materials first quarter 2021 operating income of $7.2 million was $4.8 million lower when compared to the first quarter of 2020. Lower shipping volumes unfavorably impacted earnings by $3.2 million and operations were $1.3 million unfavorable driven by lower production to manage customer demand and inventory levels. Selling price increases due to raw material pass-through provisions were more than offset by higher raw material and energy prices, reducing earnings by net $0.3 million.

Other Financial Information

The amount of Other and Unallocated operating expense in the table of Segment Financial Information totaled $5.9 million in the first quarter of 2021 compared with $14.8 million in the same period a year ago. Excluding the items identified to present adjusted earnings, unallocated expenses for the first quarter of 2021 decreased $1.0 million compared to the first quarter of 2020.

In the first quarter of 2021, income from continuing operations totaled $15.6 million and income tax expense totaled $7.2 million. On adjusted pre-tax income of $15.5 million, income tax expense was $7.0 million in the first quarter of 2021. The comparable amounts in the same quarter of 2020 were $17.8 million and $7.0 million, respectively. The effective tax rate on adjusted earnings was 45% in the first quarter of 2021.

Balance Sheet and Other Information

Cash and cash equivalents totaled $87.4 million as of March31, 2021, and net debt was $219.4 million compared with $213.9 million at the end of 2020. Net leverage increased nominally to 1.9 times on March31, 2021 versus 1.8 times at December31, 2020. (Refer to the calculation of this measure provided in the tables at the end of this release.)

Capital expenditures during the first quarter of 2021 and 2020 totaled $5.4 million and $7.0 million, respectively. Adjusted free cash flow for the first three months of 2021 was a use of $8.9 million compared with a use of $10.6 million in the same period of 2020. (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 first quarter results. The Company will make available on its Investor Relations website this quarters earnings release and an accompanying financial presentation that includes significant financial information to be discussed on the conference call including the Companys outlook pertaining to financial performance. Information related to the conference call is as follows:

What: Glatfelter?s 1^st Quarter 2021 Earnings Release Conference Call When: Tuesday, May 4, 2021, 11:00 a.m. (ET) Number: US dial 888.335.5539 International dial 973.582.2857 Conference ID: 3297372 Webcast: https://www.glatfelter.com/investors/ webcasts-and-presentations/ Rebroadcast May 4, 2021, 2:00 p.m. through May 18, 12:00 p.m. Dates: Rebroadcast Within US dial 855.859.2056 Number: International dial 404.537.3406 Conference ID: 3297372

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 subsidiariesConsolidated Statements of Income(unaudited)

Three months ended March 31In thousands, except per share 2021 2020 Net sales $ 225,674 $ 231,560 Costs of products sold 186,378 194,685 Gross profit 39,296 36,875 Selling, general and administrative expenses 22,827 24,594 Gains on dispositions of plant, equipment and (850 ) ? timberlands, netOperating income 17,319 12,281 Non-operating income (expense) Interest expense (1,531 ) (1,778 )Interest income 20 264 Other, net (224 ) (753 )Total non-operating expense (1,735 ) (2,267 )Income from continuing operations before income 15,584 10,014 taxesIncome tax provision 7,190 2,608 Net income $ 8,394 $ 7,406 Basic earnings per share Income from continuing operations $ 0.19 $ 0.17 Income from discontinued operations ? ? Basic earnings per share $ 0.19 $ 0.17 Diluted earnings per share Income from continuing operations $ 0.19 $ 0.17 Income from discontinued operations ? ? Diluted earnings per share $ 0.19 $ 0.17 Cash dividend declared per common share $ 0.135 $ 0.13 Weighted average shares outstanding Basic 44,450 44,275 Diluted 44,869 44,530

Segment Financial Information(unaudited)

Three monthsended March 31Dollars in CompositeFibers Airlaid Materials OtherandUnallocated Total thousands 2021 2020 2021 2020 2021 2020 2021 2020 Net sales $ 141,249 $ 132,711 $ 84,425 $ 98,849 $ ? $ ? $ 225,674 $ 231,560 Costs of 114,267 106,985 72,585 82,246 (474 ) 5,454 186,378 194,685 products soldGross profit 26,982 25,726 11,840 16,603 474 (5,454 ) 39,296 36,875 (loss)SG&A 10,917 10,624 4,643 4,581 7,267 9,389 22,827 24,594 Gains ondispositions of plant,equipmentandtimberlands, ? ? ? ? (850 ) - (850 ) - netTotaloperating 16,065 15,102 7,197 12,022 (5,943 ) (14,843 ) 17,319 12,281 income (loss)Non operating ? ? ? ? (1,735 ) (2,267 ) (1,735 ) (2,267 )expenseIncome (loss)before income $ 16,065 $ 15,102 $ 7,197 $ 12,022 $ (7,678 ) $ (17,110 ) $ 15,584 $ 10,014 taxes Supplementary DataMetric tons 34,140 35,983 28,864 35,039 ? ? 63,004 71,022 soldDepreciation,depletion andamortization $ 6,981 $ 6,466 $ 5,848 $ 5,451 $ 904 $ 3,485 $ 13,733 $ 15,402 ($ inthousands)Capital 2,773 3,956 1,739 2,103 867 955 5,379 7,014 expenditures

(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)

Three months ended March 31In thousands 2021 2020 Cash Flow Data Cash from continuing operations provided (used) by:Operating activities $ (6,046 ) $ (5,603 )Investing activities (4,603 ) (7,014 )Financing activities 179 (6,847 ) Depreciation, depletion and amortization 13,733 15,402 Capital expenditures 5,379 7,014

March 31 December 31 2021 2020 Balance Sheet Data Cash and cash equivalents $ 87,366 $ 99,581 Total assets 1,267,879 1,286,881 Total debt 306,746 313,521 Shareholders? equity 571,061 577,932

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 Companys core operations, which consist of the production and sale of composite fibers and airlaid materials. Management and the Companys Board of Directors use non-GAAP adjusted earnings to evaluate the performance of the Companys 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 Companys 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 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 in the first quarter of 2020 included a non-cash charge of $2.5 million associated with accelerated depreciation and cash severance costs totaling $3.5 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. -- 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 Companys termination of its qualified pension plan and the related actions to settle all obligations to the plans participants. Since the pension plan was fully funded, the settlement of pension obligations did not require the use of the Companys 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.

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 Companys results of operations for the respective period. However, non-GAAP adjusted earnings provide a measure of how the Companys 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 Three months ended March 31In thousands 2021 2020 Cash from operations $ (6,046 ) $ (5,603 )Capital expenditures (5,379 ) (7,014 )Free cash flow (11,425 ) (12,617 )Adjustments: Restructuring charge - Metallized operations 1,135 ? Cost optimization actions 1,156 1,883 Corporate headquarters relocation 268 ? Strategic initiatives 732 ? Fox River environmental matter 321 105 Tax refunds on adjustments to adjusted earnings (1,115 ) ? Adjusted free cash flow $ (8,928 ) $ (10,629 )

Net Debt March 31 December 31 In thousands 2021 2020 Current portion of long-term debt $ 23,942 $ 25,057 Short-term debt 11,725 ? Long term debt 271,079 288,464 Total 306,746 313,521 Less: Cash (87,366 ) (99,581 )Net Debt $ 219,380 $ 213,940

Trailing Year endedEBITDA twelve December months ended 31 March 31In thousands 2021 2020 Net income $ 22,286 $ 21,298 Exclude: Income from discontinued (515 ) (515 )operations, net of taxAdd back: Taxes on Continuing operations 16,158 11,576 Depreciation and amortization 54,931 56,600 Interest expense, net 6,620 6,623 EBITDA 99,480 95,582 Adjustments: Restructuring charge - Metallized operations 3,758 7,211 Cost optimization actions 4,231 5,979 Corporate headquarter relocation 1,026 871 Pension settlement expenses, net 6,081 6,154 COVID-19 incremental costs 2,715 2,715 Asset impairment charge 900 900 Strategic initiatives 2,170 1,567 Timberland sales and related costs (2,232 ) (1,382 )Adjusted EBITDA $ 118,129 $ 119,597

Leverage March 31 December 31 In thousands 2021 2020 Net Debt $ 219,380 $ 213,940 Divided by Adjusted EBITDA 118,129 119,597 Net leverage 1.9 x 1.8 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 Companys 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 Glatfelters 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 Companys 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 Companys annualized net sales approximate $916 million with customers in over 100 countries and approximately 2,415 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) 225-2793ramesh.shettigar@glatfelter.com eileen.beck@glatfelter.com