Business context and reporting period
This is Glatfelter Corporation’s unaudited Form 10-Q for the three months ended March 31, 2021, filed May 4, 2021. Glatfelter describes itself as a global engineered-materials supplier, reporting Composite Fibers and Airlaid Materials as continuing operating segments; its former Specialty Papers business is reported as discontinued operations. The request names Magnera Corp, but the filing identifies the registrant as Glatfelter Corporation (NYSE: GLT); confirm the intended issuer.
Financial performance and position
Amounts below are in U.S. dollars; income-statement and cash-flow figures compare Q1 2021 with Q1 2020.
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Net sales | $225.7 million | $231.6 million; down 2.5% |
| Gross profit / margin | $39.3 million / 17.4% | $36.9 million / 15.9% |
| Operating income | $17.3 million | $12.3 million |
| Net income from continuing operations | $8.4 million | $7.4 million |
| Diluted EPS | $0.19 | $0.17 |
| Adjusted earnings / diluted EPS, non-GAAP | $8.5 million / $0.19 | $10.8 million / $0.24 |
| Operating cash flow | Use of $6.0 million | Use of $5.6 million |
| Capital expenditures | $5.4 million | $7.0 million |
Cash and cash equivalents were $87.4 million at March 31, 2021, with a further $178.1 million available under the revolving facility. Total current assets were $463.1 million and current liabilities $235.7 million. Reported long-term debt was $296.8 million before deferred issuance costs; the company also had $11.7 million of short-term debt. The credit-agreement leverage ratio was 1.8x, against a maximum of 4.0x (temporarily 4.5x after a material acquisition). The quarterly dividend declared was $0.135 per share.
Material changes versus the prior comparable period
- Revenue declined despite Composite Fibers growth, as Airlaid Materials sales fell. Composite Fibers revenue rose 6.4% to $141.2 million, including $10.3 million of favorable currency translation; operating income increased 6.4% to $16.1 million.
- Airlaid Materials revenue decreased 14.6% to $84.4 million and operating income fell 40.1% to $7.2 million. Shipments were down 18%, with tabletop demand affected by restaurant closures and hygiene/wipes customers reducing inventory after elevated year-end stocking.
- Consolidated gross margin improved to 17.4% from 15.9%; GAAP operating income and EPS increased. However, adjusted earnings declined year over year, from $10.8 million to $8.5 million.
- Cash used in operations increased modestly, primarily reflecting greater working-capital use, particularly inventory. Cash and cash equivalents fell from $99.6 million at year-end 2020; cash including restricted cash declined to $98.9 million.
- Long-term debt declined from $315.4 million at December 31, 2020 to $296.8 million at March 31, 2021, while the company added $11.7 million of short-term borrowing.
Outlook, commentary, risks and unusual items
- Management expected the $175 million purchase of Georgia-Pacific’s U.S. nonwovens business to close by mid-May 2021, subject to customary conditions. The business had approximately $100 million of 2020 sales and was to join Airlaid Materials; funding was expected from cash and revolving-credit borrowings.
- Management forecast full-year 2021 capital expenditures of $38 million to $42 million. It stated that cash, operating cash flow and credit availability were expected to meet near- and long-term cash needs, and that it did not expect debt covenants to constrain operations or financing.
- COVID-19 continued to weigh on tabletop demand. Management cited continued strength in food and beverage filtration, personal hygiene and wipes, while warning of possible demand, supply-chain and production effects from the pandemic.
- Other risks include raw-material and energy price changes, currency fluctuations, competition, customer concentration or loss, production interruptions, labor disputes, international and geopolitical conditions, tax matters, and the ability to finance and integrate acquisitions.
- Q1 included an $0.85 million gain from timberland sales. The effective tax rate was adversely affected by U.S. operating losses that generated no tax benefit and a German local tax-rate increase. Gross unrecognized tax benefits were $47.2 million; the filing said they could decrease by up to $6.3 million within twelve months.
- The company recorded approximately $12 million of value-added-tax liability and a related receivable, expecting full recovery with no net earnings or cash-flow impact, although payment and recovery timing could differ.
- Fox River environmental reserves totaled $18.1 million, including $3.6 million current and $14.5 million long-term. The company said it did not believe its costs would materially exceed the accrued amount; monitoring and maintenance obligations extend over at least 30 years.
- Foreign-currency translation reduced reported Q1 net results by $0.1 million, despite increasing reported sales by $14.5 million. A hypothetical 100-basis-point rise in variable interest rates was estimated to increase annual interest expense by $0.3 million.
Key facts investors should verify
- Confirm the issuer and ticker intended: the supplied filing is for Glatfelter Corporation (GLT), not an entity named Magnera Corp.
- Check whether the Georgia-Pacific acquisition closed as expected and assess final purchase-price adjustments, financing, integration and contribution to Airlaid Materials.
- Track recovery in Airlaid Materials volumes, especially tabletop, hygiene and wipes, and whether the first-quarter inventory and customer-order patterns persisted.
- Reconcile GAAP earnings improvement with the decline in adjusted earnings, including the company’s non-GAAP adjustments and comparability.
- Monitor operating cash flow, working-capital needs, 2021 capital spending, debt and covenant headroom following the acquisition.
- Follow developments in tax examinations and unrecognized tax benefits, the VAT receivable recovery, and Fox River environmental obligations.