Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2014

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Financial Statements

18. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Our 5.375% Notes issued by P. H. Glatfelter Company (the “Parent”) are fully and unconditionally guaranteed, on a joint and several basis, by certain of our 100%-owned domestic subsidiaries, PHG Tea Leaves, Inc., Mollanvick, Inc., and Glatfelter Holdings, LLC. The guarantees are subject to certain customary release provisions including i) the designation of such subsidiary as an unrestricted or excluded subsidiary; (ii) in connection with any sale or disposition of the capital stock of the subsidiary guarantor; and (iii) upon our exercise of our legal defeasance option or our covenant defeasance option, all of which are more fully described in the Indenture dated as of October 3, 2012 among us, the Guarantors and US Bank National Association, as Trustee, relating to the 5.375% Notes. The following presents our condensed consolidating statements of income, including comprehensive income for the three months and six months ended June 30, 2014 and 2013, our condensed consolidating balance sheets as of June 30, 2014 and December 31, 2013 and condensed consolidating cash flows for the six months ended June 30, 2014 and 2013. These financial statements reflect 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. Effective December 31, 2013, Glatfelter Pulpwood Company, previously a guarantor, was merged with and into the parent. Accordingly, all condensed consolidating financial statements have been restated to give effect to this merger as of the earliest period presented. In addition, the amounts of intercompany investing and financing activities and the related interest expense and interest income previously presented net for the six months ended June 30, 2013 have been presented on a gross basis to conform to the current year’s presentation.

Condensed Consolidating Statements of Income and Comprehensive Income for the

three months ended June 30, 2014

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	217,864		$	4		$	227,478		$	(5	)	$	445,341
Energy and related sales, net		790			—			—			—			790
Total revenues		218,654			4			227,478			(5	)		446,131
Costs of products sold		215,756			4			188,939			(5	)		404,694
Gross profit		2,898			—			38,539			—			41,437
Selling, general and administrative expenses		16,555			143			15,616			—			32,314
Gains on dispositions of plant, equipment and timberlands, net		(162	)		(1,316	)		(4	)		—			(1,482	)
Operating income (loss)		(13,495	)		1,173			22,927			—			10,605
Other non-operating income (expense)
Interest expense		(4,756	)		—			(2,815	)		2,809			(4,762	)
Interest income		164			2,656			41			(2,809	)		52
Other, net		18,683			11			389			(19,022	)		61
Total other non-operating income (expense)		14,091			2,667			(2,385	)		(19,022	)		(4,649	)
Income before income taxes		596			3,840			20,542			(19,022	)		5,956
Income tax provision (benefit)		(4,073	)		715			4,645			—			1,287
Net income		4,669			3,125			15,897			(19,022	)		4,669
Other comprehensive income (loss)		3,026			(550	)		1,098			(548	)		3,026
Comprehensive income	$	7,695		$	2,575		$	16,995		$	(19,570	)	$	7,695

Condensed Consolidating Statements of Income and Comprehensive Income for the

three months ended June 30, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	216,985		$	8		$	208,982		$	(8	)	$	425,967
Energy and related sales, net		424			—			—			—			424
Total revenues		217,409			8			208,982			(8	)		426,391
Costs of products sold		210,978			8			174,573			(8	)		385,551
Gross profit		6,431			—			34,409			—			40,840
Selling, general and administrative expenses		16,928			88			17,512			—			34,528
Gains on dispositions of plant, equipment and timberlands, net		(17	)		—			(2	)		—			(19	)
Operating income (loss)		(10,480	)		(88	)		16,899			—			6,331
Other non-operating income (expense)
Interest expense		(4,703	)		—			(1,672	)		1,861			(4,514	)
Interest income		176			1,727			4			(1,861	)		46
Other, net		12,139			(6	)		714			(12,672	)		175
Total other non-operating income (expense)		7,612			1,721			(954	)		(12,672	)		(4,293	)
Income (loss) before income taxes		(2,868	)		1,633			15,945			(12,672	)		2,038
Income tax provision (benefit)		(3,801	)		634			4,272			—			1,105
Net income		933			999			11,673			(12,672	)		933
Other comprehensive income		7,105			1,379			3,119			(4,498	)		7,105
Comprehensive income	$	8,038		$	2,378		$	14,792		$	(17,170	)	$	8,038

Condensed Consolidating Statements of Income and Comprehensive Income for the

six months ended June 30, 2014

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	443,695		$	21		$	457,367		$	(21	)	$	901,062
Energy and related sales – net		6,052			—			—			—			6,052
Total revenues		449,747			21			457,367			(21	)		907,114
Costs of products sold		432,472			21			378,165			(21	)		810,637
Gross profit		17,275			—			79,202			—			96,477
Selling, general and administrative expenses		34,347			156			31,362			—			65,865
Gains on dispositions of plant, equipment and timberlands, net		(974	)		(1,317	)		—			—			(2,291	)
Operating income		(16,098	)		1,161			47,840			—			32,903
Other non-operating income (expense)
Interest expense		(9,494	)		—			(5,545	)		5,465			(9,574	)
Interest income		316			5,214			48			(5,465	)		113
Other, net		40,300			21			1,471			(41,520	)		272
Total other non-operating income (expense)		31,122			5,235			(4,026	)		(41,520	)		(9,189	)
Income before income taxes		15,024			6,396			43,814			(41,520	)		23,714
Income tax provision (benefit)		(4,293	)		1,628			7,062			—			4,397
Net income		19,317			4,768			36,752			(41,520	)		19,317
Other comprehensive income (loss)		5,991			(549	)		1,983			(1,434	)		5,991
Comprehensive income	$	25,308		$	4,219		$	38,735		$	(42,954	)	$	25,308

Condensed Consolidating Statements of Income and Comprehensive Income for the

six months ended June 30, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	444,101		$	13		$	387,055		$	(13	)	$	831,156
Energy and related sales, net		1,525			—			—			—			1,525
Total revenues		445,626			13			387,055			(13	)		832,681
Costs of products sold		409,926			13			324,540			(13	)		734,466
Gross profit		35,700			—			62,515			—			98,215
Selling, general and administrative expenses		38,054			102			29,859			—			68,015
Gains on dispositions of plant, equipment and timberlands, net		(90	)		—			(2	)		—			(92	)
Operating income (loss)		(2,264	)		(102	)		32,658			—			30,292
Other non-operating income (expense)
Interest expense		(9,419	)		—			(2,485	)		3,549			(8,355	)
Interest income		260			3,416			22			(3,550	)		148
Other, net		24,095			(8	)		1,454			(25,119	)		422
Total other non-operating income (expense)		14,936			3,408			(1,009	)		(25,120	)		(7,785	)
Income before income taxes		12,672			3,306			31,649			(25,120	)		22,507
Income tax provision (benefit)		(3,890	)		1,308			8,527			—			5,945
Net income		16,562			1,998			23,122			(25,120	)		16,562
Other comprehensive loss		(584	)		(3,229	)		(4,859	)		8,088			(584	)
Comprehensive income (loss)	$	15,978		$	(1,231	)	$	18,263		$	(17,032	)	$	15,978

Condensed Consolidating Balance Sheet as of

June 30, 2014

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	9,411	$	179	$	18,426	$	—		$	28,016
Other current assets		225,862		335,537		318,541		(366,211	)		513,729
Plant, equipment and timberlands, net		249,508		997		469,314		—			719,819
Other assets		1,021,078		234,602		209,890		(1,097,027	)		368,543
Total assets	$	1,505,859	$	571,315	$	1,016,171	$	(1,463,238	)	$	1,630,107
Liabilities and Shareholders’ Equity
Current liabilities	$	385,613	$	5,435	$	247,066	$	(374,307	)	$	263,807
Long-term debt		250,000		—		481,686		(318,069	)		413,617
Deferred income taxes		73,380		207		75,883		(9,465	)		140,005
Other long-term liabilities		104,283		—		12,809		3,003			120,095
Total liabilities		813,276		5,642		817,444		(698,838	)		937,524
Shareholders’ equity		692,583		565,673		198,727		(764,400	)		692,583
Total liabilities and shareholders’ equity	$	1,505,859	$	571,315	$	1,016,171	$	(1,463,238	)	$	1,630,107

Condensed Consolidating Balance Sheet as of

December 31, 2013

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	56,216	$	501		$	66,165	$	—		$	122,882
Other current assets		208,814		327,152			253,779		(326,045	)		463,700
Plant, equipment and timberlands, net		247,243		1,054			475,043		—			723,340
Other assets		973,748		236,411			214,301		(1,055,972	)		368,488
Total assets	$	1,486,021	$	565,118		$	1,009,288	$	(1,382,017	)	$	1,678,410
Liabilities and Shareholders’ Equity
Current liabilities	$	375,535	$	2,855		$	247,855	$	(337,878	)	$	288,367
Long-term debt		250,000		—			513,120		(320,795	)		442,325
Deferred income taxes		70,989		(283	)		78,633		(8,319	)		141,020
Other long-term liabilities		105,021		—			13,792		3,409			122,222
Total liabilities		801,545		2,572			853,400		(663,583	)		993,934
Shareholders’ equity		684,476		562,546			155,888		(718,434	)		684,476
Total liabilities and shareholders’ equity	$	1,486,021	$	565,118		$	1,009,288	$	(1,382,017	)	$	1,678,410

Condensed Consolidating Statement of Cash Flows for the six

months ended June 30, 2014

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(15,054	)	$	1,773		$	(8,085	)	$	—		$	(21,366	)
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(15,963	)		—			(14,193	)		—			(30,156	)
Proceeds from disposal plant, equipment and timberlands, net		1,000			1,355			5			—			2,360
Advances of intercompany loans		—			(3,450	)		—			3,450			—
Other		(100	)		—			—			—			(100	)
Total investing activities		(15,063	)		(2,095	)		(14,188	)		3,450			(27,896	)
Financing activities
Net repayments of indebtedness		—			—			(25,425	)		—			(25,425	)
Payment of dividends to shareholders		(9,164	)		—			—			—			(9,164	)
Repurchases of common stock		(9,158	)		—			—			—			(9,158	)
Borrowings of intercompany loans		3,450			—			—			(3,450	)		—
Payments related to share-based compensation awards and other		(1,816	)		—			—			—			(1,816	)
Total financing activities		(16,688	)		—			(25,425	)		(3,450	)		(45,563	)
Effect of exchange rate on cash		—			—			(41	)		—			(41	)
Net decrease in cash		(46,805	)		(322	)		(47,739	)		—			(94,866	)
Cash at the beginning of period		56,216			501			66,165			—			122,882
Cash at the end of period	$	9,411		$	179		$	18,426		$	—		$	28,016

Condensed Consolidating Statement of Cash Flows for the six

months ended June 30, 2013

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	13,825		$	2,187		$	32,215		$	—		$	48,227
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(20,618	)		—			(40,205	)		—			(60,823	)
Proceeds from disposal plant, equipment and timberlands, net		89			—			3			—			92
Repayments from intercompany loans		—			28,750			—			(28,750	)		—
Advances of intercompany loans		(1,000	)		(35,057	)		—			36,057			—
Intecompany capital contributed		—			(91	)		—			91			—
Acquisitions, net of cash acquired		—			—			(210,911	)		—			(210,911	)
Other		(225	)		—			—			—			(225	)
Total investing activities		(21,754	)		(6,398	)		(251,113	)		7,398			(271,867	)
Financing activities
Net proceeds from indebtedness		—			—			182,230			—			182,230
Payments of note offering costs		(160	)		—			(259	)		—			(419	)
Payment of dividends to shareholders		(8,245	)		—			—			—			(8,245	)
Repayments of intercompany loans		(14,750	)		—			(14,000	)		28,750			—
Borrowings of intercompany loans		330			—			35,727			(36,057	)		—
Intercompany capital received		—			—			91			(91	)		—
Proceeds from stock options exercised and other		(2,332	)		—			—			—			(2,332	)
Total financing activities		(25,157	)		—			203,789			(7,398	)		171,234
Effect of exchange rate on cash		—			—			(518	)		—			(518	)
Net decrease in cash		(33,086	)		(4,211	)		(15,627	)		—			(52,924	)
Cash at the beginning of period		43,781			4,278			49,620			—			97,679
Cash at the end of period	$	10,695		$	67		$	33,993		$	—		$	44,755