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Glatfelter Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 3, 2012 03:24PM

Glatfelter (GLT) filed Quarterly Report for the period ended 2012-03-31. Glatfelter has a market cap of $666.2 million; its shares were traded at around $15.09 with a P/E ratio of 15.5 and P/S ratio of 0.4. The dividend yield of Glatfelter stocks is 2.3%. Glatfelter had an annual average earning growth of 5.3% over the past 10 years.

Highlight of Business Operations:

Specialty Papers’ operating income totaled $23.7 million and $22.2 million for the first quarters of 2012 and 2011, respectively. Although volumes shipped declined 1.5%, this unit’s profitability was favorably impacted by higher selling prices, the mix of products sold and efficient operations.

In Advanced Airlaid Materials, net sales were $61.6 million and $61.1 million in the first quarters of 2012 and 2011, respectively. The increase was primarily due to a 3.7% increase in volumes shipped which more than offset a $0.4 million adverse impact of lower selling prices.

Income taxes For the first three months of 2012, we recorded a provision for income taxes of $8.2 million on $27.1 million of pretax income, or 30.3%. The comparable amounts in the first quarter of 2011 were income tax expense $7.9 million on $25.3 million of pretax income, or 31.2%. The lower tax rate in the first quarter of 2012 was due, in part, to gains on timberland sales in the first quarter of 2011 which are taxed at a higher rate, partially offset by the expiration of the research and development tax credit and a change in the mix of jurisdictions in which taxable income is generated.

Foreign Currency We own and operate facilities in Canada, Germany, France, the United Kingdom and the Philippines. The functional currency of our Canadian operations is the U.S. dollar. However, in Germany and France it is the Euro, in the UK, it is the British Pound Sterling, and in the Philippines the functional currency is the Peso. During the first three months of 2012, Euro functional currency operations generated approximately 25.7% of our sales and 24.8% of operating expenses and British Pound Sterling operations represented 7.0% of net sales and 7.0% of operating expenses. The translation of the results from these international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

Table of Contents challenges to current rules or on our successful implementation of appropriate available options. In addition, the timing of any additional capital spending is uncertain. Enactment of new environmental laws or regulations or changes in existing laws or regulations could significantly change our estimates. In addition, we may incur obligations to remove or mitigate any adverse effects on the environment resulting from our operations, including the restoration of natural resources and liability for personal injury and for damages to property and natural resources. See Item 1 – Financial Statements – Note 14 for a summary of significant environmental matters. We expect to meet all of our near- and longer-term cash needs from a combination of operating cash flow, cash and cash equivalents, our credit facility or other bank lines of credit and other long-term debt. However, as discussed in Item 1 – Financial Statements – Note 14, an unfavorable outcome of various environmental matters could have a material adverse impact on our consolidated financial position, liquidity and/or results of operations. Off-Balance-Sheet Arrangements As of March 31, 2012 and December 31, 2011, we had not entered into any off-balance-sheet arrangements. Financial derivative instruments, to which we are a party, and guarantees of indebtedness, which solely consist of obligations of subsidiaries and a partnership, are reflected in the condensed consolidated balance sheets included herein in Item 1 – Financial Statements. Outlook For Specialty Papers, we expect slightly lower shipping volumes and an unfavorable mix in the second quarter of 2012 compared with the first quarter of 2012. Selling prices should rise as announced price increases are implemented and overall input costs are expected to rise slightly. We also plan to complete the annually scheduled maintenance outages at both the Chillicothe and Spring Grove facilities in the second quarter of 2012. The outages are expected to adversely impact second quarter operating profit by approximately $21 million, pre-tax. In addition, non-shutdown related maintenance spending is expected to increase by approximately $2 million, pre-tax, compared to the first quarter. We anticipate Composite Fibers’ shipping volumes will be 5% higher in the second quarter and that selling prices will generally be in line with the first quarter of 2012. However, the mix of products sold is expected to be slightly unfavorable. Input costs are expected to increase moderately. Shipping volumes for the Advanced Airlaid Materials business unit in the second quarter of 2012 are expected to be in-line with the first quarter of 2012. Input cost increases are expected to outpace selling price changes due to the pass-through provisions in certain customer contracts but we expect this to be more than offset by the impact of our continuous improvement initiatives.

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