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 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; or (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 six months ended June 30, 2018 and 2017, our condensed consolidating balance sheets as of June 30, 2018 and December 31, 2017, and our condensed consolidating cash flows for the six months ended June 30, 2018 and 2017.

Condensed Consolidating Statement of Income for the three months ended June 30, 2018

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	190,032		$	32,319		$	208,579		$	(25,157	)	$	405,773
Energy and related sales, net		944			—			—			—			944
Total revenues		190,976			32,319			208,579			(25,157	)		406,717
Costs of products sold		203,339			31,097			175,835			(25,157	)		385,114
Gross profit (loss)		(12,363	)		1,222			32,744			—			21,603
Selling, general and administrative
expenses		16,971			(332	)		14,922			—			31,561
(Gain) loss on dispositions of plant
equipment and timberlands, net		(22	)		(565	)		8			—			(579	)
Operating income (loss)		(29,312	)		2,119			17,814			—			(9,379	)
Other non-operating
income (expense)
Interest expense		(6,389	)		(585	)		(446	)		1,606			(5,814	)
Interest income		133			1,446			53			(1,606	)		26
Equity in earnings of subsidiaries		14,971			12,707			—			(27,678	)		—
Other, net		1,532			529			(2,318	)		—			(257	)
Total other non-operating
income (expense)		10,247			14,097			(2,711	)		(27,678	)		(6,045	)
Income (loss) before income taxes		(19,065	)		16,216			15,103			(27,678	)		(15,424	)
Income tax provision (benefit)		(11,666	)		1,267			2,374			—			(8,025	)
Net income (loss)		(7,399	)		14,949			12,729			(27,678	)		(7,399	)
Other comprehensive income (loss)		(25,653	)		(28,587	)		(28,149	)		56,736			(25,653	)
Comprehensive income (loss)	$	(33,052	)	$	(13,638	)	$	(15,420	)	$	29,058		$	(33,052	)

Condensed Consolidating Statement of Income for the six months ended June 30, 2018

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	389,471		$	52,332		$	424,714		$	(50,097	)	$	816,420
Energy and related sales, net		2,372			—			—			—			2,372
Total revenues		391,843			52,332			424,714			(50,097	)		818,792
Costs of products sold		394,504			49,362			354,514			(50,097	)		748,283
Gross profit (loss)		(2,661	)		2,970			70,200			—			70,509
Selling, general and administrative
expenses		37,408			1,673			29,543			—			68,624
(Gain) loss on dispositions of plant
equipment and timberlands, net		(460	)		(1,680	)		7			—			(2,133	)
Operating income (loss)		(39,609	)		2,977			40,650			—			4,018
Other non-operating
income (expense)
Interest expense		(12,071	)		(1,040	)		(874	)		2,976			(11,009	)
Interest income		279			2,690			87			(2,976	)		80
Equity in earnings of subsidiaries		36,204			34,962			—			(71,166	)
Other, net		(881	)		(2,734	)		3,587			—			(28	)
Total other non-operating
income (expense)		23,531			33,878			2,800			(71,166	)		(10,957	)
Income (loss) before income taxes		(16,078	)		36,855			43,450			(71,166	)		(6,939	)
Income tax provision (benefit)		(14,395	)		673			8,466			—			(5,256	)
Net income (loss)		(1,683	)		36,182			34,984			(71,166	)		(1,683	)
Other comprehensive income (loss)		(11,633	)		(17,551	)		(16,114	)		33,665			(11,633	)
Comprehensive income (loss)	$	(13,316	)	$	18,631		$	18,870		$	(37,501	)	$	(13,316	)

Condensed Consolidating Statement of Income for the three months ended June 30, 2017

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	191,370		$	23,052		$	194,708		$	(21,788	)	$	387,342
Energy and related sales, net		981			—			—			—			981
Total revenues		192,351			23,052			194,708			(21,788	)		388,323
Costs of products sold		196,145			22,047			162,184			(21,788	)		358,588
Gross profit		(3,794	)		1,005			32,524			—			29,735
Selling, general and administrative
expenses		16,421			236			14,888			—			31,545
(Gain) loss on dispositions of plant
equipment and timberlands, net		16			(74	)		—			—			(58	)
Operating income (loss)		(20,231	)		843			17,636			—			(1,752	)
Other non-operating
income (expense)
Interest expense		(5,182	)		(206	)		(437	)		1,349			(4,476	)
Interest income		142			1,237			15			(1,349	)		45
Equity in earnings of subsidiaries		18,801			19,249			—			(38,050	)
Other, net		781			(2,319	)		1,636			—			98
Total other non-operating
income (expense)		14,542			17,961			1,214			(38,050	)		(4,333	)
Income (loss) before income taxes		(5,689	)		18,804			18,850			(38,050	)		(6,085	)
Income tax provision (benefit)		25			3			(399	)		—			(371	)
Net income (loss)		(5,714	)		18,801			19,249			(38,050	)		(5,714	)
Other comprehensive income		26,332			23,964			23,371			(47,335	)		26,332
Comprehensive income	$	20,618		$	42,765		$	42,620		$	(85,385	)	$	20,618

Condensed Consolidating Statement of Income for the six months ended June 30, 2017

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	397,141		$	42,585		$	380,595		$	(42,266	)	$	778,055
Energy and related sales, net		2,110			—			—			—			2,110
Total revenues		399,251			42,585			380,595			(42,266	)		780,165
Costs of products sold		381,391			40,633			315,043			(42,266	)		694,801
Gross profit		17,860			1,952			65,552			—			85,364
Selling, general and administrative
expenses		36,583			310			29,529			—			66,422
(Gain) loss on dispositions of plant
equipment and timberlands, net		48			(74	)		—			—			(26	)
Operating income (loss)		(18,771	)		1,716			36,023			—			18,968
Other non-operating
income (expense)
Interest expense		(9,843	)		(319	)		(941	)		2,619			(8,484	)
Interest income		291			2,398			88			(2,619	)		158
Equity in earnings of subsidiaries		32,418			33,101			-			(65,519	)
Other, net		2,365			(4,525	)		3,070			—			910
Total other non-operating
income (expense)		25,231			30,655			2,217			(65,519	)		(7,416	)
Income before income taxes		6,460			32,371			38,240			(65,519	)		11,552
Income tax provision (benefit)		571			(47	)		5,139			—			5,663
Net income		5,889			32,418			33,101			(65,519	)		5,889
Other comprehensive income		33,525			29,066			28,385			(57,451	)		33,525
Comprehensive income	$	39,414		$	61,484		$	61,486		$	(122,970	)	$	39,414

Condensed Consolidating Balance Sheet as of June 30, 2018

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	1,201	$	1,729	$	104,259	$	-		$	107,189
Other current assets		262,122		256,018		295,167		(316,171	)		497,136
Plant, equipment and timberlands, net		367,703		86,461		390,303		—			844,467
Investments in subsidiaries		837,670		652,335		—		(1,490,005	)		—
Other assets		144,794		—		143,511		—			288,305
Total assets	$	1,613,490	$	996,543	$	933,240	$	(1,806,176	)	$	1,737,097
Liabilities and Shareholders' Equity
Current liabilities	$	422,603	$	81,975	$	148,468	$	(316,171	)	$	336,875
Long-term debt		394,462		67,000		48,715		—			510,177
Deferred income taxes		3,201		18,542		54,321		—			76,064
Other long-term liabilities		106,272		485		20,272		—			127,029
Total liabilities		926,538		168,002		271,776		(316,171	)		1,050,145
Shareholders’ equity		686,952		828,541		661,464		(1,490,005	)		686,952
Total liabilities and shareholders’ equity	$	1,613,490	$	996,543	$	933,240	$	(1,806,176	)	$	1,737,097

Condensed Consolidating Balance Sheet as of December 31, 2017

In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	1,292	$	720	$	114,207	$	-		$	116,219
Other current assets		249,293		217,822		279,626		(277,989	)		468,752
Plant, equipment and timberlands, net		375,231		80,992		409,520		—			865,743
Investments in subsidiaries		829,895		653,128		—		(1,483,023	)		—
Other assets		139,552		—		140,529		—			280,081
Total assets	$	1,595,263	$	952,662	$	943,882	$	(1,761,012	)	$	1,730,795
Liabilities and Shareholders' Equity
Current liabilities	$	402,787	$	54,640	$	167,738	$	(277,989	)	$	347,176
Long-term debt		368,496		51,000		50,602		—			470,098
Deferred income taxes		14,081		16,814		52,676		—			83,571
Other long-term liabilities		100,971		313		19,738		—			121,022
Total liabilities		886,335		122,767		290,754		(277,989	)		1,021,867
Shareholders’ equity		708,928		829,895		653,128		(1,483,023	)		708,928
Total liabilities and shareholders’ equity	$	1,595,263	$	952,662	$	943,882	$	(1,761,012	)	$	1,730,795

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2018

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated

Net cash provided (used) by
Operating activities	$	(4,089	)	$	(114	)	$	24,241		$	(20,000	)	$	38
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(13,414	)		(12,902	)		(10,628	)		—			(36,944	)
Proceeds from disposals of plant, equipment and timberlands, net		598			1,785			1			—			2,384
Advances of intercompany loans		—			(3,445	)		—			3,445			—
Intercompany capital contributed		—			(315	)		—			315			—
Intercompany capital returned		—			20,000			—			(20,000	)		—
Other		(68	)		—			—			—			(68	)
Total investing activities		(12,884	)		5,123			(10,627	)		(16,240	)		(34,628	)
Financing activities
Net borrowings (repayments) of long-term debt		25,660			16,000			(647	)		—			41,013
Payment of dividends to shareholders		(11,368	)		—			—			—			(11,368	)
Borrowings of intercompany loans		3,445			—			—			(3,445	)		—
Intercompany capital received		—			—			315			(315	)		—
Intercompany capital returned		—			—			(20,000	)		20,000			—
Payment of intercompany dividend		—			(20,000	)		—			20,000			—
Proceeds from government grants		125			—			—			—			125
Payments related to share-based compensation awards and other		(980	)		—			—			—			(980	)
Total financing activities		16,882			(4,000	)		(20,332	)		36,240			28,790
Effect of exchange rate on cash		—			—			(3,230	)		—			(3,230	)
Net increase (decrease) in cash		(91	)		1,009			(9,948	)		—			(9,030	)
Cash at the beginning of period		1,292			720			114,207			—			116,219
Cash at the end of period	$	1,201		$	1,729		$	104,259		$	—		$	107,189

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2017

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(12,072	)	$	(1,085	)	$	42,606		$	(685	)	$	28,764
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(40,739	)		(21,421	)		(8,887	)		—			(71,047	)
Proceeds from disposals of plant, equipment and timberlands, net		8			75			—			—			83
Repayments from intercompany loans		—			12,000			—			(12,000	)		—
Advances of intercompany loans		—			(12,550	)		—			12,550			—
Intercompany capital contributed		—			(400	)		—			400			—
Total investing activities		(40,731	)		(22,296	)		(8,887	)		950			(70,964	)
Financing activities
Net borrowings (repayments) of long-term debt		55,000			25,000			(16,292	)		—			63,708
Payment of dividends to shareholders		(11,130	)		—			—			—			(11,130	)
Repayments of intercompany loans		—			—			(12,000	)		12,000			—
Borrowings of intercompany loans		12,550			—			—			(12,550	)		—
Intercompany capital received		—			—			400			(400	)		—
Payment of intercompany dividend		—			—			(685	)		685			—
Payments related to share-based compensation awards and other		(112	)		—			—			—			(112	)
Total financing activities		56,308			25,000			(28,577	)		(265	)		52,466
Effect of exchange rate on cash		—			—			3,732			—			3,732
Net increase in cash		3,505			1,619			8,874			—			13,998
Cash at the beginning of period		5,082			1,461			48,901			—			55,444
Cash at the end of period	$	8,587		$	3,080		$	57,775		$	—		$	69,442