Glatfelter (NYSE:GLT)

Transcription

1 Glatfelter (NYSE:GLT) 2011 Second Quarter Earnings Conference Call August 2, 2011 Dante C. Parrini Chairman & Chief Executive Officer John P. Jacunski Senior Vice President & Chief Financial Officer

2 Forward-Looking Statements and Use of non-gaap Financial Measures Certain statements included in this presentation, 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 These statements are based on management s current expectations and are subject to numerous risks, uncertainties and other unpredictable or uncontrollable factors, which may cause actual results or performance to differ materially from the Company s expectations. Various risks and factors that could cause future results to differ materially from those expressed in the forwardlooking statements include, but are not limited to: changes in industry, business, market, political and economic conditions in the U.S. and other countries in which Glatfelter does business; demand for or pricing of its products; changes in tax legislation, governmental laws, regulations and policies; initiatives of regulatory authorities; acquisition integration risks; technological changes and innovations; market growth rates; cost reduction initiatives; and other factors. In light of these risks, uncertainties and other factors, the forward-looking events discussed in this presentation 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 presentation 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 presentation. More information about these factors is contained in Glatfelter s filings with the U.S. Securities and Exchange Commission, which are available at During the course of this presentation, certain non-u.s. GAAP financial measures will be presented. A reconciliation of these measures to U.S. GAAP financial measures is included in the appendix of this presentation.

3 Q Highlights Adjusted EPS (EPS Before Special Items) $0.34 Record quarterly net sales 10% increase in net sales to $398 million in Q Led by growth of 20% in single-serve coffee and 15% in feminine hygiene products Advanced Airlaid Materials operating income nearly doubles $0.02 $0.07 Q2'10 Q1'11 Q2'11 Year-over-year earnings growth Favorable tax adjustments added $0.06/share Specialty Papers annual mill outages cost $0.29/share in Q and $0.28/share in Q

4 Adjusted EPS Q vs. Q $0.06 $0.07 Resolution of foreign tax audits, partially offset by state tax law changes $0.02 ($0.04) $0.03 $0.00 Q2-10 SPBU CFBU AMBU Tax Rate Q2-11 Note: See appendix of this presentation for the reconciliation of adjusted EPS to its nearest GAAP measure. 4

5 Specialty Papers Q Highlights Dollars in Thousands Q Q Q $7.4 ($0.3) ($6.5) Tons shipped 187, , ,763 Net sales $208,740 $220,454 $216,708 Energy and related sales, net $1,915 $2,986 $2,060 Operating income (loss) $2,729 $22,218 $(92) $2.7 ($3.3) ($0.1) ($0.1) Operating margin 1.3% 10.1% Q2'10 Operating Income Selling Price Volume & Mix RM and Energy Costs Operations Other Q2'11 Operating Income Net sales were up 3.8% y/y, driven by higher selling prices and 2.1% increase in shipping volume Increase in shipments led by Forms, Envelope and Engineered Products Volumes shipped by Specialty Papers outperformed the broader UFS market, which was down 3.2% compared to Q Selling prices were higher across all market segments, generating $7.4 million Input costs increased by $6.5 million, primarily driven by higher costs for wood, starch, caustic and energy Operations was a net negative in the quarter of $3.3 million Operating difficulties in the pulp mill and the recovery boiler at Spring Grove Annually scheduled maintenance outages adversely impacted operating income by $20.6 million in Q2 2011, compared with $19.6 million in Q

6 Composite Fibers Q Highlights Dollars in Thousands Q Q Q $3.6 $1.4 $(4.9) Tons shipped 22,966 22,909 22,938 Net sales $101,999 $115,235 $116,372 $8.9 $0.5 $(0.2) $9.3 Operating income $8,913 $12,406 $9,250 Operating margin 8.7% 10.8% 7.9% Q2'10 Operating Income Selling Price Volume & Mix RM and Energy Costs Operations and CI FX & Other Q2'11 Operating Income Net sales increased 7% y/y, on a constant currency basis Shipments were higher in Food & Beverage (+1.9%), and Technical Specialties (+4.0%), but down in Composite Laminates (-2.5%) and Metallized Products (-2.3%) Operating margins negatively impacted in Q Cost inflation outpaced selling price increases Operational inefficiencies from product qualifications Downtime to manage inventory levels due to increased machine productivity Favorable product mix Food & Beverage growing faster than other segments Selling prices were higher in all segments, but lagging increases in input cost Input costs were up by $4.9 million, driven by higher prices for abaca pulp, wood pulp, synthetic fiber, and metallized base paper 6

7 Advanced Airlaid Materials Q Highlights Dollars in Thousands Q Q Q $3.9 $0.1 $(3.5) Tons shipped 20,111 21,542 22,281 Net sales $52,042 $61,083 $64,904 $1.8 $(0.5) $3.7 Operating income $1,926 $1,745 $3,727 $1.9 Operating margin 3.7% 2.9% 5.7% Operating Income $3.7 Q2'10 Operating Income Selling Price Volume & Mix RM and Energy Costs Operations FX & Other Higher selling prices across most product lines improved results by $3.9 million Q2'11 Operating Income $1.9 $1.7 Shipping volume increased 10.8% over Q Higher costs for all primary raw materials impacted results by $3.5 million in Q Q2'10 Q1'11 Q2'11 Continuous Improvement initiatives, including supply chain synergies, waste reduction and higher machine output, delivered $1.8 million to operating income during the quarter 7

8 Q Other Financial Highlights Recorded a $2.9 million income tax benefit (net) $3.4 million benefit for resolution of certain foreign tax audits $0.5 million negative adjustment to deferred taxes in connection with changes in state tax laws Acquisition and integration expenses were $0.7 million in Q and $2.0 million in Q $50 million share buyback program authorized in April Repurchased 318,608 shares of common stock for approximately $4.7 million 8

9 Free Cash Flow $67.2 Alternative Fuel Mixture and Cellulosic Bio-fuel credits impacted cash flow in both years $20.4 1H'10 1H'11 (in millions) 1H 10 1H 11 Cash Flow from Operations $82.7 $48.3 Less: Capital Expenditures (15.4) (27.9) Free Cash Flow $67.2 $20.4 $54.9 million in 1H 2010 and $20.7 million from in 1H 2011 Capital expenditures in 1H 2011 were $12.4 million higher than in 1H 2010, reflecting investment in growth businesses Invested $16.8 million in working capital for growth in 2011 Overall working capital days in line with December 2010 Note: The sum of individual amounts set forth above may not agree to the column totals due to rounding. 9

10 Pension Expense and Funded Status (in millions) Estimate 1H 10 1H 11 Service and interest costs $31.4 $32.0 $33.4 $33.6 $16.7 $17.0 Expected return on plan assets (50.1) (39.8) (40.3) (41.8) (20.1) (20.9) Amortization of prior service and actuarial costs One-time charge 2.0 Pension (Income) / Expense $(16.1) $7.0 $9.2 $9.6 $4.7 $4.0 Funded status $14.3 $79.6 $92.1 N/A N/A N/A Cash contributions* $0 $0 $0 $0 $0 $0 * Qualified plans only During the third quarter of 2011, the Company will record a $2.0 million one-time pre-tax charge for the normal pension accounting expense associated with the retirement of the Company s former CEO. 10

11 Strong Balance Sheet (in millions) 31-Dec Jun-11 Cash $95.8 $108.3 Total Debt Collateralized Debt (36.7) (36.7) Net Debt $200.5 $187.6 Shareholder's Equity $552.4 $585.2 TTM Adj. EBITDA (excl. Pension) $150.9 $161.4 Leverage * 1.3x 1.2x Cash available under Bank facility $218.3 $220.5 Note: *The above calculation is not intended to be used for purposes of calculating debt covenant compliance. 11

12 Q Outlook Specialty Papers Shipping volume in Q is expected to be approximately 5% higher than in Q Selling prices are expected to increase at a faster pace than input costs. Normal 3 rd quarter maintenance outage estimated at $2.5 million. Composite Fibers Shipping volume in Q is expected to be approximately 5% higher than in Q Shipments of tea and coffee products expected to increase approximately 10%. Selling prices for the third quarter are expected to be in-line with the second quarter. Input costs rising modestly. Advanced Airlaid Materials Shipping volume in Q is expected to increase approximately 5% compared with Q Selling prices and input costs are expected to be largely in-line with Q levels. Other During the third quarter of 2011, the Company will record a $2.0 million one-time pre-tax charge for the normal pension accounting expense associated with the retirement of the Company s former CEO. 12

13 Appendix

14 Financial Highlights Net Sales (in millions) Adj. EBITDA / Margin % (in millions) 8.9% 9.7% 10.0% 10.7% 10.4% 10.4% $986 $1,148 $1,264 $1,184 $1,455 $1,550 $88.4 $111.7 $125.5 $126.2 $150.9 $ Q2'11 TTM Q2'11 TTM Adj. EBITDA Adj. EBITDA % of Net Sales GLT net sales exceeded $1.5 billion for the trailing twelve months. EBITDA continues to grow, driven by organic growth, execution of continuous improvement initiatives and strategic acquisitions. 14

15 Financial Overview (in millions) Q2 10 Q2 11 Net Sales $362.8 $398.0 Adjusted Operating Income, excl. Pension Adjusted EBITDA, excl. Pension $10.9 $8.5 $27.7 $25.7 Free Cash Flow $53.0 $0.9 Net Debt $258.5 $187.6 Cash Balance $42.6 $108.3 Note: See appendix of this presentation for the reconciliation of adjusted EPS to its nearest GAAP measure. 15

16 Details of Other and Unallocated The following sets forth details of Other and Unallocated amounts presented in the Company s Business Unit Financial Information included in the earnings release. (in millions) Q2 10 Q2 11 Gains on dispositions of plant, equipment and timberlands Acquisition and integration expenses $ 0.2 $ (2.0) (0.7) Net pension expense (2.4) (1.6) Other costs* (2.7) (4.4) Operating income (loss) ($6.8) ($6.7). * Increase in other costs for Q vs. Q due primarily to higher professional services fees. Note: The sum of individual amounts set forth above may not agree to the column totals due to rounding. 16

17 Adjusted EPS (EPS Before Special Items) $0.43 $0.25 $0.30 $0.24 $0.33 $0.29 $0.36 $0.31 $0.34 $0.19 $0.06 $0.02 $0.07 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $(0.22) Note: See appendix of this presentation for the reconciliation of adjusted EPS to its nearest GAAP measure. 17

18 Adjusted EPS excluding Pension (EPS Before Special Items and Net Pension Expenses) $0.38 $0.35 $0.32 $0.39 $0.34 $0.37 $0.20 $0.24 $0.26 $0.22 $0.00 $0.05 $0.09 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $(0.19) Note: See appendix of this presentation for the reconciliation of adjusted EPS to its nearest GAAP measure. 18

19 Specialty Papers Operating Income $ in millions $22.8 $20.9 $23.1 Includes onetime items totaling $8.2 $23.0 $22.2 $15.6 $18.4 $15.9 $16.8 $11.4 $2.7 $(0.1) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 $(0.7) $(6.4)

20 Composite Fibers Operating Income $ in millions $12.4 $6.1 $6.8 $8.4 $5.5 $5.8 $7.1 $6.3 $8.9 $9.7 $8.0 $9.3 $3.7 $3.6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

21 Reconciliation of Non-GAAP Adjusted Earnings Per Share Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net income (loss) $0.25 $0.43 $1.00 $1.00 ($0.01) $0.00 $0.85 $0.33 $0.38 $0.05 Cellulosic bio-fuel and alternative fuel mixture credits - (0.67) (0.72) (0.70) - - (0.50) - - Gains from sales of timberland and related transaction costs (0.01) (0.00) (0.02) (0.04) Acquisition and integration related costs Foreign currency hedge on acquisition price (0.01) Adjusted earnings (loss) $ 0.24 $ (0.22) $ 0.29 $ 0.33 $ 0.19 $ 0.02 $ 0.36 $ 0.31 $ 0.34 $ 0.07 Pension Impact on Adjusted EPS $ 0.02 $ 0.03 $ 0.03 $ 0.02 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.02 Adjusted earnings (loss) excl. pension $ 0.26 $ (0.19) $ 0.32 $ 0.35 $ 0.22 $ 0.05 $ 0.39 $ 0.34 $ 0.37 $ 0.09 Note: The sum of individual per share amounts set forth above may not agree to adjusted income per share due to rounding. 21

22 Reconciliation of Non-GAAP Measures Adjusted EBITDA, Excluding Pension Adjusted Operating Income, Excluding Pension In millions Q Q Income before Income Taxes $ 0.5 $ (0.4) Net Pension Expenses Depreciation and Amortization Net Interest Expense EBITDA, excluding pension $ 25.9 $ 25.0 Adjustments / exclusions Gains on Timberland Sales and Transaction Related Costs (0.2) - Acquisition and Integration Related Costs Adjusted EBITDA, excluding pension $ 27.7 $ 25.7 Less: Depreciation and Amortization (16.4) (17.4) Less: Other Income / (Deductions) (0.4) 0.2 Adjusted Operating Income, excluding pension $ 10.9 $ 8.5 Note: The sum of individual amounts set forth above may not agree to the column totals due to rounding. 22

23 Reconciliation of Non-GAAP Measures Adjusted EBITDA, Excluding Pension In millions Q2'11 TTM Income before Income Taxes $ (22.2) $ 93.9 $ 81.0 $ $ 33.5 $ 57.9 Net Pension Expenses (17.0) (12.9) (16.1) Depreciation and Amortization Net Interest Expense EBITDA, excluding pension $ 32.1 $ $ $ $ $ Adjustments / exclusions Gains on Timberland Sales and Transaction Related Costs (15.7) (79.0) (18.6) (0.5) (0.4) (3.4) Gains from Insurance Recoveries (0.2) Environmental Remediation Debt Redemption Costs Cellulosic Bio-fuel and Alternative Fuel Mixture Credits (105.5) Acquisition and Integration Related Costs Write-off of Concert Indemnification Receivable Foreign Currency Hedge on Acquisition Price Adjusted EBITDA, excluding pension $ 88.4 $ $ $ $ $ Note: The sum of individual amounts set forth above may not agree to the column totals due to rounding. 23

24 Reconciliation of Non-GAAP Measure Net Debt and Free Cash Flow Net debt excluding collateralized debt December 31 June 30 In thousands Short term debt $0.8 $0.0 Long term debt Total debt (-) Cash (95.8) (108.3) Total debt less cash (-) Collateralized debt from Timberland note (36.7) (36.7) Net debt excluding collateralized debt $200.5 $187.6 Free Cash Flow Six months ended June 30 In thousands Cash from operations $82,675 $48,313 Less: Capital expenditures (15,445) (27,877) Free cash flow $67,230 $20,436 Note: The sum of individual amounts set forth above may not agree to the column totals due to rounding. 24