glt-10q_20190930.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, 2019

☐	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) 850-0170

(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock

GLT

New York Stock Exchange

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 21, 2019 totaled 44,171,151 shares.

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

REPORT ON FORM 10-Q

For the QUARTERLY PERIOD ENDED

September 30, 2019

Table of Contents

			Page
PART I - FINANCIAL INFORMATION

Item 1	Financial Statements
	Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2019 and 2018 (unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2019 and 2018 (unaudited)		3
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)		5
	Statements of Shareholders’ Equity for the three months and nine months ended September 30, 2019 and 2018 (unaudited)		6
	Notes to Condensed Consolidated Financial Statements (unaudited)		7
	1.	Organization	7
	2.	Accounting Policies	7
	3.	Acquisition	8
	4.	Revenue	9
	5.	Discontinued Operations	10
	6.	Gain on Disposition of Plant, Equipment and Timberlands	11
	7.	Earnings Per Share	11
	8.	Accumulated Other Comprehensive Income	12
	9.	Income Taxes	13
	10.	Stock-based Compensation	14
	11.	Retirement Plans and Other Post- Retirement Benefits	16
	12.	Inventories	16
	13.	Capitalized Interest	17
	14.	Leases	17
	15.	Long-term Debt	18
	16.	Fair Value of Financial Instruments	19
	17.	Financial Derivatives and Hedging Activities	19
	18.	Commitments, Contingencies and Legal Proceedings	22
	19.	Segment Information	23

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3	Quantitative and Qualitative Disclosures About Market Risks		36
Item 4	Controls and Procedures		36

PART II – OTHER INFORMATION			37

Item 6	Exhibits		37

	SIGNATURES		37

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	2019			2018			2019			2018
Net sales	$	232,515		$	209,855		$	696,701		$	636,806
Costs of products sold		194,494			179,983			585,563			537,073
Gross profit		38,021			29,872			111,138			99,733
Selling, general and administrative expenses		23,721			25,799			71,143			81,915
Gains on dispositions of plant, equipment and timberlands, net		(235	)		(249	)		(1,327	)		(1,939	)
Operating income		14,535			4,322			41,322			19,757
Non-operating income (expense)
Interest expense		(1,902	)		(3,965	)		(8,513	)		(11,237	)
Interest income		185			147			931			227
Other, net		(1,034	)		2,253			(3,547	)		1,131
Total non-operating expense		(2,751	)		(1,565	)		(11,129	)		(9,879	)
Income from continuing operations before income taxes		11,784			2,757			30,193			9,878
Income tax provision		3,141			3,462			10,654			7,037
Income (loss) from continuing operations		8,643			(705	)		19,539			2,841

Discontinued operations:
Income (loss) before income taxes		1,062			(114,656	)		1,291			(128,714	)
Income tax benefit		(2,519	)		(19,530	)		(2,511	)		(28,361	)
Income (loss) from discontinued operations		3,581			(95,126	)		3,802			(100,353	)
Net income (loss)	$	12,224		$	(95,831	)	$	23,341		$	(97,512	)

Basic earnings per share
Income (loss) from continuing operations	$	0.19		$	(0.02	)	$	0.44		$	0.06
Income (loss) from discontinued operations		0.09			(2.17	)		0.09			(2.29	)
Basic earnings (loss) per share	$	0.28		$	(2.19	)	$	0.53		$	(2.23	)

Diluted earnings (loss) per share
Income (loss) from continuing operations	$	0.19		$	(0.02	)	$	0.44		$	0.06
Income (loss) from discontinued operations		0.09			(2.17	)		0.09		$	(2.29	)
Diluted earnings (loss) per share	$	0.28		$	(2.19	)	$	0.53		$	(2.23	)

Cash dividends declared per common share	$	0.13		$	0.13		$	0.39		$	0.39

Weighted average shares outstanding
Basic		44,171			43,792			44,113			43,754
Diluted		44,442			43,792			44,405			43,754

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

- 2 -

GLATFELTER

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	2019			2018			2019			2018
Net income (loss)	$	12,224		$	(95,831	)	$	23,341		$	(97,512	)
Foreign currency translation adjustments		(17,073	)		(3,217	)		(20,452	)		(23,693	)
Net change in:
Deferred gains on cash flow hedges, net of taxes of $(873), $(582), $(1,629) and $(1,718), respectively		2,365			1,616			4,608			4,363
Unrecognized retirement obligations, net of taxes of $(220), $(1,932), $(1,606) and $(3,874), respectively		2,817			21,572			7,657			27,668
Other comprehensive income (loss)		(11,891	)		19,971			(8,187	)		8,338
Comprehensive income (loss)	$	333		$	(75,860	)	$	15,154		$	(89,174	)

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

- 3 -

GLATFELTER

Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30			December 31
In thousands	2019			2018
Assets
Cash and cash equivalents	$	57,046		$	142,685
Accounts receivable, net		121,050			119,772
Inventories		190,574			173,411
Prepaid expenses and other current assets		40,637			33,418
Total current assets		409,307			469,286

Plant, equipment and timberlands, net		524,021			556,044
Goodwill		146,093			153,463
Intangible assets, net		83,129			93,614
Other assets		83,016			67,347
Total assets	$	1,245,566		$	1,339,754

Liabilities and Shareholders' Equity
Current portion of long-term debt	$	22,235		$	10,785
Accounts payable		109,609			120,701
Dividends payable		5,742			5,719
Environmental liabilities		7,700			23,000
Other current liabilities		72,160			72,597
Total current liabilities		217,446			232,802

Long-term debt		329,771			400,962
Deferred income taxes		79,151			78,651
Other long-term liabilities		80,441			88,441
Total liabilities		706,809			800,856

Commitments and contingencies		—			—

Shareholders’ equity
Common stock		544			544
Capital in excess of par value		60,965			62,239
Retained earnings		776,424			770,305
Accumulated other comprehensive loss		(145,627	)		(137,440	)
		692,306			695,648
Less cost of common stock in treasury		(153,549	)		(156,750	)
Total shareholders’ equity		538,757			538,898
Total liabilities and shareholders’ equity	$	1,245,566		$	1,339,754

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

- 4 -

GLATFELTER

Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine months ended September 30
In thousands	2019			2018
Operating activities
Net income (loss)	$	23,341		$	(97,512	)
(Income) loss from discontinued operations, net of taxes		(3,802	)		100,353

Adjustments to reconcile to net cash provided (used) by continuing operations:
Depreciation, depletion and amortization		38,114			34,731
Amortization of debt issue costs and original issue discount		1,525			870
Deferred income tax benefit (provision)		441			(5,466	)
Gains on dispositions of plant, equipment and timberlands, net		(1,327	)		(1,939	)
Share-based compensation		2,683			4,594
Change in operating assets and liabilities
Accounts receivable		(5,431	)		(10,421	)
Inventories		(23,728	)		(40,314	)
Prepaid and other current assets		(4,512	)		(2,935	)
Accounts payable		(5,347	)		(2,019	)
Accruals and other current liabilities		(5,891	)		3,768
Other		(472	)		78
Net cash provided (used) by operating activities from continuing operations		15,594			(16,212	)

Investing activities
Expenditures for purchases of plant, equipment and timberlands		(18,017	)		(32,155	)
Proceeds from disposals of plant, equipment and timberlands, net		1,363			2,073
Acquisition, net of cash acquired		(1,974	)		—
Other		(163	)		(68	)
Net cash used by investing activities from continuing operations		(18,791	)		(30,150	)

Financing activities
Net (repayments) borrowings under revolving credit facility		(30,183	)		174,761
Repayment of 5.375% Notes		(250,000	)		—
Proceeds from term loans		248,644			—
Payments of borrowing costs		(2,170	)		—
Repayment of term loans		(11,020	)		(8,373	)
Payments of dividends		(17,194	)		(17,064	)
Payments related to share-based compensation awards and other		(755	)		(1,008	)
Net cash provided (used) by financing activities from continuing operations		(62,678	)		148,316
Effect of exchange rate changes on cash		(1,794	)		(3,931	)
Net increase (decrease) in cash and cash equivalents		(67,669	)		98,023
Change in cash and cash equivalents from discontinued operations		(17,970	)		19,828
Cash and cash equivalents at the beginning of period		142,685			116,219
Cash and cash equivalents at the end of period	$	57,046		$	234,070

Supplemental cash flow information
Cash paid for:
Interest, net of amounts capitalized	$