Condensed Consolidating Financial Statements

9 Months Ended

Sep. 30, 2015

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., Glatfelter Composite Fibers N. A., Inc. (“CFNA”), Glatfelter Advanced Materials N.A., Inc. (“GAMNA”), 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 and the First Supplemental Indenture dated as of October 27, 2015, among us, the Guarantors and US Bank National Association, as Trustee, relating to the 5.375% Notes.

The following presents the condensed consolidating statements of income, including comprehensive income for the three months and nine months ended September 30, 2015 and 2014, the condensed consolidating balance sheets as of September 30, 2015 and December 31, 2014 and the condensed consolidating cash flows for the nine months ended September 30, 2015 and 2014. 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. The condensed consolidating financial statements set forth below include the addition of CFNA and GAMNA as guarantors effective September 30, 2015 and all prior periods have been restated to retroactively effect this change. In addition, our presentation of the Guarantors’ statement of income for the three months and nine months ended September 30, 2014 has been restated to correctly apply the equity method of accounting to reflect the Guarantors’ equity interests in certain Non Guarantors. Such changes are reflected under the caption “Equity in earnings of subsidiaries” in the accompanying condensed consolidating statements of income. The correction had no impact on any financial information of the Parent Company, the Non Guarantors or on the condensed consolidating balance sheet or the statement of cash flows.

Condensed Consolidating Statement of Income for the

three months ended September 30, 2015

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	222,803		$	19,005		$	197,589		$	(19,437	)	$	419,960
Energy and related sales, net		1,153			—			—			—			1,153
Total revenues		223,956			19,005			197,589			(19,437	)		421,113
Costs of products sold		197,906			17,299			165,437			(19,437	)		361,205
Gross profit		26,050			1,706			32,152			—			59,908
Selling, general and administrative expenses		24,764			(8	)		15,036			—			39,792
Gains on dispositions of plant, equipment and timberlands, net		(4	)		—			(119	)		—			(123	)
Operating income		1,290			1,714			17,235			—			20,239
Other non-operating income (expense)
Interest expense		(4,346	)		—			(23,201	)		23,230			(4,317	)
Interest income		181			23,129			11			(23,231	)		90
Equity in earnings of subsidiaries		14,173			(9,366	)		—			(4,808	)		—
Other, net		(961	)		23			718			—			(220	)
Total other non-operating income (expense)		9,047			13,786			(22,472	)		(4,809	)		(4,447	)
Income (loss) before income taxes		10,337			15,500			(5,237	)		(4,809	)		15,792
Income tax provision (benefit)		(3,167	)		1,270			4,185			—			2,288
Net income (loss)		13,504			14,230			(9,422	)		(4,809	)		13,504
Other comprehensive income (loss)		(3,002	)		(5,954	)		(7,752	)		13,706			(3,002	)
Comprehensive income (loss)	$	10,502		$	8,276		$	(17,174	)	$	8,897		$	10,502

Condensed Consolidating Statement of Income for the

three months ended September 30, 2014

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	236,182		$	17,735		$	228,699		$	(17,524	)	$	465,092
Energy and related sales, net		860			—			—			—			860
Total revenues		237,042			17,735			228,699			(17,524	)		465,952
Costs of products sold		197,182			17,019			188,762			(17,524	)		385,439
Gross profit		39,860			716			39,937			—			80,513
Selling, general and administrative expenses		19,352			589			17,946			—			37,886
Gains on dispositions of plant, equipment and timberlands, net		(1,590	)		—			—			—			(1,590	)
Operating income		22,098			127			21,991			—			44,217
Other non-operating income (expense)
Interest expense		(4,790	)		—			(90,098	)		90,217			(4,671	)
Interest income		152			89,951			145			(90,218	)		30
Equity in earnings of subsidiaries		14,935			(74,502	)		—			59,566			—
Other, net		(383	)		9			202			5			(167	)
Total other non-operating income (expense)		9,914			15,458			(89,751	)		59,570			(4,808	)
Income (loss) before income taxes		32,012			15,585			(67,760	)		59,570			39,409
Income tax provision (benefit)		1,640			1,091			6,306			—			9,037
Net income (loss)		30,372			14,494			(74,066	)		59,570			30,372
Other comprehensive income (loss)		(29,577	)		(25,843	)		16,924			8,919			(29,577	)
Comprehensive income (loss)	$	795		$	(11,349	)	$	(57,142	)	$	68,489		$	795

Condensed Consolidating Statement of Income for the

nine months ended September 30, 2015

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	655,599		$	61,822		$	590,466		$	(59,655	)	$	1,248,232
Energy and related sales, net		3,936			—			—			—			3,936
Total revenues		659,535			61,822			590,466			(59,655	)		1,252,168
Costs of products sold		614,060			58,554			494,360			(59,655	)		1,107,319
Gross profit		45,475			3,268			96,106			—			144,849
Selling, general and administrative expenses		57,607			947			41,647			—			100,201
Gains on dispositions of plant, equipment and timberlands, net		(1,526	)		(1,183	)		(179	)		—			(2,888	)
Operating income (loss)		(10,606	)		3,504			54,638			—			47,536
Other non-operating income (expense)
Interest expense		(13,771	)		—			(35,965	)		36,559			(13,177	)
Interest income		513			36,226			52			(36,559	)		232
Equity in earnings of subsidiaries		48,775			11,879			—			(60,654	)		—
Other, net		(2,423	)		(136	)		2,367			—			(192	)
Total other non-operating income (expense)		33,094			47,969			(33,546	)		(60,654	)		(13,137	)
Income before income taxes		22,488			51,473			21,092			(60,654	)		34,399
Income tax provision (benefit)		(7,789	)		2,586			9,325			—			4,122
Net income		30,277			48,887			11,767			(60,654	)		30,277
Other comprehensive income (loss)		(21,200	)		(30,607	)		21,156			9,451			(21,200	)
Comprehensive income	$	9,077		$	18,280		$	32,923		$	(51,203	)	$	9,077

Condensed Consolidating Statement of Income for the

nine months ended September 30, 2014

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	679,877		$	56,138		$	685,350		$	(55,211	)	$	1,366,154
Energy and related sales, net		6,912			—			—			—			6,912
Total revenues		686,789			56,138			685,350			(55,211	)		1,373,066
Costs of products sold		629,984			53,491			567,812			(55,211	)		1,196,076
Gross profit		56,805			2,647			117,538			—			176,990
Selling, general and administrative expenses		53,699			1,431			48,622			—			103,751
Gains on dispositions of plant, equipment and timberlands, net		(2,565	)		(1,316	)		—			—			(3,881	)
Operating income		5,671			2,532			68,916			—			77,120
Other non-operating income (expense)
Interest expense		(14,284	)		—			(95,643	)		95,682			(14,245	)
Interest income		468			95,165			193			(95,683	)		143
Equity in earnings of subsidiaries		56,784			(38,229	)		—			(18,555	)		—
Other, net		(1,603	)		30			1,673			5			105
Total other non-operating income (expense)		41,365			56,966			(93,777	)		(18,551	)		(13,997	)
Income (loss) before income taxes		47,036			59,498			(24,861	)		(18,551	)		63,123
Income tax provision (benefit)		(2,653	)		2,719			13,368			—			13,434
Net income (loss)		49,689			56,779			(38,229	)		(18,551	)		49,689
Other comprehensive income (loss)		(23,586	)		(26,392	)		18,907			7,485			(23,586	)
Comprehensive income (loss)	$	26,103		$	30,387		$	(19,322	)	$	(11,066	)	$	26,103

Condensed Consolidating Balance Sheet as of

September 30, 2015

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	28,626	$	297		$	44,742	$	—		$	73,665
Other current assets		232,486		260,054			261,431		(268,192	)		485,779
Plant, equipment and timberlands, net		283,712		1,005			412,607		—			697,324
Investments in subsidiaries		734,303		504,783			—		(1,239,086	)		—
Other assets		132,732		—			148,732		(485	)		280,979
Total assets	$	1,411,859	$	766,139		$	867,512	$	(1,507,763	)	$	1,537,747
Liabilities and Shareholders’ Equity
Current liabilities	$	368,220	$	31,720		$	163,984	$	(271,574	)	$	292,350
Long-term debt		250,000		—			131,535		—			381,535
Deferred income taxes		48,226		(505	)		50,110		3,376			101,207
Other long-term liabilities		99,297		33			17,209		—			116,539
Total liabilities		765,743		31,248			362,838		(268,198	)		891,631
Shareholders’ equity		646,116		734,891			504,674		(1,239,565	)		646,116
Total liabilities and shareholders’ equity	$	1,411,859	$	766,139		$	867,512	$	(1,507,763	)	$	1,537,747

Condensed Consolidating Balance Sheet as of

December 31, 2014

In thousands	Parent Company		Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	42,208	$	509		$	57,120		$	—		$	99,837
Other current assets		216,940		439,910			254,911			(436,976	)		474,785
Plant, equipment and timberlands, net		255,255		996			441,357			—			697,608
Investments in subsidiaries		826,084		401,540			—			(1,227,624	)		—
Other assets		121,125		—			186,128			(17,979	)		289,274
Total assets	$	1,461,612	$	842,955		$	939,516		$	(1,682,579	)	$	1,561,504
Liabilities and Shareholders’ Equity
Current liabilities		403,662		13,143			307,184			(444,258	)		279,731
Long-term debt		250,000		—			721,457			(572,579	)		398,878
Deferred income taxes		46,483		(506	)		70,328			(12,289	)		104,016
Other long-term liabilities		112,358		24			11,608			5,780			129,770
Total liabilities		812,503		12,661			1,110,577			(1,023,346	)		912,395
Shareholders’ equity		649,109		830,294			(171,061	)		(659,233	)		649,109
Total liabilities and shareholders’ equity	$	1,461,612	$	842,955		$	939,516		$	(1,682,579	)	$	1,561,504

Condensed Consolidating Statement of Cash Flows for the

nine months ended September 30, 2015

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	9,927		$	152		$	60,444		$	—		$	70,523
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(52,331	)		(42	)		(21,907	)		—			(74,280	)
Proceeds from disposal plant, equipment and timberlands, net		1,584			1,213			384			—			3,181
Repayments from intercompany loans		1,465			53,855			—			(55,320	)		—
Advances of intercompany loans		—			(44,590	)		—			44,590			—
Intercompany capital (contributed) returned		10,500			(300	)		—			(10,200	)		—
Acquisitions, net of cash acquired		—			—			(224	)		—			(224	)
Other		(1,600	)		—			—			—			(1,600	)
Total investing activities		(40,382	)		10,136			(21,747	)		(20,930	)		(72,923	)
Financing activities
Net repayments of indebtedness		—			—			(3,387	)		—			(3,387	)
Payments of borrowing costs		(1,329	)		—			—			—			(1,329	)
Payment of dividends to shareholders		(15,215	)		—			—			—			(15,215	)
Repayments of intercompany loans		(9,158	)		—			(46,162	)		55,320			—
Borrowings of intercompany loans		44,590			—			—			(44,590	)		—
Intercompany capital received (returned)		—			(10,500	)		300			10,200			—
Payments related to share-based compensation awards and other		(2,015	)		—			—			—			(2,015	)
Total financing activities		16,873			(10,500	)		(49,249	)		20,930			(21,946	)
Effect of exchange rate on cash		—			—			(1,826	)		—			(1,826	)
Net decrease in cash		(13,582	)		(212	)		(12,378	)		—			(26,172	)
Cash at the beginning of period		42,208			509			57,120			—			99,837
Cash at the end of period	$	28,626		$	297		$	44,742		$	—		$	73,665

Condensed Consolidating Statement of Cash Flows for the

nine months ended September 30, 2014

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	712		$	3,371		$	17,297		$	—		$	21,380
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(26,368	)		—			(20,668	)		—			(47,036	)
Proceeds from disposal plant, equipment and timberlands, net		2,687			1,355			9			—			4,051
Repayments from intercompany loans		—			10,409			—			(10,409	)		—
Advances of intercompany loans		—			(15,540	)		—			15,540			—
Other		(600	)		—			—			—			(600	)
Total investing activities		(24,281	)		(3,776	)		(20,659	)		5,131			(43,585	)
Financing activities
Net proceeds from indebtedness		—			—			(18,128	)		—			(18,128	)
Payment of dividends to shareholders		(13,935	)		—			—			—			(13,935	)
Repurchases of common stock		(12,180	)		—			—			—			(12,180	)
Borrowings of intercompany loans		15,540			—			—			(15,540	)		—
Repayments of intercompany loans		—			—			(10,409	)		10,409			—
Payments related to share-based compensation awards and other		(1,764	)		—			—			—			(1,764	)
Total financing activities		(12,339	)		—			(28,537	)		(5,131	)		(46,007	)
Effect of exchange rate on cash		—			—			(1,015	)		—			(1,015	)
Net decrease in cash		(35,908	)		(405	)		(32,914	)		—			(69,227	)
Cash at the beginning of period		56,216			495			66,171			—			122,882
Cash at the end of period	$	20,308		$	90		$	33,257		$	—		$	53,655