glt-10q_20180930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from           to

 

 

96 South George Street, Suite 520

York, Pennsylvania 17401

(Address of principal executive offices)

(717) 225-4711

(Registrant's telephone number, including area code)

 

 

Commission file

number

 

Exact name of registrant as

specified in its charter

 

IRS Employer

Identification No.

 

State or other jurisdiction of

incorporation or organization

 

 

1-03560

 

P. H. Glatfelter Company

 

23-0628360

 

Pennsylvania

 

 

N/A

(Former name or former address, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at the past 90 days.    Yes      No  .

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  .

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes      No  .

Common Stock outstanding on October 29, 2018 totaled 43,782,109 shares.

 

 

 


 

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

REPORT ON FORM 10-Q

For the QUARTERLY PERIOD ENDED

September 30, 2018

Table of Contents

 

 

Page

 

Page

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1

Financial Statements

 

 

 

Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2018 and 2017 (unaudited)

 

2

 

Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2018 and 2017 (unaudited)

 

3

 

Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (unaudited)

 

4

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)

 

5

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

6

 

1.

Organization

 

6

 

2.

Accounting Policies

 

6

 

3.

Acquisition

 

7

 

4.

Revenue

 

7

 

5.

Discontinued Operations

 

8

 

6.

Gain on Disposition of Plant, Equipment and Timberlands

 

10

 

7.

Earnings Per Share

 

10

 

8.

Accumulated Other Comprehensive Income

 

11

 

9.

Income Taxes

 

13

 

10.

Stock-based Compensation

 

14

 

11.

Retirement Plans and Other Post- Retirement Benefits

 

15

 

12.

Inventories

 

15

 

13.

Capitalized Interest

 

15

 

14.

Long-term Debt

 

16

 

15.

Fair Value of Financial Instruments

 

17

 

16.

Financial Derivatives and Hedging Activities

 

17

 

17.

Commitments, Contingencies and Legal Proceedings

 

19

 

18.

Segment Information

 

22

 

19.

Condensed Consolidating Financial Statements

 

23

 

 

 

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

Item 3

Quantitative and Qualitative Disclosures About Market Risks

 

38

Item 4

Controls and Procedures

 

38

 

 

 

 

PART II – OTHER INFORMATION

 

39

 

 

 

 

Item 6

Exhibits

 

39

 

 

 

 

 

SIGNATURES

 

39

 

 

 

 

 


 

PART I

Item 1 – Financial Statements

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

 

 

 

Three months ended

September 30

 

 

Nine months ended

September 30

 

In thousands, except per share

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net sales

 

$

209,855

 

 

$

210,120

 

 

$

636,806

 

 

$

591,035

 

Costs of products sold

 

 

179,983

 

 

 

172,745

 

 

 

537,073

 

 

 

485,783

 

Gross profit

 

 

29,872

 

 

 

37,375

 

 

 

99,733

 

 

 

105,252

 

Selling, general and administrative expenses

 

 

25,799

 

 

 

27,083

 

 

 

81,915

 

 

 

81,530

 

Gains on dispositions of plant, equipment and timberlands, net

 

 

(249

)

 

 

(93

)

 

 

(1,939

)

 

 

(168

)

Operating income

 

 

4,322

 

 

 

10,385

 

 

 

19,757

 

 

 

23,890

 

Non-operating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(3,965

)

 

 

(3,324

)

 

 

(11,237

)

 

 

(10,025

)

Interest income

 

 

147

 

 

 

51

 

 

 

227

 

 

 

209

 

Other, net

 

 

2,253

 

 

 

(387

)

 

 

1,131

 

 

 

(558

)

Total non-operating expense

 

 

(1,565

)

 

 

(3,660

)

 

 

(9,879

)

 

 

(10,374

)

Income from continuing operations before income taxes

 

 

2,757

 

 

 

6,725

 

 

 

9,878

 

 

 

13,516

 

Income tax provision

 

 

3,462

 

 

 

1,680

 

 

 

7,037

 

 

 

4,429

 

Income (loss) from continuing operations

 

 

(705

)

 

 

5,045

 

 

 

2,841

 

 

 

9,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

(114,656

)

 

 

9,661

 

 

 

(128,714

)

 

 

14,422

 

Income tax provision (benefit)

 

 

(19,530

)

 

 

2,601

 

 

 

(28,361

)

 

 

5,515

 

Income (loss) from discontinued operations

 

 

(95,126

)

 

 

7,060

 

 

 

(100,353

)

 

 

8,907

 

Net income (loss)

 

$

(95,831

)

 

$

12,105

 

 

$

(97,512

)

 

$

17,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(0.02

)

 

$

0.12

 

 

$

0.06

 

 

$

0.21

 

Income (loss) from discontinued operations

 

 

(2.17

)

 

 

0.16

 

 

 

(2.29

)

 

 

0.20

 

Basic earnings (loss) per share

 

$

(2.19

)

 

$

0.28

 

 

$

(2.23

)

 

$

0.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(0.02

)

 

$

0.11

 

 

$

0.06

 

 

$

0.21

 

Income (loss) from discontinued operations

 

 

(2.17

)

 

 

0.16

 

 

 

(2.29

)

 

$

0.20

 

Diluted earnings (loss) per share

 

$

(2.19

)

 

$

0.27

 

 

$

(2.23

)

 

$

0.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.13

 

 

$

0.13

 

 

$

0.39

 

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,792

 

 

 

43,617

 

 

 

43,754

 

 

 

43,601

 

Diluted

 

 

43,792

 

 

 

44,182

 

 

 

43,754

 

 

 

44,410

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

- 2 -

GLATFELTER

09.30.18 Form 10-Q


 

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 

 

 

Three months ended

September 30

 

 

Nine months ended

September 30

 

In thousands

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income (loss)

 

$

(95,831

)

 

$

12,105

 

 

$

(97,512

)

 

$

17,994

 

Foreign currency translation adjustments

 

 

(3,217

)

 

 

16,559

 

 

 

(23,693

)

 

 

50,128

 

Net change in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred gains (losses) on cash flow hedges, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of $(582), $111, $(1,718) and $2,031, respectively

 

 

1,616

 

 

 

(1,514

)

 

 

4,363

 

 

 

(6,111

)

Unrecognized retirement obligations, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of $(1,932), $(1,340), $(3,874) and $(4,018), respectively

 

 

21,572

 

 

 

2,285

 

 

 

27,668

 

 

 

6,838

 

Other comprehensive income

 

 

19,971

 

 

 

17,330

 

 

 

8,338

 

 

 

50,855

 

Comprehensive income (loss)

 

$

(75,860

)

 

$

29,435

 

 

$

(89,174

)

 

$

68,849

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

- 3 -

GLATFELTER

09.30.18 Form 10-Q


 

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

September 30

 

 

December 31

 

In thousands

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

234,070

 

 

$

116,219

 

Accounts receivable, net

 

117,584

 

 

 

110,586

 

Inventories

 

170,986

 

 

 

136,201

 

Prepaid expenses and other current assets

 

30,245

 

 

 

32,013

 

Current assets held for sale

 

188,322

 

 

 

189,952

 

Total current assets

 

741,207

 

 

 

584,971

 

 

 

 

 

 

 

 

 

Plant, equipment and timberlands, net

 

497,568

 

 

 

515,183

 

Goodwill

 

79,882

 

 

 

82,744

 

Intangible assets, net

 

53,444

 

 

 

58,859

 

Other assets

 

106,943

 

 

 

81,127

 

Noncurrent assets held for sale

 

271,731

 

 

 

407,911

 

Total assets

$

1,750,775

 

 

$

1,730,795

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

Current portion of long-term debt

$

10,904

 

 

$

11,298

 

Accounts payable

 

103,432

 

 

 

113,212

 

Dividends payable

 

5,696

 

 

 

5,678

 

Environmental liabilities

 

26,000

 

 

 

28,500

 

Other current liabilities

 

74,203

 

 

 

75,668

 

Current liabilities held for sale

 

110,163

 

 

 

112,820

 

Total current liabilities

 

330,398

 

 

 

347,176

 

 

 

 

 

 

 

 

 

Long-term debt

 

635,406

 

 

 

470,098

 

Deferred income taxes

 

56,599

 

 

 

83,571

 

Other long-term liabilities

 

80,946

 

 

 

79,649

 

Long-term liabilities held for sale

 

40,480

 

 

 

41,373

 

Total liabilities

 

1,143,829

 

 

 

1,021,867

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

Common stock

 

544

 

 

 

544

 

Capital in excess of par value

 

64,329

 

 

 

62,594

 

Retained earnings

 

856,118

 

 

 

948,411

 

Accumulated other comprehensive loss

 

(154,635

)

 

 

(140,675

)

 

 

766,356

 

 

 

870,874

 

Less cost of common stock in treasury

 

(159,410

)

 

 

(161,946

)

Total shareholders’ equity

 

606,946

 

 

 

708,928

 

Total liabilities and shareholders’ equity

$

1,750,775

 

 

$

1,730,795

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 4 -

GLATFELTER

09.30.18 Form 10-Q


 

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

Nine months ended

September 30

 

In thousands

2018

 

 

2017

 

Operating activities

 

 

 

 

 

 

 

Net income (loss)

$

(97,512

)

 

$

17,994

 

(Income) loss from discontinued operations, net of tax benefits

 

100,353

 

 

 

(8,907

)

 

 

 

 

 

 

 

 

Adjustments to reconcile to net cash provided by continuing operations:

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

34,731

 

 

 

30,276

 

Amortization of debt issue costs and original issue discount

 

870

 

 

 

868

 

Deferred income tax benefit

 

(5,466

)

 

 

(1,233

)

Gains on dispositions of plant, equipment and timberlands, net

 

(1,939

)

 

 

(168

)

Share-based compensation

 

4,594

 

 

 

4,331

 

Change in operating assets and liabilities

 

 

 

 

 

 

 

Accounts receivable

 

(10,421

)

 

 

(16,125

)

Inventories

 

(40,314

)

 

 

(4,051

)

Prepaid and other current assets

 

(2,935

)

 

 

(3,280

)

Accounts payable

 

(2,019

)

 

 

6,099

 

Accruals and other current liabilities

 

3,768

 

 

 

(2,756

)

Other

 

78

 

 

 

(2,547

)

Net cash (used) provided by operating activities from continuing operations

 

(16,212

)

 

 

20,501

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Expenditures for purchases of plant, equipment and timberlands

 

(32,155

)

 

 

(57,978

)

Proceeds from disposals of plant, equipment and timberlands, net

 

2,073

 

 

 

209

 

Other

 

(68

)

 

 

(100

)

Net cash used by investing activities from continuing operations

 

(30,150

)

 

 

(57,869

)

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Net borrowings under revolving credit facility

 

174,761

 

 

 

96,534

 

Repayment of term loans

 

(8,373

)

 

 

(6,947

)

Payments of dividends

 

(17,064

)

 

 

(16,805

)

Payments related to share-based compensation awards and other

 

(1,008

)

 

 

(128

)

Net cash provided by financing activities from continuing operations

 

148,316

 

 

 

72,654

 

Effect of exchange rate changes on cash

 

(3,931

)

 

 

5,448

 

Net increase in cash and cash equivalents

 

98,023

 

 

 

40,734

 

Change in cash and cash equivalents from discontinued operations

 

19,828

 

 

 

(11,891

)

Cash and cash equivalents at the beginning of period

 

116,219

 

 

 

55,444

 

Cash and cash equivalents at the end of period

$

234,070

 

 

$

84,287

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

Interest, net of amounts capitalized

$

7,213

 

 

$

6,521

 

Income taxes, net

 

11,001

 

 

 

7,567

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

- 5 -

GLATFELTER

09.30.18 Form 10-Q


 

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1.

ORGANIZATION

P. H. Glatfelter Company and subsidiaries is a leading global supplier of high-quality, innovative and customizable solutions found in tea and single-serve coffee filtration, personal hygiene and packaging products as well as home improvement and industrial applications. We are headquartered in York, PA, and operate facilities in the United States, Canada, Germany, France, the United Kingdom and the Philippines. We have sales and distribution offices in the U.S., Europe, Russia and China and our products are marketed worldwide, either directly to customers or through brokers and agents. The terms “we,” “us,” “our,” “the Company,” or “Glatfelter,” refer to P. H. Glatfelter Company and subsidiaries unless the context indicates otherwise.

 

 

2.

ACCOUNTING POLICIES

Basis of Presentation The unaudited condensed consolidated financial statements (“financial statements”) include the accounts of Glatfelter and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

We prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. In our opinion, the financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. When preparing these financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2017 Annual Report on Form 10-K.

Discontinued Operations The results of operations for our Specialty Papers Business Unit have been classified as discontinued operations for all periods presented in the condensed consolidated statements of income. In addition, the related assets and liabilities of this business unit have been classified as held for sale in the condensed consolidated balance sheets for all periods presented.

Reclassification   As a result of adopting the provisions of Accounting Standards Update (“ASU”) No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Cost we reclassified certain amounts of periodic benefit expense for previously reported periods from Cost of products sold and Selling, general and administrative expense to Non-operating Expense.

Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Management believes the estimates and assumptions used in the preparation of these financial statements are reasonable, based upon currently available facts and known circumstances, but recognizes that actual results may differ from those estimates and assumptions.

Revenue Recognition  We adopted ASU No. 2014-09, Revenue from Contracts with Customers in the first quarter of 2018. This ASU clarifies the principles for recognizing revenue and establishes expanded disclosure requirements; however, the adoption of ASU No. 2014-09 had no impact on the timing or amount of revenue recognized for any period presented.  Refer to Note 4 for additional information about the disaggregation of our net sales.

Our revenue is earned primarily from the manufacture and sale of engineered materials (“product sales”).  Revenue is earned pursuant to contracts, supply agreements and other arrangements with a wide variety of customers. Our performance obligation is to produce a specified product according to technical specifications and, in substantially all instances, to deliver the product. Revenue from product sales is earned at a point in time. We recognize revenue on product sales when we have satisfied our performance obligation and control of the product has passed to the customer thereby entitling us to payment. With respect to substantially all arrangements for product sales, this is deemed to occur when title transfers in accordance with specified shipping terms.

The prices are fixed at the time the sales arrangement is entered into and payment terms are customary for similar arrangements in our industry. Many of our agreements include customary provisions for volume rebates, discounts and similar incentives. In addition, we are obligated for products that fail to meet agreed upon specification. Provisions for such items are estimated and recorded as sales deductions in the period in which the related revenue is recognized.

Recently Issued Accounting Pronouncements   In February 2018, the FASB issued ASU No. 2018-02, “Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income. (“ASU No. 2018-02”).”  In December 2017, Tax Cuts and Jobs Act (“TCJA”) was passed into law and, among other provisions, reduced the statutory federal tax rate from 35% to 21%.  The change in the tax rate impacted the carrying value of deferred tax assets and liabilities.  ASU No. 2018-02 allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from the TCJA.  We elected to adopt ASU No. 2018-02 in the first quarter of 2018, and we reclassified $22.3 million of net deferred tax benefits from AOCI to Retained earnings.

- 6 -

GLATFELTER

09.30.18 Form 10-Q


 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU will require organizations such as us that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will be effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. We are in the process of assessing the impact this standard will have on us and expect to follow a modified retrospective method provided for under the standard. The adoption of this standard is not expected to have a material impact on our results of operations.

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (“ASU No. 2017-12”), which simplifies the application of hedge accounting and more closely aligns hedge accounting with an entity’s risk management strategies. ASU No. 2017-12 also amends the manner in which hedge effectiveness may be performed and changes the presentation of hedge ineffectiveness in the financial statements. ASU No. 2017-12 is effective for us beginning January 1, 2019, with early adoption permitted. ASU No. 2017-12 requires a cumulative-effect adjustment for certain items upon adoption. We are currently evaluating the impact the adoption of ASU No. 2017-12 will have on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” that changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. Under the new guidance, an allowance is recognized based on an estimate of expected credit losses. This standard is effective for us in the first quarter of 2020 and must be adopted using a modified retrospective approach. We are currently assessing the impact this standard may have on our results of operations and financial position.

 

3.

ACQUISITION

On October 1, 2018, we completed our acquisition of Georgia-Pacific’s European nonwovens business (the “GP Business”) for $186 million including a working capital adjustment and subject to customary post-closing purchase price adjustments.   

The acquisition consisted of Georgia-Pacific’s operations located in Steinfurt, Germany, along with sales offices located in France and Italy.  The Steinfurt facility produces high-quality airlaid products for the table-top, wipes, hygiene, food pad, and other nonwoven materials markets, competing in the marketplace with nonwoven technologies and substrates, as well as other materials focused primarily on consumer based end-use applications.  The facility is a state-of-the-art, 32,000-metric-ton-capacity manufacturing facility that employs approximately 220 people. Steinfurt’s results will be reported

prospectively from the acquisition date as part of our Advanced Airlaid Materials business unit.

In 2017, the GP Business had net sales of $99 million.  We financed the transaction through a combination of cash on hand and borrowings under our revolving credit facility.  We have not provided the additional disclosure requirements required under ASC No. 805 “Business Combinations” as it was deemed impractical to do so considering the recent timing of the transaction.

 

4.

REVENUE

The following tables set forth disaggregated information pertaining to our net sales:

 

 

 

Three months ended

September 30

 

 

Nine months ended

September 30

 

 

In thousands

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

Composite Fibers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food & beverage

 

$

68,534

 

 

$

66,539

 

 

$

209,117

 

 

$

194,575

 

 

Wallcovering

 

 

26,135

 

 

 

28,365

 

 

 

82,056

 

 

 

76,993

 

 

Technical specialties

 

 

20,615

 

 

 

21,309

 

 

 

63,182

 

 

 

56,692

 

 

Composite laminates

 

 

10,544

 

 

 

10,558

 

 

 

28,902

 

 

 

28,652

 

 

Metallized

 

 

13,348

 

 

 

15,578

 

 

 

40,450

 

 

 

43,678

 

 

 

 

 

139,176

 

 

 

142,349

 

 

 

423,707

 

 

 

400,590

 

 

Advanced Airlaid Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Feminine hygiene

 

 

46,054

 

 

 

46,623

 

 

 

141,464

 

 

 

133,550

 

 

Specialty wipes

 

 

11,104

 

 

 

8,899

 

 

 

29,366

 

 

 

21,941

 

 

Adult incontinence

 

 

5,036

 

 

 

3,761

 

 

 

14,658

 

 

 

10,625

 

 

Home care

 

 

4,009

 

 

 

3,715

 

 

 

11,911

 

 

 

9,642

 

 

Other

 

 

4,476

 

 

 

4,773

 

 

 

15,700

 

 

 

14,687

 

 

 

 

 

70,679

 

 

 

67,771

 

 

 

213,099

 

 

 

190,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

209,855

 

 

$

210,120

 

 

$

636,806

 

 

$

591,035

 

 

 

 

 

Three months ended

September 30

 

 

Nine months ended

September 30

 

 

In thousands

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

Composite Fibers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe, Middle East and Africa

 

$

87,870

 

 

$

91,944

 

 

$

274,442

 

 

$

259,532

 

 

Americas

 

 

30,205

 

 

 

26,198

 

 

 

83,245

 

 

 

76,734

 

 

Asia Pacific

 

 

21,101

 

 

 

24,207

 

 

 

66,020

 

 

 

64,324

 

 

 

 

 

139,176

 

 

 

142,349

 

 

 

423,707

 

 

 

400,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advanced Airlaid Materials

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe, Middle East and Africa

 

 

35,283

 

 

 

36,025

 

 

 

107,416

 

 

 

98,158

 

 

Americas

 

 

34,899

 

 

 

31,297

 

 

 

104,027

 

 

 

91,229

 

 

Asia Pacific

 

 

497

 

 

 

449

 

 

 

1,656

 

 

 

1,058

 

 

 

 

 

70,679

 

 

 

67,771

 

 

 

213,099

 

 

 

190,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

209,855

 

 

$

210,120

 

 

$

636,806

 

 

$

591,035

 

 

 

 

- 7 -

GLATFELTER

09.30.18 Form 10-Q


 

5.

DISCONTINUED OPERATIONS

 

On October 31, 2018, we completed the previously announced sale of our Specialty Papers Business Unit on a cash free and debt free basis to Pixelle Specialty Solutions LLC, an affiliate of Lindsay Goldberg (the “Purchaser”) for $360 million.  Cash proceeds from the sale were approximately $323 million in cash reflecting estimated purchase price adjustments as of the closing date and the assumption by the Purchaser of approximately $38 million in retiree healthcare liabilities. In addition, the Purchaser assumed approximately $220 million of pension liabilities relating to Specialty Papers’ employees and will receive approximately $270 million of related assets from the Company’s existing pension plan.  

 

In connection with the sale of Specialty Papers, we entered into a Transition Services Agreement with Purchaser pursuant to which we agreed to provide various back-office and information technology support until the business is fully separated from us.

 

The following table sets forth a summary of discontinued operations included in the condensed consolidated statements of income:

 

 

Three months ended

September 30

 

 

Nine months ended

September 30

 

In thousands

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net sales

 

$

201,288

 

 

$

203,206

 

 

$

590,757

 

 

$

600,346

 

Energy and related sales, net

 

 

844

 

 

 

1,236

 

 

 

3,217

 

 

 

3,346

 

Total revenues

 

 

202,132

 

 

 

204,442

 

 

 

593,974

 

 

 

603,692

 

Costs of products sold

 

 

181,628

 

 

 

188,076

 

 

 

572,820

 

 

 

569,840

 

Gross profit

 

 

20,504

 

 

 

16,366

 

 

 

21,154

 

 

 

33,852

 

Selling, general and administrative expenses

 

 

6,058

 

 

 

5,997

 

 

 

18,566

 

 

 

17,971

 

(Gains) losses on dispositions of plant, equipment and timberlands, net

 

 

3

 

 

 

70

 

 

 

(440

)

 

 

118

 

Operating income

 

 

14,443

 

 

 

10,299

 

 

 

3,028

 

 

 

15,763

 

Non-operating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,281

)

 

 

(1,221

)

 

 

(6,017

)

 

 

(3,005

)

Other, net

 

 

(1,174

)

 

 

583

 

 

 

(81

)

 

 

1,664

 

Impairment charge

 

 

(125,644

)

 

 

 

 

 

(125,644

)

 

 

 

Income (loss) before income taxes

 

 

(114,656

)

 

 

9,661

 

 

 

(128,714

)

 

 

14,422

 

Income tax provision (benefit)

 

 

(19,530

)

 

 

2,601

 

 

 

(28,361

)

 

 

5,515

 

Income (loss) from discontinued operations

 

$

(95,126

)

 

$

7,060

 

 

$

(100,353

)

 

$

8,907

 

 

The amounts presented above are derived from the segment reporting for Specialty Papers adjusted to include certain retirement benefit costs and to exclude corporate shared services costs which are required to remain in continuing operations. Interest expense was allocated to discontinued operations based on borrowings under the revolving credit facility required to be repaid with proceeds from the sale of Specialty Papers. The amounts set forth above include the recognition of a $1.8 million, pre-tax, pension curtailment charge related to the transfer and discontinuance of future service of Specialty Papers’ employees. We also recognized an impairment charge representing an estimate of the amount by which the carrying value of Specialty Papers’ net assets exceeded their fair value based on the estimated net proceeds to be received from the sale.

 

 


- 8 -

GLATFELTER

09.30.18 Form 10-Q


 

The following table sets forth the carrying amounts of Specialty Papers’ major asset and liabilities, which were classified as held for sale in the condensed consolidated balance sheets:

 

September 30

 

 

December 31