GlobeNewswire Inc | Aug 3, 2021 06:50AM EDT

August 03, 2021

~ Successful Mount Holly integration contributed favorably to Q2 results

~ Acquisition of Jacob Holm will add scale and new technologies, enhancing engineered materials portfolio

CHARLOTTE, N.C., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Glatfelter Corporation (NYSE: GLT), a leading global supplier of engineered materials, today reported net income for the three months ended June30, 2021 of $1.5 million, or $0.03 per diluted share, compared with a loss of $2.3 million, or a loss of $0.05 per share, in the same period a year ago. The results include the acquisition of Georgia-Pacifics U.S. nonwovens business (Mount Holly) effective May 13, 2021. Adjusted earnings from continuing operations for the three months ended June30, 2021 and 2020, were $8.0 million, or $0.18 per share, compared with $9.9 million, or $0.22 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 June30, 2021 totaled $244.9 million, compared with $216.2 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 7.1% and 5.0%, respectively.

Despite entering the second quarter expecting continued softer demand from customer destocking, Airlaid Materials recorded higher than expected volume growth driven by a rebound in tabletop products as in-person dining began to recover globally, said Dante C. Parrini, Chairman and Chief Executive Officer. The higher volumes, combined with increased production and a strong contribution from Mount Holly, propelled Glatfelter to deliver positive overall results compared to expectations.

Mr. Parrini added, In Composite Fibers, shipments were up slightly from the first quarter and our team continues to successfully implement the cost-related price increases we announced earlier this year. While our pricing actions only partially offset the rise in costs of raw materials, energy, and freight, we expect the benefit of our price increases to be more fully realized in the second half of 2021, further counteracting inflationary pressures in this segment. We remain disciplined in our approach toward managing costs throughout the entire supply chain while ensuring continued and timely delivery of high-quality products to our customers.

Mr. Parrini concluded, While we have been navigating the dynamic supply and demand environment stemming from the pandemic, our team remains committed to Glatfelters ongoing business transformation by making significant progress in executing our growth strategy. The newly-acquired Mount Holly facility made an immediate contribution to our Airlaid segment, and it strategically positions us to participate in the growing demand within health and hygiene categories. Of additional importance, on July 22, we announced the acquisition of Jacob Holm, a global leading manufacturer of premium quality spunlace nonwovens. This transaction will further diversify our end markets and technologies, enhance our overall innovation capabilities and add meaningful scale to the Company.

Second 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 June 30 2021 2020 In thousands, except per share Amount EPS Amount EPS Net income (loss) $ 1,410 $ 0.03 $ (2,416 ) $ (0.05 )Exclude: Loss from discontinued 82 ? 135 ? operations, net of taxIncome (loss) from continuing 1,492 0.03 (2,281 ) (0.05 )operationsAdjustments (pre-tax): Strategic initiatives 7,831 ? Corporate headquarters 206 ? relocationRestructuring charge - ? 5,067 Metallized operationsCost optimization actions ? 1,349 Pension settlement expenses, ? 6,330 netCOVID-19 incremental costs ? 1,180 Asset impairment charge ? 900 Timberland sales and related (1,553 ) (601 ) costsTotal adjustments (pre-tax) 6,484 14,225 Income taxes ^(1) (50 ) (2,047 ) CARES Act of 2020 tax provision 90 ? ^(2)Total after-tax adjustments 6,524 0.15 12,178 0.27 Adjusted earnings from $ 8,016 $ 0.18 $ 9,897 $ 0.22 continuing operations

-- Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated. -- 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 June 30 Dollars in 2021 2020 Change thousands Tons shipped 34,471 29,032 5,439 18.7 %(metric)Net sales $ 141,598 $ 122,137 $ 19,461 15.9 %Operating income 11,063 11,487 (424 ) (3.7 )%Operating margin 7.8 % 9.4 %

Composite Fibers net sales increased $19.5 million or 15.9% in the second quarter of 2021, compared to the year-ago quarter, mainly driven by a 95% increase in our wallcover sales from the trough of the pandemic in 2020 and favorable currency translation of $10.7 million. Overall shipments, excluding metallized which was restructured in the second quarter of 2020, were up 26% versus the second quarter of 2020.

Composite Fibers operating income of $11.1 million was $0.4 million lower compared to the second quarter of 2020. Raw material and energy prices were $6.0 million higher than the same period last year and partly offset by approximately $2.0 million of price increases. In addition, higher sales volume for wallcover, electrical, and coffee products, combined with increased production to meet customer demand, fully offset input price inflation. The impact of currency and related hedging activity negatively impacted earnings by $0.6 million.

Airlaid Materials

Three months ended June 30 Dollars in 2021 2020 Change thousands Tons shipped 34,315 33,277 1,038 3.1 %(metric)Net sales $ 103,313 $ 94,046 $ 9,267 9.9 %Operating income 8,431 12,292 (3,861 ) (31.4 )%Operating margin 8.2 % 13.1 %

Airlaid Materials net sales increased $9.3 million in the year-over-year comparison, including six weeks of sales from Mount Holly. Shipments were 3.1% higher driven by Mount Holly as well as a significant increase in tabletop demand as in-person dining began to recover globally. These increases were partially offset by lower shipments in the hygiene and wipes categories related to customer destocking from elevated inventory levels maintained during the pandemic. Currency translation was $4.6 million favorable.

Airlaid Materials second quarter 2021 operating income of $8.4 million was $3.9 million lower when compared to the second quarter of 2020. Higher shipments were more than offset by unfavorable mix negatively impacting earnings by $0.9 million while operations were $1.9 million unfavorable driven by lower production to adjust to customer demand and manage 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 $0.8 million. The impact of currency and related hedging activity further negatively impacted earnings by $0.3 million.

Other Financial Information

The amount of Other and Unallocated operating expense in the table of Segment Financial Information totaled $11.4 million in the second quarter of 2021 compared with $14.7 million in the same period a year ago. Excluding the items identified to present adjusted earnings, unallocated expenses for the second quarter of 2021 decreased $1.9 million compared to the second quarter of 2020.

In the second quarter of 2021, income from continuing operations totaled $5.5 million and income tax expense totaled $4.0 million. On adjusted pre-tax income of $12.0 million, income tax expense was $4.0 million in the second quarter of 2021. The comparable amounts in the same quarter of 2020 were $14.5 million and $4.6 million, respectively. The effective tax rate on adjusted earnings was 33% in the second quarter of 2021.

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:

Six months ended June 30 2021 2020 In thousands, except per share Amount EPS Amount EPS Net income $ 9,804 $ 0.22 $ 4,990 $ 0.11 Exclude: Loss from discontinued 82 ? 135 0.01 operations, net of taxIncome from continuing 9,886 0.22 5,125 0.12 operationsAdjustments (pre-tax) Strategic initiatives 8,434 ? Corporate headquarters 361 ? relocationRestructuring charge - ? 11,054 Metallized operationsCost optimization actions ? 3,097 Pension settlement expenses, net ? 6,403 COVID-19 incremental costs ? 1,180 Asset impairment charge ? 900 Timberland sales and related (2,403 ) (601 ) costsTotal adjustments (pre-tax) 6,392 22,033 Income taxes ^(1) 31 (3,882 ) CARES Act of 2020 tax provision 183 (2,569 ) (benefit) ^(2)Total after-tax adjustments 6,606 0.14 15,582 0.34 Adjusted earnings from $ 16,492 $ 0.37 $ 20,707 $ 0.46 continuing operations

-- Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated. -- 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 $84.2 million as of June30, 2021, and net debt was $397.2 million compared with $213.9 million at the end of 2020. Net leverage increased to 3.1 times at June30, 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).

Effective May 13, 2021, we completed our previously announced acquisition of Georgia-Pacifics U.S. nonwovens business which consists of an airlaid manufacturing operation in Mount Holly, North Carolina, along with a nonwovens product development operation and associated employees in Memphis, Tennessee. The purchase price totaled $175 million, subject to customary purchase price adjustments. We financed the acquisition through a combination of cash-on-hand and $160 million of borrowings under our existing revolving credit facility.

Capital expenditures during the six months of 2021 and 2020 totaled $11.2 million and $12.0 million, respectively. Adjusted free cash flow for the first six months of 2021 was $(4.8) million compared with $1.6 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 second 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 2^nd Quarter 2021 Earnings Release Conference Call When: Tuesday, August 3, 2021, 11:00 a.m. (ET) Number: US dial 888.335.5539 International dial 973.582.2857 Conference ID: 4388692 Webcast: https://www.glatfelter.com/investors/ webcasts-and-presentations/ Rebroadcast Dates: August 3, 2021, 2:00 p.m. through August 17, 12:00 p.m. Rebroadcast Within US dial 855.859.2056Number: International dial 404.537.3406 Conference ID: 4388692

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 Six months ended June 30 June 30In thousands, except 2021 2020 2021 2020 per share Net sales $ 244,911 $ 216,183 $ 470,585 $ 447,743 Costs of products sold 209,357 184,120 395,735 378,878 Gross profit 35,554 32,063 74,850 68,865 Selling, general and 28,984 23,551 51,811 48,072 administrative expensesGains on dispositionsof plant, equipment and (1,553 ) (597 ) (2,403 ) (597 )timberlands, netOperating income 8,123 9,109 25,442 21,390 Non-operating income (expense)Interest expense (1,772 ) (1,759 ) (3,303 ) (3,537 )Interest income 11 87 31 351 Pension settlement ? (6,330 ) ? (6,403 )expenses, netOther, net (849 ) (835 ) (1,073 ) (1,515 )Total non-operating (2,610 ) (8,837 ) (4,345 ) (11,104 )expenseIncome from continuingoperations before 5,513 272 21,097 10,286 income taxesIncome tax provision 4,021 2,553 11,211 5,161 Income (loss) from 1,492 (2,281 ) 9,886 5,125 continuing operations Discontinued operations:Loss before income (82 ) (135 ) (82 ) (135 )taxesIncome tax provision ? ? ? ? Loss from discontinued (82 ) (135 ) (82 ) (135 )operationsNet income (loss) $ 1,410 $ (2,416 ) $ 9,804 $ 4,990 Basic earnings per shareIncome (loss) from $ 0.03 $ (0.05 ) $ 0.22 $ 0.12 continuing operationsLoss from discontinued ? ? ? (0.01 )operationsBasic earnings per $ 0.03 $ (0.05 ) $ 0.22 $ 0.11 share Diluted earnings per shareIncome (loss) from $ 0.03 $ (0.05 ) $ 0.22 $ 0.12 continuing operationsLoss from discontinued ? ? ? (0.01 )operationsDiluted earnings per $ 0.03 $ (0.05 ) $ 0.22 $ 0.11 share Cash dividend declared $ 0.14 $ 0.135 $ 0.275 $ 0.265 per common share Weighted average shares outstandingBasic 44,563 44,343 44,507 44,309 Diluted 44,872 44,343 44,865 44,541

Segment Financial Information(unaudited)

Three months ended June 30Dollars in CompositeFibers Airlaid Materials OtherandUnallocated Total thousands 2021 2020 2021 2020 2021 2020 2021 2020 Net sales $ 141,598 $ 122,137 $ 103,313 $ 94,046 $ ? $ ? $ 244,911 $ 216,183 Costs of 119,334 100,387 90,138 77,581 (115 ) 6,152 209,357 184,120 products soldGross profit 22,264 21,750 13,175 16,465 115 (6,152 ) 35,554 32,063 (loss)SG&A 11,201 10,263 4,744 4,173 13,039 9,115 28,984 23,551 Gains ondispositions of plant,equipmentandtimberlands, ? ? ? ? (1,553 ) (597 ) (1,553 ) (597 )netTotaloperating 11,063 11,487 8,431 12,292 (11,371 ) (14,670 ) 8,123 9,109 income (loss)Non operating ? ? ? ? (2,610 ) (8,837 ) (2,610 ) (8,837 )expenseIncome (loss)before income $ 11,063 $ 11,487 $ 8,431 $ 12,292 $ (13,981 ) $ (23,507 ) $ 5,513 $ 272 taxes Supplementary DataMetric tons 34,471 29,032 34,315 33,277 ? ? 68,786 62,309 soldDepreciation,depletion andamortization $ 7,000 $ 6,431 $ 6,767 $ 5,473 $ 966 $ 2,302 $ 14,733 $ 14,206 ($ inthousands) ^(1)Capital 2,882 2,105 1,297 1,712 1,653 1,180 5,832 4,997 expenditures

Six monthsended June 30Dollars in CompositeFibers Airlaid Materials OtherandUnallocated Total thousands 2021 2020 2021 2020 2021 2020 2021 2020 Net sales $ 282,847 $ 254,848 $ 187,738 $ 192,895 $ ? $ ? $ 470,585 $ 447,743 Costs of 233,601 207,372 162,723 159,827 (589 ) 11,679 395,735 378,878 products soldGross profit 49,246 47,476 25,015 33,068 589 (11,679 ) 74,850 68,865 (loss)SG&A 22,118 20,887 9,387 8,754 20,306 18,431 51,811 48,072 Gains ondispositions of plant,equipmentandtimberlands, ? ? ? ? (2,403 ) (597 ) (2,403 ) (597 )netTotaloperating 27,128 26,589 15,628 24,314 (17,314 ) (29,513 ) 25,442 21,390 income (loss)Non operating ? ? ? ? (4,345 ) (11,104 ) (4,345 ) (11,104 )expenseIncome (loss)before income $ 27,128 $ 26,589 $ 15,628 $ 24,314 $ (21,659 ) $ (40,617 ) $ 21,097 $ 10,286 taxes Supplementary DataMetric tons 68,611 65,015 63,179 68,316 ? ? 131,790 133,331 soldDepreciation,depletion andamortization $ 13,981 $ 12,897 $ 12,615 $ 10,924 $ 1,870 $ 5,787 $ 28,466 $ 29,608 ($ inthousands) ^(1)Capital 5,655 6,061 3,036 3,815 2,520 2,135 11,211 12,011 expenditures

-- 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)

Six months ended June 30In thousands 2021 2020 Cash Flow Data Cash from continuing operations provided (used) by:Operating activities $ 1,365 $ (912 )Investing activities (181,136 ) (11,448 )Financing activities 165,138 (23,175 ) Depreciation, depletion and amortization 28,466 29,608 Capital expenditures 11,211 12,011

June 30 December 31 2021 2020 Balance Sheet Data Cash and cash equivalents $ 84,164 $ 99,581 Total assets 1,460,090 1,286,881 Total debt 481,412 313,521 Shareholders? equity 571,245 577,932

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 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 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 Six months ended June 30In thousands 2021 2020 Cash from operations $ 1,365 $ (912 )Capital expenditures (11,211 ) (12,011 )Free cash flow (9,846 ) (12,923 )Adjustments: Cost optimization actions 1,640 2,261 Strategic initiatives 1,573 ? Restructuring charge - Metallized operations 1,252 4,341 Corporate headquarters relocation 784 54 Fox River environmental matter 775 2,158 Pension settlement ? 6,330 COVID-19 incremental costs ? 1,180 Tax refunds on adjustments to adjusted earnings (976 ) (1,833 )Adjusted free cash flow $ (4,798 ) $ 1,568

Net Debt June 30 December 31 In thousands 2021 2020 Current portion of long-term debt $ 24,267 $ 25,057 Short-term debt 11,884 ? Long term debt 445,261 288,464 Total 481,412 313,521 Less: Cash (84,164 ) (99,581 )Net Debt $ 397,248 $ 213,940

EBITDA Trailing twelve months Year ended ended June 30 December 31In thousands 2021 2020 Net income $ 26,112 $ 21,298 Exclude: Income from discontinued (568 ) (515 )operations, net of taxAdd back: Taxes on Continuing 17,626 11,576 operationsDepreciation and amortization 55,458 56,600 Interest expense, net 6,709 6,623 EBITDA 105,337 95,582 Pro forma - Mount Holly ^(1) 10,368 Adjustments: Strategic initiatives 10,001 1,567 Cost optimization actions 2,882 5,979 COVID-19 incremental costs 1,535 2,715 Corporate headquarters relocation 1,232 871 Restructuring charge - Metallized 57 7,211 operationsAsset impairment charge ? 900 Pension settlement expenses, net (249 ) 6,154 Timberland sales and related costs (3,184 ) (1,382 )Adjusted EBITDA $ 127,979 $ 119,597

-- Gives effect to historical Mount Holly EBITDA prior to the May 13, 2021 acquisition date.

Leverage June 30 December 31 In thousands 2021 2020 Net Debt $ 397,248 $ 213,940 Divided by Adjusted EBITDA 127,979 119,597 Net leverage 3.1 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 $1 billion with customers in over 100 countries and approximately 2,550 employees worldwide. Operations include twelve 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