Aug 10, 2005. /Lesprom Network/. Glatfelter reported on Tuesday net income of $1.7 million, or $0.04 per diluted share, for the second quarter of 2005, compared to a loss of $1.6 million, or $0.04 per diluted share, in the same quarter a year ago. Reported results for the second quarter of 2005 include an after-tax gain of $1.4 million, or $0.03 per diluted share, from the collection of insurance proceeds covering certain environmental liabilities. Excluding this non-recurring gain, adjusted results for the second quarter of 2005 were $0.3 million, or $0.01 per diluted share. On an adjusted earnings basis, the company’s improved financial performance in the quarter-to-quarter comparison was primarily due to higher volumes and pricing in the North America-based specialty papers business unit that more than offset weaker performance by the company’s Europe-based long fiber and overlay papers business unit. “The improved results of our specialty papers business unit reflect more favorable operating conditions in its targeted markets, the benefits of the 2004 North American restructuring program and the continued success from our new product development activities,” said George H. Glatfelter II, chairman and chief executive officer. “However, our long fiber and overlay papers business unit continues to be adversely affected by weaker economic conditions in Western Europe and increased competition.” Net sales totaled $145.3 million for the second quarter of 2005, an increase of $16.3 million, or 12.6%, compared to the same quarter a year ago. This growth was primarily driven by a $14.2 million increase in specialty papers’ net sales consisting of $5.1 million in higher product pricing and a 9.0% increase in volume. Long fiber and overlay papers’ volumes shipped declined 1% and selling prices declined slightly on a constant currency basis in the quarter-to-quarter comparison. The decline in this unit’s performance reflects the adverse effects of a weaker economy in Western Europe and increased competition. The translation of foreign currencies favorably impacted 2005 second quarter net sales by $1.8 million compared to the same quarter a year ago. Costs of products sold totaled $128.2 million for the second quarter of 2005, an increase of $12.3 million compared with the same quarter a year ago. In addition to the effect of a 7.8% increase in net tons shipped, higher fiber, other raw materials, and energy prices increased costs of products sold by approximately $3.2 million. The translation of foreign currencies increased costs by $1.8 million. These factors were partially offset by reduced labor costs attributable to the North American restructuring program and improved operating performance at the company’s Neenah, Wisconsin, facility. During the second quarters of 2005 and 2004, the company completed its annually scheduled maintenance shutdowns of its Spring Grove, Pennsylvania, facility. These shutdowns result in increased maintenance spending and reduced production leading to unfavorable manufacturing variances that negatively affect costs of products sold. The Spring Grove maintenance shutdown had an estimated impact on gross profit of approximately $5.9 million in the second quarter of 2005 and $5.5 million in the comparable quarter a year ago. Gross profit increased to $19.8 million for the second quarter of 2005 compared to $16.0 million in the year earlier quarter. Selling, general and administrative expenses in the second quarter of 2005 totaled $17.0 million compared with $15.7 million in the year-earlier second quarter. Legal fees, primarily related to the collection of insurance recoveries and other matters, increased $1.4 million in the quarter-to-quarter comparison. The translation of foreign currencies increased selling, general and administrative expenses by $0.2 million. For the first six months of 2005, net income totaled $8.0 million or $0.18 per diluted share, compared to $34.6 million and $0.79 per diluted share, respectively, in the same period of 2004. Reported results for the first six months of 2005 include after-tax gains of $1.4 million, or $0.03 per diluted share, from the collection of insurance proceeds covering certain environmental liabilities. The results for the first six months of 2004 benefited from after-tax gains totaling $35.0 million, or $0.80 per share, from sales of timberlands and the corporate aircraft and from insurance recoveries. In addition, the 2004 six month results include after-tax restructuring charges totaling $0.5 million, or $0.01 per diluted share. Commenting on the outlook for 2005, Mr. Glatfelter stated, “Although we are seeing some softening in portions of our book publishing and envelope paper markets, overall, we expect market conditions in our specialty papers business unit to remain relatively stable accompanied by continued volume growth in engineered products. It is also clear that our Europe-based long fiber and overlay papers business unit is facing increased challenges. Certain markets will continue to be adversely affected by increased competition and overcapacity, and we expect other markets to be negatively impacted by weak economic conditions in Western Europe. We are currently developing a comprehensive program designed to improve the performance of this business unit. Headquartered in York, Pennsylvania, Glatfelter is a global manufacturer of specialty papers and engineered products. U.S. operations include facilities in Spring Grove, Pennsylvania, and Neenah, Wisconsin. International operations include facilities in Germany, France and the Philippines and an office in China.