Glatfelter reported first-quarter 2015 net income of $13.9 million, or $0.32 per diluted share, and adjusted earnings of $13.4 million, or $0.30 per diluted share. For the first quarter of 2014, net income was $14.6 million, or $0.33 per diluted share, and adjusted earnings were $14.1 million or $0.32 per diluted share. Consolidated net sales totaled $417.5 million in the first quarter of 2015 compared with $455.7 million in the first quarter of 2014. Currency translation adjustments unfavorably impacted the year-over-year comparison by $28 million reflecting a significantly stronger U.S. dollar.
“The first quarter of 2015 began with a number of challenges including the significant weakening of the Euro, the market situation in Russia and the operational cost penalties in Specialty Papers.” said Dante C. Parrini, chairman and chief executive officer. “Considering these circumstances, we generated solid results in the first quarter with adjusted earnings slightly below a year ago. More importantly, we are continuing to position the company to capitalize on opportunities in our key markets and to withstand the ongoing macroeconomic headwinds. Our planned and purposeful efforts include introducing new, more competitive products in the Russian market and gaining additional U.S. dollar denominated business. We also remain focused on implementing our cost control measures and are on pace to achieve our targets of a 3% to 5% workforce reduction and $25 million to $30 million of cost savings in 2015.”
Mr. Parrini continued, “Based on the progress we made implementing our key initiatives in the first quarter and our plans for the rest of the year, I believe our business is well prepared to address the challenges we are facing and deliver on our 2015 growth opportunities and long-term business strategy.”
First-Quarter Business Unit Results
Net sales for this business unit declined $23.3 million, or 14.7 percent, due to $20.4 million of unfavorable currency translation together with lower shipping volumes and $2.8 million from lower selling prices, partially offset by the inclusion of Spezialpapierfabrik (SPO), which was acquired in the fourth quarter of 2014. Shipping volumes declined 5.1 percent primarily due to reduced demand for nonwoven wall cover, which is directly impacted by the geopolitical and currency instabilities in Russia and Ukraine.
Composite Fibers’ first-quarter 2015 operating income decreased $4.6 million to $14.7 million compared to the year-ago period. The decline in operating income was primarily related to unfavorable foreign currency translation, which negatively impacted results by $2.8 million, the impact of lower selling prices and a $1.3 million impact from lower production to manage inventory levels. These factors were partially offset by a $3.0 million benefit from lower raw material and energy prices.
Advanced Airlaid Materials
On a year-over-year basis, Advanced Airlaid Materials’ net sales decreased $9.0 million largely due to $7.2 million of unfavorable foreign currency translation and a 4.1 percent decline in shipping volumes which more than offset a $1.7 million benefit from higher selling prices.
First-quarter 2015 operating income declined $0.6 million compared to the same quarter a year-ago as the benefit from higher selling prices was more than offset by $0.9 million from higher raw material and energy prices and $1.2 million from the adverse impact of foreign currency translation.
On a year-over-year basis, Specialty Papers’ net sales decreased $6.0 million, or 2.6 percent due to lower shipping volumes and mix changes partially offset by a $1.8 million benefit from higher average selling prices.
Operating income increased $7.1 million in the year-over-year comparison including the impact of higher selling prices and $2.6 million from lower raw material and energy prices. In 2015, problems with a power boiler in Pennsylvania and an evaporator upset in Ohio negatively impacted earnings by $9 million. In 2014, operating income was negatively impacted by $16 million due to evaporator issues in Ohio and excess costs resulting from severe weather conditions. Energy and related sales decreased $3.2 million in the comparison as severe weather conditions in 2014 resulted in higher selling prices for excess power.
Other Financial Information
Pension expense totaled $2.8 million and $1.5 million for the first quarters of 2015 and 2014, respectively. The increase reflects the impact of lower discount rates and changes to mortality assumptions. For 2015, the Company expects full year pension expense to increase to approximately $11.5 million. Because the Company’s qualified plan remains overfunded, a cash contribution is not expected for the foreseeable future.
The Company completed the sale of 1,370 acres of timberlands during the first quarter of 2015 for $3.0 million and realized an after-tax gain of $1.6 million.
During the first quarter of 2015, the Company eliminated approximately 1.3 percent of its workforce in connection with the global workforce efficiency and cost reduction program initiated earlier in the year and recorded charges totaling, on a pre-tax basis, $1.3 million for severance and related costs.
The Company recorded an income tax provision of $4.3 million on adjusted pre-tax earnings resulting in an effective tax rate of 24.5 percent compared with an effective tax rate of 16.5 percent in the same quarter a year ago. The effective tax rate in the first quarter of 2014 reflects a $2.2 million tax benefit related to the reduction of deferred tax liabilities in connection with the restructuring of non-U.S. legal entities.
In the picture: Dante C. Parrini, chairman and chief executive officer of Glatfelter.