GlobeNewswire Inc | Aug 4, 2020 06:50AM EDT

August 04, 2020

~ Another record quarter for Airlaid Materials profitability ~~W0:

~ All Glatfelter production facilities remain operational under extensive health and safety protocols ~~W0:

YORK, Pa., Aug. 04, 2020 (GLOBE NEWSWIRE) -- Glatfelter (NYSE: GLT), a leading global supplier of engineered materials, today reported its results for the second quarter of 2020 which are summarized in the following table:

Three months ended June 30 2020 2019In thousands, except per Amount EPS Amount EPSshare Net income (loss) $ (2,416 ) $ (0.05 ) $ 5,831 $ 0.13Income (loss) from (2,281 ) (0.05 ) 6,293 0.14continuing operationsAdjusted earnings from 9,897 0.22 8,452 0.19continuing operations

On an adjusted basis, earnings from continuing operations for thethree months ended June30, 2020 and 2019, were $9.9 million, or $0.22 per share, compared with$8.5 million, or $0.19 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 totaled $216.2 million and $235.1 million for thethree months ended June30, 2020 and 2019, respectively. On a constant currency basis, Composite Fibers and Airlaid Materials net sales decreased by 6.3% and 7.2%, respectively.

Glatfelters solid second quarter results, in the midst of a global pandemic, demonstrate the resiliency of our new business model and continued demand for our portfolio of engineered materials that are essential for producing a variety of consumer staples, said Dante C. Parrini, Chairman and Chief Executive Officer. Composite Fibers outperformed expectations for the quarter, due in part to strong shipments in the food and beverage category and better than expected demand for wallcover products. Profitability for this segment relative to guidance was also better than expected, driven by lower downtime and continued cost control.

In Airlaid Materials, we saw exceptional growth in home care and health and hygiene products, although overall shipments for the segment were hampered by the pandemics impact on tabletop demand as restaurants around the globe were either closed or operating at dramatically reduced capacity. Despite this headwind on volumes, Airlaid Materials achieved record quarterly EBITDA with margin of 19%.

Mr. Parrini added, I am proud of how Glatfelter PEOPLE are responding to the challenges related to COVID-19 and are successfully continuing to operate globally while keeping our workforce safe. Glatfelters ongoing transformation into a more agile and cost-effective business, coupled with a portfolio of essential consumer staples, have enabled us to optimize performance in this unprecedented and volatile year. The trust and confidence of our customers have been further strengthened in these uncertain times by consistently and reliably delivering premium quality products. Due to the strength of our improved balance sheet, the Board demonstrated its commitment to a steady return of capital to shareholders by increasing the dividend in the second quarter.

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 2020 2019In thousands, except per share Amount EPS Amount EPS Net income (loss) $ (2,416 ) $ (0.05 ) $ 5,831 $ 0.13Exclude: Loss from discontinued 135 ? 462 0.01operations, net of taxIncome (loss) from continuing (2,281 ) (0.05 ) 6,293 0.14operationsAdjustments (pre-tax) Restructuring charge - Metallized 5,067 ? operationsCost optimization actions 1,349 1,984 Pension settlement expenses, net 6,330 ? COVID-19 incremental costs 1,180 ? Asset impairment charge 900 ? Strategic initiatives ? 142 Timberland sales and related costs (601 ) (423 ) Total adjustments (pre-tax) 14,225 1,703 Income taxes ^(1) (2,047 ) 456 Total after-tax adjustments 12,178 0.27 2,159 0.05Adjusted earnings from continuing $ 9,897 $ 0.22 $ 8,452 $ 0.19operations

(1) Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated.

The sum of individual per share amounts set forth above may not agree to adjusted earnings per share due to rounding.

A description of each of the adjustments presented above is included later in this release.

Composite Fibers

Three months ended June 30 Dollars in thousands 2020 2019 Change Tons shipped (metric) 29,032 34,523 (5,491) (15.9 )%Net sales $122,137 $132,581 $(10,444) (7.9 )%Operating income 11,487 12,985 (1,498) (11.5 )%Operating margin 9.4 % 9.8 %

Composite Fibers net sales decreased $10.4 million or 7.9%, compared to the year-ago quarter driven by lower shipments of wallcover products, which were down 49%, as well as unfavorable foreign currency translation of $2.0 million.

Composite Fibers operating income of $11.5 million was $1.5 million lower, or approximately 12% unfavorable, compared to the second quarter of 2019. Lower shipping volumes impacted results by $2.1 million driven predominantly by lower wallcover demand. The downtime required to manage inventory levels for nonwoven wallcover products was mostly offset by improved operations, strong cost control actions and higher production to meet strong demand in our food and beverage category. A benefit of $3.1 million from lower input prices, primarily wood pulp, was partially offset by $2.0 million impact from lower selling prices. Currency unfavorably impacted results by $0.2 million compared to the year-ago quarter.

Airlaid Materials

Three months ended June 30 Dollars in thousands 2020 2019 Change Tons shipped (metric) 33,277 34,041 (764) (2.2 )%Net sales $94,046 $102,472 $(8,426) (8.2 )%Operating income 12,292 10,362 1,930 18.6 %Operating margin 13.1 % 10.1 %

Airlaid Materials net sales decreased $8.4 million in the year-over-year comparison. Shipments were lower by 2.2% due to weak demand for tabletop products as restaurants globally were closed or operated at dramatically limited capacity. This shortfall in demand was mostly offset by strong orders for home care and health and hygiene products. Selling prices were $4.6 million lower due to contractual cost pass-through arrangements, while currency translation was unfavorable by $1.1 million.

Airlaid Materials second quarter 2020 operating income of $12.3 million was $1.9 million favorable, or approximately 19% higher, when compared to the second quarter of 2019. Improved sales mix favorably impacted results by $0.6 million, while price declines due to contractual raw material pass-through provisions were more than offset by lower raw material and energy prices, adding net $0.5 million of profit. Efficient operations complemented by disciplined cost control favorably impacted results by $0.9 million, driven by higher demand for essential product categories and improved performance in both North American facilities compared to the year-ago quarter.

Other Financial Information

The amount of Other and Unallocated operating expense in the table of Segment Financial Information totaled$14.7 million in thesecond quarter of 2020 compared with$8.2 million in the same period a year ago. Excluding the items identified to present adjusted earnings, unallocated expenses for the second quarter of 2020 increased $0.3 million compared to the second quarter of 2019.

As previously reported in 2019, the Company terminated its qualified pension plan. During the second quarter of 2020, the Company recorded a $6.3 million charge for excise taxes, net of post settlement adjustments, in connection with the completion of the reversion of $55.5 million of excess pension plan assets. After transferring $14.1 million to a suspense account to fund future 401(k) contributions and accruing $8.3 million of excise taxes, approximately $33.1 million became available for general corporate purposes.

During the second quarter of 2020, the Company recorded non-cash asset impairment charges of $0.9 million related to a trade name intangible asset acquired in connection with the 2013 Dresden wallcover acquisition. The charge was due to a change in the estimated fair value of the trade name, primarily driven by lower forecasted wallcover revenues associated with economic instability in Russia and Ukraine and incremental impacts from the COVID-19 pandemic on this business.

In thesecond quarter of 2020, income from continuing operations totaled$0.3 million and income tax expense totaled $2.6 million. On adjusted pre-tax income of $14.5 million, income tax expense was $4.6 million in thesecond quarter of 2020. The comparable amounts in the same quarter of 2019 were $13.7 million and $5.2 million, respectively. The effective tax rate on adjusted earnings was 32% in the second quarter of 2020.

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 2020 2019 In thousands, except per share Amount EPS Amount EPS Net income $ 4,990 $ 0.11 $ 11,117 $ 0.25 Exclude: (Income) loss from 135 0.01 (221 ) ? discontinued operations, net of taxIncome from continuing operations 5,125 0.12 10,896 0.25 Adjustments (pre-tax) Restructuring charge - Metallized 11,054 ? operationsCost optimization actions 3,097 5,907 Pension settlement expenses, net 6,403 ? COVID-19 incremental costs 1,180 ? Asset impairment charge 900 ? Airlaid capacity expansion costs ? 1,014 Debt refinancing ? 992 Strategic initiatives ? 249 Fox River environmental matter ? (2,509 ) Timberland sales and related costs (601 ) (881 ) Total adjustments (pre-tax) 22,033 4,772 Income taxes ^(1) (3,882 ) 67 CARES Act of 2020 tax benefit ^(2) (2,569 ) ? Total after-tax adjustments 15,582 0.34 4,839 0.11 Adjusted earnings from continuing $ 20,707 $ 0.46 $ 15,735 $ 0.35 operations

(1) Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated. Tax benefit recorded in connection with passage of the Coronavirus Aid,(2) 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.

Balance Sheet and Other Information

Cash and cash equivalents totaled$76.6 million as ofJune30, 2020, and net debt was $270.9 million compared with $233.7 million at the end of 2019. The increase in net debt primarily reflects working capital and the funding of a 401(k) suspense account in connection with the completion of the pension plan asset reversion. Net leverage on June30, 2020 andDecember31, 2019 was 2.4 times and 2.2 times, respectively. (Refer to the calculation of this measure provided in the tables at the end of this release.)

Capital expenditures during the first six months of 2020 and 2019 totaled $12.0 million and $10.6 million, respectively. Adjusted free cash flow for the six months of 2020 was a use of $12.9 million compared with a use of $29.9 million in the year earlier period. (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 which 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 2020 Earnings Release Conference Call When: Tuesday, August 4, 2020, 11:00 a.m. (ET) Number: US dial 888.335.5539 International dial 973.582.2857 Conference ID: 4699123 Webcast: https://www.glatfelter.com/investors/ webcasts-and-presentations/ Rebroadcast Dates: August 4, 2020, 2:00 p.m. through August 18, 2020, 12:00 p.m. Rebroadcast Within US dial 855.859.2056Number: International dial 404.537.3406 Conference ID: 4699123

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.

P. H. Glatfelter Company and subsidiariesConsolidated Statements of Income(unaudited)

Three months ended Six months ended June 30 June 30In thousands, except 2020 2019 2020 2019 per share Net sales $ 216,183 $ 235,053 $ 447,743 $ 464,186 Costs of products sold 184,120 197,553 378,878 391,069 Gross profit 32,063 37,500 68,865 73,117 Selling, general and 23,551 22,800 48,072 47,422 administrative expensesGains on dispositionsof plant, equipment and (597 ) (423 ) (597 ) (1,092 )timberlands, netOperating income 9,109 15,123 21,390 26,787 Non-operating income (expense)Interest expense (1,759 ) (1,865 ) (3,537 ) (6,611 )Interest income 87 241 351 746 Pension settlement (6,330 ) ? (6,403 ) ? expenses, netOther, net (835 ) (1,551 ) (1,515 ) (2,513 )Total non-operating (8,837 ) (3,175 ) (11,104 ) (8,378 )expenseIncome from continuingoperations before 272 11,948 10,286 18,409 income taxesIncome tax provision 2,553 5,655 5,161 7,513 Income (loss) from (2,281 ) 6,293 5,125 10,896 continuing operations Discontinued operations:Income (loss) before (135 ) (485 ) (135 ) 229 income taxesIncome tax provision ? (23 ) ? 8 (benefit)Income (loss) from (135 ) (462 ) (135 ) 221 discontinued operationsNet income (loss) $ (2,416 ) $ 5,831 $ 4,990 $ 11,117 Basic earnings (loss) per shareIncome (loss) from $ (0.05 ) $ 0.14 $ 0.12 $ 0.25 continuing operationsIncome (loss) from ? (0.01 ) (0.01 ) 0.01 discontinued operationsBasic earnings (loss) $ (0.05 ) $ 0.13 $ 0.11 $ 0.26 per share Diluted earnings (loss) per shareIncome (loss) from $ (0.05 ) $ 0.14 $ 0.12 $ 0.25 continuing operationsIncome (loss) from ? (0.01 ) (0.01 ) ? discontinued operationsDiluted earnings (loss) $ (0.05 ) $ 0.13 $ 0.11 $ 0.25 per share Cash dividend declared $ 0.135 $ 0.13 $ 0.265 $ 0.26 per common share Weighted average shares outstandingBasic 44,343 44,140 44,309 44,084 Diluted 44,343 44,382 44,541 44,351

Segment Financial Information(unaudited)



Three months ended June 30Dollars in CompositeFibers Airlaid Materials OtherandUnallocated Total thousands 2020 2019 2020 2019 2020 2019 2020 2019 Net sales $ 122,137 $ 132,581 $ 94,046 $ 102,472 $ - $ - $ 216,183 $ 235,053 Costs of 100,387 109,565 77,581 87,825 6,152 163 184,120 197,553 products soldGross profit 21,750 23,016 16,465 14,647 (6,152 ) (163 ) 32,063 37,500 (loss)SG&A 10,263 10,031 4,173 4,285 9,115 8,484 23,551 22,800 Gains ondispositions of plant,equipmentandtimberlands, - - - - (597 ) (423 ) (597 ) (423 )netTotaloperating 11,487 12,985 12,292 10,362 (14,670 ) (8,224 ) 9,109 15,123 income (loss)Non operating - - - - (8,837 ) (3,175 ) (8,837 ) (3,175 )expenseIncome (loss)before income $ 11,487 $ 12,985 $ 12,292 $ 10,362 $ (23,507 ) $ (11,399 ) $ 272 $ 11,948 taxes Supplementary DataMetric tons 29,032 34,523 33,277 34,041 - - 62,309 68,564 soldDepreciation,depletion and $ 6,431 $ 6,601 $ 5,473 $ 5,279 $ 2,302 $ 852 $ 14,206 $ 12,732 amortization^(1)Capital 2,105 1,516 1,712 2,821 1,180 431 4,997 4,768 expenditures

Six monthsended June 30Dollars in CompositeFibers Airlaid Materials OtherandUnallocated Total thousands 2020 2019 2020 2019 2020 2019 2020 2019 Net sales $ 254,848 $ 261,298 $ 192,895 $ 202,888 $ - $ - $ 447,743 $ 464,186 Costs of 207,372 216,128 159,827 173,814 11,679 1,127 378,878 391,069 products soldGross profit 47,476 45,170 33,068 29,074 (11,679 ) (1,127 ) 68,865 73,117 (loss)SG&A 20,887 20,837 8,754 8,674 18,431 17,911 48,072 47,422 Gains ondispositions of plant,equipmentandtimberlands, - - - - (597 ) (1,092 ) (597 ) (1,092 )netTotaloperating 26,589 24,333 24,314 20,400 (29,513 ) (17,946 ) 21,390 26,787 income (loss)Non operating - - - - (11,104 ) (8,378 ) (11,104 ) (8,378 )expenseIncome (loss)before income $ 26,589 $ 24,333 $ 24,314 $ 20,400 $ (40,617 ) $ (26,324 ) $ 10,286 $ 18,409 taxes Supplementary DataMetric tons 65,015 66,052 68,316 67,218 - - 133,332 133,270 soldDepreciation,depletion and $ 12,897 $ 13,275 $ 10,924 $ 10,547 $ 5,787 $ 1,698 $ 29,608 $ 25,520 amortization^(1)Capital 6,061 4,704 3,815 5,013 2,135 916 12,011 10,633 expenditures









The amount presented in 2020 in the Other and unallocated column includes(1) accelerated depreciation incurred in connection with the restructuring of Composite Fibers? Metallized operations.

Selected Financial Information(unaudited)

Six months ended June 30In thousands 2020 2019 Cash Flow Data Cash from continuing operations used by: Operating activities $ (912 ) $ (19,285 )Investing activities (11,448 ) (11,581 )Financing activities (23,175 ) (40,353 ) Depreciation, depletion and amortization 29,608 25,520 Capital expenditures 12,011 10,633

June 30 December 31 2020 2019 Balance Sheet Data Cash and cash equivalents $ 76,619 $ 126,201 Total assets 1,226,884 1,283,794 Total debt 347,559 359,859 Shareholders? equity 540,999 555,959

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 papers and airlaid non-woven 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:

-- 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 our Caerphilly, UK site. For the second quarter, the charge includes a non-cash charge of $2.3 million associated with accelerated depreciation and the write-off of inventory and spare parts in addition to cash severance costs totaling $2.8 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. -- Pension settlement expenses, net. This adjustment reflects expenses incurred in connection with the termination of the Companys qualified pension plan in 2019 and the reversion of excess pension plan assets to the Company in the second quarter of 2020. In the fourth quarter of 2019, the Company incurred a $75.3 million pension settlement charge in connection with the termination of the plan. Since the pension plan was fully funded, the settlement of the pension obligations did not require the use of the Companys cash, but instead was accomplished with plan assets. In connection with the reversion of excess pension plan assets in the second quarter of 2020, the Company incurred pension settlement expenses related to excise taxes, net of post settlement adjustments and certain related professional fees. -- 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. -- 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. -- Airlaid capacity expansion. These adjustments reflect non-capitalized, one-time costs incurred related to the start-up of a new airlaid production facility in Fort Smith, Arkansas and implementation of a new business system. -- Debt refinancing costs. Represents a charge to write-off unamortized debt issuance costs in connection with the redemption of the Companys $250 million, 5.375% Notes. -- 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 the related integration. -- Fox River environmental matter. This adjustment excludes a gain and reflects a decrease in the Companys overall reserve included in income for the Fox River matter primarily due to the resolution of the litigation in the first quarter of 2019. -- 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 the tax benefit recognized 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 2020 2019 Cash from operations $ (912 ) $ (19,285 )Less: Capital expenditures (12,011 ) (10,633 )Adjusted free cash flow $ (12,923 ) $ (29,918 )

Net Debt June 30 December 31 In thousands 2020 2019 Current portion of long-term debt $ 22,866 $ 22,940 Long term debt 324,693 336,919 Total 347,559 359,859 Less: Cash (76,619 ) (126,201 )Net Debt $ 270,940 $ 233,658

EBITDA Trailing twelve Year ended months ended June 30 December 31In thousands 2020 2019 Net loss $ (27,668 ) $ (21,540 )Exclude: (Income) loss from (3,314 ) (3,670 )discontinued operations, net of taxAdd Taxes on Continuing (11,594 ) (9,242 )back: operations Depreciation and 54,908 50,820 amortization Interest expense, net 6,606 9,285 EBITDA 18,938 25,653 Adjustments: Restructuring charge - Metallized 7,154 ? operationsCost optimization actions 5,773 8,583 Pension settlement expenses, net 81,729 75,326 COVID-19 incremental costs 1,180 ? Asset impairment charge 900 ? Airlaid capacity expansion costs ? 1,014 Strategic initiatives ? 249 Fox River environmental matter ? (2,509 )Timberland sales and related costs (1,292 ) (1,572 )Adjusted EBITDA $ 114,382 $ 106,744

Trailing twelve months Year endedLeverage ended December June 30 31In thousands 2020 2019 Net Debt $ 270,940 $ 233,658 Divided by Adjusted 114,382 106,744 EBITDANet leverage 2.4 x 2.2 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 York, PA, and transitioning to new headquarters in Charlotte, NC, the Companys annualized net sales approximate $925 million with customers in over 100 countries and approximately 2,500 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) 225-2793