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 June 30, 2019
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) 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 July 24, 2019 totaled 44,171,151 shares.
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
REPORT ON FORM 10-Q
For the QUARTERLY PERIOD ENDED
June 30, 2019
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1
Financial Statements
Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2019 and 2018 (unaudited)
2
Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2019 and 2018 (unaudited)
3
Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 (unaudited)
4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)
5
Statements of Shareholders’ Equity for the three months and six months ended June 30, 2019 and 2018 (unaudited)
6
Notes to Condensed Consolidated Financial Statements (unaudited)
7
1.
Organization
2.
Accounting Policies
3.
Acquisition
8
4.
Revenue
9
5.
Discontinued Operations
10
6.
Gain on Disposition of Plant, Equipment and Timberlands
11
7.
Earnings Per Share
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
13.
Capitalized Interest
17
14.
Leases
15.
Long-term Debt
18
16.
Fair Value of Financial Instruments
19
17.
Financial Derivatives and Hedging Activities
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
PART II – OTHER INFORMATION
37
Item 6
Exhibits
SIGNATURES
PART I
Item 1 – Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended
June 30
Six months ended
In thousands, except per share
2019
2018
Net sales
$
235,053
215,742
464,186
426,949
Costs of products sold
197,553
182,443
391,069
357,090
Gross profit
37,500
33,299
73,117
69,859
Selling, general and administrative expenses
22,800
26,185
47,422
56,116
Gains on dispositions of plant, equipment and timberlands, net
(423
)
(574
(1,092
(1,690
Operating income
15,123
7,688
26,787
15,433
Non-operating income (expense)
Interest expense
(1,865
(3,822
(6,611
(7,272
Interest income
241
26
746
80
Other, net
(1,551
(799
(2,513
(1,122
Total non-operating expense
(3,175
(4,595
(8,378
(8,314
Income from continuing operations before income taxes
11,948
3,093
18,409
7,119
Income tax provision
5,655
1,813
7,513
3,575
Income from continuing operations
6,293
1,280
10,896
3,544
Discontinued operations:
Income (loss) before income taxes
(485
(18,517
229
(14,058
Income tax provision (benefit)
(23
(9,838
(8,831
Income (loss) from discontinued operations
(462
(8,679
221
(5,227
Net income (loss)
5,831
(7,399
11,117
(1,683
Basic earnings per share
0.14
0.03
0.25
0.08
(0.01
(0.20
0.01
(0.12
Basic earnings (loss) per share
0.13
(0.17
0.26
(0.04
Diluted earnings (loss) per share
—
Cash dividends declared per common share
Weighted average shares outstanding
Basic
44,140
43,770
44,084
43,735
Diluted
44,382
44,487
44,351
44,531
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 2 -
GLATFELTER
06.30.19 Form 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands
Foreign currency translation adjustments
1,426
(33,223
(3,379
(20,476
Net change in:
Deferred gains on cash flow hedges, net of taxes
of $78, $(1,719), $(756) and $(1,136), respectively
21
4,549
2,243
2,747
Unrecognized retirement obligations, net of taxes
of $(1,241), $(965), $(1,386) and $(1,942), respectively
4,352
3,021
4,840
6,096
Other comprehensive income (loss)
5,799
(25,653
3,704
(11,633
Comprehensive income (loss)
11,630
(33,052
14,821
(13,316
- 3 -
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31
Assets
Cash and cash equivalents
58,945
142,685
Accounts receivable, net
136,548
119,772
192,123
173,411
Prepaid expenses and other current assets
42,758
33,418
Total current assets
430,374
469,286
Plant, equipment and timberlands, net
541,856
556,044
Goodwill
153,158
153,463
Intangible assets, net
88,882
93,614
Other assets
81,720
67,347
Total assets
1,295,990
1,339,754
Liabilities and Shareholders' Equity
Current portion of long-term debt
23,238
10,785
Accounts payable
115,241
120,701
Dividends payable
5,742
5,719
Environmental liabilities
6,867
23,000
Other current liabilities
74,059
72,597
Total current liabilities
225,147
232,802
Long-term debt
361,792
400,962
Deferred income taxes
78,968
78,651
Other long-term liabilities
86,964
88,441
Total liabilities
752,871
800,856
Commitments and contingencies
Shareholders’ equity
Common stock
544
Capital in excess of par value
59,920
62,239
Retained earnings
769,940
770,305
Accumulated other comprehensive loss
(133,736
(137,440
696,668
695,648
Less cost of common stock in treasury
(153,549
(156,750
Total shareholders’ equity
543,119
538,898
Total liabilities and shareholders’ equity
- 4 -
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities
(Income) loss from discontinued operations, net of taxes
(221
5,227
Adjustments to reconcile to net cash used by continuing operations:
Depreciation, depletion and amortization
25,520
23,195
Amortization of debt issue costs and original issue discount
1,380
580
Deferred income tax benefit
(143
(3,437
Share-based compensation
1,638
3,505
Change in operating assets and liabilities
Accounts receivable
(17,004
(14,791
(19,513
(29,040
Prepaid and other current assets
(6,593
(760
(3,465
1,824
Accruals and other current liabilities
(12,258
(6,471
Other
1,349
(332
Net cash used by operating activities from continuing operations
(19,285
(23,873
Investing activities
Expenditures for purchases of plant, equipment and timberlands
(10,633
(25,937
Proceeds from disposals of plant, equipment and timberlands, net
1,116
1,804
Acquisition, net of cash acquired
(1,974
(90
(68
Net cash used by investing activities from continuing operations
(11,581
(24,201
Financing activities
Net (repayments) borrowings under revolving credit facility
(19,294
46,660
Repayment of 5.375% Notes
(250,000
Proceeds from term loans
248,644
Payments of borrowing costs
(2,170
Repayment of term loans
(5,326
(5,647
Payments of dividends
(11,452
(11,368
Payments related to share-based compensation awards and other
(755
(980
Net cash provided (used) by financing activities from continuing operations
(40,353
28,665
Effect of exchange rate changes on cash
(291
(3,230
Net decrease in cash and cash equivalents
(71,510
(22,639
Change in cash and cash equivalents from discontinued operations
(12,230
13,609
Cash and cash equivalents at the beginning of period
116,219
Cash and cash equivalents at the end of period
107,189
Supplemental cash flow information
Cash paid for:
Interest, net of amounts capitalized
7,742
6,935
Income taxes, net
7,157
6,804
- 5 -
STATEMENTS OF SHAREHOLDERS’ EQUITY
Common
stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Comprehensive
Loss
Treasury
Stock
Total
Shareholders’
Equity
Balance at April 1, 2019
60,565
769,857
(139,535
(155,243
536,188
Net income
Other comprehensive income
Comprehensive income
Cash dividends declared ($0.13 per share)
(5,748
Share-based compensation expense
1,161
Delivery of treasury shares
RSUs and PSAs
(1,429
1,427
(2
Employee stock options exercised — net
(377
267
(110
Balance at June 30, 2019
Balance at April 1, 2018
62,359
970,736
(148,953
(160,694
723,992
Net loss
Other comprehensive loss
Comprehensive loss
(5,694
1,722
(1,216
1,215
(1
(38
(15
Balance at June 30, 2018
62,827
957,643
(174,606
(159,456
686,952
Balance at January 1, 2019
Cash dividends declared ($0.26 per share)
(11,482
(2,421
2,097
(324
(1,536
1,104
(432
Balance at January 1, 2018
62,594
948,411
(140,675
(161,946
708,928
Reclassification pursuant to ASU No. 2018-02
22,298
(22,298
(11,383
(2,376
1,900
(476
(1,095
590
(505
- 6 -
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, Pennsylvania, 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.
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 2018 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.
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.
Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 842”). This ASU requires organizations to recognize on its balance sheet the assets and liabilities for the rights and obligations created by leases. We adopted ASU 842 as of January 1, 2019 and elected to follow a modified retrospective method which permitted us to adopt the standard without restating previously reported periods. As a result of adopting ASU 842, we recorded a right of use asset and corresponding lease obligation of approximately $14.1 million. Refer to Note 14 “Leases” for additional information.
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. We adopted ASU No. 2017-12 effective January 1, 2019 but it had an insignificant effect on our results of operations and financial position.
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.
- 7 -
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 post-closing purchase price adjustments of $2.0 million.
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 were reported prospectively from the acquisition date as part of our Advanced Airlaid Materials business unit.
We financed the transaction through a combination of cash on hand and borrowings under our revolving credit facility.
The preliminary allocation set forth in the following table is based on all information available to us at the present time and is subject to change. In the event new information, primarily related to the finalization of the values of certain intangible assets, becomes available, the measurement of the amounts of goodwill reflected may be affected. The preliminary allocation of the purchase price to assets acquired and liabilities assumed is as follows:
Preliminary
Allocation
7,540
13,277
Inventory
11,133
290
Plant, equipment and timberlands
66,167
Intangible assets
43,573
75,349
217,329
Liabilities
8,577
Deferred tax liabilities
19,119
Other long term liabilities
1,162
28,858
188,471
less cash acquired
(7,540
Total purchase price
180,931
For purposes of allocating the total purchase price, assets acquired and liabilities assumed are recorded at their estimated fair market value. The allocation set forth above is based on management’s estimate of the fair value using valuation techniques such as discounted cash flow models, appraisals and similar methodologies. The amount allocated to intangible assets represents the estimated value of customer relationships, technological know-how and trade name.
In connection with the Steinfurt acquisition we recorded $75.3 million of goodwill and $43.6 million of intangible assets. The goodwill arising from the acquisition largely relates to strategic benefits, product and market diversification, assembled workforce, and similar factors. For tax purposes, none of the goodwill is deductible. Intangible assets consist of technology, customer relationships and tradename.
- 8 -
The following table summarizes unaudited pro forma financial information for the indicated periods of 2018 as if the acquisition occurred as of January 1, 2018:
Pro forma
239,663
476,948
1,326
5,177
Income per share from continuing operations
0.12
REVENUE
The following tables set forth disaggregated information pertaining to our net sales:
Composite Fibers
Food & beverage
70,390
70,186
141,843
140,583
Wallcovering
22,958
27,789
41,508
55,921
Technical specialties
19,266
21,609
38,554
42,567
Composite laminates
9,218
8,960
17,693
18,358
Metallized
10,749
14,390
21,700
27,102
132,581
142,934
261,298
284,531
Advanced Airlaid Materials
Feminine hygiene
51,851
46,937
106,839
95,410
Specialty wipes
17,656
10,495
34,988
18,262
Table top
16,347
2,179
29,678
4,244
Adult incontinence
6,365
5,190
11,853
9,622
Home care
3,875
8,316
7,902
5,901
4,132
11,214
6,978
102,472
72,808
202,888
142,418
TOTAL
Europe, Middle East and Africa
80,002
91,790
157,916
186,572
Americas
33,964
28,992
65,604
53,040
Asia Pacific
18,615
22,152
37,778
44,919
55,206
35,905
109,645
72,133
45,261
36,310
89,595
69,128
2,005
593
3,648
1,157
- 9 -
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 $210 million of pension liabilities relating to Specialty Papers’ employees and will receive approximately $280 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:
190,031
389,469
Energy and related sales, net
944
2,373
Total revenues
190,975
391,842
202,671
391,192
Gross profit (loss)
(11,696
650
485
5,376
(229
12,508
(5
(443
Operating income (loss)
(17,067
(11,415
(1,991
(3,736
541
1,093
Income tax (provision) benefit
(8
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 following table sets forth a summary of cash flows from discontinued operations which is included in the condensed consolidated statements of cash flows:
Net cash provided (used) by operating activities
(10,658
23,911
Net cash used by investing activities
(1,572
(10,427
Net cash provided by financing activities
125
- 10 -
GAINS ON DISPOSITION OF PLANT, EQUIPMENT AND TIMBERLANDS
During the first six months of 2019 and 2018 we completed the following sales of timberlands and other assets included in continuing operations:
Dollars in thousands
Acres
Proceeds
Gain
Timberlands
361
902
881
n/a
214
211
1,092
1,029
1,785
1,680
1,690
EARNINGS PER SHARE
The following table sets forth the details of basic and diluted earnings per share (“EPS”) from continuing operations:
Weighted average common shares
outstanding used in basic EPS
Effect of dilutive SOSARs,
PSAs and RSUs
242
717
outstanding and common share
equivalents used in diluted EPS
Earnings per share from continuing operations
796
The numerator used to compute income per share from discontinued operations was $(0.462) million and $(8.679) million for the second quarter of 2019 and 2018, respectively, and $0.221 million and $(5.227) million for the first six months of 2019 and 2018, respectively. The denominator used to compute per share amounts of loss from discontinued operations is the same as the denominator used for per share amounts of income from continuing operations.
- 11 -
The following table sets forth potential common shares outstanding that were not included in the computation of diluted EPS for the periods indicated, because their effect would be anti-dilutive:
1,233
2,393
ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table sets forth details of the changes in accumulated other comprehensive income (losses) for the three months and six months ended June 30, 2019 and 2018.
Currency translation adjustments
Unrealized gain (loss) on cash flow hedges
Change in pensions
Change in other postretirement defined benefit plans
(74,427
4,421
(70,810
1,281
Other comprehensive income before reclassifications (net of tax)
1,040
4,926
7,392
Amounts reclassified from accumulated
other comprehensive income (net of tax)
(1,019
(441
(133
(1,593
Net current period other comprehensive income (loss)
4,485
(73,001
4,442
(66,325
1,148
(29,092
(5,894
(118,428
4,461
Other comprehensive income (loss) before reclassifications (net of tax)
3,368
(29,855
1,181
3,261
(240
4,202
(62,315
(1,345
(115,167
4,221
(69,622
2,199
(71,431
1,414
3,681
5,228
(1,438
180
(266
(1,524
5,106
(41,839
(4,092
(98,295
3,551
Amount reclassified for adoption of ASU No. 2018-02
(23,297
999
Balance as adjusted at January 1, 2018
(121,592
4,550
(162,973
151
(20,325
2,596
6,425
(329
8,692
- 12 -
Reclassifications out of accumulated other comprehensive income and into the condensed consolidated statements of income were as follows:
Three months ended June 30
Description
Line Item in Statements of Income
Cash flow hedges (Note 17)
(Gains) losses on cash flow hedges
(1,411
1,636
(1,996
3,595
Tax expense (benefit)
392
(455
558
(999
Net of tax
Retirement plan obligations (Note 11)
Amortization of deferred benefit pension plans
Prior service costs
54
88
Actuarial losses
789
2,060
1,564
4,119
Discontinued operations amortization of defined benefit pension plans
2,240
4,344
Discontinued operations
843
4,304
1,652
8,474
Tax benefit
(1,284
(1,043
(1,472
(2,049
Amortization of deferred benefit other plans
(3
Actuarial gains
(173
(17
(346
(33
Discontinued operations amortization of defined benefit other plans
(301
(403
(176
(318
(351
(436
Tax expense
43
78
85
107
Total reclassifications, net of tax
INCOME TAXES
Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The effects of income taxes are measured based on enacted tax laws and rates.
We elect to account for the tax associated with the Global Intangible Low-Taxed Income (GILTI) provision of the 2017 Tax Cuts and Jobs Act in the period in which it is incurred. The GILTI provisions require entities to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.
For the six months ended June 30, 2019, our effective tax rate increased by approximately 8% as a result of the GILTI provisions due to our U.S. federal tax loss carryforward position which limits our ability to recognize the associated foreign tax credits and a deduction of up to 50% of the GILTI income. Due to our U.S. federal tax loss carryforward position, there is no impact to cash taxes related to the GILTI provisions.
For the six months ended June 30, 2019, we recorded an additional valuation allowance of $1.6 million against our net deferred tax assets primarily due to uncertainty regarding our ability to utilize federal net operating losses and credit carryforwards. In assessing the need for a valuation allowance, we consider all available positive and negative evidence in our analysis. Based on this analysis, we recorded a valuation allowance for the portion of deferred tax assets where the weight of the evidence indicated it is more likely than not that the deferred tax assets will not be realized.
As of June 30, 2019 and December 31, 2018, we had $30.6 million and $29.6 million, respectively, of gross unrecognized tax benefits. As of June 30, 2019, if such benefits were to be recognized, approximately $20.4 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate.
- 13 -
We, or one of our subsidiaries, file income tax returns with the United States Internal Revenue Service, as well as various state and foreign authorities.
The following table summarizes, by major jurisdiction, tax years that remain subject to examination:
Open Tax Years
Jurisdiction
Examinations not
yet initiated
Examination in
progress
United States
Federal
2015 - 2018
State
2014 - 2018
2015 - 2017
Canada(1)
2011-2013; 2018
2014 - 2017
Germany(1)
2016 - 2018
2012 - 2015
France
United Kingdom
2017 - 2018
Philippines
2016 - 2017
(1)
includes provincial or similar local jurisdictions, as applicable
The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of federal, state and foreign examinations, and the lapse of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may decrease within the next twelve months by a range of zero to $6.2 million. Substantially all this range relates to tax positions taken in Germany and the U.S.
We recognize interest and penalties related to uncertain tax positions as income tax expense. The following table summarizes information included in continuing operations related to interest and penalties on uncertain tax positions:
In millions
Interest expense (income)
0.2
0.1
Penalties
Accrued interest payable
1.3
1.1
STOCK-BASED COMPENSATION
The P. H. Glatfelter Amended and Restated Long Term Incentive Plan (the “LTIP”) provides for the issuance of Glatfelter common stock to eligible participants in the form of restricted stock units, restricted stock awards, non-qualified stock options, performance shares, incentive stock options and performance units.
Pursuant to terms of the LTIP, we have issued to eligible participants restricted stock units, performance share awards and stock only stock appreciation rights.
Restricted Stock Units (“RSU”) and Performance Share Awards (“PSAs”) Awards of RSUs and PSAs are made under our LTIP. The RSUs vest on the passage of time, generally on a graded scale over a three, four, and five-year period, or in certain instances the RSUs were issued with five-year cliff vesting. PSAs are issued to participants and vesting is based on achievement of cumulative financial performance targets covering a two-year period followed by an additional one-year service period. In addition, beginning in 2018, PSA awards include a modifier based on our three-year total shareholder return (“TSR”) relative to the TSR of the S&P SmallCap 600 Index. The performance measures include a minimum, target and maximum performance level providing the
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grantees an opportunity to receive more or less shares than targeted depending on actual financial performance. In addition, the number of shares earned may be further increased or decreased based on our TSR relative to the S&P SmallCap 600 Index.
For RSUs, the grant date fair value of the awards, which is equal to the closing price per common share on the date of the award, is used to determine the amount of expense to be recognized over the applicable service period. For PSAs, the grant date fair value is estimated using a lattice model. The significant inputs include the stock price, volatility, dividend yield, and risk-free rate of return. Settlement of RSUs and PSAs will be made in shares of our common stock currently held in treasury.
The following table summarizes RSU and PSA activity during periods indicated:
Units
Balance at January 1,
756,786
929,386
Granted
449,054
389,065
Forfeited
(127,603
(70,891
Shares delivered
(163,078
(150,020
Balance at June 30,
915,159
1,097,540
The amount granted in 2019 and 2018 includes 218,422 and 183,355, respectively, of PSAs exclusive of reinvested dividends.
The following table sets forth aggregate RSU and PSA compensation expense included in continuing operations for the periods indicated:
1,596
1,595
Stock Only Stock Appreciation Rights (“SOSARs”) Under terms of the SOSAR, a recipient receives the right to a payment in the form of shares of common stock equal to the difference, if any, in the fair market value of one share of common stock at the time of exercising the SOSAR and the exercise price. The SOSARs vest ratably over a three year period and have a term of ten years. No SOSARs were awarded since 2016.
The following table sets forth information related to outstanding SOSARS:
SOSARS
Shares
Wtd Avg
Exercise
Price
Outstanding at January 1,
2,334,742
18.08
2,561,846
17.87
Exercised
(441,920
14.31
(148,145
13.26
Canceled / forfeited
(446,435
21.06
(20,994
18.76
Outstanding at June 30,
1,446,387
19.31
2,392,707
18.15
The following table sets forth SOSAR compensation expense included in continuing operations for the periods indicated:
64
244
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RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS
The following tables provide information with respect to the net periodic costs of our pension and post-retirement medical benefit plans included in continuing operations.
Pension Benefits
Service cost
373
595
Interest cost
3,337
3,241
Expected return on plan assets
(3,699
(5,530
Amortization of prior service cost
Amortization of unrecognized loss
Total net periodic benefit cost
854
370
Other Benefits
15
84
79
Amortization of prior service credit
Amortization of actuarial gain
(83
77
857
1,189
6,787
6,482
(7,395
(11,061
1,901
740
30
168
159
(165
156
In April 2019, we informed participants that our qualified pension plan benefits would be frozen as of May 31, 2019 and the plan was terminated June 30, 2019. We replaced this benefit for active employees with an enhanced defined contribution plan. In connection with the termination, we remeasured the pension liability and recognized a gain of $1.9 million in the second quarter of 2019 as an adjustment to other comprehensive income (loss).
INVENTORIES
Inventories, net of reserves, were as follows:
Raw materials
53,708
50,205
In-process and finished
99,880
84,894
Supplies
38,535
38,312
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CAPITALIZED INTEREST
The following table sets forth details of interest incurred, capitalized and expensed included in continuing operations:
Interest cost incurred
1,865
3,822
6,611
7,668
Interest capitalized
396
7,272
Capitalized interest relates to spending for the Airlaid capacity expansion project.
LEASES
We enter into a variety of arrangements in which we are the lessee for the use of automobiles, forklifts and other production equipment, production facilities, warehouses and office space. We determine if an arrangement contains a lease at inception. All our lease arrangements are operating leases and are recorded in the condensed consolidated balance sheet under the caption “Other assets” and “Other long-term liabilities.” We currently do not have any finance leases.
Operating lease right of use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. We use our incremental borrowing rate based on information available at the commencement date in determining the lease liabilities as our leases generally do not provide an implicit rate. Lease terms may include options to extend or terminate when we are reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.
We also have arrangements with both lease and non-lease components. The Company elected the practical expedient not to separate non-lease components from lease components for the Company’s real estate and automobile leases. We elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for arrangements less than twelve months in duration.
At June 30, 2019, the ROU assets and corresponding lease obligation included in our condensed consolidated balance sheet totaled $12.6 million and had a weighted average remaining maturity of 37 months. The weighted average discount rate used to value the leases at inception was 3.01%. We recognized $3.0 million of operating lease expense during the first six months of 2019.
The following table sets forth required minimum lease payments for the periods indicated:
2,761
5,020
2020
4,579
3,861
2021
3,066
2,515
2022
1,605
2023
577
584
Thereafter
339
383
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LONG-TERM DEBT
Long-term debt is summarized as follows:
Revolving credit facility, due Mar. 2020
114,495
Revolving credit facility, due Feb. 2024
94,454
5.375% Notes, due Oct. 2020
250,000
Term loan, due Feb. 2024
250,360
2.40% Term Loan, due Jun. 2022
4,877
5,725
2.05% Term Loan, due Mar. 2023
22,778
25,972
1.30% Term Loan, due Jun. 2023
6,503
7,361
1.55% Term Loan, due Sep. 2025
8,715
9,470
Total long-term debt
387,687
413,023
Less current portion
(23,238
(10,785
Unamortized deferred issuance costs
(2,657
(1,276
Long-term debt, net of current portion
On February 8, 2019, we entered into an amended and restated $400 million Revolving Credit Facility and a €220 million Term Loan with a consortium of banks (together, the “Credit Agreement”). The proceeds of the Term Loan due Feb. 2024 were used to redeem in its entirety the 5.375% Notes. The principal amount of the Term Loan amortizes in consecutive quarterly installments of principal, with each such quarterly installment to be in an amount equal to 1.25% of the Term Loan funded, commencing on July 1, 2019 and continuing quarterly thereafter. The €220 million Term Loan is designated as a net investment hedge of our Euro functional currency foreign subsidiaries. During the first six months of 2019, we recognized a pre-tax loss of $1.7 million from changes in currency exchange rates through Other Comprehensive Income (Loss).
For all US dollar denominated borrowings under the Revolving Credit Facility, the borrowing rate is, at our option, either, (a) the bank’s base rate which is equal to the greater of i) the prime rate; ii) the federal funds rate plus 50 basis points; or iii) the daily Euro-rate plus 100 basis points plus an applicable spread over either i), ii) or iii) ranging from 12.5 basis points to 100 basis points based on the Company’s leverage ratio and its corporate credit ratings determined by Standard & Poor’s Rating Services and Moody’s Investor Service, Inc. (the “Corporate Credit Rating”); or (b) the daily Euro-rate plus an applicable margin ranging from 112.5 basis points to 200 basis points based on the Company’s leverage ratio and the Corporate Credit Rating. For non-US dollar denominated borrowings, interest is based on (b) above.
The Credit Agreement contains a number of customary covenants for financings of this type that, among other things, restrict our ability to dispose of or create liens on assets, incur additional indebtedness, repay other indebtedness, limits certain intercompany financing arrangements, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios including: i) maximum net debt to EBITDA ratio (the “leverage ratio”); and ii) a consolidated EBITDA to interest expense ratio. The most restrictive of our covenants is a maximum leverage ratio of 4.0x provided that such ratio increases to 4.5x during the period of four fiscal quarters immediately following a material acquisition such as Steinfurt. As of June 30, 2019, the leverage ratio, as calculated in accordance with the definition in our Credit Agreement, was 3.5x. A breach of these requirements would give rise to certain remedies under the Revolving Credit Facility, among which are the termination of the agreement and accelerated repayment of the outstanding borrowings plus accrued and unpaid interest under the Credit Agreement.
All remaining principal outstanding and accrued interest under the Credit Agreement will be due and payable on February 8, 2024.
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Glatfelter Gernsbach GmbH & Co. KG (“Gernsbach”), a wholly-owned subsidiary of ours, entered into a series of borrowing agreements with IKB Deutsche Industriebank AG, Düsseldorf (“IKB”) as summarized below:
Amounts in thousands
Original
Principal
Interest
Rate
Maturity
Borrowing date
Apr. 11, 2013
€
42,700
2.05
%
Mar. 2023
Sep. 4, 2014
10,000
2.40
Jun. 2022
Oct. 10, 2015
2,608
1.55
Sep. 2025
Apr. 26, 2016
1.30
Jun. 2023
May 4, 2016
7,195
Each of the borrowings require quarterly repayments of principal and interest and provide for representations, warranties and covenants customary for financings of these types. The financial covenants contained in each of the IKB loans, which relate to the minimum ratio of consolidated EBITDA to consolidated interest expense and the maximum ratio of consolidated total net debt to consolidated adjusted EBITDA, are calculated by reference to our Credit Agreement.
P. H. Glatfelter Company guarantees all debt obligations of its subsidiaries. All such obligations are recorded in these condensed consolidated financial statements.
Letters of credit issued to us by certain financial institutions totaled $5.2 million as of June 30, 2019 and December 31, 2018. The letters of credit, which reduce amounts available under our Revolving Credit Facility, primarily provide financial assurances for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance program. We bear the credit risk on this amount to the extent that we do not comply with the provisions of certain agreements. No amounts are outstanding under the letters of credit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts reported on the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value. The following table sets forth carrying value and fair value of long-term debt:
December 31, 2018
Carrying
Value
Fair Value
Variable rate debt
Fixed-rate bonds
249,010
2.40% Term loan
4,976
5,836
2.05% Term loan
23,190
26,346
1.30% Term Loan
6,526
7,341
1.55% Term loan
8,812
9,453
388,318
412,481
The values set forth above are based on observable inputs and other relevant market data (Level 2). The fair value of financial derivatives is set forth below in Note 17.
FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES
As part of our overall risk management practices, we enter into financial derivatives primarily designed to either i) hedge foreign currency risks associated with forecasted transactions (“cash flow hedges”); or ii) mitigate the impact that changes in currency exchange rates have on intercompany financing transactions and foreign currency denominated receivables and payables (“foreign currency hedges”).
Derivatives Designated as Hedging Instruments - Cash Flow Hedges We use currency forward contracts as cash flow hedges to manage our exposure to fluctuations in the currency exchange rates on certain forecasted production costs or capital expenditures
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expected to be incurred. Currency forward contracts involve fixing the exchange for delivery of a specified amount of foreign currency on a specified date. As of June 30, 2019, the maturity of currency forward contracts ranged from one month to 18 months.
We designate certain currency forward contracts as cash flow hedges of forecasted raw material purchases, certain production costs or capital expenditures with exposure to changes in foreign currency exchange rates. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is deferred as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance sheets. With respect to hedges of forecasted raw material purchases or production costs, the amount deferred is subsequently reclassified into costs of products sold in the period that inventory produced using the hedged transaction affects earnings. For hedged capital expenditures, deferred gains or losses are reclassified and included in the historical cost of the capital asset and subsequently affect earnings as depreciation is recognized.
We had the following outstanding derivatives that were used to hedge foreign exchange risks associated with forecasted transactions and designated as hedging instruments:
Derivative
Sell/Buy - sell notional
Philippine Peso / British Pound
13,140
Philippine Peso / Euro
18,312
16,446
Euro / British Pound
16,987
15,250
U.S. Dollar / Euro
6,619
Canadian Dollar / U.S. Dollar
3,030
Sell/Buy - buy notional
Euro / Philippine Peso
936,919
1,069,006
British Pound / Philippine Peso
1,076,319
980,137
Euro / U.S. Dollar
93,495
76,417
U.S. Dollar / Canadian Dollar
37,563
35,154
British Pound / Euro
216
Derivatives Not Designated as Hedging Instruments - Foreign Currency Hedges We also entered into forward foreign exchange contracts to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities. None of these contracts are designated as hedges for financial accounting purposes and, accordingly, changes in value of the foreign exchange forward contracts and in the offsetting underlying on-balance-sheet transactions are reflected in the accompanying condensed consolidated statements of income under the caption “Other, net.”
The following sets forth derivatives used to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities:
U.S. Dollar / British Pound
24,000
25,500
3,000
2,000
15,000
11,000
9,000
8,000
These contracts have maturities of one month from the date originally entered into.
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Fair Value Measurements The following table summarizes the fair values of derivative instruments for the period indicated and the line items in the accompanying condensed consolidated balance sheets where the instruments are recorded:
December 31 2018
Prepaid Expenses
and Other
Balance sheet caption
Current Assets
Current Liabilities
Designated as hedging:
Forward foreign currency exchange contracts
4,880
4,381
1,548
Not designated as hedging:
452
103
346
122
The amounts set forth in the table above represent the net asset or liability giving effect to rights of offset with each counterparty. The effect of netting the amounts presented above did not have a material effect on our consolidated financial position.
The following table summarizes the amount of income or (loss) from derivative instruments recognized in our results of operations for the periods indicated and the line items in the accompanying condensed consolidated statements of income where the results are recorded:
Forward foreign currency exchange contracts:
Effective portion – cost of products sold
1,460
(1,636
2,045
(3,595
Ineffective portion – other – net
110
(212
Other – net
(264
(898
28
(601
The impact of activity not designated as hedging was substantially all offset by the remeasurement of the underlying on-balance-sheet item.
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The fair values of the foreign exchange forward contracts are considered to be Level 2. Foreign currency forward contracts are valued using foreign currency forward and interest rate curves. The fair value of each contract is determined by comparing the contract rate to the forward rate and discounting to present value. Contracts in a gain position are recorded in the condensed consolidated balance sheets under the caption “Prepaid expenses and other current assets” and the value of contracts in a loss position is recorded under the caption “Other current liabilities.”
A rollforward of fair value amounts recorded as a component of accumulated other comprehensive income (loss), before taxes, is as follows:
3,004
(5,640
Deferred (losses) gains on cash flow hedges
5,044
288
Reclassified to earnings
(2,045
6,003
(1,757
We expect substantially all of the amounts recorded as a component of accumulated other comprehensive income will be recorded as a component of the capital asset or realized in results of operations within the next 12 to 18 months and the amount ultimately recognized will vary depending on actual market rates.
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Credit risk related to derivative activity arises in the event the counterparty fails to meet its obligations to us. This exposure is generally limited to the amounts, if any, by which the counterparty’s obligations exceed our obligation to them. Our policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings.
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
Fox River - Neenah, Wisconsin
Background. We previously reported we faced significant uncertainties associated with environmental claims arising out of the presence of polychlorinated biphenyls (“PCBs”) in sediments in the lower Fox River, on which our former Neenah facility was located, and in the Bay of Green Bay Wisconsin (collectively, the “Site”). We have resolved these uncertainties as described below.
Since the early 1990s, the United States, the State of Wisconsin (collectively, the “Governments”) and two Indian tribes have pursued the cleanup of a 39-mile stretch of river from Little Lake Butte des Morts into Green Bay and natural resource damages (“NRDs”).
The United States Environmental Protection Agency (“EPA”) has divided the Site into five “operable units”, including the most upstream portion of the Site on which our facility was located (“OU1”) and four downstream reaches of the river and bay (“OU2-5”).
The United States originally notified several entities that they were potentially responsible parties (“PRPs”). We, with contributions of certain other PRPs, implemented the remedial action in OU1 under a consent decree with the Governments. That work is complete, other than on-going monitoring and maintenance.
For OU2-5, after giving effect to settlements reached with the Governments, the remaining PRPs exposed to continuing obligations to implement the remainder of the cleanup consisted of us, Georgia Pacific Consumer Products, L.P. (“Georgia Pacific”) and NCR Corporation (“NCR”). The majority of the work in OU 2-5 has been funded or conducted by parties other than us. The cleanup is expected to continue at least through 2019, followed by decommissioning and post-remediation long-term monitoring and maintenance.
In 2017, the United States entered into a consent decree with the State of Wisconsin, NCR, and Appvion under which NCR agreed to complete the remaining cleanup and both NCR and Appvion agreed not to seek to recover from us or anyone else any amounts they have spent or would spend, and we and others would be barred from seeking claims against NCR or Appvion. Under the consent decree, the Governments agreed to seek long term monitoring and maintenance in OU2-5 from us and Georgia Pacific; as the result of earlier settlements, Georgia Pacific was only responsible for that work in the most downstream three miles of the river (“OU4b”) and the bay of Green Bay (“OU5”). The Governments agreed to seek their past and future oversight costs only from us.
We and Georgia Pacific had claims against each other to reallocate the costs that we had each incurred or would incur. In 2017, we entered into a settlement agreement with Georgia Pacific to settle these claims. Georgia Pacific agreed to implement the monitoring and maintenance in OU4b and OU5 and we agreed to monitoring and maintenance of all other upstream operable units. We paid Georgia Pacific $9.5 million in August 2017 in connection with this settlement.
After years of extensive and complex litigation, in January 2019, we reached an agreement with the United States, the State of Wisconsin, and Georgia-Pacific to resolve all remaining claims among those parties. A consent decree (“Glatfelter consent decree”) documenting that agreement was entered in the federal district court on March 14, 2019. Under the Glatfelter consent decree, we paid $20.5 million to settle the United States’ and Wisconsin’s claims for response costs incurred by them prior to October 2018 and for NRDs. We also agreed to reimburse the governments for future oversight costs incurred over the next 30 years. We anticipate that a significant portion of the oversight costs will be incurred in the next few years while the remediation is being completed. Once finished, costs will be an order of magnitude lower in most years during the period of long-term monitoring and maintenance. In addition to our previous agreement to be responsible for long-term monitoring and maintenance of OU-1, under this consent decree, we agreed to be primarily responsible for long-term monitoring and maintenance in OU2-OU4a.
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period that the balance in that account exceeds the amount due under our fixed-price contract. The difference at present is approximately $2 million. We are also required to secure the payment of that difference with a renewal letter of credit or another instrument in the interim.
Reserves for the Site. Our reserve for past and future government oversight costs and long-term monitoring and maintenance is set forth below:
45,001
43,144
Payments
(20,641
(2,708
Reserve adjustment
(2,509
Assumption of WTM I escrow
4,746
Accretion
98
66
21,949
45,248
Of our total reserve for the Fox River, $6.9 million is recorded in the accompanying June 30, 2019 condensed consolidated balance sheet under the caption “Environmental liabilities” and the remaining $15.0 million is recorded under the caption “Other long term liabilities.” In connection with the court approval of our January 2019 consent decree, we reduced our reserve by $2.5 million and recorded the adjustment as a reduction in “Selling, general and administrative” expenses in the condensed consolidated statements of income.
SEGMENT INFORMATION
The following tables set forth financial and other information by business unit for the period indicated:
Advanced Airlaid
Other and
Dollars in millions
Materials
Unallocated
132.6
142.9
102.5
72.8
235.1
215.7
Cost of products sold
109.6
118.0
87.8
62.8
1.6
197.6
182.4
23.0
24.9
14.7
10.0
(0.2
(1.6
37.5
33.3
SG&A
11.7
4.3
2.4
8.5
12.1
22.8
26.2
Gains on dispositions of plant,
equipment and timberlands, net
(0.4
(0.6
Total operating income (loss)
13.0
13.2
10.4
7.6
(8.3
(13.1
15.1
7.7
Non-operating expense
(3.2
(4.6
(11.5
(17.7
11.9
3.1
Supplementary Data
Net tons sold (thousands)
34.5
36.7
34.0
24.5
68.5
61.2
Depreciation, depletion and
amortization
6.6
7.2
5.3
3.5
0.8
1.2
12.7
Capital expenditures
1.5
2.8
2.5
0.5
0.6
4.8
5.9
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Six months ended June 30
261.3
284.5
202.9
142.4
464.2
426.9
216.1
232.7
173.8
122.5
1.9
391.1
357.1
45.2
51.8
29.1
19.9
(1.2
(1.9
73.1
69.9
20.8
23.3
8.7
5.1
17.9
27.7
47.4
56.1
(1.1
(1.7
24.4
28.5
20.4
14.8
(18.0
(27.9
26.8
15.4
(8.4
(26.4
(36.2
18.4
7.1
66.1
73.0
67.2
48.3
133.3
121.4
13.3
14.6
10.5
6.3
1.7
2.3
25.5
23.2
4.7
7.9
5.0
15.6
0.9
10.6
25.9
The sum of individual amounts set forth above may not agree to the condensed consolidated financial statements included herein due to rounding.
Business Units Results of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. The costs incurred by support areas not directly aligned with the business unit are allocated primarily based on an estimated utilization of support area services or are included in “Other and Unallocated” in the table set forth above.
Management evaluates results of operations of the business units before certain corporate level costs and the effects of certain gains or losses not considered to be related to the core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of business units and the extent of cash flow generated from these core operations. Such amounts are presented under the caption “Other and Unallocated.” In the evaluation of business unit results, management does not use any measures of total assets. This presentation is aligned with the management and operating structure of our company. It is also on this basis that the Company’s performance is evaluated internally and by the Company’s Board of Directors.
Specialty Papers’ results of operations are reported as discontinued operations. In addition, corporate shared services costs previously included in Specialty Papers’ results are required to be included in income from continuing operations and are reported as “other and unallocated”.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein and Glatfelter’s Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2018 Annual Report on Form 10-K.
Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects and future consolidated financial position or results of operations, made in this Report on Form 10-Q are forward looking. We use words such as “anticipates”, “believes”, “expects”, “future”, “intends” and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from such expectations. The following discussion includes forward-looking statements all of which are inherently difficult to predict. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. Accordingly, we identify the following important factors, among others, which could cause our results to differ from any results that might be projected, forecasted or estimated in any such forward-looking statements:
i.
variations in demand for our products including the impact of unplanned market-related downtime, variations in product pricing, or product substitution;
ii.
the impact of competition, changes in industry production capacity, including the construction of new mills or new machines, the closing of mills and incremental changes due to capital expenditures or productivity increases;
iii.
risks associated with our international operations, including local economic and political environments and fluctuations in currency exchange rates;
iv.
geopolitical matters, including any impact to our operations from events in Russia, Ukraine and Philippines;
v.
our ability to develop new, high value-added products;
vi.
changes in the price or availability of raw materials we use, particularly woodpulp, pulp substitutes, synthetic pulp, and abaca fiber;
vii.
changes in energy-related prices and commodity raw materials with an energy component;
viii.
the impact of unplanned production interruption at our facilities or at any of our key suppliers;
ix.
disruptions in production and/or increased costs due to labor disputes;
x.
the gain or loss of significant customers and/or on-going viability of such customers;
xi.
the impact of war and terrorism;
xii.
the impact of unfavorable outcomes of audits by various state, federal or international tax authorities or changes in pre-tax income and its impact on the valuation of deferred taxes;
xiii.
enactment of adverse state, federal or foreign tax or other legislation or changes in government legislation, policy or regulation; and
xiv.
our ability to finance, consummate and integrate acquisitions.
Introduction We manufacture a wide array of engineered materials. We manage our company along two business units:
•
Composite Fibers with revenue from the sale of single-serve tea and coffee filtration papers, nonwoven wallcovering base materials, metallized products, composite laminate papers, and many technically special papers including substrates for electrical applications; and
Advanced Airlaid Materials with revenue from the sale of airlaid nonwoven fabric-like materials used in feminine hygiene and adult incontinence products, specialty wipes, home care products and other airlaid applications.
Specialty Papers’ results of operations and financial condition are reported as discontinued operations. Following is a discussion and analysis primarily of the financial results of operations and financial condition of our continuing operations.
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RESULTS OF OPERATIONS
Six months ended June 30, 2019 versus the six months ended June 30, 2018
Overview For the first six months of 2019, we reported net income of $11.1 million, or $0.25 per share compared with a loss of $1.7 million and $0.04 per diluted share in the year earlier period.
On October 1, 2018, we acquired Georgia-Pacific’s European nonwovens business based in Steinfurt, Germany (“Steinfurt”). The results of Steinfurt, whose annual revenue approximates $99 million, are included prospectively from the date of acquisition. In addition, we sold our Specialty Papers business unit on October 31, 2018. Accordingly, the financial results of the business unit are classified as discontinued operations for all periods presented.
The following table sets forth summarized consolidated results of operations:
Continuing operations
Income
Earnings per share
Income (loss)
Earnings (loss) per share
In addition to the results reported in accordance with GAAP, we evaluate our performance using adjusted earnings and adjusted earnings per diluted share. We disclose this information to allow investors to evaluate our performance exclusive of certain items that impact the comparability of results from period to period and we believe it is helpful in understanding underlying operating trends and cash flow generation.
Adjusted earnings from continuing operations for the first six months of 2019 were $15.7 million, or $0.35 per diluted share compared with $7.9 million, or $0.18 per diluted share, for the same period a year ago. The improved results reflect i) growth in Advanced Airlaid Materials, as revenue and operating income each improved by approximately 40%; ii) lower corporate costs in connection with cost reduction initiatives; and iii) lower interest expense, net. Adjusted earnings consists of net income determined in accordance with GAAP adjusted to exclude the impact of the following:
Strategic initiatives. These adjustments primarily reflect professional and legal fees incurred directly related to evaluating and executing certain strategic initiatives including costs associated with acquisitions and related integration costs.
Airlaid capacity expansion costs. These adjustments reflect non-capitalized, one-time costs incurred related to the start-up of a new airlaid production facility in Fort Smith, Arkansas and implementation of a new business system.
Cost optimization actions. These adjustments reflect charges incurred in connection with initiatives to optimize the cost structure of the Company including costs related to the organizational change to a functional operating model. The costs are primarily related to executive separation, other headcount reduction efforts, professional fees, asset write-offs and certain contract termination costs. These adjustments, which have occurred at various times in the past, are irregular in timing and relate to specific identified programs to reduce or optimize the cost structure of a particular business unit or the corporate function.
Debt refinancing costs. Represents a charge to write-off unamortized debt issuance costs in connection with the redemption of the Company’s $250 million, 5.375% Notes.
Fox River environmental matter. This adjustment excludes income related to a decrease in the Company’s overall reserve for the Fox River matter primarily due to the resolution of the litigation in the first quarter of 2019.
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Timberland sales and related costs. These adjustments exclude gains from the sales of timberlands as these items are not considered to be part of our core business, ongoing results of operations or cash flows. These adjustments are irregular in timing and amount and may significantly impact our operating results.
U.S. Tax Reform. These adjustments reflect amounts estimating the impact of the Tax Cuts and Jobs Act (“TCJA”) which was signed into law on December 22, 2017.
Adjusted earnings and adjusted earnings per share are considered measures not calculated in accordance with GAAP, and therefore are non-GAAP measures. The non-GAAP financial information should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with GAAP. The following table sets forth the reconciliation of net income to adjusted earnings for the six months ended June 30, 2019 and 2018:
Amount
EPS
Exclude: Net income from discontinued operations
Adjustments (pre-tax)
Cost optimization actions
5,907
Airlaid capacity expansion costs
1,014
4,705
Debt refinancing
992
Strategic initiatives
249
2,195
Fox River environmental matter
Timberland sales and related costs
(881
(1,680
Total adjustments (pre-tax)
4,772
5,220
Income taxes (1)
67
(813
U.S. Tax Reform
Total after-tax adjustments
4,839
0.11
4,399
0.10
Adjusted earnings
15,735
0.35
7,943
0.18
Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated and the related $0.5 million increase in our valuation allowance related to the termination of our qualified pension plan.
The sum of individual per share amounts set forth above may not agree to adjusted earnings per share due to rounding.
Business Unit Performance
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Business Units Results of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. The costs incurred by support areas not directly aligned with the business unit are allocated primarily based on an estimated utilization of support area services or are included in “Other and Unallocated” in the Business Unit Performance table.
Management evaluates results of operations of the business units before certain corporate level costs, and the effects of certain gains or losses not considered to be related to the core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of business units and the extent of cash flow generated from these core operations. Such amounts are presented under the caption “Other and Unallocated.” In the evaluation of business unit results, management does not use any measures of total assets. This presentation is aligned with the management and operating structure of our company. It is also on this basis that the Company’s performance is evaluated internally and by the Company’s Board of Directors.
Sales and Costs of Products Sold
Change
37,237
33,979
3,258
Gross profit as a percent of Net sales
15.8
16.4
The following table sets forth the contribution to consolidated net sales by each business unit:
Percent of Total
Business Unit
56.3
66.6
Advanced Airlaid Material
43.7
33.4
100.0
Net sales totaled $464.2 million and $426.9 million in the first six months of 2019 and 2018, respectively. The increase was primarily due to the Steinfurt acquisition, volume growth in Advanced Airlaid Materials’ legacy business and higher selling prices partially offset by unfavorable currency translation. On a constant currency basis and excluding the Steinfurt acquisition, Advanced Airlaid Material’s net sales increased 15.4% and Composite Fibers’ decreased by 3.2%.
Composite Fibers’ net sales decreased $23.2 million, or 8.2% primarily due to a 9.5% decline in shipping volumes partially offset by higher average selling prices totaling $1.3 million. Food and beverage shipping volumes were up 2.4% but were more than offset by declines in wallcover and metallized products which were lower by 18.9% and 19.5%, respectively. Currency translation was unfavorable by $14.2 million.
Composite Fibers’ operating income for the first six months of 2019 totaled $24.4 million, a decrease of $4.1 million compared to the year-earlier quarter. Lower shipping volumes and machine downtime to manage inventory levels impacted results by $2.7 million. Higher raw material and energy prices of $6.8 million and costs related to the disruption in the supply of a key raw material were partially offset by benefits of efficient operations and our cost reduction actions. Currency was $2.9 million favorable compared to the year-ago quarter reflecting hedging instruments that matured, more than offsetting the impact of a lower Euro translation rate.
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The primary drivers are summarized in the following chart:
Advanced Airlaid Materials’ net sales increased $60.5 million, or 42.5%, primarily due to the Steinfurt acquisition and a 11.5% organic increase in shipping volumes reflecting growth in wipes, hygiene and table top products. Higher average selling prices contributed $2.7 million and currency translation was unfavorable by $5.3 million.
Advanced Airlaid Materials’ operating income for the first six months of 2019 totaled $20.4 million, or 37.8% higher than the comparable period a year ago. The increase was primarily due to higher shipping volumes which contributed $7.0 million primarily from the Steinfurt acquisition. Higher selling prices were offset by $2.4 million of higher raw material and energy costs. The primary drivers are summarized in the following chart:
Other and Unallocated The amount of “Other and Unallocated” expense in our table of Business Unit Performance totaled $18.0 million in the first six months of 2019 compared with $27.9 million in the first six months of 2018. The decrease in Other and Unallocated expenses, excluding the impact of gains from timberland sales, primarily reflects reduced corporate costs, lower start-up costs related to the Advanced Airlaid Materials capacity expansion program and the reduction in our reserve for the Fox River matter. Other and Unallocated expenses during the first six months of 2019, include $5.9 million of costs related to cost optimization including changes in our business model and associated executive separation costs.
Income taxes In the first six months of 2019 and 2018, we recorded an income tax provision of $7.5 million and $3.6 million, respectively, on income from continuing operations of $18.4 million and $7.1 million, respectively. The lower effective tax rate in the first six months of 2019 compared to the same period of 2018 was primarily due to the closure of certain tax audits.
Foreign Currency We own and operate facilities in Canada, Germany, France, the United Kingdom and the Philippines. The functional currency of our Canadian operations is the U.S. dollar. However, in Germany and France it is the Euro, in the UK, it is the British Pound Sterling, and in the Philippines the functional currency is the Peso. On an annual basis, our euro denominated revenue
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exceeds euro expenses by an estimated €160 million. For the first six months of 2019, the average currency exchange rate was 1.13 dollar/euro compared with 1.21 in the same period of 2018. With respect to the British Pound Sterling, Canadian Dollar, and Philippine Peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the euro. As a result, we are exposed to changes in currency exchange rates and such changes could be significant. The translation of the results from international operations into U.S. dollars is subject to changes in foreign currency exchange rates.
The table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the first six months of 2019.
Favorable
(unfavorable)
(19,490
21,073
SG&A expenses
1,514
Income taxes and other
(44
3,053
The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in 2019 were the same as 2018. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.
Discontinued Operations We completed the sale of our Specialty Papers business unit on October 31, 2018. Its results of operations are reported as discontinued operations for all periods presented. For the first six months 2019, we reported income from discontinued operations of $0.2 million compared with a loss of $5.2 million in the same period of 2018. The results for the first six months of 2019 reflect a $1.3 million insurance settlement related to an equipment failure partially offset by professional fees and other costs directly related to the business unit.
Three months ended June 30, 2019 versus the three months ended June 30, 2018
Overview For the second quarter of 2019, our net income totaled $5.8 million, or $0.13 per share compared with a loss of $7.4 million, or $0.17 per share in the second quarter of 2018. On an adjusted basis earnings from continuing operations for the second quarter of 2019 was $8.5 million, or $0.19 per share compared with $4.0 million, or $0.09 per share, for the same period a year ago. The following table sets forth summarized results of operations:
Loss from discontinued operations
Loss per share
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The following table sets forth the reconciliation of net income (loss) to adjusted earnings for the three months ended June 30, 2019 and 2018:
Diluted EPS
Add: Loss from discontinued operations, net of tax
462
8,679
0.20
Cost optimization
1,984
142
1,727
1,672
(565
1,703
2,834
456
(247
172
2,159
0.05
2,759
0.06
8,452
0.19
4,039
0.09
The sum of individual amounts set forth above may not agree to the condensed consolidated financial statements included herein due to rounding
19,311
15,110
4,201
16.0
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56.4
66.2
43.6
33.8
Net sales totaled $235.1 million and $215.7 million in the second quarters of 2019 and 2018, respectively. Excluding the Steinfurt, Germany acquisition and on a constant currency basis, Advanced Airlaid Materials’ net sales increased by 11.7% and Composite Fibers’ net sales decreased by 3.0%.
Composite Fibers’ net sales declined $10.4 million, or 7.2%, primarily due to a 5.9% decline in shipping volumes. The decline in shipping volumes was primarily due to metallized and wallcover products, which were lower by 17.4% and 10.5%, respectively. Currency translation unfavorably impacted the quarter-to-quarter comparison by $6.0 million.
Composite Fibers’ second quarter of 2019 operating income decreased to $13.0 million, down slightly from the year-earlier quarter. Lower shipping volumes impacted results by $1.3 million. Higher raw material prices of $1.5 million and were partially offset by higher selling prices and improved operations totaling $0.8 million. Currency favorably impacted results by $1.8 million compared to the year-ago quarter reflecting hedging instruments that matured, more than offsetting the impact of a lower Euro translation rate. Composite Fibers’ operating margin increased by 60 basis points primarily due to an improved product mix and cost optimization initiatives. The primary drivers are summarized in the following chart:
Advanced Airlaid Materials’ net sales increased $29.7 million in the quarter-over-quarter comparison primarily due to the Steinfurt acquisition and a 9.6% organic increase in shipping volumes reflecting strong growth in wipes, hygiene and table top products. Higher average selling prices contributed $0.8 million and currency translation was unfavorable by $2.2 million.
Advanced Airlaid Materials’ operating income totaled $10.4 million compared with $7.6 million in the second quarter of 2018. The increase was primarily due to higher shipping volumes and the Steinfurt acquisition. Higher selling prices were partially offset by $0.4 million of higher raw material and energy costs. The primary drivers are summarized in the following chart:
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Other and Unallocated The amount of net operating expenses not allocated to a business unit and reported as “Other and Unallocated” in our table of Business Unit Performance totaled $8.3 million in the second quarter of 2019 compared with $13.1 million in the second quarter of 2018. Excluding the items identified to present “adjusted earnings,” unallocated expenses for the second quarter of 2019 declined $3.7 million compared to the second quarter of 2018, primarily reflecting the impact of corporate cost reduction initiatives.
Income Taxes In the second quarter of 2019, we recorded an income tax provision of $5.7 million on income from continuing operations of $11.9 million. The comparable amounts in the same period of 2018 were $1.8 million and $3.1 million, respectively.
Foreign Currency The table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the second quarter of 2019.
Favorable (unfavorable)
(8,204
9,763
606
63
2,228
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LIQUIDITY AND CAPITAL RESOURCES
Our business requires significant expenditures for new or enhanced equipment, to support our research and development efforts, and to support our business strategy. In addition, we have mandatory debt service requirements of both principal and interest. The following table summarizes cash flow information for each of the periods presented:
Cash and cash equivalents at beginning of period
Cash provided (used) by
Net cash used
(83,740
(9,030
Cash and cash equivalents at end of period
At June 30, 2019, we had $58.9 million in cash and cash equivalents held by both domestic and foreign subsidiaries. Unremitted earnings of our foreign subsidiaries as of January 1, 2018 and forward are deemed to be indefinitely reinvested and therefore no U.S. tax liability is reflected in the accompanying condensed consolidated financial statements. Approximately 60% of our cash and cash equivalents is held by our foreign subsidiaries but could be repatriated without incurring a significant amount of additional taxes.
Cash used by operating activities in the first six months of 2019 totaled $19.3 million compared with $23.9 million in the same period a year ago. The improvement in cash used by operation was primarily due to increased profitability partially offset by an increased use for working capital. The use of $20.5 million of cash in the first six months of 2019 for the Fox River matter was substantially offset by lower incentive payments and other accruals.
Net cash used by investing activities decreased by $12.6 million in the year-over-year comparison due to lower capital expenditures driven by the completion of the airlaid capacity expansion in early 2018.
Net cash used by financing activities totaled $40.4 million in the first six months of 2019 compared with $28.7 million provided by financing activities in the same period of 2018. The increase in cash used by financing activities primarily reflects net repayment of borrowings under our revolving credit facility.
The following table sets forth our outstanding long-term indebtedness:
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In the first quarter of 2019, we significantly changed our debt capital structure. On February 8, 2019, we entered into a new credit facility with a consortium of financial institutions. The new five-year facility (the “2019 Facility”) replaces our then existing revolving credit facility and consists of a $400 million variable rate revolver and a €220 million, amortizing term loan. The other terms of the 2019 Facility are substantially similar to our previous revolving credit facility. On February 28, 2019, we redeemed all outstanding 5.375% Notes with proceeds from the new term loan.
The 2019 Facility contains a number of customary compliance covenants, the most restrictive of which is a maximum leverage ratio of 4.0x provided that such ratio increases to 4.5x during the period of four fiscal quarters immediately following a material acquisition such as Steinfurt. As of June 30, 2019, the leverage ratio, as calculated in accordance with the definition in our amended credit agreement, was 3.5x, within the limits set forth in our credit agreement. Based on our expectations of future results of operations and capital needs, we do not believe the debt covenants will impact our operations or limit our ability to undertake financings that may be necessary to meet our capital needs.
Financing activities include cash used for common stock dividends. In both the first six months of 2019 and 2018, we used $11.5 million and $11.4 million, respectively, of cash for dividends on our common stock. Our Board of Directors determines what, if any, dividends will be paid to our shareholders. Dividend payment decisions are based upon then-existing factors and conditions and, therefore, historical trends of dividend payments are not necessarily indicative of future payments.
We are subject to various federal, state and local laws and regulations intended to protect the environment as well as human health and safety. At various times, we have incurred significant costs to comply with these regulations and we could incur additional costs as new regulations are developed or regulatory priorities change.
We expect to meet all of our near and long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility and other long-term debt.
Off-Balance-Sheet Arrangements As of June 30, 2019 and December 31, 2018, we had not entered into any off-balance-sheet arrangements. Financial derivative instruments, to which we are a party, and guarantees of indebtedness, which solely consist of obligations of subsidiaries, are reflected in the condensed consolidated balance sheets included herein in Item 1 – Financial Statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Year Ended December 31
Carrying Value
Average principal outstanding
At fixed interest rates – Term Loans
40,193
32,153
21,434
11,324
5,267
42,873
43,504
At variable interest rates
340,120
329,167
316,649
304,131
291,613
344,814
Weighted-average interest rate
On fixed rate debt – Term Loans
1.88
1.86
1.82
1.77
1.67
On variable rate debt
1.50
The table above presents the average principal outstanding and related interest rates for the next five years for debt outstanding as of June 30, 2019. Fair values included herein have been determined based upon rates currently available to us for debt with similar terms and remaining maturities.
Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At June 30, 2019, we had $385.0 million of long-term debt, net of unamortized debt issuance costs, of which 89.6% was at variable interest rates. Variable-rate debt outstanding represents borrowings under the 2019 Facility including both revolving credit borrowings and the amortizing term loan. Interest accrues based on LIBOR plus a margin. At June 30, 2019, the interest rate paid was approximately 1.50%. A hypothetical 100 basis point increase or decrease in the interest rate on variable rate debt would increase or decrease annual interest expense by $3.4 million.
As part of our overall risk management practices, we enter into financial derivatives primarily designed to either i) hedge foreign currency risks associated with forecasted transactions – “cash flow hedges”; or ii) mitigate the impact that changes in currency exchange rates have on intercompany financing transactions and foreign currency denominated receivables and payables – “foreign currency hedges.” For a more complete discussion of this activity, refer to Item 1 – Financial Statements – Note 16.
We are subject to certain risks associated with changes in foreign currency exchange rates to the extent our operations are conducted in currencies other than the U.S. Dollar. On an annual basis, our euro denominated revenue exceeds euro expenses by an estimated €160 million. With respect to the British Pound Sterling, Canadian Dollar, and Philippine Peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the euro. As a result, particularly with respect to the euro, we are exposed to changes in currency exchange rates and such changes could be significant.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures Our chief executive officer and our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2019, have concluded that, as of the evaluation date, our disclosure controls and procedures are effective.
Changes in Internal Controls There were no changes in our internal control over financial reporting during the three months ended June 30, 2019, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II
ITEM 6. EXHIBITS
The following exhibits are filed herewith or incorporated by reference as indicated.
10.1
P.H. Glatfelter Company Supplemental Executive Retirement Plan (Amended and Restated)
10.2
Amendment No. 2019-1 to the P.H. Glatfelter Company Supplemental Management Pension Plan
31.1
Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2
Certification of Samuel L. Hillard, Senior Vice President and Chief Financial Officer, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1
Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, furnished herewith.
32.2
Certification of Samuel L. Hillard, Senior Vice President and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, furnished herewith.
101.INS
XBRL Instance Document - – the instance document does not appear in the Interactive Data file because iXBRL tags are embedded within the Inline XBRL document.
101.SCH
XBRL Taxonomy Extension Schema, filed herewith.
101.CAL
XBRL Extension Calculation Linkbase, filed herewith.
101.DEF
XBRL Extension Definition Linkbase, filed herewith.
101.LAB
XBRL Extension Label Linkbase, filed herewith.
101.PRE
XBRL Extension Presentation Linkbase, filed herewith.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
P. H. GLATFELTER COMPANY
(Registrant)
July 30, 2019
By
/s/ David C. Elder
David C. Elder
Vice President, Finance
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