15.

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 Advance 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 our condensed consolidating statements of income, including comprehensive income for the three months and six months ended June 30, 2016, our condensed consolidating cash flows for the six months ended June 30, 2016 and 2015 and our condensed consolidating balance sheets as of June 30, 2016 and December 31, 2015. The condensed consolidating financial statements set forth below include the addition of CFNA and GAMNA as guarantors during 2015.

Condensed Consolidating Statement of Income for the Three months ended June 30, 2016

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales

209,269

17,561

196,675

(17,092

)

406,413

Energy and related sales, net

2,001

—

2,001

Total revenues

211,270

17,561

196,675

(17,092

)

408,414

Costs of products sold

204,495

16,711

161,577

(17,092

)

365,691

Gross profit

6,775

850

35,098

—

42,723

Selling, general and administrative expenses

22,622

(36

)

14,605

—

37,191

Loss on dispositions of plant, equipment and timberlands, net

—

Operating income (loss)

(15,849

)

886

20,493

—

5,530

Other non-operating income (expense)

Interest expense

(4,289

)

—

(814

)

1,150

(3,953

)

Interest income

169

1,001

(1,150

)

Equity in earnings of subsidiaries

16,385

16,071

—

(32,456

)

—

Other, net

(575

)

(1,421

)

2,313

—

317

Total other non-operating income (expense)

11,690

15,651

1,540

(32,456

)

(3,575

)

Income (loss) before income taxes

(4,159

)

16,537

22,033

(32,456

)

1,955

Income tax provision (benefit)

(6,124

)

152

5,962

—

(10

)

Net income

1,965

16,385

16,071

(32,456

)

1,965

Other comprehensive income (loss)

(11,539

)

(13,937

)

(13,490

)

27,427

(11,539

)

Comprehensive income (loss)

(9,574

)

2,448

2,581

(5,029

)

(9,574

)

Condensed Consolidating Statement of Income for the Six months ended June 30, 2016

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales

427,157

36,207

381,141

(35,874

)

808,631

Energy and related sales, net

2,667

—

2,667

Total revenues

429,824

36,207

381,141

(35,874

)

811,298

Costs of products sold

396,454

34,761

315,391

(35,874

)

710,732

Gross profit

33,370

1,446

65,750

—

100,566

Selling, general and administrative expenses

41,067

(221

)

28,203

—

69,049

Loss on dispositions of plant, equipment and timberlands, net

—

Operating income (loss)

(7,701

)

1,667

37,525

—

31,491

Other non-operating income (expense)

Interest expense

(8,704

)

—

(1,601

)

2,236

(8,069

)

Interest income

350

1,993

(2,236

)

152

Equity in earnings of subsidiaries

29,257

27,825

—

(57,082

)

—

Other, net

(1,117

)

(1,401

)

2,135

—

(383

)

Total other non-operating income (expense)

19,786

28,417

579

(57,082

)

(8,300

)

Income before income taxes

12,085

30,084

38,104

(57,082

)

23,191

Income tax provision (benefit)

(6,048

)

827

10,279

—

5,058

Net income

18,133

29,257

27,825

(57,082

)

18,133

Other comprehensive income (loss)

4,203

(384

)

(373

)

757

4,203

Comprehensive income

22,336

28,873

27,452

(56,325

)

22,336

Condensed Consolidating Statement of Income for the Three months ended June 30, 2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	212,920		$	22,667		$	194,779		$	(19,563	)	$	410,803
Energy and related sales, net		715			—			—			—			715

Total revenues		213,635			22,667			194,779			(19,563	)		411,518
Costs of products sold		212,472			21,921			163,855			(19,563	)		378,685

Gross profit		1,163			746			30,924			—			32,833
Selling, general and administrative expenses		15,661			458			13,018			—			29,137
Loss on dispositions of plant, equipment and timberlands, net		(51	)		—			(60	)		—			(111	)

Operating income (loss)		(14,447	)		288			17,966			—			3,807
Other non-operating income (expense)
Interest expense		(4,608	)		—			(6,370	)		6,626			(4,352	)
Interest income		169			6,498			36			(6,625	)		77
Equity in earnings of subsidiaries		17,478			11,305			—			(28,783	)		—
Other, net		(746	)		(29	)		990			—			215

Total other non-operating income (expense)		12,293			17,774			(5,344	)		(28,782	)		(4,060	)

Income (loss) before income taxes		(2,154	)		18,062			12,622			(28,782	)		(253	)
Income tax provision (benefit)		(5,002	)		584			1,317			—			(3,101	)

Net income		2,848			17,478			11,305			(28,782	)		2,848
Other comprehensive income (loss)		17,087			13,680			(9,958	)		(3,722	)		17,087

Comprehensive income	$	19,935		$	31,158		$	1,347		$	(32,504	)	$	19,935

Condensed Consolidating Statement of Income for the Six months ended June 30, 2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	432,796		$	42,817		$	392,877		$	(40,218	)	$	828,272
Energy and related sales, net		2,783			—			—			—			2,783

Total revenues		435,579			42,817			392,877			(40,218	)		831,055
Costs of products sold		416,154			41,255			328,923			(40,218	)		746,114

Gross profit		19,425			1,562			63,954			—			84,941
Selling, general and administrative expenses		32,843			955			26,611			—			60,409
Gains on dispositions of plant, equipment and timberlands, net		(1,522	)		(1,183	)		(60	)		—			(2,765	)

Operating income (loss)		(11,896	)		1,790			37,403			—			27,297
Other non-operating income (expense)
Interest expense		(9,425	)		—			(12,764	)		13,329			(8,860	)
Interest income		331			13,097			41			(13,327	)		142
Equity in earnings of subsidiaries		34,562			21,499			—			(56,061	)		—
Other, net		(1,460	)		(159	)		1,649			(2	)		28

Total other non-operating income (expense)		24,008			34,437			(11,074	)		(56,061	)		(8,690	)

Income before income taxes		12,112			36,227			26,329			(56,061	)		18,607
Income tax provision (benefit)		(4,661	)		1,665			4,830			—			1,834

Net income		16,773			34,562			21,499			(56,061	)		16,773
Other comprehensive income (loss)		(18,198	)		(24,870	)		28,890			(4,020	)		(18,198	)

Comprehensive income (loss)	$	(1,425	)	$	9,692		$	50,389		$	(60,081	)	$	(1,425	)

Condensed Consolidating Balance Sheet as of June 30, 2016

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Assets

Cash and cash equivalents

6,512

2,545

49,475

—

58,532

Other current assets

207,168

255,574

266,025

(262,714

)

466,053

Plant, equipment and timberlands, net

329,041

18,507

400,488

—

748,036

Investments in subsidiaries

783,479

535,117

—

(1,318,596

)

—

Other assets

112,876

—

139,687

—

252,563

Total assets

1,439,076

811,743

855,675

(1,581,310

)

1,525,184

Liabilities and Shareholders’ Equity

Current liabilities

401,540

28,180

144,387

(262,714

)

311,393

Long-term debt

247,381

—

110,985

—

358,366

Deferred income taxes

26,905

(229

)

48,479

—

75,155

Other long-term liabilities

87,027

313

16,707

—

104,047

Total liabilities

762,853

28,264

320,558

(262,714

)

848,961

Shareholders’ equity

676,223

783,479

535,117

(1,318,596

)

676,223

Total liabilities and shareholders’ equity

1,439,076

811,743

855,675

(1,581,310

)

1,525,184

Condensed Consolidating Balance Sheet as of December 31, 2015


In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	59,130	$	465		$	45,709	$	—		$	105,304
Other current assets		199,690		238,515			239,367		(230,509	)		447,063
Plant, equipment and timberlands, net		286,334		1,114			411,416		—			698,864
Investments in subsidiaries		737,450		507,116			—		(1,244,566	)		—
Other assets		106,586		—			142,599		—			249,185

Total assets	$	1,389,190	$	747,210		$	839,091	$	(1,475,075	)	$	1,500,416

Liabilities and Shareholders’ Equity
Current liabilities	$	363,037	$	9,725		$	162,081	$	(230,523	)	$	304,320
Long-term debt		247,075		—			106,221		—			353,296
Deferred income taxes		28,561		(79	)		47,976		—			76,458
Other long-term liabilities		87,270		—			15,825		—			103,095

Total liabilities		725,943		9,646			332,103		(230,523	)		837,169
Shareholders’ equity		663,247		737,564			506,988		(1,244,552	)		663,247

Total liabilities and shareholders’ equity	$	1,389,190	$	747,210		$	839,091	$	(1,475,075	)	$	1,500,416

Condensed Consolidating Statement of Cash Flows for the Six months ended June 30, 2016


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	17,067		$	2,821		$	16,752		$	—		$	36,640
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(51,043	)		(18,861	)		(10,487	)		—			(80,391	)
Proceeds from disposals of plant, equipment and timberlands, net		41			—			12			—			53
Repayments from intercompany loans		—			7,500			—			(7,500	)		—
Advances of intercompany loans		—			(7,880	)		—			7,880			—
Intercompany capital contributed		(17,000	)		(500	)		—			17,500			—
Other		(300	)		—			—			—			(300	)

Total investing activities		(68,302	)		(19,741	)		(10,475	)		17,880			(80,638	)
Financing activities
Net long-term borrowings		—			—			4,222			—			4,222
Payments of borrowing costs		(51	)		—			(85	)		—			(136	)
Payment of dividends to shareholders		(10,679	)		—			—			—			(10,679	)
Repayments of intercompany loans		—			—			(7,500	)		7,500			—
Borrowings of intercompany loans		7,880			—			—			(7,880	)		—
Intercompany capital (returned) received		—			17,000			500			(17,500	)		—
Proceeds from government grants		2,443			2,000			—			—			4,443
Payments related to share-based compensation awards and other		(976	)		—			—			—			(976	)

Total financing activities		(1,383	)		19,000			(2,863	)		(17,880	)		(3,126	)
Effect of exchange rate on cash		—			—			352			—			352

Net increase (decrease) in cash		(52,618	)		2,080			3,766			—			(46,772	)
Cash at the beginning of period		59,130			465			45,709			—			105,304

Cash at the end of period	$	6,512		$	2,545		$	49,475		$	—		$	58,532

Condensed Consolidating Statement of Cash Flows for the Six months ended June 30, 2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(4,343	)	$	(695	)	$	30,551		$	—		$	25,513
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(30,241	)		—			(14,334	)		—			(44,575	)
Proceeds from disposals of plant, equipment and timberlands, net		1,581			1,213			257			—			3,051
Repayments from intercompany loans		—			48,855			—			(48,855	)		—
Advances of intercompany loans		—			(38,690	)		—			38,690			—
Intercompany capital (contributed) returned		10,500			(300	)		—			(10,200	)		—
Other		(1,600	)		—			—			—			(1,600	)

Total investing activities		(19,760	)		11,078			(14,077	)		(20,365	)		(43,124	)
Financing activities
Net repayments of indebtedness		—			—			(1,492	)		—			(1,492	)
Payments of borrowing costs		(1,329	)		—			—			—			(1,329	)
Payment of dividends to shareholders		(9,992	)		—			—			—			(9,992	)
Repayments of intercompany loans		(9,158	)		—			(39,697	)		48,855			—
Borrowings of intercompany loans		38,690			—			—			(38,690	)		—
Intercompany capital (returned) received		—			(10,500	)		300			10,200			—
Payments related to share-based compensation awards and other		(2,000	)		—			—			—			(2,000	)

Total financing activities		16,211			(10,500	)		(40,889	)		20,365			(14,813	)
Effect of exchange rate on cash		—			—			(1,651	)		—			(1,651	)

Net decrease in cash		(7,892	)		(117	)		(26,066	)		—			(34,075	)
Cash at the beginning of period		42,208			509			57,120			—			99,837

Cash at the end of period	$	34,316		$	392		$	31,054		$	—		$	65,762