Document

10-Q 1 q1form10-qx033122.htm 10-Q Document

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 March 31, 2022


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

For the transition period from to

4350 Congress Street, Suite 600

Charlotte, North Carolina 28209

(Address of principal executive offices)

(704) 885-2555

(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

Glatfelter Corporation

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 May 4, 2022 totaled 44,720,442 shares.

GLATFELTER CORPORATION AND SUBSIDIARIES

REPORT ON FORM 10-Q

For the Quarterly Period Ended

March 31, 2022

Table of Contents


PART I - FINANCIAL INFORMATION			Page
Item 1	Financial Statements		2
	Condensed Consolidated Statements of Income for the three months ended March 31, 2022 and 2021 (unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021 (unaudited)		3
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)		5
	Statements of Shareholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)		6
	Notes to Condensed Consolidated Financial Statements (unaudited)		7
	1	Organization	7
	2	Accounting Policies	7
	3	Acquisition	7
	4	Revenue	9
	5	Gains on Disposition of Plant, Equipment and Timberlands	9
	6	Goodwill and Other Asset Impairment	10
	7	Discontinued Operations	11
	8	Earnings Per Share	11
	9	Accumulated Other Comprehensive Income	12
	10	Stock-based Compensation	14
	11	Retirement Plans and Other Post-Retirement Benefits	15
	12	Income Taxes	15
	13	Inventories	16
	14	Goodwill and Other Intangible Assets	17
	15	Leases	18
	16	Long-term Debt	19
	17	Fair Value of Financial Instruments	20
	18	Financial Derivatives and Hedging Activities	20
	19	Commitments, Contingencies and Legal Proceedings	23
	20	Segment Information	24
	21	Sub s equent Event	25
Item 2	M anagement’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3	Quantitative and Qualitative Disclosures About Market Risks		35
Item 4	Controls and Procedures		35
PART II – OTHER INFORMATION			36
Item 1A	Risk Factors		36
Item 6	Exhibits		37
	SIGNATURES		38

PART I

Item 1 – Financial Statements

GLATFELTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three months ended March 31,
In thousands, except per share		2022		2021

Net sales		$	381,680	$	225,674
Costs of products sold		350,015		186,378
Gross profit		31,665		39,296
Selling, general and administrative expenses		33,166		22,827
Goodwill and other asset impairment charges		117,349		—
Gains on dispositions of plant, equipment and timberlands, net		(2,961)		(850)
Operating income (loss)		(115,889)		17,319
Non-operating income (expense)
Interest expense		(7,862)		(1,531)
Interest income		17		20

Other, net		(1,340)		(224)
Total non-operating expense		(9,185)		(1,735)
Income (loss) from continuing operations before income taxes		(125,074)		15,584
Income tax provision (benefit)		(16,784)		7,190
Income (loss) from continuing operations		(108,290)		8,394

Discontinued operations:
Loss before income taxes		(37)		—
Income tax provision		—		—
Loss from discontinued operations		(37)		—
Net income (loss)		$	(108,327)	$	8,394

Basic earnings per share
Income from continuing operations		$	(2.42)	$	0.19
Loss from discontinued operations		—		—
Basic earnings per share		$	(2.42)	$	0.19

Diluted earnings per share
Income from continuing operations		$	(2.42)	$	0.19
Loss from discontinued operations		—		—
Diluted earnings per share		$	(2.42)	$	0.19

Weighted average shares outstanding
Basic		44,709		44,450
Diluted		44,709		44,869

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

- 2 -

GLATFELTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three months ended March 31,
In thousands		2022		2021
Net income (loss)		$	(108,327)	$	8,394

Foreign currency translation adjustments		(10,915)		(13,193)
Net change in:
Deferred gains (losses) on derivatives, net of taxes of $(600) and $(1,301), respectively		(357)		3,261
Unrecognized retirement obligations, net of taxes of $(160) and $(73), respectively		152		92
Other comprehensive loss		(11,120)		(9,840)
Comprehensive loss		$	(119,447)	$	(1,446)

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

- 3 -

GLATFELTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


In thousands	March 31, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	80,452	$	138,436
Accounts receivable, net	221,228		170,212
Inventories	292,096		279,520
Prepaid expenses and other current assets	55,069		48,398
Total current assets	648,845		636,566

Plant, equipment and timberlands, net	716,567		758,812
Goodwill	177,063		236,165
Intangible assets, net	116,722		156,304
Other assets	89,841		92,760
Total assets	$	1,749,038	$	1,880,607

Liabilities and Shareholders' Equity
Current portion of long-term debt	$	25,516	$	26,437
Short-term debt	25,448		22,843
Accounts payable	210,514		214,015
Dividends payable	6,261		6,237
Environmental liabilities	2,400		2,200
Other current liabilities	98,044		99,438
Total current liabilities	368,183		371,170

Long-term debt	758,263		738,075
Deferred income taxes	64,925		87,285
Other long-term liabilities	140,934		141,315
Total liabilities	1,332,305		1,337,845

Commitments and contingencies	—		—

Shareholders’ equity
Common stock	544		544
Capital in excess of par value	61,873		64,779
Retained earnings	591,012		705,600
Accumulated other comprehensive loss	(91,424)		(80,304)
	562,005		690,619
Less cost of common stock in treasury	(145,272)		(147,857)
Total shareholders’ equity	416,733		542,762
Total liabilities and shareholders’ equity	$	1,749,038	$	1,880,607

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

- 4 -

GLATFELTER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three months ended March 31,
In thousands	2022		2021
Operating activities
Net income (loss)	$	(108,327)	$	8,394
Loss from discontinued operations, net of taxes	37		—
Adjustments to reconcile to net cash provided by continuing operations:
Depreciation, depletion and amortization	18,484		13,733
Amortization of debt issue costs and original issue discount	452		153

Goodwill and other asset impairment charges	117,349		—
Inventory and accounts receivable charges	3,948		—
Deferred income tax benefit	(21,227)		(410)
Gains on dispositions of plant, equipment and timberlands, net	(2,961)		(850)
Share-based compensation	909		1,208
Change in operating assets and liabilities:
Accounts receivable	(53,318)		(7,002)
Inventories	(17,699)		(13,248)
Prepaid and other current assets	(5,946)		167
Accounts payable	1,776		(7,460)
Accruals and other current liabilities	949		(3,447)
Other	(666)		2,716
Net cash used by operating activities from continuing operations	(66,240)		(6,046)
Investing activities
Expenditures for purchases of plant, equipment and timberlands	(12,349)		(5,379)
Proceeds from disposals of plant, equipment and timberlands, net	3,160		876
Acquisition, net of cash acquired	1,413		—
Other	(25)		(100)
Net cash used by investing activities from continuing operations	(7,801)		(4,603)
Financing activities

Proceeds from term loans	—		11,725
Repayment of term loans	(6,712)		(6,136)

Net borrowings under revolving credit facility	31,019		1,151
Payments of borrowing costs	(559)		(35)
Payments of dividends	(6,237)		(5,990)

Payments related to share-based compensation awards and other	(1,230)		(536)
Net cash provided by financing activities from continuing operations	16,281		179
Effect of exchange rate changes on cash	(748)		(2,213)
Net decrease in cash, cash equivalents and restricted cash	(58,508)		(12,683)
Decrease in cash, cash equivalents and restricted cash from discontinued operations	(108)		(78)
Cash, cash equivalents and restricted cash at the beginning of period	148,814		111,665
Cash, cash equivalents and restricted cash at the end of period	90,198		98,904
Less: restricted cash in Prepaid expenses and other current assets	(2,000)		(2,000)
Less: restricted cash in Other assets	(7,746)		(9,538)
Cash and cash equivalents at the end of period	$	80,452	$	87,366

Supplemental cash flow information
Cash paid for:
Interest	$	1,494	$	1,408
Income taxes, net	8,245		3,493

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

- 5 -

GLATFELTER CORPORATION AND SUBSIDIARIES

STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)


In thousands	Common stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity





















Balance at January 1, 2022	$	544	$	64,779	$	705,600	$	(80,304)	$	(147,857)	$	542,762
Net loss					(108,327)						(108,327)
Other comprehensive loss							(11,120)				(11,120)
Comprehensive loss											(119,447)
Cash dividends declared ($0.14 per share)					(6,261)						(6,261)
Share-based compensation expense			909								909
Delivery of treasury shares
RSUs and PSAs			(3,815)						2,585		(1,230)
Balance at March 31, 2022	$	544	$	61,873	$	591,012	$	(91,424)	$	(145,272)	$	416,733

Balance at January 1, 2021	$	544	$	63,261	$	723,365	$	(58,653)	$	(150,585)	$	577,932
Net income					8,394						8,394
Other comprehensive loss							(9,840)				(9,840)
Comprehensive loss											(1,446)
Cash dividends declared $0.135 per share)					(6,003)						(6,003)
Share-based compensation expense			1,208								1,208
Delivery of treasury shares
RSUs and PSAs			(1,893)						1,263		(630)

Balance at March 31, 2021	$	544	$	62,576	$	725,756	$	(68,493)	$	(149,322)	$	571,061

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

- 6 -

GLATFELTER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.ORGANIZATION

Glatfelter Corporation and subsidiaries ("Glatfelter") is a leading global supplier of engineered materials with a strong focus on innovation and sustainability. Glatfelter's high quality, technology-driven, innovative, and customizable nonwovens solutions can be found in products that are Enhancing Everyday Life®. These include personal care and hygiene products, food and beverage filtration, critical cleaning products, medical and personal protection, packaging products, as well as home improvement and industrial applications. Headquartered in Charlotte, NC, the Company’s 2021 net sales were $1.1 billion with approximately 3,250 employees worldwide. Glatfelter’s operations utilize a variety of manufacturing technologies including airlaid, wetlaid and spunlace with sixteen manufacturing sites located in the United States, Canada, Germany, the United Kingdom, France, Spain, and the Philippines. The Company has sales offices in all major geographies serving customers under the Glatfelter and Sontara brands. Additional information about Glatfelter may be found at www.glatfelter.com. The terms “we,” “us,” “our,” “the Company,” or “Glatfelter,” refer to Glatfelter Corporation 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 you have read the audited consolidated financial statements included in our 2021 Annual Report on Form 10-K.

Discontinued Operations The results of operations and cash flows of our former Specialty Papers business have been classified as discontinued operations for all periods presented in the condensed consolidated statements of income.

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 actual results may differ from those estimates and assumptions.

Inventories Our inventories are stated at the lower of cost or net realizable value. Raw materials, in-process and finished goods inventories are valued principally using the average-cost method.

3.ACQUISITION

On May 13, 2021, we completed the acquisition of all the outstanding equity interests in Georgia-Pacific Mt. Holly LLC, Georgia-Pacific's U.S. nonwovens business ("Mount Holly") for $170.9 million. Mount Holly’s results are reported prospectively from the acquisition date as part of our Airlaid Materials segment.

On October 29, 2021, we completed the acquisition of PMM Holding (Luxembourg) AG, the owner of all of the equity interest in Jacob Holm, a global leading manufacturer of premium quality spunlace nonwoven fabrics for critical cleaning, high-performance materials, personal care, hygiene and medical applications, for approximately $304.0 million for all outstanding shares and the extinguishment of Jacob Holm’s debt.

For the quarter ended March 31, 2022, there were no changes to the preliminary purchase price allocation related to the Jacob Holm acquisition.

- 7 -

The following table sets forth information related to amounts of net sales and operating income (loss) of the acquired businesses included in our results of operations in the first quarter of 2022:


	Three months ended March 31,
In thousands	2022
Mount Holly
Net sales	$	27,304
Operating income	2,723
Jacob Holm
Net sales	96,387
Operating loss	(1,572)

The following table summarizes annual unaudited pro forma financial information as if the acquisition occurred as of January 1, 2021:


(unaudited)		Three months ended March 31,
In thousands, except per share	0	2021
Pro forma
Net sales		$	342,553
Operating income		23,438

The pro forma financial information set forth above for the three months ended March 31, 2021 includes $0.6 million of one-time costs directly related to the Mount Holly transaction. Such costs are presented under the caption “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of income.

- 8 -

4.REVENUE

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


	Three months ended March 31,
In thousands		2022		2021
Revenue by product category
Composite Fibers
Food & beverage		$	75,223	$	76,953
Wallcovering		15,831		22,629
Technical specialties		23,136

SEC Form 10-Q filed by Glatfelter Corporation