GlobeNewswire Inc | Nov 9, 2020 06:50AM EST

November 09, 2020

CHARLOTTE, N.C., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Glatfelter Corporation (NYSE: GLT), a leading global supplier of engineered materials, today reported its results for the third quarter of 2020 which are summarized in the following table:

Three months ended September 30 2020 2019 In thousands, except Amount EPS Amount EPS per share Net income $ 6,527 $ 0.15 $ 12,224 $ 0.28 Income from 6,527 0.15 8,643 0.19 continuing operationsAdjusted earningsfrom continuing 7,041 0.16 9,731 0.22 operations

On an adjusted basis, earnings from continuing operations for the three months ended September30, 2020 and 2019, were $7.0 million, or $0.16 per share, compared with $9.7 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 September30, 2020 totaled $233.5 million compared with $232.5 million during the same period in 2019. On a constant currency basis, Composite Fibers and Airlaid Materials net sales decreased by 0.5% and 6.4%, respectively.

Glatfelter delivered another quarter of solid results as both segments continued to safely produce and deliver essential engineered materials while maintaining a focus on operational excellence and cost discipline, said Dante C. Parrini, Chairman and Chief Executive Officer. Airlaid Materials continued to build on its strong results from the second quarter, achieving another quarter of record profit. Sequential quarter growth in Airlaid shipments was driven by a rebound in tabletop and steady demand in feminine hygiene and home care products. Composite Fibers shipments were also better than expected, increasing sequentially by 21%, as wallcover demand that had fallen at the beginning of the pandemic began to recover and remained steady through the quarter. Although volume growth in wallcover improved overall shipments for Composite Fibers, operating profit was impacted due to manufacturing downtime to manage inventory levels and optimize cash flow.

Mr. Parrini continued, Our steady performance during these uncertain times is a testament to the resilience of our employees and the agility of our business model, which is emblematic of the New Glatfelter. We continue to maintain our vigilant efforts to keep Glatfelter PEOPLE safe and ensure the uninterrupted availability of our products despite the challenging market conditions and volatility caused by the COVID-19 pandemic. Looking ahead, we remain focused on operational excellence and continuing our positive momentum to finish the year strong.

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 2020 2019 In thousands, except per share Amount EPS Amount EPS Net income $ 6,527 $ 0.15 $ 12,224 $ 0.28 Exclude: Income from discontinued ? ? (3,581 ) (0.09 )operations, net of taxIncome from continuing operations 6,527 0.15 8,643 0.19 Adjustments (pre-tax) Restructuring charge - Metallized 57 ? operationsCost optimization actions 1,270 1,736 Corporate headquarters relocation 610 ? Pension settlement expenses, net 389 ? COVID-19 incremental costs 586 ? Strategic initiatives 843 ? Timberland sales and related costs (412 ) (233 ) Total adjustments (pre-tax) 3,343 1,503 Income taxes ^(1) (375 ) (415 ) CARES Act of 2020 tax benefit ^(2) (2,454 ) ? Total after-tax adjustments 514 0.01 1,088 0.02 Adjusted earnings from continuing $ 7,041 $ 0.16 $ 9,731 $ 0.22 operations

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

(2) Tax benefit 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.

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 September 30 Dollars in 2020 2019 Change thousands Tons shipped 35,009 33,394 1,615 4.8 %(metric)Net sales $ 132,419 $ 127,704 $ 4,715 3.7 %Operating income 10,464 11,129 (665 ) (6.0 )%Operating margin 7.9 % 8.7 %

Composite Fibers net sales increased $4.7 million or 3.7%, compared to the year-ago quarter driven by higher shipments in the wallcover, technical specialty, and food and beverage product categories and favorable currency translation of $5.3 million. These increases were partially offset by lower selling prices of $3.0 million as well as lower metallized shipments following our exit of the more commoditized parts of this business at our Gernsbach, Germany facility earlier this year.

Composite Fibers operating income of $10.5 million was $0.7 million lower, or approximately 6% unfavorable, compared to the third quarter of 2019. Higher shipping volumes in most product categories improved operating profit by $0.3 million. A benefit of $2.0 million from lower input prices, primarily wood pulp, was offset by a $3.0 million impact from lower selling prices. Improved operations and strong cost control actions were offset by machine downtime previously planned to manage inventory and reduce labor costs.

Airlaid Materials

Three months ended September 30 Dollars in 2020 2019 Change thousands Tons shipped 34,752 35,907 (1,155 ) (3.2 )%(metric)Net sales $ 101,054 $ 104,811 $ (3,757 ) (3.6 )%Operating income 12,917 11,595 1,322 11.4 %Operating margin 12.8 % 11.1 %

Airlaid Materials net sales decreased $3.8 million in the year-over-year comparison. Despite the 98% sequential quarter improvement in tabletop volumes, shipments overall for the segment were lower by 3.2% on a year-over-year basis due to continued softer demand for tabletop products as restaurants remained operating at dramatically limited capacity. This shortfall in demand was mostly offset by strong orders for home care, feminine hygiene and wipes products. Selling prices were $3.5 million lower due to contractual cost pass-through arrangements but mostly offset by favorable currency translation of $2.9 million.

Airlaid Materials third quarter 2020 operating income of $12.9 million was $1.3 million favorable, or approximately 11% higher, when compared to the third quarter of 2019. Improved sales mix favorably impacted results by $0.4 million, while price declines due to contractual raw material pass-through provisions outpaced lower raw material and energy prices, reducing operating profit by a net $0.4 million. Disciplined cost control, complemented by efficient operations, positively impacted results by $0.1 million, and a more favorable foreign exchange environment benefited results by $1.2 million.

Other Financial Information

The amount of Other and Unallocated operating expense in the table of Segment Financial Information totaled $9.4 million in the third 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 third quarter of 2020 decreased $0.5 million compared to the third quarter of 2019.

In the third quarter of 2020, income from continuing operations totaled $10.1 million and income tax expense totaled $3.6 million. On adjusted pre-tax income of $13.5 million, income tax expense was $6.4 million in the third quarter of 2020. The comparable amounts in the same quarter of 2019 were $13.3 million and $3.6 million, respectively. The effective tax rate on adjusted earnings was 48% in the third 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:

Nine months ended September 30 2020 2019 In thousands, except per share Amount EPS Amount EPS Net income $ 11,517 $ 0.26 $ 23,341 $ 0.53 Exclude: (Income) loss from 135 ? (3,802 ) (0.09 )discontinued operations, net of taxIncome from continuing operations 11,652 0.26 19,539 0.44 Adjustments (pre-tax) Restructuring charge - Metallized 11,111 ? operationsCost optimization actions 4,367 7,643 Corporate headquarters relocation 610 ? Pension settlement expenses, net 6,792 ? COVID-19 incremental costs 1,766 ? Asset impairment charge 900 ? Airlaid capacity expansion costs ? 1,014 Debt refinancing ? 992 Strategic initiatives 843 249 Fox River environmental matter ? (2,509 ) Timberland sales and related costs (1,013 ) (1,114 ) Total adjustments (pre-tax) 25,376 6,275 Income taxes ^(1) (4,257 ) (348 ) CARES Act of 2020 tax benefit ^(2) (5,023 ) ? Total after-tax adjustments 16,096 0.36 5,927 0.13 Adjusted earnings from continuing $ 27,748 $ 0.62 $ 25,466 $ 0.57 operations

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

(2) Tax benefit 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.

Balance Sheet and Other Information

Cash and cash equivalents totaled $59.2 million as of September30, 2020, and net debt was $272.7 million compared with $233.7 million at the end of 2019. The increase in net debt primarily reflects the impact from foreign exchange and the funding of a 401(k) account to offset future company retirement contributions as part of the completion of the pension plan asset reversion. Net leverage on September30, 2020 and December31, 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 nine months of 2020 and 2019 totaled $20.2 million and $18.0 million, respectively. Adjusted free cash flow for the nine months of 2020 was $4.4 million compared with a use of $2.4 million in the prior year 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 third 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 3^r^d Quarter 2020 Earnings Release Conference Call When: Monday, November 9, 2020, 11:00 a.m. (ET) Number: US dial 888.335.5539 International dial 973.582.2857 Conference ID: 5797672 Webcast: https://www.glatfelter.com/investors/ webcasts-and-presentations/ Rebroadcast Dates: November 9, 2020, 2:00 p.m. through November 23, 2020, 12:00 p.m. Rebroadcast Within US dial 855.859.2056Number: International dial 404.537.3406 Conference ID: 5797672

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 Nine months ended September 30 September 30In thousands, except 2020 2019 2020 2019 per share Net sales $ 233,473 $ 232,515 $ 681,216 $ 696,701 Costs of products sold 195,222 194,494 574,100 585,563 Gross profit 38,251 38,021 107,116 111,138 Selling, general and 24,635 23,721 72,707 71,143 administrative expensesGains on dispositionsof plant, equipment and (413 ) (235 ) (1,010 ) (1,327 )timberlands, netOperating income 14,029 14,535 35,419 41,322 Non-operating income (expense)Interest expense (1,810 ) (1,902 ) (5,347 ) (8,513 )Interest income 39 185 390 931 Pension settlement (389 ) ? (6,792 ) ? expenses, netOther, net (1,728 ) (1,034 ) (3,243 ) (3,547 )Total non-operating (3,888 ) (2,751 ) (14,992 ) (11,129 )expenseIncome from continuingoperations before 10,141 11,784 20,427 30,193 income taxesIncome tax provision 3,614 3,141 8,775 10,654 Income from continuing 6,527 8,643 11,652 19,539 operations Discontinued operations:Income (loss) before ? 1,062 (135 ) 1,291 income taxesIncome tax provision ? (2,519 ) ? (2,511 )(benefit)Income (loss) from ? 3,581 (135 ) 3,802 discontinued operationsNet income $ 6,527 $ 12,224 $ 11,517 $ 23,341 Basic earnings per shareIncome from continuing $ 0.15 $ 0.19 $ 0.26 $ 0.44 operationsIncome from ? 0.09 ? 0.09 discontinued operationsBasic earnings per $ 0.15 $ 0.28 $ 0.26 $ 0.53 share Diluted earnings per shareIncome from continuing $ 0.15 $ 0.19 $ 0.26 $ 0.44 operationsIncome from ? 0.09 ? 0.09 discontinued operationsDiluted earnings per $ 0.15 $ 0.28 $ 0.26 $ 0.53 share Cash dividend declared $ 0.135 $ 0.13 $ 0.40 $ 0.39 per common share Weighted average shares outstandingBasic 44,368 44,171 44,329 44,113 Diluted 44,636 44,442 44,549 44,405

Segment Financial Information(unaudited)

Three monthsended September 30Dollars in CompositeFibers Airlaid Materials OtherandUnallocated Total thousands 2020 2019 2020 2019 2020 2019 2020 2019 Net sales $ 132,419 $ 127,704 $ 101,054 $ 104,811 $ - $ - $ 233,473 $ 232,515 Costs of 112,031 106,024 83,699 88,442 (508 ) 28 195,222 194,494 products soldGross profit 20,388 21,680 17,355 16,369 508 (28 ) 38,251 38,021 (loss)SG&A 9,924 10,551 4,438 4,774 10,273 8,396 24,635 23,721 Gains ondispositions of plant,equipmentandtimberlands, - - - - (413 ) (235 ) (413 ) (235 )netTotaloperating 10,464 11,129 12,917 11,595 (9,352 ) (8,189 ) 14,029 14,535 income (loss)Non operating - - - - (3,888 ) (2,751 ) (3,888 ) (2,751 )expenseIncome (loss)before income $ 10,464 $ 11,129 $ 12,917 $ 11,595 $ (13,240 ) $ (10,940 ) $ 10,141 $ 11,784 taxes Supplementary DataMetric tons 35,009 33,394 34,752 35,907 - - 69,761 69,301 soldDepreciation,depletion and $ 6,755 $ 6,445 $ 5,674 $ 5,285 $ 1,273 $ 864 $ 13,702 $ 12,594 amortizationCapital 3,060 3,995 2,791 2,869 2,303 520 8,154 7,384 expenditures

Nine monthsended September 30Dollars in CompositeFibers Airlaid Materials OtherandUnallocated Total thousands 2020 2019 2020 2019 2020 2019 2020 2019 Net sales $ 387,267 $ 389,002 $ 293,949 $ 307,699 $ - $ - $ 681,216 $ 696,701 Costs of 319,403 322,152 243,526 262,256 11,171 1,155 574,100 585,563 products soldGross profit 67,864 66,850 50,423 45,443 (11,171 ) (1,155 ) 107,116 111,138 (loss)SG&A 30,811 31,388 13,192 13,448 28,704 26,307 72,707 71,143 Gains ondispositions of plant,equipmentandtimberlands, - - - - (1,010 ) (1,327 ) (1,010 ) (1,327 )netTotaloperating 37,053 35,462 37,231 31,995 (38,865 ) (26,135 ) 35,419 41,322 income (loss)Non operating - - - - (14,992 ) (11,129 ) (14,992 ) (11,129 )expenseIncome (loss)before income $ 37,053 $ 35,462 $ 37,231 $ 31,995 $ (53,857 ) $ (37,264 ) $ 20,427 $ 30,193 taxes Supplementary DataMetric tons 100,024 99,446 103,068 103,125 - - 203,092 202,571 soldDepreciation,depletion and $ 19,652 $ 19,720 $ 16,598 $ 15,832 $ 7,060 $ 2,562 $ 43,310 $ 38,114 amortization^(1)Capital 9,121 8,699 6,606 7,882 4,438 1,436 20,165 18,017 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)

Nine months ended September 30In thousands 2020 2019 Cash Flow Data Cash from continuing operations provided (used) by:Operating activities $ 24,539 $ 15,594 Investing activities (19,178 ) (18,791 )Financing activities (60,963 ) (62,678 ) Depreciation, depletion and amortization 43,310 38,114 Capital expenditures 20,165 18,017

September 30 December 31 2020 2019 Balance Sheet Data Cash and cash equivalents $ 59,241 $ 126,201 Total assets 1,233,942 1,283,794 Total debt 331,892 359,859 Shareholders? equity 558,425 555,959

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 and airlaid nonwoven 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 Caerphilly, UK. The charge includes a non-cash charge of $5.0 million associated with accelerated depreciation and the write-off of inventory and spare parts in addition to cash severance costs totaling $6.1 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. -- Corporate headquartersrelocation. 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 previous corporate headquarters. -- 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 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. -- 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 Nine months ended September 30In thousands 2020 2019 Cash from operations $ 24,539 $ 15,594 Less: Capital expenditures (20,165 ) (18,017 )Adjusted free cash flow $ 4,374 $ (2,423 )

Net Debt September 30 December 31 In thousands 2020 2019 Current portion of long-term debt $ 23,908 $ 22,940 Long term debt 307,984 336,919 Total 331,892 359,859 Less: Cash (59,241 ) (126,201 )Net Debt $ 272,651 $ 233,658

EBITDA Trailing twelve months Year ended ended September 30 December 31In thousands 2020 2019 Net loss $ (33,366 ) $ (21,542 )Exclude: (Income) loss from 267 (3,670 )discontinued operations, net of taxAdd back: Taxes on Continuing (11,121 ) (9,242 )operationsDepreciation and amortization 56,016 50,820 Interest expense, net 6,660 9,285 EBITDA 18,456 25,651 Adjustments: Restructuring charge - Metallized 7,211 ? operationsCost optimization actions 5,307 8,583 Corporate headquarter relocation 419 ? Pension settlement expenses, net 82,118 75,326 COVID-19 incremental costs 1,766 ? Asset impairment charge 900 ? Airlaid capacity expansion costs ? 1,014 Strategic initiatives 843 249 Fox River environmental matter ? (2,509 )Timberland sales and related costs (1,471 ) (1,572 )Adjusted EBITDA $ 115,549 $ 106,742

Leverage Trailing twelve months ended Year ended September 30 December 31In thousands 2020 2019 Net Debt $ 272,651 $ 233,658 Divided by 115,549 106,742 Adjusted 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 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) 225-2793ramesh.shettigar@glatfelter.com eileen.beck@glatfelter.com