Glatfelter Reports Fourth Quarter and Full Year 2020 Results

- Strong financial performance in the midst of the pandemic
- Progressing transformation with recent announcement to acquire Georgia-Pacific’s U.S. nonwovens business

On an adjusted basis, earnings from continuing operations for the three months ended December 31, 2020 and 2019, were $9.6 million, or $0.22 per share, compared with $7.7 million, or $0.17 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 December 31, 2020 totaled $235.3 million compared with $231.0 million during the same period in 2019. On a constant currency basis, Composite Fibers’ and Airlaid Materials’ net sales decreased by 1.4% and 5.2%, respectively.

“Glatfelter delivered robust earnings in the fourth quarter, further contributing to a strong year amid unforeseen global economic challenges resulting from the pandemic,” said Dante C. Parrini (photo), Chairman and Chief Executive Officer. “As businesses across the globe faced unprecedented volatility, Glatfelter continued to make progress by focusing on employee health and safety and overall operational excellence while ensuring uninterrupted supply of critical products to our customers, thereby achieving full-year adjusted EBITDA growth of 12%. We continued to realize operational and strategic benefits of our transformation that included an optimized portfolio comprised of over 85% essential consumer staples, and an improved cost structure from a flatter and more agile operating model. Also, we generated significant cash flow that translated into meaningful debt reduction, resulting in a very healthy balance sheet.”

Mr. Parrini continued, “In Composite Fibers, strong demand across nearly all product categories drove an increase in total shipments during the quarter compared to prior year. This volume increase and improved mix, combined with elevated production, enabled the segment to deliver an operating profit margin of nearly 11% for the fourth quarter. In Airlaid Materials, shipments during the quarter were above the prior year in all product categories except tabletop, which was negatively affected by the pandemic. As a result, we took more downtime in our Airlaid facilities to manage tabletop inventory, which impacted profitability. For the year, the Airlaid segment delivered an operating profit margin of approximately 12%, exceeding our guidance range.”

“As we start the new year, we remain focused on managing through the ongoing pandemic by keeping our employees safe and facilities operational. Equally important will be accelerating growth through diligent commercial execution and strategic investments such as our recently announced acquisition of Georgia-Pacific’s U.S. nonwovens operations. We believe this business is an excellent fit for Glatfelter and, given our strong balance sheet and stable cash flows, we are financially well positioned to invest in a variety of opportunities that further enhance the enterprise and align with our long-term growth strategy,” concluded Mr. Parrini.

Environmental, Social and Governance (ESG) Update
Over its 157-year history, Glatfelter has been committed to sustainability and being a responsible corporate citizen. In 2020, the Company made important strides in its ESG initiatives by formalizing sustainability priorities and publishing an ESG report. In addition, Glatfelter received special recognition for several of its high-performing sustainable engineered materials solutions. As part of Unilever’s “Partner with Purpose” program, Glatfelter was named a Top 3 finalist in the Climate and Nature Impact category for its DYNAGREEN plant-based, heat-sealable tea bag product. The Company was also awarded the “Fine to Flush” certificate from Water UK (a trade association representing major water companies in the United Kingdom) for its improved nonwoven substrate used in dispersible wipes and moist toilet tissues.

Cmposite Fibers
Composite Fibers’ net sales increased $5.2 million or 3.9%, compared to the year-ago quarter driven by higher shipments in all product categories except metallized, which was restructured earlier in the year. These increases and favorable currency translation of $7.0 million were partially offset by lower selling prices of $3.7 million.

Composite Fibers’ operating income of $15.0 million was $2.6 million higher, or approximately 21% favorable, compared to the fourth quarter of 2019. Stronger shipping volumes in nearly all product categories and improved mix favorably impacted operating profit by $2.5 million. Lower selling prices of $3.7 million were partially offset by lower input prices of $1.3 million, primarily wood pulp. Higher production in most of our facilities to meet the elevated demand, coupled with strong operations, favorably impacted results by $3.4 million. Currency unfavorably impacted results by $0.9 million, reflecting hedging instruments that matured this quarter being lower versus a year ago and more than offsetting the stronger Euro translation rate.

Arlaid Materials
Airlaid Materials’ quarterly net sales decreased $0.9 million in the year-over-year comparison. Shipping volumes decreased 2.5% compared to the prior year quarter and selling prices were $0.8 million lower, reflecting the contractual pass-through of lower raw material prices. Currency translation was $4.2 million favorable.

Airlaid Materials’ fourth quarter 2020 operating income of $9.1 million was consistent with the fourth quarter of 2019. Lower shipping volumes unfavorably impacted results by $0.6 million, while lower raw material and energy prices of $1.2 million more than offset selling price declines of $0.8 million, adding net $0.4 million. Operations were $0.7 million unfavorable, mainly driven by lower production in response to the pandemic-driven decline in demand for tabletop products compared to the prior year. Currency translation was $0.9 million favorable.

Other Financial Information
The amount of “Other and Unallocated” operating expense in the table of Segment Financial Information totaled $10.4 million in the fourth 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 fourth quarter of 2020 decreased $0.7 million compared to the fourth quarter of 2019.

In the fourth quarter of 2020, income from continuing operations totaled $11.9 million and income tax expense totaled $2.8 million. On adjusted pre-tax income of $14.7 million, income tax expense was $5.0 million in the fourth quarter of 2020. The comparable amounts in the same quarter of 2019 were $11.2 million and $3.5 million, respectively. The effective tax rate on adjusted earnings was 34% in the fourth quarter of 2020.