Guarantor Financial Statements

9 Months Ended

Sep. 30, 2011

Guarantor Financial Statements [Abstract]

GUARANTOR FINANCIAL STATEMENTS

18. GUARANTOR FINANCIAL STATEMENTS

Our 7 ¹/8% Notes have been fully and unconditionally guaranteed, on a joint and several basis, by certain of our 100%-owned domestic subsidiaries: PHG Tea Leaves, Inc., Mollanvick, Inc., The Glatfelter Pulp Wood Company, and Glatfelter Holdings, LLC. The following presents our condensed consolidating statements of income and cash flow, and our condensed consolidating balance sheets. These financial statements reflect P. H. Glatfelter Company (the parent), the guarantor subsidiaries (on a combined basis), the non-guarantor subsidiaries (on a combined basis) and elimination entries necessary to combine such entities on a consolidated basis.

Correction to classification of Condensed Consolidating Statement of Cash Flows – For the presentation of the condensed consolidating statement of cash flows for the nine months ended September 30, 2010 included herein, we have corrected the classification of certain intercompany financing transactions to correctly classify $170 million of intercompany capital transfers between the Parent Company and wholly-owned guarantor and non-guarantor subsidiaries which were made in connection with the Concert acquisition. For the Parent Company the correction reclassified the transfers from operating cash activities to investing activities made by the Parent to the Guarantors of $146 million and to the non-Guarantors of $24 million. Similar reclassifications were made to the Guarantors and non-Guarantors amounts to reflect the receipt of this capital contribution as a financing activity. This reclassification had no effect on the total cash flows of the Parent, Guarantors, or non Guarantors, or on the reported amounts of cash flows for any period presented in our accompanying consolidated statement of cash flows.

Condensed Consolidating Statement of Income for the

three months ended September 30, 2011

In thousand	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	225,410		$	13,060		$	191,083		$	(13,060	)	$	416,493
Energy and related sales – net		2,840			—			—			—			2,840
Total revenues		228,250			13,060			191,083			(13,060	)		419,333
Costs of products sold		201,649			11,949			163,900			(13,081	)		364,417
Gross profit		26,601			1,111			27,183			21			54,916
Selling, general and administrative expenses		17,661			646			13,123			—			31,430
Gains on dispositions of plant, equipment and timberlands, net		(276	)		(417	)		(5	)		—			(698	)
Operating income		9,216			882			14,065			21			24,184
Other non-operating income (expense)
Interest expense		(6,247	)		—			(209	)		—			(6,456	)
Other income (expense) – net		10,557			1,898			(867	)		(11,591	)		(3	)
Total other non-operating income (expense)		4,310			1,898			(1,076	)		(11,591	)		(6,459	)
Income (loss) before income taxes		13,526			2,780			12,989			(11,570	)		17,725
Income tax provision (benefit)		500			979			3,213			7			4,699
Net income (loss)	$	13,026		$	1,801		$	9,776		$	(11,577	)	$	13,026

Condensed Consolidating Statement of Income for the

three months ended September 30, 2010

In thousand	Parent Company			Guarantors		Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	217,335		$	13,086	$	161,762		$	(13,086	)	$	379,097
Energy and related sales – net		3,312			—		—			—			3,312
Total revenues		220,647			13,086		161,762			(13,086	)		382,409
Costs of products sold		187,526			11,579		140,643			(13,079	)		326,669
Gross profit		33,121			1,507		21,119			(7	)		55,740
Selling, general and administrative expenses		16,506			591		10,685			—			27,782
Gains on dispositions of plant, equipment and timberlands, net		(123	)		—		(27	)		—			(150	)
Operating income		16,738			916		10,461			(7	)		28,108
Other non-operating income (expense)
Interest expense		(6,254	)		—		(311	)		—			(6,565	)
Other income (expense) – net		9,143			2,063		(1,268	)		(9,957	)		(19	)
Total other non-operating income (expense)		2,889			2,063		(1,579	)		(9,957	)		(6,584	)
Income (loss) before income taxes		19,627			2,979		8,882			(9,964	)		21,524
Income tax provision (benefit)		(19,810	)		492		1,585			(180	)		(17,913	)
Net income (loss)	$	39,437		$	2,487	$	7,297		$	(9,784	)	$	39,437

Condensed Consolidating Statement of Income for the nine

months ended September 30, 2011

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	662,572		$	37,878		$	548,677		$	(37,878	)	$	1,211,249
Energy and related sales – net		7,887			—			—			—			7,887
Total revenues		670,459			37,878			548,677			(37,878	)		1,219,136
Costs of products sold		601,185			34,691			468,756			(38,079	)		1,066,553
Gross profit		69,274			3,187			79,921			201			152,583
Selling, general and administrative expenses		53,671			1,893			38,956			—			94,520
Gains on dispositions of plant, equipment and timberlands, net		(318	)		(3,575	)		(9	)		—			(3,902	)
Operating income		15,921			4,869			40,974			201			61,965
Non-operating income (expense)
Interest expense		(18,728	)		—			(649	)		—			(19,377	)
Other income (expense) – net		36,285			5,892			(3,805	)		(38,286	)		86
Total other income (expense)		17,557			5,892			(4,454	)		(38,286	)		(19,291	)
Income (loss) before income taxes		33,478			10,761			36,520			(38,085	)		42,674
Income tax provision (benefit)		525			4,111			6,251			(1,166	)		9,721
Net income (loss)	$	32,953		$	6,650		$	30,269		$	(36,919	)	$	32,953

Condensed Consolidating Statement of Income for the nine

months ended September 30, 2010

In thousand	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	633,778		$	37,440		$	445,375		$	(37,440	)	$	1,079,153
Energy and related sales – net		8,834			—			—			—			8,834
Total revenues		642,612			37,440			445,375			(37,440	)		1,087,987
Costs of products sold		571,217			32,272			386,354			(37,272	)		952,571
Gross profit		71,395			5,168			59,021			(168	)		135,416
Selling, general and administrative expenses		56,088			1,759			33,452			—			91,299
Gains on dispositions of plant, equipment and timberlands, net		(123	)		(168	)		(27	)		—			(318	)
Operating income		15,430			3,577			25,596			(168	)		44,435
Non-operating income (expense)
Interest expense		(18,059	)		—			(986	)		—			(19,045	)
Other income (expense) – net		16,093			4,166			(114	)		(23,443	)		(3,298	)
Total other income (expense)		(1,966	)		4,166			(1,100	)		(23,443	)		(22,343	)
Income (loss) before income taxes		13,464			7,743			24,496			(23,611	)		22,092
Income tax provision (benefit)		(25,702	)		2,046			6,944			(362	)		(17,074	)
Net income (loss)	$	39,166		$	5,697		$	17,552		$	(23,249	)	$	39,166

Condensed Consolidating Balance Sheet as of

September 30, 2011

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	69,837	$	890	$	27,524	$	—		$	98,251
Other current assets		257,575		428,146		234,044		(501,983	)		417,782
Plant, equipment and timberlands – net		239,143		6,689		360,216		—			606,048
Other assets		814,039		167,410		99,132		(852,635	)		227,946
Total assets	$	1,380,594	$	603,135	$	720,916	$	(1,354,618	)	$	1,350,027
Liabilities and Shareholders’ Equity
Current liabilities	$	327,089	$	45,994	$	335,285	$	(499,758	)	$	208,610
Long-term debt		296,046		—		36,695		—			332,741
Deferred income taxes		80,948		17,445		41,365		(35,004	)		104,754
Other long-term liabilities		117,889		13,365		10,332		3,714			145,300
Total liabilities		821,972		76,804		423,677		(531,048	)		791,405
Shareholders’ equity		558,622		526,331		297,239		(823,570	)		558,622
Total liabilities and shareholders’ equity	$	1,380,594	$	603,135	$	720,916	$	(1,354,618	)	$	1,350,027

Condensed Consolidating Balance Sheet as of

December 31, 2010

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	61,953	$	91	$	33,744	$	—		$	95,788
Other current assets		230,957		380,986		203,048		(408,089	)		406,902
Plant, equipment and timberlands – net		244,157		7,161		356,836		16			608,170
Other assets		773,254		167,877		103,250		(813,494	)		230,887
Total assets	$	1,310,321	$	556,115	$	696,878	$	(1,221,567	)	$	1,341,747
Liabilities and Shareholders’ Equity
Current liabilities	$	277,343	$	3,672	$	336,679	$	(404,548	)	$	213,146
Long-term debt		295,529		—		36,695		—			332,224
Deferred income taxes		70,575		14,836		42,204		(32,697	)		94,918
Other long-term liabilities		114,432		13,210		9,999		11,376			149,017
Total liabilities		757,879		31,718		425,577		(425,869	)		789,305
Shareholders’ equity		552,442		524,397		271,301		(795,698	)		552,442
Total liabilities and shareholders’ equity	$	1,310,321	$	556,115	$	696,878	$	(1,221,567	)	$	1,341,747

Condensed Consolidating Statement of Cash Flows for the nine

months ended September 30, 2011

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	78,151		$	(29,590	)	$	35,875		$	(3,300	)	$	81,136
Investing activities
Purchase of plant, equipment and timberlands		(19,985	)		(65	)		(24,592	)		—			(44,642	)
Proceeds from disposal plant, equipment and timberlands		597			3,821			24			—			4,442
Repayments from (advances of) intercompany loans, net		(10,133	)		29,933			—			(19,800	)		—
Total investing activities		(29,521	)		33,689			(24,568	)		(19,800	)		(40,200	)
Financing activities
Net (repayments of) proceeds from indebtedness		—			—			(798	)		—			(798	)
Payment of dividends to shareholders		(12,578	)		—			—			—			(12,578	)
Repurchases of common stock		(26,251	)		—			—			—			(26,251	)
(Repayments) borrowings of intercompany loans, net		(2,050	)		—			(17,750	)		19,800			—
Payment of intercompany dividends		—			(3,300	)		—			3,300			—
Proceeds from stock options exercised		132			—			—			—			132
Total financing activities		(40,747	)		(3,300	)		(18,548	)		23,100			(39,495	)
Effect of exchange rate on cash		—			—			1,022			—			1,022
Net increase (decrease) in cash		7,883			799			(6,219	)		—			2,463
Cash at the beginning of period		61,953			91			33,744			—			95,788
Cash at the end of period	$	69,836		$	890		$	27,525		$	—		$	98,251

Condensed Consolidating Statement of Cash Flows for the nine

months ended September 30, 2010

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	102,951		$	(10,044	)	$	31,243		$	(770	)	$	123,380
Investing activities
Purchase of plant, equipment and timberlands		(13,297	)		(518	)		(9,454	)		—			(23,269	)
Proceeds from disposal plant, equipment and timberlands		124			182			27			—			333
Repayments from (advances of) intercompany loans, net		(8,049	)		(134,715	)		5,393			137,371			—
Intercompany capital contributed		(170,520	)		(24,995	)		—			195,515			—
Acquisition of Concert Industries Corp., net of cash acquired		—			—			(229,080	)		—			(229,080	)
Total investing activities		(191,742	)		(160,046	)		(233,114	)		332,886			(252,016	)
Financing activities
Net (repayments of) proceeds from indebtedness		75,703			—			(2,979	)		—			72,724
Payment of dividends to shareholders		(12,556	)		—			—			—			(12,556	)
(Repayments) borrowings of intercompany loans, net		(19,265	)		(200	)		156,836			(137,371	)		—
Intercompany capital received		—			170,520			24,995			(195,515	)		—
Proceeds from stock options and other		147			—			—			—			147
Payment of intercompany dividends		—			(770	)		—			770			—
Total financing activities		44,029			169,550			178,852			(332,116	)		60,315
Effect of exchange rate on cash		—			—			(3,766	)		—			(3,766	)
Net decrease in cash		(44,762	)		(540	)		(26,785	)		—			(72,087	)
Cash at the beginning of period		76,970			985			57,465			—			135,420
Cash at the end of period	$	32,208		$	445		$	30,680		$	—		$	63,333