e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD from
to
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For the quarterly period ended September 30, 2009
Commission file number 1-3560
P. H. Glatfelter Company
(Exact name of registrant as specified in its charter)
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Pennsylvania
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23-0628360 |
(State or other jurisdiction of
incorporation or organization)
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(IRS Employer Identification No.) |
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96 South George Street, Suite 500 |
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York, Pennsylvania 17401
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(717) 225-4711 |
(Address of principal executive offices)
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(Registrants telephone number, including area code) |
N/A
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for at least
the past 90 days. Yes þ No o.
Indicate by check mark whether the registrant has submitted electronically and posted
on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes o
No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o No þ.
As of October 31, 2009, P. H. Glatfelter Company had 45,596,601 shares of
common stock outstanding.
P. H. GLATFELTER COMPANY
REPORT ON FORM 10-Q
for the QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2009
Table of Contents
PART I
Item 1 Financial Statements
P. H. GLATFELTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30 |
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September 30 |
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In thousands, except per share |
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2009 |
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2008 |
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2009 |
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2008 |
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Net sales |
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$ |
312,358 |
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$ |
339,822 |
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$ |
882,889 |
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$ |
965,545 |
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Energy sales
net |
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2,132 |
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2,885 |
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6,194 |
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7,612 |
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Total revenues |
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314,490 |
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342,707 |
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889,083 |
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973,157 |
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Costs of products sold |
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232,025 |
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285,535 |
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704,303 |
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839,329 |
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Gross profit |
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82,465 |
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57,172 |
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184,780 |
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133,828 |
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Selling, general and administrative expenses |
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29,303 |
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24,802 |
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80,364 |
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74,314 |
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Reversal of shutdown and restructuring charges |
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(856 |
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Gains on dispositions of plant, equipment and timberlands, net |
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(9 |
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(3,975 |
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(681 |
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(18,477 |
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Operating income |
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53,171 |
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36,345 |
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105,097 |
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78,847 |
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Non-operating income (expense) |
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Interest expense |
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(4,528 |
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(5,654 |
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(14,798 |
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(17,626 |
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Interest income |
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318 |
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1,170 |
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1,583 |
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4,131 |
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Other net |
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204 |
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146 |
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86 |
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317 |
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Total other income (expense) |
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(4,006 |
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(4,338 |
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(13,129 |
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(13,178 |
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Income before income taxes |
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49,165 |
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32,007 |
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91,968 |
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65,669 |
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Income tax provision |
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3,171 |
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10,345 |
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14,566 |
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21,176 |
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Net income |
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$ |
45,994 |
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$ |
21,662 |
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$ |
77,402 |
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$ |
44,493 |
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Earnings per share |
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Basic |
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$ |
1.01 |
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$ |
0.48 |
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$ |
1.70 |
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$ |
0.98 |
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Diluted |
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1.00 |
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0.47 |
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1.69 |
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0.97 |
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Cash dividends declared per common share |
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$ |
0.09 |
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$ |
0.09 |
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$ |
0.27 |
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$ |
0.27 |
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Weighted average shares outstanding |
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Basic |
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45,699 |
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45,279 |
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45,649 |
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45,221 |
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Diluted |
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45,865 |
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45,650 |
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45,712 |
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45,669 |
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
GLATFELTER
-2-
P. H. GLATFELTER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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September 30 |
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December 31 |
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In thousands |
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2009 |
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2008 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
116,240 |
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$ |
32,234 |
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Accounts
receivable net |
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136,215 |
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132,635 |
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Inventories |
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163,340 |
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193,354 |
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Prepaid expenses and other current assets |
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66,713 |
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33,596 |
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Total current assets |
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482,508 |
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391,819 |
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Plant,
equipment and timberlands net |
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477,093 |
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493,564 |
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Other assets |
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134,636 |
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171,926 |
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Total assets |
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$ |
1,094,237 |
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$ |
1,057,309 |
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Liabilities and Shareholders Equity |
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Current liabilities |
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Current portion of long-term debt |
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$ |
13,759 |
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$ |
13,759 |
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Short-term debt |
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3,150 |
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5,866 |
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Accounts payable |
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62,926 |
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59,750 |
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Dividends payable |
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4,164 |
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4,089 |
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Environmental liabilities |
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989 |
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5,734 |
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Other current liabilities |
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107,934 |
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100,904 |
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Total current liabilities |
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192,922 |
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190,102 |
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Long-term debt |
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246,828 |
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293,660 |
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Deferred income taxes |
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77,971 |
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90,158 |
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Other long-term liabilities |
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142,144 |
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140,682 |
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Total liabilities |
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659,865 |
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714,602 |
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Commitments and contingencies |
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Shareholders equity |
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Common stock |
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544 |
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544 |
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Capital in excess of par value |
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47,260 |
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45,806 |
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Retained earnings |
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669,947 |
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605,001 |
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Accumulated other comprehensive loss |
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(153,111 |
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(176,133 |
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564,640 |
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475,218 |
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Less cost of common stock in treasury |
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(130,268 |
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(132,511 |
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Total shareholders equity |
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434,372 |
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342,707 |
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Total liabilities and shareholders equity |
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$ |
1,094,237 |
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$ |
1,057,309 |
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
GLATFELTER
-3-
P. H. GLATFELTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Nine months ended |
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September 30 |
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In thousands |
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2009 |
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2008 |
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Operating activities |
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Net income |
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$ |
77,402 |
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$ |
44,493 |
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Adjustments to reconcile to net cash provided by operating
activities: |
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Depreciation, depletion and amortization |
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45,823 |
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46,374 |
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Pension expense (income) |
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5,045 |
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(11,944 |
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Reversal of shutdown and restructuring charges |
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(856 |
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Deferred income tax provision |
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(18,599 |
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4,366 |
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Gains on dispositions of plant, equipment and timberlands, net |
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(681 |
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(18,477 |
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Stock-based compensation |
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3,704 |
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3,575 |
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Alternative fuel mixture credits, net of credits applied to taxes due |
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(34,888 |
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Change in operating assets and liabilities: |
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Accounts receivable, net |
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197 |
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(34,768 |
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Inventories |
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33,645 |
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(1,215 |
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Prepaid expenses and other current assets |
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5,245 |
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5,925 |
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Accounts payable |
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1,492 |
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(11,482 |
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Environmental matters |
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(7,383 |
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(12,503 |
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Accruals and other current liabilities |
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8,220 |
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2,906 |
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Other |
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292 |
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1,365 |
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Net cash provided by operating activities |
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119,514 |
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17,759 |
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Investing activities |
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Expenditures for purchases of plant, equipment and timberlands |
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(16,704 |
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(40,839 |
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Proceeds from disposals of plant, equipment and timberlands, net |
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728 |
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19,280 |
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Proceeds from timberland installment sale note receivable |
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37,850 |
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Net cash provided (used) by investing activities |
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21,874 |
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(21,559 |
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Financing activities |
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Net repayments of revolving credit facility |
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(1,623 |
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(25,000 |
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Net repayments of short term debt |
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(2,640 |
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(846 |
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Repayment of Note payable, due March 2013 |
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(34,000 |
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Proceeds from Term Loan, due January 2013 |
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36,695 |
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Principal
repayments 2011 Term Loan |
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(12,000 |
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(9,000 |
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Payment of dividends |
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(12,433 |
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(12,343 |
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Proceeds from stock options exercised and other |
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1,150 |
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Net cash used by financing activities |
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(62,696 |
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(9,344 |
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Effect of exchange rate changes on cash |
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5,314 |
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(742 |
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Net increase (decrease) in cash and cash equivalents |
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84,006 |
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(13,886 |
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Cash and cash equivalents at the beginning of period |
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32,234 |
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29,833 |
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Cash and cash equivalents at the end of period |
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$ |
116,240 |
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$ |
15,947 |
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Supplemental cash flow information |
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Cash paid for |
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Interest |
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$ |
9,523 |
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$ |
12,182 |
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Income taxes |
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16,175 |
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18,239 |
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The accompanying notes are an integral part of these condensed consolidated financial
statements.
GLATFELTER
-4-
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
unaudited
P. H. Glatfelter Company and subsidiaries
(Glatfelter, our, us or we) is a
manufacturer of specialty papers and engineered products. Headquartered in York, Pennsylvania, our
manufacturing facilities are located in Spring Grove, Pennsylvania; Chillicothe and Freemont, Ohio;
Gloucestershire (Lydney), England; Caerphilly, Wales; Gernsbach, Germany; Scaër, France; and the
Philippines. Our products are marketed throughout the United States and in over 85 other countries,
either through wholesale paper merchants, brokers and agents or directly to customers.
Basis of Presentation The unaudited condensed consolidated
financial statements (financial
statements) include the accounts of Glatfelter and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated. We have evaluated all subsequent events through
November 6, 2009, the date the financial statements were issued.
We prepared these financial statements in accordance with accounting
principles generally
accepted in the United States of America (generally accepted accounting principles or GAAP). In
our opinion, the financial statements reflect all normal, recurring adjustments needed to present
fairly our results for the interim periods. When preparing these financial statements, we have
assumed that you have read the audited consolidated financial statements included in our 2008
Annual Report on Form 10-K (2008 Form 10-K).
Accounting Estimates The preparation of financial statements
in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingencies as of the balance sheet date and the reported amounts
of revenues and expenses during the reporting period. Management believes the estimates and
assumptions used in the preparation of these financial statements are reasonable, based upon
currently available facts and known circumstances, but recognizes that actual results may differ
from those estimates and assumptions.
In June 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification (ASC) and the
Hierarchy of GAAP, a replacement of SFAS No. 162 (SFAS 168) as codified under ASC 105 Generally
Accepted Accounting Principles. SFAS No. 168 became the source of authoritative GAAP recognized by
the FASB. SFAS No. 168 was effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The issuance of SFAS No. 168 requires
references to authoritative US GAAP to coincide with the appropriate section of the ASC.
Accordingly, this standard did not have an impact on our financial condition or results of
operations.
On December 30, 2008, the FASB issued FSP FAS 132(R)-1
Employers Disclosures about
Postretirement Benefit Plan Assets (FSP FAS 132(R)-1) as codified under ASC 715-20 Defined
Benefit Plans General. This standard, which will be effective for us beginning December 31,
2009, will require more detailed disclosures about pension plan assets, our investment strategies,
major categories of plan assets, concentrations of risk within the plan, and valuation techniques
used to measure fair value. The adoption of FSP FAS 132(R)-1 is not expected to have a material
impact on our consolidated financial position or results of operations.
4. |
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ALTERNATIVE FUEL MIXTURE CREDITS |
The U.S. Internal Revenue Code provides a tax credit for companies
that use alternative fuel
mixtures to produce energy to operate their businesses. The credit, equal to $0.50 per gallon of
alternative fuel contained in the mixture, is refundable to the taxpayer. We began mixing black
liquor and diesel fuel in late February 2009 and filed an application to be registered as an
alternative fuel mixer with the Internal Revenue Service in March 2009. On May 11, 2009, we were
notified by the Internal Revenue Service that our application to be registered as an alternative
fuel mixer was approved. We subsequently filed an excise tax refund claim for the alternative fuel
mixture consumed at our Spring Grove, PA and Chillicothe, OH facilities during the period February
20, 2009 through May 17, 2009 and received a payment from the Internal Revenue Service (IRS) on
June 30, 2009 in the amount of $29.7 million.
GLATFELTER
-5-
For the period May 18, 2009 through September 30, 2009, we
earned an additional $45.8 million
of alternative fuel mixture credits for which a claim has yet to be submitted to the IRS. Of this
amount, $10.9 million was used to reduce estimated interim tax payments. We intend to claim the
balance of this amount as a non-taxable income tax credit in connection with the filing of our 2009
federal corporate income tax return.
The accompanying condensed consolidated statement of income for the
three months and nine
months ended September 30, 2009 includes $33.0 million and $73.8 million, respectively, recorded as
a credit to cost of products sold representing alternative fuel mixture credits earned through
September 30, 2009, net of associated expenses. On an after-tax basis, we recognized
$32.9 million of alternative fuel mixture credits during the third quarter of 2009 and $63.3
million in the nine months ended September 30, 2009.
According to the Internal Revenue Code, the tax credit is scheduled
to expire on December 31,
2009. However, there can be no assurances that the incentive program for alternative fuel mixtures
will continue in effect or that its provisions, including taxes applicable to the credits, will not
be changed, or that we will be successful in receiving future credits under the program.
5. |
|
GAIN ON DISPOSITIONS OF PLANT, EQUIPMENT AND TIMBERLANDS |
During the first nine months of 2009 and 2008, we completed sales of
timberlands as summarized
by the following table:
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Dollars in thousands |
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Acres |
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Proceeds |
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Gain |
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2009 |
|
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Timberlands |
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189 |
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$ |
728 |
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$ |
699 |
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Other |
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n/a |
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|
|
|
(18 |
) |
|
|
|
|
|
|
189 |
|
|
$ |
728 |
|
|
$ |
681 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Timberlands |
|
|
4,561 |
|
|
$ |
19,280 |
|
|
$ |
18,646 |
|
Other |
|
|
n/a |
|
|
|
|
|
|
|
(169 |
) |
|
|
|
|
|
|
4,561 |
|
|
$ |
19,280 |
|
|
$ |
18,477 |
|
|
The following table sets forth the details of basic and diluted
earnings per share (EPS):
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
September 30 |
In thousands, except per share |
|
2009 |
|
2008 |
|
Net income |
|
$ |
45,994 |
|
|
$ |
21,662 |
|
|
|
|
Weighted average common shares outstanding
used in basic EPS |
|
|
45,699 |
|
|
|
45,279 |
|
Common shares issuable upon exercise of
dilutive stock options, restricted stock
awards and performance awards |
|
|
166 |
|
|
|
371 |
|
|
|
|
Weighted average common shares outstanding
and common share equivalents used in diluted
EPS |
|
|
45,865 |
|
|
|
45,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.01 |
|
|
$ |
0.48 |
|
Diluted |
|
|
1.00 |
|
|
|
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
September 30 |
In thousands, except per share |
|
2009 |
|
2008 |
|
Net income |
|
$ |
77,402 |
|
|
$ |
44,493 |
|
|
|
|
Weighted average common shares outstanding used
in basic EPS |
|
|
45,649 |
|
|
|
45,221 |
|
Common shares issuable upon exercise of dilutive
stock options, restricted stock awards and
performance awards |
|
|
63 |
|
|
|
448 |
|
|
|
|
Weighted average common shares outstanding and
common share equivalents used in diluted EPS |
|
|
45,712 |
|
|
|
45,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.70 |
|
|
$ |
0.98 |
|
Diluted |
|
|
1.69 |
|
|
|
0.97 |
|
|
Approximately 1,244,410 and 674,534 of potential common shares have
been excluded from
the computation of diluted earnings per share for the three month period ended September 30, 2009
and 2008, respectively, due to their anti-dilutive nature. The amounts excluded for the nine month
period ended September 30, 2009 and 2008, were 2,287,620 and 674,534, respectively.
Income taxes are recognized for the amount of taxes payable or
refundable for the current year
and deferred tax liabilities and assets for the future tax consequences of events that have been
recognized in our consolidated financial statements or tax returns. The effects of income taxes are
measured based on enacted tax laws and rates.
GLATFELTER
-6-
As of September 30, 2009 and December 31, 2008, we had
$28.7 million and $29.2 million,
respectively, of gross unrecognized tax benefits. As of September 30, 2009, if such benefits were
to be recognized, approximately $25.1 million would be recorded as a component of income tax
expense, thereby affecting our effective tax rate.
We, or one of our subsidiaries, file income tax returns with the
United States Internal
Revenue Service, as well as various state and foreign authorities. The following table summarizes
tax years that remain subject to examination by major jurisdiction:
|
|
|
|
|
|
|
|
|
|
|
Open Tax Year |
|
|
Examination in |
|
Not under |
Jurisdiction |
|
progress |
|
examination |
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
|
|
Federal |
|
|
N/A |
|
|
2007 and 2008 |
State |
|
|
2004 |
|
|
2004 2008 |
International |
|
|
|
|
|
|
|
|
Germany (1) |
|
|
2003 2006 |
|
|
2007 and 2008 |
France |
|
|
N/A |
|
|
2006 2008 |
United Kingdom |
|
|
N/A |
|
|
2006 2008 |
Philippines |
|
2005 2008 |
|
|
N/A |
|
|
|
|
(1) |
|
includes provincial or similar local jurisdictions, as applicable |
The amount of income taxes we pay is subject to ongoing audits by
federal, state and foreign
tax authorities, which often result in proposed assessments. Management performs a comprehensive
review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax
positions. Based on these reviews and the result of discussions and resolutions of matters with
certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as
necessary. However, future results may include favorable or unfavorable adjustments to our
estimated tax liabilities in the period the assessments are determined or resolved or as such
statutes are closed. Due to potential for resolution of federal, state and foreign examinations,
and the expiration of various statutes of limitation, it is reasonably possible our gross
unrecognized tax benefits balance may change within the next twelve months by as much as $7.6
million. Substantially all of this relates to tax positions taken in the U.S. and in Germany.
On July 14, 2009, we received notification that the IRS
examination of our federal returns
for the tax years 2004 through 2006 was completed. Accordingly, we recognized a benefit in the
third quarter of 2009 of $0.6 million, net, of previously unrecognized tax benefits related to
uncertain tax positions for these periods.
We recognize interest and penalties related to uncertain tax
positions as income tax expense.
Interest expense recognized in the third quarter of 2009 and first nine months of 2009 totaled $0.1
million and $0.7 million, respectively. Accrued interest was $3.4 million and $2.6 million as of
September 30, 2009 and December 31, 2008, respectively. We did not record any penalties associated
with uncertain tax positions during the third quarters of 2009 or 2008.
8. |
|
STOCK-BASED COMPENSATION |
On April 29, 2009, our shareholders approved the P. H.
Glatfelter Amended and Restated Long
Term Incentive Plan (the LTIP) to authorize, among other things, the issuance of up to 5,500,000
shares of Glatfelter common stock to eligible participants. The LTIP provides for the issuance of
restricted stock units, restricted stock awards, non-qualified stock options, performance shares,
incentive stock options and performance units.
Restricted Stock Units (RSU) Awards of RSU are
made under our LTIP. The RSUs vest based
solely on the passage of time on a graded scale over a three, four, and five-year period. The
following table summarizes RSU activity during the first nine months of 2009:
|
|
|
|
|
Units |
|
2009 |
|
|
Beginning balance |
|
|
486,988 |
|
Granted |
|
|
205,360 |
|
Forfeited |
|
|
(6,000 |
) |
Restriction lapsed/shares delivered |
|
|
(5,747 |
) |
|
|
|
|
Ending balance |
|
|
680,601 |
|
|
The following table sets forth RSU compensation expense for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
September 30 |
In thousands |
|
2009 |
|
2008 |
|
Three months ended |
|
$ |
448 |
|
|
$ |
470 |
|
Nine months ended |
|
|
1,175 |
|
|
|
1,324 |
|
|
GLATFELTER
-7-
Stock Only Stock Appreciation Rights (SOSARs) Under terms of
the SOSAR, the recipients
receive the right to a payment in the form of shares of common stock equal to the difference, if
any, in the fair market value of one share of common stock at the time of exercising the SOSAR and
the strike price. The SOSARs vest ratably over a three year period and have a term of ten years.
The following table sets forth information related to outstanding SOSARS.
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
Wtd Avg |
|
|
|
|
|
|
|
Exercise |
|
SOSARS |
|
Shares |
|
|
Price |
|
|
Outstanding at Jan. 1, |
|
|
718,810 |
|
|
$ |
14.63 |
|
Granted |
|
|
1,043,210 |
|
|
|
9.91 |
|
Exercised |
|
|
|
|
|
|
|
|
Canceled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at Sept 30, |
|
|
1,762,020 |
|
|
$ |
11.84 |
|
|
|
|
|
|
|
|
|
|
2009 SOSAR Grants |
|
|
|
|
|
|
|
|
Weighted average grant date fair value per share |
|
$ |
2.83 |
|
|
|
|
|
Aggregate grant date fair value (in thousands) |
|
$ |
2,957 |
|
|
|
|
|
Black-Scholes Assumptions |
|
|
|
|
|
|
|
|
Dividend yield |
|
|
3.63 |
% |
|
|
|
|
Risk free rate of return |
|
|
2.26 |
% |
|
|
|
|
Volatility |
|
|
40.59 |
% |
|
|
|
|
Expected life |
|
6 yrs |
|
|
|
|
|
|
The following table sets forth SOSAR compensation expense for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
September 30 |
In thousands |
|
2009 |
|
2008 |
|
Three months ended |
|
$ |
596 |
|
|
$ |
387 |
|
Nine months ended |
|
|
1,293 |
|
|
|
1,123 |
|
|
9. |
|
RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS |
The following table provides information with respect to the net
periodic costs of our
qualified and non-qualified pension plans and our post retirement medical benefit plans.
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
September 30 |
In thousands |
|
2009 |
|
2008 |
|
Pension Benefits |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
2,158 |
|
|
$ |
1,907 |
|
Interest cost |
|
|
5,861 |
|
|
|
5,897 |
|
Expected return on plan assets |
|
|
(9,884 |
) |
|
|
(12,445 |
) |
Amortization of prior service cost |
|
|
537 |
|
|
|
571 |
|
Amortization of unrecognized loss |
|
|
3,186 |
|
|
|
91 |
|
|
|
|
Net periodic benefit cost (income) |
|
$ |
1,858 |
|
|
$ |
(3,979 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
654 |
|
|
$ |
503 |
|
Interest cost |
|
|
878 |
|
|
|
825 |
|
Expected return on plan assets |
|
|
(122 |
) |
|
|
(216 |
) |
Amortization of prior service cost |
|
|
(308 |
) |
|
|
(337 |
) |
Amortization of unrecognized loss |
|
|
519 |
|
|
|
359 |
|
|
|
|
Net periodic benefit cost |
|
$ |
1,621 |
|
|
$ |
1,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
September 30 |
In thousands |
|
2009 |
|
2008 |
|
Pension Benefits |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
6,475 |
|
|
$ |
6,435 |
|
Interest cost |
|
|
17,582 |
|
|
|
17,646 |
|
Expected return on plan assets |
|
|
(29,663 |
) |
|
|
(38,077 |
) |
Amortization of prior service cost |
|
|
1,610 |
|
|
|
1,768 |
|
Amortization of unrecognized loss |
|
|
9,559 |
|
|
|
284 |
|
|
|
|
Net periodic benefit cost (income) |
|
$ |
5,563 |
|
|
$ |
(11,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
1,963 |
|
|
$ |
1,564 |
|
Interest cost |
|
|
2,634 |
|
|
|
2,401 |
|
Expected return on plan assets |
|
|
(365 |
) |
|
|
(633 |
) |
Amortization of prior service cost |
|
|
(925 |
) |
|
|
(933 |
) |
Amortization of unrecognized loss |
|
|
1,556 |
|
|
|
981 |
|
|
|
|
Net periodic benefit cost |
|
$ |
4,863 |
|
|
$ |
3,380 |
|
|
GLATFELTER
-8-
|
|
|
|
|
|
|
|
|
|
|
Sept. 30, |
|
Dec. 31, |
In millions |
|
2009 |
|
2008 |
|
Pension Plan Assets |
|
|
|
|
|
|
|
|
Fair value at end of period |
|
$ |
472.0 |
|
|
$ |
400.6 |
|
|
The fair value of the plans assets declined approximately 29%
during 2008. As a result,
during 2009 we expect to recognize net pension expense totaling approximately $7.3 million, on a
pre-tax basis. As of December 31, 2008, approximately 63% of the pension plan assets were invested
in publicly-traded equity securities and the balance was comprised of cash and fixed rate debt
instruments.
As of December 31, 2008, our pension plans were overfunded by
$14.3 million. We will not be
required to make contributions to our qualified pension plans during 2009.
The following table sets forth comprehensive income and its
components:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
September 30 |
In thousands |
|
2009 |
|
2008 |
|
Net income |
|
$ |
45,994 |
|
|
$ |
21,662 |
|
Foreign currency translation adjustments |
|
|
7,892 |
|
|
|
(29,510 |
) |
Amortization of unrecognized pension
liability, net of tax |
|
|
2,465 |
|
|
|
466 |
|
|
|
|
Comprehensive income |
|
$ |
56,351 |
|
|
$ |
(7,382 |
) |
|
|
|
|
|
Nine months ended |
|
|
September 30 |
In thousands |
|
2009 |
|
2008 |
|
Net income |
|
$ |
77,402 |
|
|
$ |
44,493 |
|
Foreign currency translation adjustment |
|
|
15,945 |
|
|
|
(14,669 |
) |
Amortization of unrecognized pension liability,
net of tax |
|
|
7,077 |
|
|
|
1,370 |
|
|
|
|
Comprehensive income |
|
$ |
100,424 |
|
|
$ |
31,194 |
|
|
Inventories, net of reserves, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Sept. 30, |
|
Dec. 31, |
In thousands |
|
2009 |
|
2008 |
|
Raw materials |
|
$ |
46,822 |
|
|
$ |
49,083 |
|
In-process and finished |
|
|
70,516 |
|
|
|
97,390 |
|
Supplies |
|
|
46,002 |
|
|
|
46,881 |
|
|
|
|
Total |
|
$ |
163,340 |
|
|
$ |
193,354 |
|
|
Long-term debt is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Sept. 30, |
|
Dec. 31, |
In thousands |
|
2009 |
|
2008 |
|
Revolving credit facility, due April 2011 |
|
$ |
5,892 |
|
|
$ |
6,724 |
|
Term Loan, due April 2011 |
|
|
18,000 |
|
|
|
30,000 |
|
Term Loan, due January 2013 |
|
|
36,695 |
|
|
|
36,695 |
|
Note payable, due March 2013 |
|
|
|
|
|
|
34,000 |
|
71/8% Notes, due May 2016 |
|
|
200,000 |
|
|
|
200,000 |
|
|
|
|
Total long-term debt |
|
|
260,587 |
|
|
|
307,419 |
|
Less current portion |
|
|
(13,759 |
) |
|
|
(13,759 |
) |
|
|
|
Long-term debt, net of current portion |
|
$ |
246,828 |
|
|
$ |
293,660 |
|
|
On April 3, 2006, we, along with certain of our subsidiaries as
borrowers and certain of
our subsidiaries as guarantors, entered into a credit agreement with certain financial
institutions. Pursuant to the credit agreement, we may borrow, repay and reborrow revolving credit
loans in an aggregate principal amount not to exceed $200 million outstanding at any time. All
borrowings under our credit facility are unsecured. The revolving credit commitment expires on
April 2, 2011.
In addition, on April 3, 2006, pursuant to the credit
agreement, we received a term loan in
the principal amount of $100 million. Quarterly repayments of principal outstanding under the term
loan began on March 31, 2007 with the final principal payment due on April 2, 2011. In addition, if
certain prepayment events occur, such as the incurrence of additional indebtedness in excess of
$30.0 million in the aggregate, or the issuance of additional equity; we must repay a specified
portion of the term loan within five days of the prepayment event.
We have the right to prepay the term loan and revolving credit
borrowings in whole or in part
without premium or penalty, subject to timing conditions related to the interest rate option
chosen.
Borrowings under the credit agreement bear interest, at our option,
at either (a) the banks
base rate described in the credit agreement as the greater of the prime rate or the federal funds
rate plus 50 basis points, or (b) the EURO rate based generally on the London Interbank Offer Rate,
plus an applicable margin that varies from 67.5 basis points to 137.5 basis points according to our
corporate credit rating determined by S&P and Moodys.
The credit agreement contains a number of customary covenants for
financings of this type
that, among other things, restrict our ability to dispose of or create liens on assets, incur
additional indebtedness, repay other indebtedness, create liens on assets, make acquisitions and
engage in mergers or consolidations. We are also required to comply with specified financial tests
and
GLATFELTER
-9-
ratios, each as defined in the credit agreement, including a consolidated minimum net worth test
and
a maximum debt to earnings before interest, taxes,
depreciation and amortization (EBITDA) ratio. A breach of these requirements, of which we were
not aware of any at September 30, 2009, would give rise to certain remedies under the credit
agreement as amended, among which are the termination of the agreement and accelerated repayment of
the outstanding borrowings plus accrued and unpaid interest under the credit facility.
On April 28, 2006, we completed an offering of
$200.0 million aggregate principal amount of
our 71/8% Senior Notes due 2016. Net proceeds from this offering totaled approximately $196.4
million, after deducting the commissions and other fees and expenses relating to the offering. The
proceeds were primarily used to redeem $150.0 million aggregate principal amount of our then
outstanding 67/8% notes due July 2007, plus the payment of applicable redemption premium and accrued
interest.
Interest on these Senior Notes accrues at the rate of 71/8% per annum
and is payable
semiannually in arrears on May 1 and November 1.
Prior to May 1, 2011, we may redeem all, but not less than all,
of the notes at a redemption
price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, plus
a make-whole premium. On or after May 1, 2011, we may redeem some or all of the notes at
specified redemption prices.
The 71/8% Senior Note agreement contains a cross-default
clause that provides if there were to
be an event of default under the credit agreement discussed earlier, we would also be in default
under the 71/8% Senior Notes.
In November 2007, we sold timberlands and as consideration
received a $43.2 million, 20-year
interest bearing note receivable from the timberland buyer (the Glawson Note). In January 2008,
we monetized the Glawson Note. In this transaction, we entered into a new $36.7 million term loan
agreement (the 2008 Term Loan) with a financial institution. The 2008 Term Loan matures in
January 2013 and bears interest at a six-month reserve adjusted LIBOR plus a margin rate of 1.20%
per annum. This is secured by, among other assets, the Glawson Note together with a letter of
credit issued in our favor by Royal Bank of Scotland, plc. backing the collectability of the
Glawson Note.
The Glawson Note is recorded in the accompanying condensed
consolidated balance sheets under
the caption Other long-term assets.
On March 21, 2003, we sold timberlands and received as
consideration a $37.9 million 10-year
interest bearing note receivable from the timberland buyer Sustainable Conservation, Inc. (the
Sustainable Note). We pledged this note as collateral under a $34.0 million promissory note
payable to a financial institution (the Note Payable). The Note Payable, as amended was scheduled
to mature in March 2013 and was secured by a letter of credit issued in our favor by SunTrust Bank
backing the collectability of the Sustainable Note.
Under terms of each of the above transactions, minimum credit
ratings must be maintained by
the respective financial institution issuing the letters of credit. If, after 60 days from the date
such credit rating falls below the specified minimum, an event of default is deemed to have
occurred under the respective debt instrument owed by us to the financial institution unless
actions are taken to cure such default. Potential remedial actions include: (i) amending the terms
of the applicable debt instrument; (ii) a replacement of the letter of credit with an appropriately
rated institution; or (iii) repaying the Note Payable.
On April 23, 2009, the credit rating of the financial
institution that issued the letter of
credit behind the Sustainable Note fell below the required minimum level. To avoid the occurrence
of an event of default associated with the credit downgrade of SunTrust, on June 10, 2009, we,
Sustainable Conservation and SunTrust agreed to collapse the transaction, the effect of which was:
i) the acceleration of the maturity date of the Sustainable Note to June 10, 2009; (ii)
satisfaction in full of the $37.9 million Sustainable Note owed to us; and iii) the satisfaction in
full of the $34 million indebtedness owed by us to SunTrust under the Term Loan Agreement. As a
result, we received net proceeds of approximately $3.5 million, after transaction costs.
P. H. Glatfelter Company guarantees debt obligations of all its
subsidiaries. All such
obligations are recorded in these consolidated financial statements.
As of September 30, 2009 and December 31, 2008, we had
$5.8 million and $12.1 million,
respectively, of letters of credit issued to us by certain financial institutions. The letters of
credit outstanding as of September 30, 2009, provide financial assurances primarily for the benefit
of certain state workers compensation insurance agencies in conjunction with our self-insurance
program. We bear the credit risk on this amount to the extent that we do not comply with the
provisions of certain agreements. No amounts are outstanding under the letters of credit.
GLATFELTER
-10-
13. |
|
ASSET RETIREMENT OBLIGATION |
During 2008, we recorded $11.5 million, net present value, of
asset retirement obligations
related to the legal requirement to close several lagoons at our Spring Grove, PA facility.
Historically, the lagoons were used to dispose of residual waste material. Closure of the lagoons,
which is expected to occur over the next eight years, will be accomplished by filling the lagoons
and installing a non-permeable liner which will be covered with soil to construct the required cap
over the lagoons. The amount referred to above was accrued with a corresponding increase in the
carrying value of the property, equipment and timberlands caption on the condensed consolidated
balance sheet. The amount capitalized is being depreciated as a charge to operations on the
straight-line basis in relation to the expected closure period. The amount accrued represented the
discounted present value of the expected cash flows to be incurred during the closure period. The
present value of the discounted cash flows is being accreted as a charge to earnings on the
effective interest method. Following is a summary of activity recorded during the first nine months
of 2009:
|
|
|
|
|
In thousands |
|
Liability |
|
|
Balance at December 31, 2008 |
|
$ |
11,606 |
|
Accretion |
|
|
472 |
|
Payments |
|
|
(1,697 |
) |
|
|
|
|
Balance at September 30, 2009 |
|
$ |
10,381 |
|
|
Of the total liability at September 30, 2009, $1.7 million
is recorded in the
accompanying condensed consolidated balance sheet, under the caption Other current liabilities
and $8.7 million is recorded under the caption Other long-term liabilities.
14. |
|
FAIR VALUE OF FINANCIAL INSTRUMENTS |
The amounts reported on the condensed consolidated balance sheets
for cash and cash
equivalents, accounts receivable and short-term debt approximate fair value. The following table
sets forth carrying value and fair value of long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
Carrying |
|
Fair |
|
|
Carrying |
|
Fair |
In thousands |
|
Value |
|
Value |
|
|
Value |
|
Value |
|
|
|
|
|
|
Fixed-rate Bonds |
|
$ |
200,000 |
|
|
$ |
187,750 |
|
|
|
$ |
200,000 |
|
|
$ |
167,727 |
|
Fixed rate note
payable |
|
|
|
|
|
|
|
|
|
|
|
34,000 |
|
|
|
36,164 |
|
Variable rate debt |
|
|
60,587 |
|
|
|
61,349 |
|
|
|
|
73,419 |
|
|
|
75,202 |
|
|
|
|
|
|
|
Total |
|
$ |
260,587 |
|
|
$ |
249,099 |
|
|
|
$ |
307,419 |
|
|
$ |
279,093 |
|
|
|
|
|
We have $200.0 million of 71/8% fixed rate debt that is publicly
registered, but is thinly
traded, and therefore, market prices are not readily available. Accordingly, the values set forth
above were derived from independent pricing services algorithm based on debt instruments with
similar characteristics. The fair value of the
remaining debt instruments was estimated using
discounted cash flow models based on interest rates obtained from readily available, independent
sources.
15. |
|
COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS |
Fox River Neenah, Wisconsin
Background We have significant uncertainties
associated with environmental claims arising out
of the presence of polychlorinated biphenyls (PCBs) in sediments in the lower Fox River and in
the Bay of Green Bay Wisconsin (Site). As part of the 1979 acquisition of the Bergstrom Paper
Company we acquired a facility located at the Site (the Neenah Facility). In part, the Neenah
Facility used wastepaper as a source of fiber. At no time did the Neenah Facility utilize PCBs in
the pulp and paper making process, but discharges to the lower Fox River from the Neenah Facility
which may have contained PCBs from wastepaper may have occurred from 1954 to the late 1970s. Any
PCBs that our Neenah Facility discharged into the lower Fox River resulted from the presence of
PCBs in NCR®-brand carbonless copy paper in the wastepaper that was recycled at the Neenah
Facility. We closed the Neenah Facility in June 2006.
The United States, the State of Wisconsin and various state and
federal governmental agencies
(collectively, the Governments), as well as private parties, have found PCBs in sediments on the
bed of the Fox River, apparently from a number of sources at municipal and industrial facilities
along the upstream and downstream portions of the Site. The Governments have identified
manufacturing and recycling of NCR®-brand carbonless copy paper as the principal source of
that
contamination.
The United States Environmental Protection Agency (EPA)
has divided the lower Fox River and
the Bay of Green Bay site into five operable units numbered from the most upstream (OU1) to the
most downstream (OU5). OU1 is the reach from primarily Lake Winnebago to the dam at Appleton, and
is comprised of Little Lake Butte des Morts. Our Neenah Facility discharged its wastewater into
OU1. OU2 extends from the dam at Appleton to the dam at Little Rapids, OU3 from the dam at Little
Rapids to the dam at De Pere, OU4 from the dam at De Pere to the mouth of the river, and OU5 from
the mouth into the lower portion of Green Bay. The river extends 39 miles from the upstream end of
OU1 to the downstream end of OU4.
Our liabilities, if any, for this contamination primarily arise
under the federal
Comprehensive Environmental, Response, Compensation and Liability Act (CERCLA or Superfund).
The Governments have sought to recover response actions or response
GLATFELTER
-11-
costs, which are the costs of studying and cleaning up contamination, from various
responsible parties. In addition, various natural resource trustee agencies of the United
States, the States of Wisconsin and Michigan, and several Indian Tribes (the Natural Resources
Trustees or Trustees) have sought to recover natural resource damages (NRDs), including
natural resource damage assessment costs. Parties that have incurred response costs or NRDs either
voluntarily or in response to the governments and Trustees demands may have an opportunity to
seek contribution or other recovery of some or all of those costs from other parties who are
jointly and severally responsible under Superfund for those costs. Therefore, as we incur costs, we
also acquire a claim against other parties who may not have paid their equitable share of those
costs. As others incur costs, they acquire a claim against us to the extent that they claim that we
have not paid our equitable share of the total. Any party that resolves its liability to the United
States or a state in a judicially or administratively approved settlement agreement obtains
protection from contribution claims for matters addressed in the settlement.
For these reasons, all of the parties who are potentially
responsible (PRPs) under CERCLA
for response costs or NRDs have exposure to liability for: (a) the cost of past response actions
taken by anyone else, (b) the cost of past NRD payments or restoration projects incurred by anyone
else, (c) the cost of response actions to be taken in the future, and (d) NRDs. All of this
exposure is subject to substantial defenses, including, for example, that the PRP is not liable or
not jointly and severally liable for any particular cost or damage, that the cost or damage is not
recoverable under CERCLA or any other law, or that the recovery is barred by the passage of time.
In addition, a party that has incurred or committed to incur costs or has paid NRDs may be able to
claim credit for that cost or payment in any equitable allocation of response costs or NRDs in any
action for reallocation of costs.
Cleanup Decisions. Our liability exposure depends importantly
on the decisions made by EPA and
the Wisconsin Department of Natural Resources (WDNR) as to how the Site will be cleaned up, and
consequently the costs and timing of those response actions. The nature of the response actions has
been highly controversial. EPA issued a record of decision (ROD) selecting response actions for
OU1 and OU2 in December 2002. EPA issued a separate ROD selecting response actions for OU3, OU4,
and OU5 in March 2004.
As the result of continuing discussions with parties other than us,
as well as our experience
in OU1 (discussed below), EPA amended the ROD for OU2-5 in June 2007 to rely less on dredging and
more on capping and covering of sediments containing PCBs. The governments
project that these
methods will allow certain costs to be lower for this portion of the cleanup. Likewise, in June
2008, EPA also amended the ROD for OU1.
NRD Assessment. The Natural Resources Trustees have engaged
in work to assess NRDs at and
arising from the Site. However, they have not completed a required NRD Assessment under the
pertinent regulations. The Trustees estimate of NRDs ranges from $176 million to $333 million,
some of which has already been satisfied. With specific respect to NRD claims, we and others
contended that the Trustees claims are barred by the applicable 3 year statute of limitations.
Past Costs Demand. By letter dated January 15, 2009, EPA
demanded that we and six other
parties reimburse EPA for approximately $17.6 million in costs that EPA claims it incurred as
necessary costs of response not subject to any other agreement in this matter. The supporting
documentation provided by EPA has not yet allowed us fully to evaluate this demand, and,
accordingly we are unable to reasonably estimate our potential liability.
Work Under Agreements, Orders, and Decrees. As we mention
above, our exposure to liability
depends on the amount of work done, costs incurred, and damages paid both by us and by others. The
procedural context of the work done, costs incurred, and damages paid also matter.
Since 1991, the Governments and various groups of potentially
responsible parties, including
us, have entered into a series of agreements, orders, and decrees under which we and others have
performed work, incurred costs, or paid damages in connection with the Site. As a result, some
parties have contributed or performed substantial work at the Site and at least one party, Fort
Howard Corporation (whose successor is either the Fort James Operating Company or Georgia Pacific
Corporation) has resolved its NRD liability at the Site.
Notably, in April 2004, the United States District Court for
the Eastern District of Wisconsin
entered a consent decree (OU1 Consent Decree) in United States v. P.H. Glatfelter Co., No.
2:03-cv-949, under which we and WTM I Corp. have been implementing the remedy in OU1, dividing
costs evenly in addition to a $7 million contribution from Menasha Corp. and a $10 million
contribution that the United States contributed from a separate settlement in United States v.
Appleton Papers Inc., No. 2:01-cv-816, obligating NCR and Appleton Papers to contribute to certain
NRD projects. In June 2008, the parties entered into an amendment to the OU1 Consent Decree
(Amended OU1 Consent Decree). That amendment allowed for implementation of the amended remedy for
OU1 and committed us and WTM I to
GLATFELTER
-12-
implement that remedy without a cost limitation on that commitment. We and WTM I have
substantially completed the amended remedy for OU1. We anticipate that the remaining tasks, other
than monitoring and maintenance, will be completed by the second quarter of 2010.
Further, in November 2007, EPA issued an administrative order
for remedial action (UAO) to
Appleton Papers Inc., CBC Coating, Inc. (formerly known as Riverside Paper Corporation),
Georgia-Pacific Consumer Products, L.P. (formerly known as Fort James Operating Company), Menasha
Corporation, NCR Corporation, us, U.S. Paper Mills Corp., and WTM I Company directing those
respondents to implement the amended remedy in OU25. Shortly following issuance of the UAO,
Appleton Papers Inc. and NCR Corp. commenced litigation against us and others, as described below.
Accordingly, we have no vehicle for complying with the UAOs overall requirements other than
answering a judgment in the litigation, and we have so informed EPA. However, in February 2009, the
EPA sent a demand to each of the respondents on the UAO other than WTM I demanding payment of the
governments oversight costs under the UAO for the period from November 2007 through August 2008.
In February 2009, we notified the EPA that we believed that its demand could prove distracting to
litigation commenced by Appleton Papers and NCR against the other UAO respondents. In order to
remove this distraction, and in the spirit of cooperation, we stated that we would satisfy the
EPAs demand, an amount which was insignificant, in full. We have paid this amount.
Cost estimates. Estimates of the Site remediation change over
time as we, or others, gain
additional data and experience at the Site. In addition, disagreement exists over the likely costs
for some of this work. The Governments estimate that the total cost of implementing the amended
remedy in OU1 will be approximately $102 million. Because we have completed a significant amount of
work in this portion of the river, we believe the costs of completing the remedial actions
specified in the amended ROD can be completed for this amount. The United States and the State of
Wisconsin recently prepared an estimate of the total liabilities associated with this Site for
purposes of justifying a settlement with certain parties whose shares of liability the United
States and the State believe to be de minimis. That settlement is awaiting approval by the
federal court in Green Bay in a case captioned United States v. George A. Whiting Paper Co., No.
09-cv-00692. In their brief in support of their motion to enter the de minimis consent decree, the
Governments estimate the total past costs incurred at the Site including the OU1 project to be
$200 million. In addition, they estimate the cost of implementing the remedy set forth in the
amended ROD for OU2-5 (the
downstream portions of the Site) to total between $600 million and $700
million exclusive of amounts already spent. For purposes of the settlement, the Governments took
the high end of that range and applied a 50% contingency to arrive at a cost estimate for future
cleanup work of $1.05 billion. Based upon independent estimates commissioned by various potentially
responsible parties, we have no reason to disagree with the Governments assertion that future
costs to implement the amended remedy for OU25 are likely to fall between $700 million and $1.05
billion.
NRDs. The Trustees claim that we are jointly and severally
responsible for NRDs with a value
between $176 million and $333 million. In their recently filed brief, they further claim that this
figure should be inflated to 2009 dollars and then certain unreimbursed past assessment costs
should be added, so that the range of their claim would be $287 million to $423 million. We deny
(a) liability for most of these NRDs, (b) that if anyone is liable, that we are jointly and
severally liable for the full amount; and (c) that the Trustees can pursue this claim at this late
date as the limitations period for NRD claims is three years from discovery.
Allocation. Since 1991, various potentially responsible
parties have, without success,
attempted to agree on a binding, final, allocation of costs and damages among themselves. All costs
that they have incurred to date have been incurred individually, or under interim, nonbinding
allocations. However, the consent decree in United States v. P. H. Glatfelter Co. affords us and
WTM I contribution protection for claims seeking to reallocate costs of implementing the OU1
remedy, and Fort James Operating Co. (now Georgia-Pacific) has certain rights under its consent
decree. Otherwise, the parties have not litigated their internal allocation with us.
NCR and Appleton Papers Inc. have commenced litigation in the United
States District Court for
the Eastern District of Wisconsin captioned Appleton Papers Inc. v. George A. Whiting Paper Co.,
No. 2:08-cv-16, seeking to reallocate costs and damages allegedly incurred or paid or to be
incurred or paid by NCR or Appleton Papers (the Whiting Litigation). They have to date joined a
number of defendants, dismissed some of those, filed a parallel action, and consolidated the two
cases. At present, the case involves allocation claims among the two plaintiffs and 28 defendants:
us, George A. Whiting Paper Co., Menasha Corporation, Green Bay Packaging Inc., International Paper
Company, Leicht Transfer & Storage Company, Neenah Foundry Company, Newpage Wisconsin System Inc.,
The Procter & Gamble Paper Products Company, Wisconsin Public Service Corp., the Cities of
Appleton, De Pere, and Green Bay, Brown County, Green Bay Metropolitan Sewerage District, Heart of
the Valley Metropolitan Sewerage
GLATFELTER
-13-
District, Neenah-Menasha Sewerage Commission, WTM I Company, U.S. Paper Mills Corporation,
Georgia-Pacific Consumer Products LP, Georgia-Pacific LLC, Fort James Operating Company, CBC
Coating Company, Inc., Fort James Corporation, Kimberly-Clark Corporation, LaFarge North America
Inc., Union Pacific Railroad Company, and the United States Army Corps of Engineers. As the result
of certain third-party claims, federal agencies other than the Corps of Engineers are also involved
in this allocation. That litigation may be expected to result in an allocation of responsibility,
at least as among these parties, or a determination that some or all of them are not jointly and
severally liable for some costs.
As noted above, the United States and the State of Wisconsin have
lodged a proposed de minimis
party consent decree (Consent Decree) with the court asking that the Court approve a settlement
with eleven defendants to resolve their liability for this site. On October 7, 2009, the United
States and the State of Wisconsin formally requested that the Court approve the Consent Decree. The
eleven settling defendants are: George A. Whiting Paper Co.; Green Bay Metropolitan Sewerage
District; Green Bay Packaging, Inc.; Heart of the Valley Metropolitan Sewerage District;
International Paper Co.; LaFarge North America Inc.; Leicht Transfer and Storage Co.; Neenah
Foundry Co.; Procter & Gamble Paper Products Co.; Union Pacific Railroad Co.; and Wisconsin Public
Service Corp. (collectively, the Eleven Settling Defendants). The Consent Decree reflects the
conclusion of the United States and the State of Wisconsin that each of the Eleven Settling
Defendants qualifies for treatment as a de minimis party under CERCLA. The Consent Decree requires
the Settling Defendants to make a collective payment of $1,875,000. If approved by the Court, the
Consent Decree would remove these parties from the litigation. In addition, the Governments on
September 25, 2009, lodged a separate consent decree in the same case that would, if entered,
resolve the liabilities of the City of DePere. Under that consent decree, the City of DePere would
pay $210,000 to resolve its liability at the Site.
The court has entered a case management order segmenting the Whiting
Litigation for discovery
and trial. The first phase of the Whiting Litigation, addressing a single set of issues, is
currently scheduled for trial beginning in January 2010. NCR and Appleton Papers as well as
multiple defendants have filed motions for summary judgment with the Court on various issues
implicated in the first phase of the trial. It is uncertain when and how the Court will rule on
these motions. Resolution of the limited issues prescribed by the Court in the first phase of the
Whiting Litigation could adjudicate the entire case or it may resolve those issues sufficiently
that the parties can then settle their remaining disputes.
However, there can be no assurance that
the first phase of the Whiting Litigation will result, directly or indirectly, in a judgment or
settlement disposing of all claims among the parties.
We contend that we are not jointly and severally liable for costs or
damages arising from the
presence of PCBs downstream of OU1. In addition, we contend that NCR or other sources of NCR®-brand
carbonless copy paper that our Neenah Mill recycled bear most of the responsibility for costs and
damages arising from the presence of PCBs in OU1. Other parties disagree.
Reserves for the Fox River Site. As of September 30,
2009, our reserve for our claimed
liability at the Fox River, including our remediation and ongoing monitoring obligations at OU1,
our claimed liability for the remediation of OU2-5, our claimed liability for NRDs associated with
PCB contamination at the Site and all pending, threatened or asserted and unasserted claims against
us relating to PCB contamination at the Site totaled $17.8 million. No additional amounts were
accrued during the first nine months of 2009 and 2008. Of our total reserve for the Fox River, $1.0
million is recorded in the accompanying consolidated balance sheets under the caption
Environmental liabilities and the remaining $16.8 million is recorded under the caption Other
long term liabilities.
Under the OU1 Consent Decree which was signed in 2004, we
contributed $27.0 million to past
and future costs and NRDs. We later contributed $6.0 million under an agreed supplement to the OU1
Consent Decree and have since contributed an additional $9.5 million under the Amended Consent
Decree. This amount includes $6.5 million contributed in January 2009. WTM I has contributed
parallel amounts. These funds are placed into an escrow account from which we and WTM I pay for
work on the project. As required by the Amended Consent Decree, in a quarterly report submitted to
EPA in November 2008, we and WTM I concluded that the amounts in the escrow account would be
sufficient to pay for the estimated cost of the work at OU1, including operation, maintenance, and
other post-construction expenses. However, there can be no assurance that these amounts will in
fact suffice. WTM I has filed a bankruptcy petition in the Bankruptcy Court in Richmond. There can
be no assurance should additional amounts be required to complete the project that WTM I will be
able to fulfill its obligation to pay half the additional cost.
We believe that we have strong defenses to liability for remediation
of OU2-5 including the
existence of ample data that indicates that PCBs did not leave OU1 in concentrations that could
have caused or contributed to the need for cleanup in OU2-5. Others, including the EPA and
GLATFELTER
-14-
other PRPs, disagree with us and, as a result, the EPA has issued a UAO to us and to others to
perform the OU2-5 work. NCR and Appleton Papers have commenced the Whiting Litigation and have
joined us and others as defendants. Additional litigation associated with the remediation of the
Site is likely. As illustrated by the Whiting Litigation, we believe that there are additional
potentially responsible parties other than the PRPs who were named in the UAO or who have been
joined in the Whiting Litigation, including the owners of public wastewater treatment facilities
who discharged PCB-contaminated wastewater to the Fox River and entities providing PCB-containing
wastepaper to each of the recycling mills.
Even if we are not successful in establishing that we are not liable
for the remediation of
OU2-5, we do not believe that we would be allocated a significant percentage share of liability in
any equitable allocation of the remediation costs and other potential damages associated with
OU25. The accompanying consolidated financial statements do not include reserves for defense costs
for the Whiting Litigation or any future defense costs related to our involvement at the Fox River
which could be significant.
In setting our reserve for the Fox River, we have assessed our legal
defenses, including our
defenses to the allegations made in the Whiting Litigation, and assumed that we will not bear the
entire cost of remediation and damages to the exclusion of other known PRPs at the Site who are
also potentially jointly and severally liable. The existence and ability of other PRPs to
participate has also been taken into account in setting our reserve, and is generally based on our
evaluation of recent publicly available financial information on each PRP, and any known insurance,
indemnity or cost sharing agreements between PRPs and third parties. In addition, our assessment is
based upon the magnitude, nature, location and circumstances associated with the various discharges
of PCBs to the river and the relationship of those discharges to identified contamination. We will
continue to evaluate our exposure and the level of our reserves, including, but not limited to, our
potential share of the costs and NRDs, if any, associated with the Fox River site.
Other than with respect to the Amended OU1 Consent Decree, the
amount and timing of future
expenditures for environmental compliance, cleanup, remediation and personal injury, NRDs and
property damage liabilities cannot be ascertained with any certainty due to, among other things,
the unknown extent and nature of any contamination, the response actions that may ultimately be
required, the availability of remediation equipment, and landfill space, and the number and
financial resources of any other PRPs.
Other Information The Wisconsin DNR and FWS have each
published studies, the latter in draft
form, estimating the amount of PCBs discharged by each identified PRP to the lower Fox River and
the Bay of Green Bay. These reports estimate the Neenah Facilitys share of the volumetric
discharge to be as high as 27%. We do not believe the volumetric estimates used in these studies
are accurate because (a) the studies themselves disclose that they are not accurate and (b) the
volumetric estimates contained in the studies are based on assumptions that are unsupported by
existing data on the Site. We believe that our volumetric contribution is significantly lower than
the estimates set forth in these studies. Further, we do not believe that a volumetric allocation
would constitute an equitable allocation of the potential liability for the contamination. Other
factors, such as the location of contamination, the location of discharge, and a partys role in
causing discharge, must be considered in order for the allocation to be equitable.
We previously entered into interim cost-sharing agreements with four
of the other PRPs, which
provided for those PRPs to share certain costs relating to scientific studies of PCBs discharged at
the Site (Interim Cost Sharing Agreements). These interim cost-sharing agreements do not
establish the final allocation of remediation costs incurred at the Site. Based upon our evaluation
of the volume, nature and location of the various discharges of PCBs at the Site and the
relationship of those discharges to identified contamination, we believe our allocable share of
liability at the Site is less than our share of costs under the Interim Cost Sharing Agreements.
While the Amended OU1 Consent Decree provides a negotiated framework
for resolving both our
and WTM Is liability for the remediation of OU1, it does not resolve our exposure at the Site. The
OU1 Consent Decree does not address response costs necessary to remediate the remainder of the Site
and only addresses NRDs and claims for reimbursement of government expenses to a limited extent.
Because CERCLA imposes strict, and often joint and several liability, uncertainty persists
regarding our exposure with respect to the remainder of the Fox River site. In addition, as
mentioned previously, EPA has issued a UAO to us and others calling for further work in OU2-5, and
Appleton Papers and NCR have commenced the Whiting Litigation that may become more complicated and
involve additional parties. We cannot predict the outcome of the Whiting Litigation or any other
litigation or regulatory actions related to this matter.
Range of Reasonably Possible Outcomes Our analysis of the
range of reasonably possible
outcomes is derived from all available information, including but not limited to official documents
such as RODs, discussions
GLATFELTER
-15-
with the United States and other PRPs, as well as legal counsel and engineering consultants.
Based on our analysis of the current RODs and cost estimates for work to be performed at the Site,
we believe that it is reasonably possible that our costs associated with the Fox River matter may
exceed our cost estimates and the aggregate amounts accrued for the Fox River matter by amounts
that are insignificant or that could range up to $265 million over a period that is currently
undeterminable but that could range beyond 15 years. We believe that the likelihood of an outcome
in the upper end of the monetary range is significantly less than other possible outcomes within
the range and that the possibility of an outcome in excess of the upper end of the monetary range
is remote.
All remedial work in OU-1 has been completed and we and WTM I are in
the process of
decommissioning and performing the restoration of the staging area from which the remediation
activity occurred and completing all required reports for the project. We believe that these
activities can be completed with the funds that remain in the OU1 Escrow Account.
Summary Our current assessment is that we will be able to manage this environmental matter
without
a long-term, material adverse impact on the Company. This matter could, however, at any particular
time or for any particular year or years, have a material adverse effect on our consolidated
financial position, liquidity and/or results of operations or could result in a default under our
loan covenants. Moreover, there can be no assurance that our reserves will be adequate to provide
for future obligations related to this matter, that our share of costs and/or damages will not
exceed our available resources, or that such obligations will not have a long-term, material
adverse effect on our consolidated financial position, liquidity or results of operations. If we
are not successful in managing the completion of the remaining remedial work at OU1 and/or should
the United States seek to enforce the UAO for OU2-5 against us which requires us either to perform
directly or to contribute significant amounts towards the performance of that work, those
developments could have a material adverse effect on our consolidated financial position, liquidity
and results of operations and might result in a default under our loan covenants.
GLATFELTER
-16-
The following table sets forth financial and other information by
business unit for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Unit Performance |
|
For the three months ended September 30 |
Dollars in thousands |
|
Specialty Papers |
|
Composite Fibers |
|
Other and Unallocated |
|
Total |
|
|
2009 |
|
|
2008 |
|
2009 |
|
|
2008 |
|
2009 |
|
|
2008 |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
211,635 |
|
|
|
$ |
226,028 |
|
|
$ |
100,723 |
|
|
|
$ |
113,794 |
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
312,358 |
|
|
|
$ |
339,822 |
|
Energy sales, net |
|
|
2,131 |
|
|
|
|
2,885 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
2,132 |
|
|
|
|
2,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
213,766 |
|
|
|
|
228,913 |
|
|
|
100,723 |
|
|
|
|
113,794 |
|
|
|
1 |
|
|
|
|
|
|
|
|
314,490 |
|
|
|
|
342,707 |
|
Cost of products sold |
|
|
178,060 |
|
|
|
|
192,110 |
|
|
|
85,746 |
|
|
|
|
96,114 |
|
|
|
(31,781 |
) |
|
|
|
(2,689 |
) |
|
|
232,025 |
|
|
|
|
285,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
35,706 |
|
|
|
|
36,803 |
|
|
|
14,977 |
|
|
|
|
17,680 |
|
|
|
31,782 |
|
|
|
|
2,689 |
|
|
|
82,465 |
|
|
|
|
57,172 |
|
SG&A |
|
|
14,852 |
|
|
|
|
13,961 |
|
|
|
9,176 |
|
|
|
|
9,329 |
|
|
|
5,275 |
|
|
|
|
1,512 |
|
|
|
29,303 |
|
|
|
|
24,802 |
|
Gains on dispositions of plant,
equipment and timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
(3,975 |
) |
|
|
(9 |
) |
|
|
|
(3,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
20,854 |
|
|
|
|
22,842 |
|
|
|
5,801 |
|
|
|
|
8,351 |
|
|
|
26,516 |
|
|
|
|
5,152 |
|
|
|
53,171 |
|
|
|
|
36,345 |
|
Nonoperating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,006 |
) |
|
|
|
(4,338 |
) |
|
|
(4,006 |
) |
|
|
|
(4,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
20,854 |
|
|
|
$ |
22,842 |
|
|
$ |
5,801 |
|
|
|
$ |
8,351 |
|
|
$ |
22,510 |
|
|
|
$ |
814 |
|
|
$ |
49,165 |
|
|
|
$ |
32,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tons sold |
|
|
199,860 |
|
|
|
|
200,072 |
|
|
|
20,181 |
|
|
|
|
21,530 |
|
|
|
|
|
|
|
|
|
|
|
|
220,041 |
|
|
|
|
221,602 |
|
Depreciation, depletion and amortization |
|
$ |
10,623 |
|
|
|
$ |
9,007 |
|
|
$ |
6,150 |
|
|
|
$ |
6,700 |
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
16,773 |
|
|
|
$ |
15,707 |
|
Capital expenditures |
|
|
2,077 |
|
|
|
|
4,156 |
|
|
|
3,152 |
|
|
|
|
11,275 |
|
|
|
|
|
|
|
|
|
|
|
|
5,229 |
|
|
|
|
15,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Unit Performance |
|
For the nine months ended September 30 |
Dollars in thousands |
|
Specialty Papers |
|
Composite Fibers |
|
Other and Unallocated |
|
Total |
|
|
2009 |
|
|
2008 |
|
2009 |
|
|
2008 |
|
2009 |
|
|
2008 |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
595,606 |
|
|
|
$ |
634,270 |
|
|
$ |
287,283 |
|
|
|
$ |
331,274 |
|
|
$ |
|
|
|
|
$ |
1 |
|
|
$ |
882,889 |
|
|
|
$ |
965,545 |
|
Energy sales, net |
|
|
6,193 |
|
|
|
|
7,612 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
6,194 |
|
|
|
|
7,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
601,799 |
|
|
|
|
641,882 |
|
|
|
287,283 |
|
|
|
|
331,274 |
|
|
|
1 |
|
|
|
|
1 |
|
|
|
889,083 |
|
|
|
|
973,157 |
|
Cost of products sold |
|
|
528,207 |
|
|
|
|
566,334 |
|
|
|
246,122 |
|
|
|
|
280,972 |
|
|
|
(70,026 |
) |
|
|
|
(7,977 |
) |
|
|
704,303 |
|
|
|
|
839,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
73,592 |
|
|
|
|
75,548 |
|
|
|
41,161 |
|
|
|
|
50,302 |
|
|
|
70,027 |
|
|
|
|
7,978 |
|
|
|
184,780 |
|
|
|
|
133,828 |
|
SG&A |
|
|
40,777 |
|
|
|
|
41,940 |
|
|
|
26,298 |
|
|
|
|
29,038 |
|
|
|
13,289 |
|
|
|
|
3,336 |
|
|
|
80,364 |
|
|
|
|
74,314 |
|
Reversal of shutdown and restructuring
charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(856 |
) |
|
|
|
|
|
|
|
(856 |
) |
Gains on dispositions of plant,
equipment and timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(681 |
) |
|
|
|
(18,477 |
) |
|
|
(681 |
) |
|
|
|
(18,477 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
32,815 |
|
|
|
|
33,608 |
|
|
|
14,863 |
|
|
|
|
21,264 |
|
|
|
57,419 |
|
|
|
|
23,975 |
|
|
|
105,097 |
|
|
|
|
78,847 |
|
Nonoperating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,129 |
) |
|
|
|
(13,178 |
) |
|
|
(13,129 |
) |
|
|
|
(13,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
32,815 |
|
|
|
$ |
33,608 |
|
|
$ |
14,863 |
|
|
|
$ |
21,264 |
|
|
$ |
44,290 |
|
|
|
$ |
10,797 |
|
|
$ |
91,968 |
|
|
|
$ |
65,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tons sold |
|
|
556,214 |
|
|
|
|
564,983 |
|
|
|
59,445 |
|
|
|
|
65,225 |
|
|
|
|
|
|
|
|
|
|
|
|
615,659 |
|
|
|
|
630,208 |
|
Depreciation, depletion and amortization |
|
$ |
28,372 |
|
|
|
$ |
26,619 |
|
|
$ |
17,451 |
|
|
|
$ |
19,755 |
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
45,823 |
|
|
|
$ |
46,374 |
|
Capital expenditures |
|
|
9,095 |
|
|
|
|
14,586 |
|
|
|
7,509 |
|
|
|
|
26,253 |
|
|
|
100 |
|
|
|
|
|
|
|
|
16,704 |
|
|
|
|
40,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of individual business units are presented based on our
management
accounting practices and management structure. There is no comprehensive, authoritative body of
guidance for management accounting equivalent to accounting principles generally accepted in the
United States of America; therefore, the financial results of individual business units are not
necessarily comparable with similar information for any other company. The management accounting
process uses assumptions and allocations to measure performance of the business units.
Methodologies are refined from time to time as management accounting practices are enhanced and
businesses change. The costs incurred by support areas not directly aligned with the business unit
are primarily allocated based on an estimated utilization of support area services or are included
in Other and Unallocated in the table above.
Management evaluates results of operations of the business units
before pension income or
expense, alternative fuel mixture credits, charges related to the Fox River environmental reserves,
restructuring related charges, unusual items, certain corporate level costs, and the effects of
asset dispositions. Management believes that this is a more meaningful representation of the
operating performance of its core papermaking businesses, the profitability of business units and
the extent of cash flow generated from these core operations. Such amounts are presented under the
caption Other and Unallocated. This presentation is aligned with the management and operating
structure of our company. It is also on this basis that the Companys performance is evaluated
internally and by the Companys Board of Directors.
GLATFELTER
-17-
17. |
GUARANTOR FINANCIAL STATEMENTS |
Our 71/8% 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, GLT International Finance, LLC, Glatfelter Holdings, LLC and
Glatfelter Holdings II, 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.
Condensed Consolidating Statement of Income for the
three months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
211,635 |
|
|
$ |
12,816 |
|
|
$ |
100,723 |
|
|
$ |
(12,816 |
) |
|
$ |
312,358 |
|
Energy sales
net |
|
|
2,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,132 |
|
|
|
|
Total revenues |
|
|
213,767 |
|
|
|
12,816 |
|
|
|
100,723 |
|
|
|
(12,816 |
) |
|
|
314,490 |
|
Costs of products sold |
|
|
147,464 |
|
|
|
11,568 |
|
|
|
85,808 |
|
|
|
(12,815 |
) |
|
|
232,025 |
|
|
|
|
Gross profit |
|
|
66,303 |
|
|
|
1,248 |
|
|
|
14,915 |
|
|
|
(1 |
) |
|
|
82,465 |
|
Selling, general and administrative expenses |
|
|
19,495 |
|
|
|
566 |
|
|
|
9,242 |
|
|
|
|
|
|
|
29,303 |
|
(Gains) losses on dispositions of plant, equipment
and timberlands, net |
|
|
(8 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
Operating income |
|
|
46,816 |
|
|
|
683 |
|
|
|
5,673 |
|
|
|
(1 |
) |
|
|
53,171 |
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(4,148 |
) |
|
|
|
|
|
|
(380 |
) |
|
|
|
|
|
|
(4,528 |
) |
Interest income |
|
|
1,230 |
|
|
|
1,115 |
|
|
|
(202 |
) |
|
|
(1,825 |
) |
|
|
318 |
|
Other income
(expense) net |
|
|
339 |
|
|
|
45 |
|
|
|
86 |
|
|
|
(266 |
) |
|
|
204 |
|
|
|
|
Total other income (expense) |
|
|
(2,579 |
) |
|
|
1,160 |
|
|
|
(496 |
) |
|
|
(2,091 |
) |
|
|
(4,006 |
) |
|
|
|
Income (loss) before income taxes |
|
|
44,237 |
|
|
|
1,843 |
|
|
|
5,177 |
|
|
|
(2,092 |
) |
|
|
49,165 |
|
Income tax provision (benefit) |
|
|
(1,757 |
) |
|
|
929 |
|
|
|
4,699 |
|
|
|
(700 |
) |
|
|
3,171 |
|
|
|
|
Net income (loss) |
|
$ |
45,994 |
|
|
$ |
914 |
|
|
$ |
478 |
|
|
$ |
(1,392 |
) |
|
$ |
45,994 |
|
|
|
|
Condensed Consolidating Statement of Income for the
three months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
226,027 |
|
|
$ |
12,024 |
|
|
$ |
113,795 |
|
|
$ |
(12,024 |
) |
|
$ |
339,822 |
|
Energy sales
net |
|
|
2,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,885 |
|
|
|
|
Total revenues |
|
|
228,912 |
|
|
|
12,024 |
|
|
|
113,795 |
|
|
|
(12,024 |
) |
|
|
342,707 |
|
Costs of products sold |
|
|
189,315 |
|
|
|
11,998 |
|
|
|
95,801 |
|
|
|
(11,579 |
) |
|
|
285,535 |
|
|
|
|
Gross profit |
|
|
39,597 |
|
|
|
26 |
|
|
|
17,994 |
|
|
|
(445 |
) |
|
|
57,172 |
|
Selling, general and administrative expenses |
|
|
14,611 |
|
|
|
488 |
|
|
|
9,703 |
|
|
|
|
|
|
|
24,802 |
|
Reversal of shutdown and restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses on dispositions of plant, equipment
and timberlands, net |
|
|
13 |
|
|
|
(4,044 |
) |
|
|
56 |
|
|
|
|
|
|
|
(3,975 |
) |
|
|
|
Operating income |
|
|
24,973 |
|
|
|
3,582 |
|
|
|
8,235 |
|
|
|
(445 |
) |
|
|
36,345 |
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(4,854 |
) |
|
|
|
|
|
|
(800 |
) |
|
|
|
|
|
|
(5,654 |
) |
Interest income |
|
|
622 |
|
|
|
3,290 |
|
|
|
(742 |
) |
|
|
(2,000 |
) |
|
|
1,170 |
|
Other income
(expense) net |
|
|
7,312 |
|
|
|
(890 |
) |
|
|
(208 |
) |
|
|
(6,068 |
) |
|
|
146 |
|
|
|
|
Total other income (expense) |
|
|
3,080 |
|
|
|
2,400 |
|
|
|
(1,750 |
) |
|
|
(8,068 |
) |
|
|
(4,338 |
) |
|
|
|
Income (loss) before income taxes |
|
|
28,053 |
|
|
|
5,982 |
|
|
|
6,485 |
|
|
|
(8,513 |
) |
|
|
32,007 |
|
Income tax provision (benefit) |
|
|
6,391 |
|
|
|
2,482 |
|
|
|
2,392 |
|
|
|
(920 |
) |
|
|
10,345 |
|
|
|
|
Net income (loss) |
|
$ |
21,662 |
|
|
$ |
3,500 |
|
|
$ |
4,093 |
|
|
$ |
(7,593 |
) |
|
$ |
21,662 |
|
|
|
|
GLATFELTER
-18-
Condensed Consolidating Statement of Income for the nine
months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
595,606 |
|
|
$ |
35,306 |
|
|
$ |
287,283 |
|
|
$ |
(35,306 |
) |
|
$ |
882,889 |
|
Energy sales
net |
|
|
6,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,194 |
|
|
|
|
Total revenues |
|
|
601,800 |
|
|
|
35,306 |
|
|
|
287,283 |
|
|
|
(35,306 |
) |
|
|
889,083 |
|
Costs of products sold |
|
|
461,449 |
|
|
|
32,016 |
|
|
|
246,301 |
|
|
|
(35,463 |
) |
|
|
704,303 |
|
|
|
|
Gross profit |
|
|
140,351 |
|
|
|
3,290 |
|
|
|
40,982 |
|
|
|
157 |
|
|
|
184,780 |
|
Selling, general and administrative expenses |
|
|
51,819 |
|
|
|
1,639 |
|
|
|
26,906 |
|
|
|
|
|
|
|
80,364 |
|
(Gains) losses on dispositions of plant,
equipment and timberlands, net |
|
|
20 |
|
|
|
(701 |
) |
|
|
|
|
|
|
|
|
|
|
(681 |
) |
|
|
|
Operating income |
|
|
88,512 |
|
|
|
2,352 |
|
|
|
14,076 |
|
|
|
157 |
|
|
|
105,097 |
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(12,867 |
) |
|
|
(5 |
) |
|
|
(1,926 |
) |
|
|
|
|
|
|
(14,798 |
) |
Interest income |
|
|
745 |
|
|
|
4,023 |
|
|
|
(310 |
) |
|
|
(2,875 |
) |
|
|
1,583 |
|
Other income
(expense) net |
|
|
7,464 |
|
|
|
1,274 |
|
|
|
(92 |
) |
|
|
(8,560 |
) |
|
|
86 |
|
|
|
|
Total other income (expense) |
|
|
(4,658 |
) |
|
|
5,292 |
|
|
|
(2,328 |
) |
|
|
(11,435 |
) |
|
|
(13,129 |
) |
|
|
|
Income (loss) before income taxes |
|
|
83,854 |
|
|
|
7,644 |
|
|
|
11,748 |
|
|
|
(11,278 |
) |
|
|
91,968 |
|
Income tax provision (benefit) |
|
|
6,452 |
|
|
|
3,169 |
|
|
|
5,979 |
|
|
|
(1,034 |
) |
|
|
14,566 |
|
|
|
|
Net income (loss) |
|
$ |
77,402 |
|
|
$ |
4,475 |
|
|
$ |
5,769 |
|
|
$ |
(10,244 |
) |
|
$ |
77,402 |
|
|
|
|
Condensed Consolidating Statement of Income for the nine
months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
634,270 |
|
|
$ |
34,017 |
|
|
$ |
331,275 |
|
|
$ |
(34,017 |
) |
|
$ |
965,545 |
|
Energy sales
net |
|
|
7,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,612 |
|
|
|
|
Total revenues |
|
|
641,882 |
|
|
|
34,017 |
|
|
|
331,275 |
|
|
|
(34,017 |
) |
|
|
973,157 |
|
Costs of products sold |
|
|
559,042 |
|
|
|
33,211 |
|
|
|
281,486 |
|
|
|
(34,410 |
) |
|
|
839,329 |
|
|
|
|
Gross profit |
|
|
82,840 |
|
|
|
806 |
|
|
|
49,789 |
|
|
|
393 |
|
|
|
133,828 |
|
Selling, general and administrative expenses |
|
|
42,506 |
|
|
|
1,505 |
|
|
|
30,303 |
|
|
|
|
|
|
|
74,314 |
|
Reversal of shutdown and restructuring charges |
|
|
(856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(856 |
) |
(Gains) losses on dispositions of plant,
equipment and timberlands, net |
|
|
140 |
|
|
|
(18,648 |
) |
|
|
31 |
|
|
|
|
|
|
|
(18,477 |
) |
|
|
|
Operating income |
|
|
41,050 |
|
|
|
17,949 |
|
|
|
19,455 |
|
|
|
393 |
|
|
|
78,847 |
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(15,144 |
) |
|
|
(11 |
) |
|
|
(2,471 |
) |
|
|
|
|
|
|
(17,626 |
) |
Interest income |
|
|
19,965 |
|
|
|
9,583 |
|
|
|
(1,817 |
) |
|
|
(23,600 |
) |
|
|
4,131 |
|
Other income
(expense) net |
|
|
13,673 |
|
|
|
(331 |
) |
|
|
(604 |
) |
|
|
(12,421 |
) |
|
|
317 |
|
|
|
|
Total other income (expense) |
|
|
18,494 |
|
|
|
9,241 |
|
|
|
(4,892 |
) |
|
|
(36,021 |
) |
|
|
(13,178 |
) |
|
|
|
Income (loss) before income taxes |
|
|
59,544 |
|
|
|
27,190 |
|
|
|
14,563 |
|
|
|
(35,628 |
) |
|
|
65,669 |
|
Income tax provision (benefit) |
|
|
15,051 |
|
|
|
10,835 |
|
|
|
4,238 |
|
|
|
(8,948 |
) |
|
|
21,176 |
|
|
|
|
Net income (loss) |
|
$ |
44,493 |
|
|
$ |
16,355 |
|
|
$ |
10,325 |
|
|
$ |
(26,680 |
) |
|
$ |
44,493 |
|
|
|
|
GLATFELTER
-19-
Condensed
Consolidating Balance Sheet as of September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
45,204 |
|
|
$ |
279 |
|
|
$ |
70,757 |
|
|
$ |
|
|
|
$ |
116,240 |
|
Other current assets |
|
|
329,117 |
|
|
|
300,674 |
|
|
|
200,919 |
|
|
|
(464,442 |
) |
|
|
366,268 |
|
Plant,
equipment and timberlands net |
|
|
258,641 |
|
|
|
7,101 |
|
|
|
211,351 |
|
|
|
|
|
|
|
477,093 |
|
Other assets |
|
|
524,966 |
|
|
|
178,468 |
|
|
|
74,167 |
|
|
|
(642,965 |
) |
|
|
134,636 |
|
|
|
|
Total assets |
|
$ |
1,157,928 |
|
|
$ |
486,522 |
|
|
$ |
557,194 |
|
|
$ |
(1,107,407 |
) |
|
$ |
1,094,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
351,980 |
|
|
$ |
58,658 |
|
|
$ |
228,728 |
|
|
$ |
(446,444 |
) |
|
$ |
192,922 |
|
Long-term debt |
|
|
210,133 |
|
|
|
|
|
|
|
36,695 |
|
|
|
|
|
|
|
246,828 |
|
Deferred income taxes |
|
|
54,064 |
|
|
|
16,058 |
|
|
|
27,443 |
|
|
|
(19,594 |
) |
|
|
77,971 |
|
Other long-term liabilities |
|
|
107,379 |
|
|
|
13,972 |
|
|
|
9,454 |
|
|
|
11,339 |
|
|
|
142,144 |
|
|
|
|
Total liabilities |
|
|
723,556 |
|
|
|
88,688 |
|
|
|
302,320 |
|
|
|
(454,699 |
) |
|
|
659,865 |
|
Shareholders equity |
|
|
434,372 |
|
|
|
397,834 |
|
|
|
254,874 |
|
|
|
(652,708 |
) |
|
|
434,372 |
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
1,157,928 |
|
|
$ |
486,522 |
|
|
$ |
557,194 |
|
|
$ |
(1,107,407 |
) |
|
$ |
1,094,237 |
|
|
|
|
Condensed Consolidating Balance Sheet as of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
8,860 |
|
|
$ |
756 |
|
|
$ |
22,618 |
|
|
$ |
|
|
|
$ |
32,234 |
|
Other current assets |
|
|
266,899 |
|
|
|
256,834 |
|
|
|
88,288 |
|
|
|
(252,436 |
) |
|
|
359,585 |
|
Plant,
equipment and timberlands net |
|
|
277,215 |
|
|
|
7,470 |
|
|
|
208,879 |
|
|
|
|
|
|
|
493,564 |
|
Other assets |
|
|
510,144 |
|
|
|
175,927 |
|
|
|
(29,767 |
) |
|
|
(484,378 |
) |
|
|
171,926 |
|
|
|
|
Total assets |
|
$ |
1,063,118 |
|
|
$ |
440,987 |
|
|
$ |
290,018 |
|
|
$ |
(736,814 |
) |
|
$ |
1,057,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
336,182 |
|
|
$ |
17,072 |
|
|
$ |
85,668 |
|
|
$ |
(248,820 |
) |
|
$ |
190,102 |
|
Long-term debt |
|
|
222,965 |
|
|
|
|
|
|
|
70,695 |
|
|
|
|
|
|
|
293,660 |
|
Deferred income taxes |
|
|
53,976 |
|
|
|
24,615 |
|
|
|
26,272 |
|
|
|
(14,705 |
) |
|
|
90,158 |
|
Other long-term liabilities |
|
|
107,288 |
|
|
|
13,838 |
|
|
|
8,941 |
|
|
|
10,615 |
|
|
|
140,682 |
|
|
|
|
Total liabilities |
|
|
720,411 |
|
|
|
55,525 |
|
|
|
191,576 |
|
|
|
(252,910 |
) |
|
|
714,602 |
|
Shareholders equity |
|
|
342,707 |
|
|
|
385,462 |
|
|
|
98,442 |
|
|
|
(483,904 |
) |
|
|
342,707 |
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
1,063,118 |
|
|
$ |
440,987 |
|
|
$ |
290,018 |
|
|
$ |
(736,814 |
) |
|
$ |
1,057,309 |
|
|
|
|
GLATFELTER
-20-
Condensed Consolidating Statement of Cash Flows for
the nine months ended September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Net cash provided (used) by |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
67,340 |
|
|
$ |
5,990 |
|
|
$ |
49,059 |
|
|
$ |
(2,875 |
) |
|
$ |
119,514 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of plant, equipment and timberlands |
|
|
(9,057 |
) |
|
|
(138 |
) |
|
|
(7,509 |
) |
|
|
|
|
|
|
(16,704 |
) |
Proceeds from disposal plant, equipment and
timberlands |
|
|
|
|
|
|
728 |
|
|
|
|
|
|
|
|
|
|
|
728 |
|
Proceeds from installment note receivable |
|
|
|
|
|
|
|
|
|
|
37,850 |
|
|
|
|
|
|
|
37,850 |
|
Repayments from (advances of) intercompany loans,
net |
|
|
5,135 |
|
|
|
1,018 |
|
|
|
|
|
|
|
(6,153 |
) |
|
|
|
|
|
|
|
Total investing activities |
|
|
(3,922 |
) |
|
|
1,608 |
|
|
|
30,341 |
|
|
|
(6,153 |
) |
|
|
21,874 |
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (repayments of) proceeds from indebtedness |
|
|
(13,623 |
) |
|
|
|
|
|
|
(36,640 |
) |
|
|
|
|
|
|
(50,263 |
) |
Payment of dividends to shareholders |
|
|
(12,433 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,433 |
) |
(Repayments) borrowings of intercompany loans, net |
|
|
(1,018 |
) |
|
|
(5,200 |
) |
|
|
65 |
|
|
|
6,153 |
|
|
|
|
|
Payment of intercompany dividends |
|
|
|
|
|
|
(2,875 |
) |
|
|
|
|
|
|
2,875 |
|
|
|
|
|
|
|
|
Total financing activities |
|
|
(27,074 |
) |
|
|
(8,075 |
) |
|
|
(36,575 |
) |
|
|
9,028 |
|
|
|
(62,696 |
) |
Effect of exchange rate on cash |
|
|
|
|
|
|
|
|
|
|
5,314 |
|
|
|
|
|
|
|
5,314 |
|
|
|
|
Net increase (decrease) in cash |
|
|
36,344 |
|
|
|
(477 |
) |
|
|
48,139 |
|
|
|
|
|
|
|
84,006 |
|
Cash at the beginning of period |
|
|
8,860 |
|
|
|
756 |
|
|
|
22,618 |
|
|
|
|
|
|
|
32,234 |
|
|
|
|
Cash at the end of period |
|
$ |
45,204 |
|
|
$ |
279 |
|
|
$ |
70,757 |
|
|
$ |
|
|
|
$ |
116,240 |
|
|
|
|
Condensed Consolidating Statement of Cash Flows for
the nine months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
Non |
|
Adjustments/ |
|
|
In thousands |
|
Company |
|
Guarantors |
|
Guarantors |
|
Eliminations |
|
Consolidated |
|
Net cash provided (used) by |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
26,109 |
|
|
$ |
2,882 |
|
|
$ |
12,368 |
|
|
$ |
(23,600 |
) |
|
$ |
17,759 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of plant, equipment and timberlands |
|
|
(13,146 |
) |
|
|
(1,440 |
) |
|
|
(26,253 |
) |
|
|
|
|
|
|
(40,839 |
) |
Proceeds from disposal plant, equipment and
timberlands |
|
|
|
|
|
|
19,280 |
|
|
|
|
|
|
|
|
|
|
|
19,280 |
|
Repayments from (advances of) intercompany loans,
net |
|
|
2,800 |
|
|
|
(19,178 |
) |
|
|
(9,158 |
) |
|
|
25,536 |
|
|
|
|
|
Return (contributions) of intercompany capital, net |
|
|
|
|
|
|
24,997 |
|
|
|
|
|
|
|
(24,997 |
) |
|
|
|
|
|
|
|
Total investing activities |
|
|
(10,346 |
) |
|
|
23,659 |
|
|
|
(35,411 |
) |
|
|
539 |
|
|
|
(21,559 |
) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (repayments of) proceeds from indebtedness |
|
|
(36,001 |
) |
|
|
|
|
|
|
37,850 |
|
|
|
|
|
|
|
1,849 |
|
Payment of dividends to shareholders |
|
|
(12,343 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,343 |
) |
(Repayments) borrowings of intercompany loans, net |
|
|
30,936 |
|
|
|
(2,800 |
) |
|
|
(2,600 |
) |
|
|
(25,536 |
) |
|
|
|
|
Return of intercompany capital, net |
|
|
|
|
|
|
|
|
|
|
(24,997 |
) |
|
|
24,997 |
|
|
|
|
|
Payment of intercompany dividends |
|
|
|
|
|
|
(23,600 |
) |
|
|
|
|
|
|
23,600 |
|
|
|
|
|
Proceeds from stock options exercised |
|
|
1,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,150 |
|
|
|
|
Total financing activities |
|
|
(16,258 |
) |
|
|
(26,400 |
) |
|
|
10,253 |
|
|
|
23,061 |
|
|
|
(9,344 |
) |
Effect of exchange rate on cash |
|
|
(735 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
(742 |
) |
|
|
|
Net increase (decrease) in cash |
|
|
(1,230 |
) |
|
|
141 |
|
|
|
(12,797 |
) |
|
|
|
|
|
|
(13,886 |
) |
Cash at the beginning of period |
|
|
6,693 |
|
|
|
162 |
|
|
|
22,978 |
|
|
|
|
|
|
|
29,833 |
|
|
|
|
Cash at the end of period |
|
$ |
5,463 |
|
|
$ |
303 |
|
|
$ |
10,181 |
|
|
$ |
|
|
|
$ |
15,947 |
|
|
|
|
-21-
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information in the unaudited
condensed consolidated financial statements and notes thereto included herein and Glatfelters
Financial Statements and Managements Discussion and Analysis of Financial Condition and Results of
Operations included in our 2008 Annual Report on Form 10-K.
Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact, including statements regarding industry
prospects and future consolidated financial position or results of operations, made in this Report
on Form 10-Q are forward looking. We use words such as anticipates, believes, expects,
future, intends and similar expressions to identify forward-looking statements. Forward-looking
statements reflect managements current expectations and are inherently uncertain. Our actual
results may differ significantly from such expectations. The following discussion includes
forward-looking statements regarding expectations of, among others, net sales, costs of products
sold, environmental costs, capital expenditures and liquidity, all of which are inherently
difficult to predict. Although we make such statements based on assumptions that we believe to be
reasonable, there can be no assurance that actual results will not differ materially from our
expectations. Accordingly, we identify the following important factors, among others, which could
cause our results to differ from any results that might be projected, forecasted or estimated in
any such forward-looking statements:
i. |
|
variations in demand, including the impact of any unplanned market-related downtime, for,
or the pricing of, our products; |
ii. |
|
changes in the cost or availability of raw materials we use, in particular pulpwood,
market pulp, pulp substitutes, caustic soda and abaca fiber; |
iii. |
|
changes in energy-related costs and commodity raw materials with an energy component; |
iv. |
|
our ability to develop new, high value-added Specialty Papers and Composite Fibers
products; |
v. |
|
our ability to renew our electricity sales agreement at acceptable margins in relation to
our current coal supply contract; |
vi. |
|
the impact of competition, changes in industry paper production capacity, including the
construction of new mills, the closing of mills and incremental changes due to capital
expenditures or productivity increases; |
vii. |
|
the impairment of financial institutions as a result of the current credit market
conditions and any resulting impact on us, our customers or our vendors; |
viii. |
|
the gain or loss of significant customers and/or on-going viability of such customers; |
ix. |
|
cost and other effects of environmental compliance, cleanup, damages, remediation or
restoration, or personal injury or property damages related thereto, such as the costs of
natural resource restoration or damages related to the presence of polychlorinated biphenyls
(PCBs) in the lower Fox River on which our former Neenah mill was located; |
x. |
|
risks associated with our international operations, including local economic and
political environments and fluctuations in currency exchange rates; |
xi. |
|
geopolitical events, including war and terrorism; |
xii. |
|
enactment of adverse state, federal or foreign tax or other legislation or changes in
government policy or regulation; |
xiii. |
|
adverse results in litigation; and |
xiv. |
|
our ability to finance, consummate and integrate future acquisitions. |
GLATFELTER
-22-
Introduction We manufacture, both domestically and internationally, a wide array of specialty
papers and engineered products. Substantially all of our revenue is earned from the sale of our
products to customers in numerous markets, including book publishing, envelope & converting,
carbonless papers and forms, food & beverage filter papers, decorative laminates for furniture and
flooring, metallized papers and other highly technical niche markets.
Overview Our results of operations for the first nine months of 2009 when compared with the
same period of 2008 were impacted by the weak global economic conditions. Overall volumes shipped
by Specialty Papers declined 1.6% and Composite Fibers declined 8.9% in the period-to-period
comparison. As a result of the soft demand for most of our products and our efforts to reduce
inventory, during the second quarter of 2009, we incurred significant market-related downtime at
many of our facilities which adversely affected results of operations. This downtime continued
within our Composite Fibers business unit into the third quarter, although to a lesser extent. In
the first nine months of 2009, we generated $119.5 million of cash from operations, including
alternative fuel mixture credits, and we reduced inventories through close monitoring of supply and
demand. During 2009, we registered two of our facilities with the U.S. Internal Revenue Service as
alternative fuel mixers based on their use of black liquor as an alternative fuel source. Our
results of operations in the first nine months of 2009 included, on a pre-tax basis, $75.6 million
of alternative fuel mixture credits, of which $29.7 million was received in cash and another $10.9
million was used to offset interim estimated tax payments. We intend to realize the remaining $34.9
million of credits in the form of non-taxable refundable income tax credits.
Specialty Papers operating income totaled $32.8 million and $33.6 million for the first nine
months of 2009 and 2008, respectively. During of the first nine months of 2009, the weak economic
environment adversely affected demand in all markets served by Specialty Papers. As a result of
weak demand and our efforts to reduce inventory, this unit incurred market related downtime
totaling 19,400 tons of paper. During the year, we reduced Specialty Papers inventories by 29.2%.
Our Composite Fibers business units operating income declined to $14.9 million from $21.3
million in the first nine months of 2008. Volumes shipped during the first nine months of 2009
declined 8.9% compared to 2008 as a result of the weak economic environment and our customers
actions to reduce their inventory
levels. Demand for tea and coffee filter papers, this units
largest product line, declined by 5.0% primarily due to weak order patterns and customers
inventory destocking primarily in Russia, Eastern Europe and other related regions. As a result of
weak demand and our inventory reduction efforts, during the first nine months of 2009 we incurred
unscheduled downtime totaling 6,480 tons of paper, or 9% of the units total capacity for the
period.
In addition, our after-tax consolidated results of operations in 2008 included $17.8 million
of lower gains than in 2009 from the sale of timberlands. We also recorded $5.6 million of pension
expense in the first nine months of 2009 compared with pension income of $11.9 million in the
year-earlier quarter.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2009 versus the
Nine Months Ended September 30, 2008
The following table sets forth summarized results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
Nine
months ended September 30 |
In thousands, except per share |
|
2009 |
|
|
2008 |
|
|
|
|
Net sales |
|
$ |
882,889 |
|
|
|
$ |
965,545 |
|
Gross profit |
|
|
184,780 |
|
|
|
|
133,828 |
|
Operating income |
|
|
105,097 |
|
|
|
|
78,847 |
|
Net income |
|
|
77,402 |
|
|
|
|
44,493 |
|
Diluted earnings per share |
|
|
1.69 |
|
|
|
|
0.97 |
|
|
|
|
|
The consolidated results of operations for the nine months ended September 30, 2009
include the following significant items:
|
|
|
|
|
|
|
|
|
|
|
After-tax |
|
Diluted EPS |
In thousands, except per share |
|
Gain (loss) |
|
|
|
2009 |
|
|
|
|
|
|
|
|
Alternative fuel mixture credit |
|
$ |
63,308 |
|
|
$ |
1.38 |
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
Timberland sales |
|
$ |
11,027 |
|
|
$ |
0.24 |
|
Reversal of shutdown and restructuring charges |
|
|
527 |
|
|
|
0.01 |
|
Acquisition integration related costs |
|
|
(828 |
) |
|
|
(0.02 |
) |
|
The above items increased earnings by $63.3 million, or $1.38 per diluted share, in the
first nine months of 2009. In the comparable period a year ago, the above items increased earnings
by $10.7 million, or $0.23 per diluted share.
GLATFELTER
-23-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30 |
Dollars in thousands |
|
Specialty Papers |
|
Composite Fibers |
|
Other and Unallocated |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
595,606 |
|
|
|
$ |
634,270 |
|
|
$ |
287,283 |
|
|
|
$ |
331,274 |
|
|
$ |
|
|
|
|
$ |
1 |
|
|
$ |
882,889 |
|
|
|
$ |
965,545 |
|
Energy sales, net |
|
|
6,193 |
|
|
|
|
7,612 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
6,194 |
|
|
|
|
7,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
601,799 |
|
|
|
|
641,882 |
|
|
|
287,283 |
|
|
|
|
331,274 |
|
|
|
1 |
|
|
|
|
1 |
|
|
|
889,083 |
|
|
|
|
973,157 |
|
Cost of products sold |
|
|
528,207 |
|
|
|
|
566,334 |
|
|
|
246,122 |
|
|
|
|
280,972 |
|
|
|
(70,026 |
) |
|
|
|
(7,977 |
) |
|
|
704,303 |
|
|
|
|
839,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
73,592 |
|
|
|
|
75,548 |
|
|
|
41,161 |
|
|
|
|
50,302 |
|
|
|
70,027 |
|
|
|
|
7,978 |
|
|
|
184,780 |
|
|
|
|
133,828 |
|
SG&A |
|
|
40,777 |
|
|
|
|
41,940 |
|
|
|
26,298 |
|
|
|
|
29,038 |
|
|
|
13,289 |
|
|
|
|
3,336 |
|
|
|
80,364 |
|
|
|
|
74,314 |
|
Shutdown and restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(856 |
) |
|
|
|
|
|
|
|
(856 |
) |
Gains on dispositions of plant,
equipment and timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(681 |
) |
|
|
|
(18,477 |
) |
|
|
(681 |
) |
|
|
|
(18,477 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
32,815 |
|
|
|
|
33,608 |
|
|
|
14,863 |
|
|
|
|
21,264 |
|
|
|
57,419 |
|
|
|
|
23,975 |
|
|
|
105,097 |
|
|
|
|
78,847 |
|
Nonoperating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,129 |
) |
|
|
|
(13,178 |
) |
|
|
(13,129 |
) |
|
|
|
(13,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
32,815 |
|
|
|
$ |
33,608 |
|
|
$ |
14,863 |
|
|
|
$ |
21,264 |
|
|
$ |
44,290 |
|
|
|
$ |
10,797 |
|
|
$ |
91,968 |
|
|
|
$ |
65,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tons sold |
|
|
556,214 |
|
|
|
|
564,983 |
|
|
|
59,445 |
|
|
|
|
65,225 |
|
|
|
|
|
|
|
|
|
|
|
|
615,659 |
|
|
|
|
630,208 |
|
Depreciation, depletion and amortization |
|
$ |
28,372 |
|
|
|
$ |
26,619 |
|
|
$ |
17,451 |
|
|
|
$ |
19,755 |
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
45,823 |
|
|
|
$ |
46,374 |
|
Capital expenditures |
|
|
9,095 |
|
|
|
|
14,586 |
|
|
|
7,509 |
|
|
|
|
26,253 |
|
|
|
100 |
|
|
|
|
|
|
|
|
16,704 |
|
|
|
|
40,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Units Results of individual business units are presented based on our management
accounting practices and management structure. There is no comprehensive, authoritative body of
guidance for management accounting equivalent to accounting principles generally accepted in the
United States of America; therefore, the financial results of individual business units are not
necessarily comparable with similar information for any other company. The management accounting
process uses assumptions and allocations to measure performance of the business units.
Methodologies are refined from time to time as management accounting practices are enhanced and
businesses change. The costs incurred by support areas not directly aligned with the business unit
are allocated primarily based on an estimated utilization of support area services or are included
in Other and Unallocated in the table above.
Management evaluates results of operations of the business units before pension income or
expense, alternative fuel mixture credits, charges related to the Fox River environmental reserves,
restructuring related charges, unusual items, certain corporate level costs, and the effects of
asset dispositions. Management believes that this is a more meaningful representation of the
operating performance of its core papermaking businesses, the profitability of business units and
the extent of cash flow generated from these core operations. Such amounts are presented under the
caption Other and Unallocated. This presentation is aligned with the management and operating
structure of our company. It is also on this basis that the Companys performance is evaluated
internally and by the Companys Board of Directors.
Sales and Costs of Products Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
September 30 |
|
|
In thousands |
|
2009 |
|
|
2008 |
|
Change |
|
|
|
|
Net sales |
|
$ |
882,889 |
|
|
|
$ |
965,545 |
|
|
$ |
(82,656 |
) |
Energy sales net |
|
|
6,194 |
|
|
|
|
7,612 |
|
|
|
(1,418 |
) |
|
|
|
|
|
|
Total revenues |
|
|
889,083 |
|
|
|
|
973,157 |
|
|
|
(84,074 |
) |
Costs of products sold |
|
|
704,303 |
(1) |
|
|
|
839,329 |
|
|
|
(135,026 |
) |
|
|
|
|
|
|
Gross profit |
|
$ |
184,780 |
|
|
|
$ |
133,828 |
|
|
$ |
50,952 |
|
|
|
|
|
|
|
Gross profit as a
percent of Net sales |
|
|
20.9 |
% |
|
|
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $73.8 million of alternative fuel mixture credits, net of related expenses. |
The following table sets forth the contribution to consolidated net sales by each
business unit:
| | | | | | | | | |
|
|
Percent of Total |
|
|
2009 |
|
|
2008 |
|
|
|
|
Business Unit |
|
|
|
|
|
|
|
|
|
Specialty Papers |
|
|
67.5 |
% |
|
|
|
65.7 |
% |
Composite Fibers |
|
|
32.5 |
|
|
|
|
34.3 |
|
|
|
|
|
|
|
Total |
|
|
100.0 |
% |
|
|
|
100.0 |
% |
|
|
|
|
Net sales totaled $882.9 million for the first nine months of 2009, a decrease of $82.7
million, or 8.6%, compared to the same period a year ago.
In the Specialty Papers business unit, net sales for the first nine months of 2009 decreased
$38.7 million to $595.6 million. Operating income totaled $32.8 million, a slight decline from
$33.6 million compared to the same period a year ago. Operating income was adversely impacted by
the costs of unplanned downtime at the Spring Grove and Chillicothe facilities totaling
approximately $8.8 million in the first nine months of 2009 compared to the same period of 2008. In
addition, this unit recorded $1.4 million of
GLATFELTER
-24-
accelerated depreciation related to the write down of certain equipment in the first nine
months of 2009. Operating income was also negatively impacted by lower volumes shipped and mix
changes between carbonless papers and uncoated papers.
In Composite Fibers, net sales were $287.3 million for the first nine months of 2009, a
decline of $44.0 million from the year-earlier period. Operating income declined by $6.4 million in
the comparison to $14.9 million. Total volumes shipped by this business unit declined 8.9% led by
lower shipments of composite laminates and food & beverage paper products, which declined 24.4% and
5.0%, respectively. The translation of foreign currencies adversely impacted net sales by $32.0
million; however, higher average selling prices contributed $7.2 million.
Energy and raw material costs in the Composite Fibers business unit were $4.3 million higher
in the first nine months of 2009 than in the same period a year ago. Market-related downtime
adversely impacted operating results by $6.6 million in the first nine months of 2009 compared to
the same period of 2008.
Alternative Fuel Mixture Credits The U.S. Internal Revenue Code provides a tax credit for
companies that use alternative fuel mixtures to produce energy to operate their businesses. The
credit, equal to $0.50 per gallon of alternative fuel contained in the mixture, is refundable to
the taxpayer. On May 11, 2009, we were notified by the Internal Revenue Service that our
application to be registered as an alternative fuel mixer was approved. We received a payment from
the Internal Revenue Service on June 30, 2009 in the amount of $29.7 million for the alternative
fuel mixture consumed at our Spring Grove, PA and Chillicothe, OH facilities during the period
February 20, 2009 through May 17, 2009. For the third quarter of 2009, we earned $33.0 million of
alternative fuel mixture credits for which no cash was received as we intend to claim a refundable
income tax credit in connection with the filing of our 2009 federal corporate income tax return.
Since we began mixing and burning eligible alternative fuels, we have earned $75.6 million of
alternative fuel mixture credits of which $29.7 million has been received in cash, $10.9 million
was used to reduce estimated interim tax payments and $34.9 million will be claimed as refundable
income tax credits.
According to the Internal Revenue Code, the tax credit is scheduled to expire on December 31,
2009. However, there can be no assurances that the incentive program for alternative fuel mixtures
will continue in effect or that its provisions, including taxes applicable to the credits, will not
be changed, or that we will be successful in receiving future credits under the program.
Pension Expense/Income Pension expense or income results from the over-funded status of our
pension plans. The following summarizes the amounts of pension expense or income recognized for the
first nine months of 2009 compared to the same period of 2008:
| | | | | | | | | | | | | |
|
|
Nine months ended |
|
|
|
|
September 30 |
|
|
In thousands |
|
2009 |
|
|
2008 |
|
Change |
|
|
|
|
Recorded as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of products sold |
|
$ |
(3,756 |
) |
|
|
$ |
8,214 |
|
|
$ |
(11,970 |
) |
SG&A expense |
|
|
(1,807 |
) |
|
|
|
3,730 |
|
|
|
(5,537 |
) |
|
|
|
|
|
|
Total (expense) income |
|
$ |
(5,563 |
) |
|
|
$ |
11,944 |
|
|
$ |
(17,507 |
) |
|
|
|
|
The amount of pension expense or income recognized each year is determined using various
actuarial assumptions and certain other factors, including the fair value of our pension assets as
of the beginning of the year. As discussed in Item 1 Financial Statements Note 9, the fair
value of the plans assets declined approximately 29% during 2008. As a result, during 2009 we
expect to recognize net pension expense totaling approximately $7.3 million, on a pre-tax basis.
However, we do not expect to be required to make cash contributions to our qualified defined
benefit pension plans in 2009.
Selling, general and administrative (SG&A) SG&A expenses increased $6.1 million in the
period-to-period comparison and totaled $80.4 million for the first nine months of 2009. The
increase was primarily due the $5.5 million effect of recording $1.8 million of pension expense in
the first nine months of 2009 compared with $3.7 million of pension income in the same period of
2008.
GLATFELTER
-25-
Gain on Sales of Plant, Equipment and Timberlands During the first nine months of 2009 and
2008, we completed sales of timberlands which are summarized by the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands |
|
Acres |
|
Proceeds |
|
Gain |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Timberlands |
|
|
189 |
|
|
$ |
728 |
|
|
$ |
699 |
|
Other |
|
|
n/a |
|
|
|
|
|
|
|
(18 |
) |
|
|
|
|
|
|
189 |
|
|
$ |
728 |
|
|
$ |
681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Timberlands |
|
|
4,561 |
|
|
$ |
19,280 |
|
|
$ |
18,646 |
|
Other |
|
|
n/a |
|
|
|
|
|
|
|
(169 |
) |
|
|
|
|
|
|
4,561 |
|
|
$ |
19,280 |
|
|
$ |
18,477 |
|
|
Income taxes Our results of operations for the first nine months of 2009 reflect an
effective tax rate of 15.8% compared to 32.2% in the same period a year ago. The decline in the
effective tax rate is primarily due to $75.6 million of alternative fuel mixture credits taxed at a
lower effective tax rate, $45.8 million of which are non-taxable, and from a lower proportion of
timberland gains, which are taxed at a higher effective tax rate.
Foreign Currency We own and operate paper and pulp mills in Germany, France, the United
Kingdom and the Philippines. The local currency in Germany and France is the Euro, in the UK it is
the British Pound Sterling, and in the Philippines the currency is the Peso. During the first nine
months of 2009, Euro functional currency operations generated approximately 19.5% of our sales and
18.6% of operating expenses and British Pound Sterling operations represented 10.3% of net sales
and 10.5% of operating expenses. The translation of results from these international operations
into U.S. dollars is impacted by changes in foreign currency exchange rates.
The table below summarizes the effect from foreign currency translation on first nine months
of 2009 reported results compared to the first nine months of 2008:
|
|
|
|
|
|
|
Nine months |
|
In thousands |
|
ended September 30 |
|
|
|
|
Favorable (unfavorable) |
Net sales |
|
$ |
(31,990 |
) |
Costs of products sold |
|
|
31,330 |
|
SG&A expenses |
|
|
3,922 |
|
Income taxes and other |
|
|
119 |
|
|
|
|
|
Net income |
|
$ |
3,381 |
|
|
The above table only presents the financial reporting impact of foreign currency
translations. It does not present the impact of certain competitive advantages or disadvantages of
operating or competing in multi-currency markets.
GLATFELTER
-26-
Three Months Ended September 30, 2009 versus the
Three Months Ended September 30, 2008
The following table sets forth summarized results of operations:
| | | | | | | | | |
|
|
Three months ended |
|
|
September 30 |
In thousands, except per share |
|
2009 |
|
|
2008 |
|
|
|
|
Net sales |
|
$ |
312,358 |
|
|
|
$ |
339,822 |
|
Gross profit |
|
|
82,465 |
|
|
|
|
57,172 |
|
Operating income |
|
|
53,171 |
|
|
|
|
36,345 |
|
Net income |
|
|
45,994 |
|
|
|
|
21,662 |
|
Diluted earnings per share |
|
|
1.00 |
|
|
|
|
0.47 |
|
|
|
|
|
The consolidated results of operations for the three months ended September 30 include
the following significant items:
|
|
|
|
|
|
|
|
|
|
|
After-tax |
|
Diluted EPS |
In thousands, except per share |
|
Gain (loss) |
|
|
|
2009 |
|
|
|
|
|
|
|
|
Alternative fuel mixture credit |
|
$ |
32,890 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
Timberland sales and related transaction costs |
|
$ |
2,371 |
|
|
$ |
0.05 |
|
Acquisition integration |
|
|
(240 |
) |
|
|
(0.01 |
) |
|
The above items increased earnings by $32.9 million, or $0.72 per diluted share, and $2.1
million, or $0.04 per diluted share, in the third quarters of 2009 and 2008, respectively.
Business Units The following table sets forth profitability information by business unit and
the composition of consolidated income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Unit Performance |
|
For the three months ended September 30 |
Dollars in thousands |
|
Specialty Papers |
|
Composite Fibers |
|
Other and Unallocated |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
2009 |
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
211,635 |
|
|
|
$ |
226,028 |
|
|
$ |
100,723 |
|
|
|
$ |
113,794 |
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
312,358 |
|
|
|
$ |
339,822 |
|
Energy sales, net |
|
|
2,131 |
|
|
|
|
2,885 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
2,132 |
|
|
|
|
2,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
213,766 |
|
|
|
|
228,913 |
|
|
|
100,723 |
|
|
|
|
113,794 |
|
|
|
1 |
|
|
|
|
|
|
|
|
314,490 |
|
|
|
|
342,707 |
|
Cost of products sold |
|
|
178,060 |
|
|
|
|
192,110 |
|
|
|
85,746 |
|
|
|
|
96,114 |
|
|
|
(31,781 |
) |
|
|
|
(2,689 |
) |
|
|
232,025 |
|
|
|
|
285,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
35,706 |
|
|
|
|
36,803 |
|
|
|
14,977 |
|
|
|
|
17,680 |
|
|
|
31,782 |
|
|
|
|
2,689 |
|
|
|
82,465 |
|
|
|
|
57,172 |
|
SG&A |
|
|
14,852 |
|
|
|
|
13,961 |
|
|
|
9,176 |
|
|
|
|
9,329 |
|
|
|
5,275 |
|
|
|
|
1,512 |
|
|
|
29,303 |
|
|
|
|
24,802 |
|
Gains on dispositions of plant,
equipment and timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
(3,975 |
) |
|
|
(9 |
) |
|
|
|
(3,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
20,854 |
|
|
|
|
22,842 |
|
|
|
5,801 |
|
|
|
|
8,351 |
|
|
|
26,516 |
|
|
|
|
5,152 |
|
|
|
53,171 |
|
|
|
|
36,345 |
|
Nonoperating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,006 |
) |
|
|
|
(4,338 |
) |
|
|
(4,006 |
) |
|
|
|
(4,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
20,854 |
|
|
|
$ |
22,842 |
|
|
$ |
5,801 |
|
|
|
$ |
8,351 |
|
|
$ |
22,510 |
|
|
|
$ |
814 |
|
|
$ |
49,165 |
|
|
|
$ |
32,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tons sold |
|
|
199,860 |
|
|
|
|
200,072 |
|
|
|
20,181 |
|
|
|
|
21,530 |
|
|
|
|
|
|
|
|
|
|
|
|
220,041 |
|
|
|
|
221,602 |
|
Depreciation, depletion and amortization |
|
$ |
10,623 |
|
|
|
$ |
9,007 |
|
|
$ |
6,150 |
|
|
|
$ |
6,700 |
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
16,773 |
|
|
|
$ |
15,707 |
|
Capital expenditures |
|
|
2,077 |
|
|
|
|
4,156 |
|
|
|
3,152 |
|
|
|
|
11,275 |
|
|
|
|
|
|
|
|
|
|
|
|
5,229 |
|
|
|
|
15,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLATFELTER
-27-
The following table summarizes sales and costs of products sold for the three months
ended September 30, 2009 and 2008.
Sales and Costs of Products Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
September 30 |
|
|
In thousands |
|
2009 |
|
|
2008 |
|
Change |
|
|
|
|
Net sales |
|
$ |
312,358 |
|
|
|
$ |
339,822 |
|
|
$ |
(27,464 |
) |
Energy sales net |
|
|
2,132 |
|
|
|
|
2,885 |
|
|
|
(753 |
) |
|
|
|
|
|
|
Total revenues |
|
|
314,490 |
|
|
|
|
342,707 |
|
|
|
(28,217 |
) |
Costs of products sold |
|
|
232,025 |
(1) |
|
|
|
285,535 |
|
|
|
(53,510 |
) |
|
|
|
|
|
|
Gross profit |
|
$ |
82,465 |
|
|
|
$ |
57,172 |
|
|
$ |
25,293 |
|
|
|
|
|
|
|
Gross profit as a
percent of Net sales |
|
|
26.4 |
% |
|
|
|
16.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $33.0 million of alternative fuel mixture credits, net of related expenses. |
The following table sets forth the contribution to consolidated net sales by each
business unit:
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Total |
|
|
2009 |
|
|
2008 |
|
|
|
|
Business Unit |
|
|
|
|
|
|
|
|
|
Specialty Papers |
|
|
67.8 |
% |
|
|
|
66.5 |
% |
Composite Fibers |
|
|
32.2 |
|
|
|
|
33.5 |
|
|
|
|
|
|
|
Total |
|
|
100.0 |
% |
|
|
|
100.0 |
% |
|
|
|
|
Net sales totaled $312.4 million for the third quarter of 2009, a decrease of $27.5
million, or 8.1%, compared to the same period a year ago.
Specialty Papers net sales totaled $211.6 million for the third quarter of 2009, a decline of
6.4 percent compared to the 2008 third quarter. The decline in net sales in the quarterly
comparison was primarily due to lower average selling prices impacting sales by $7.5 million and
changes in the mix of products sold. Total volumes shipped were essentially unchanged in the
quarter over quarter comparison. Lower input costs benefited operating results by $6.1 million in
the comparison.
Specialty Papers operating income totaled $20.9 million and $22.8 million for the third
quarters of 2009 and 2008, respectively. The third quarter 2009 operating results for Specialty
Papers were negatively impacted by lower energy sales and by $1.4 million of accelerated
depreciation related to the write down of certain equipment no longer used by the unit.
We successfully reduced Specialty Papers inventories by 15.2% during the third quarter of
2009 in line with our strategies to maximize cash generated from operations by controlling
inventories and other working capital uses.
Net sales in the Composite Fibers business unit decreased $13.1 million or 11.5% to $100.7
million for the 2009 third quarter.
Volumes shipped during the quarter declined 6.3% compared with 2008 as a result of the weak
economic environment. Demand for tea and coffee filter papers, this units largest product line,
declined by 11.2% primarily due to continued inventory destocking by our customers. In addition,
demand was off from prior-year levels by 20.1% in composite laminate papers, while metallized
products and technical specialties increased 9.7% and 6.5%, respectively. As a result of sluggish
demand and inventory reduction efforts, the Company incurred machine downtime totaling the
equivalent of 1,700 tons of paper, or 11% of the units total quarterly capacity, adversely
impacting results by $1.3 million. On a constant currency basis, higher average selling prices
contributed approximately $0.4 million to net sales; however, the translation of foreign currencies
unfavorably affected net sales by approximately $5.4 million. The Composite Fibers business unit
was adversely impacted by higher energy and raw material costs totaling approximately $1.0 million.
Operating income declined to $5.8 million from $8.4 million in the year-earlier quarter.
Alternative Fuel Mixture Credits The accompanying consolidated statement of income for the
three months ended September 30, 2009 includes a credit of $33.0 million recorded in cost of
products sold representing alternative fuel mixture credits earned through September 30, 2009.
Pension Expense/Income Pension expense or income results from the over-funded status of our
pension plans. The following summarizes the amounts of pension expense or income recognized for the
third quarter of 2009 compared to the same period of 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
September 30 |
|
|
In thousands |
|
2009 |
|
|
2008 |
|
Change |
|
|
|
|
Recorded as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of products sold |
|
$ |
(1,254 |
) |
|
|
$ |
2,749 |
|
|
$ |
(4,003 |
) |
SG&A expense |
|
|
(604 |
) |
|
|
|
1,230 |
|
|
|
(1,834 |
) |
|
|
|
|
|
|
Total |
|
$ |
(1,858 |
) |
|
|
$ |
3,979 |
|
|
$ |
(5,837 |
) |
|
|
|
|
The amount of pension expense or income recognized each year is determined using various
actuarial assumptions and certain other factors, including the fair value of our pension assets as
of the beginning of the year.
GLATFELTER
-28-
Selling, general and administrative (SG&A) SG&A expenses increased by $4.5 million in the
quarter-to-quarter comparison and totaled $29.3 million in the third quarter of 2009. The increase
was primarily due to recording pension expense in 2009 compared with pension income in 2008
together with higher legal and professional fees in the comparison.
Income taxes For the third quarter of 2009, results of operations reflect an
effective tax rate of 6.5% on pretax income of $49.2 million compared with 32.3% and $32.0 million,
respectively, in the same period a year ago. The effective rate in the third quarter of 2009
benefited from approximately $32.8 million of the alternative fuel mixture credits included in
pre-tax income that are treated as non-taxable.
Foreign Currency We own and operate paper and pulp mills in Germany, France, the United
Kingdom and the Philippines. The local currency in Germany and France is the Euro, in the UK it is
the British Pound Sterling, and in the Philippines the currency is the Peso. During the third
quarter of 2009, Euro functional currency operations generated approximately 19.0% of our sales and
18.3% of operating expenses and British Pound Sterling operations represented 10.5% of net sales
and 11.3% of operating expenses. The translation of the results from these international operations
into U.S. dollars is subject to changes in foreign currency exchange rates.
The table below summarizes the effect from foreign currency translation on the third quarter
of 2009 reported results compared to the third quarter of 2008:
|
|
|
|
|
|
|
Three months |
|
In thousands |
|
ended |
|
|
|
|
Favorable (unfavorable) |
Net sales |
|
$ |
(5,373 |
) |
Costs of products sold |
|
|
5,620 |
|
SG&A expenses |
|
|
655 |
|
Income taxes and other |
|
|
176 |
|
|
|
|
|
Net income |
|
$ |
1,078 |
|
|
The above table only presents the financial reporting impact of foreign currency
translations. It does not present the impact of certain competitive advantages or disadvantages of
operating or competing in multi-currency markets.
LIQUIDITY AND CAPITAL RESOURCES
Our business is capital intensive and requires significant expenditures for our business
strategy, new or enhanced equipment, environmental compliance matters, and to support our research
and development efforts. In addition we have mandatory debt service requirements of both principal
and interest. The following table summarizes cash flow information for each of the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
September 30 |
In thousands |
|
2009 |
|
|
2008 |
|
|
|
|
Cash and cash equivalents at beginning of
period |
|
$ |
32,234 |
|
|
|
$ |
29,833 |
|
Cash provided by (used for) |
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
119,514 |
|
|
|
|
17,759 |
|
Investing activities |
|
|
21,874 |
|
|
|
|
(21,559 |
) |
Financing activities |
|
|
(62,696 |
) |
|
|
|
(9,344 |
) |
Effect of exchange rate changes on cash |
|
|
5,314 |
|
|
|
|
(742 |
) |
|
|
|
|
|
|
Net cash (used) provided |
|
|
84,006 |
|
|
|
|
(13,886 |
) |
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
116,240 |
|
|
|
$ |
15,947 |
|
|
|
|
|
At the end of the 2009 third quarter, we had $116.2 million in cash and $188 million
available under our revolving credit agreement, which matures in April 2011. Operating cash flow
improved by $101.8 million primarily due to significant reduction in inventories in 2009 and a
significant use of cash for accounts receivable in 2008 compared to a slight provision of cash in
2009. In addition, $29.7 million of cash was received from alternative fuel mixture credits.
Net cash provided from investing activities totaled $21.9 million in the first nine months of
2009 compared with a net use of $21.6 million in the first nine months of 2008. The improvement
reflects the collection of a $37.9 million note receivable in connection with the unwinding of the
2003 timberland installment sale; and $24.1 million from reduced capital expenditures in connection
with the deferral of discretionary capital expenditures.
Net cash used for financing activities totaled $62.7 million for the first nine months of
2009, primarily reflecting reductions of debt including $34.0 million repaid in connection with the
above referenced unwinding of the 2003 timberland installment sale. During the first nine months of
2009 and 2008, cash dividends paid on common stock totaled $12.4 million and $12.3 million,
respectively. Our Board of Directors determines what, if any, dividends will be paid to our
shareholders. Dividend payment decisions are based upon then-existing factors and conditions and,
therefore, historical trends of dividend payments are not necessarily indicative of future
payments.
GLATFELTER
-29-
The following table sets forth our outstanding long-term indebtedness:
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30, |
|
|
Dec. 31, |
In thousands |
|
2009 |
|
|
2008 |
|
|
|
|
Revolving credit facility, due April 2011 |
|
$ |
5,892 |
|
|
|
$ |
6,724 |
|
Term Loan, due April 2011 |
|
|
18,000 |
|
|
|
|
30,000 |
|
Term Loan, due January 2013 |
|
|
36,695 |
|
|
|
|
36,695 |
|
Note payable, due March 2013 |
|
|
|
|
|
|
|
34,000 |
|
71/8% Notes, due May 2016 |
|
|
200,000 |
|
|
|
|
200,000 |
|
|
|
|
|
|
|
Total long-term debt |
|
|
260,587 |
|
|
|
|
307,419 |
|
Less current portion |
|
|
(13,759 |
) |
|
|
|
(13,759 |
) |
|
|
|
|
|
|
Long-term debt, net of current portion |
|
$ |
246,828 |
|
|
|
$ |
293,660 |
|
|
|
|
|
The significant terms of the debt obligations are set forth in Item 1 Financial
Statements Note 12. As of September 30, 2009, we had $188 million of borrowing capacity
available under our revolving credit agreement. Although we do not have immediate intentions to
make additional use of the facility, we believe this agreement, and the banks that are party to it,
provides us with ready access to liquidity should we need it.
Alternative Fuel Mixture Credits The U.S. Internal Revenue Code provides a tax credit for
companies that use alternative fuel mixtures to produce energy to operate their businesses. We
received a payment from the Internal Revenue Service on June 30, 2009 in the amount of $29.7
million for the alternative fuel mixture consumed at our Spring Grove, PA and Chillicothe, OH
facilities during the period February 20, 2009 through May 17, 2009. Since we began mixing and
burning eligible alternative fuels, we have earned $75.6 million of alternative fuel mixture
credits of which $29.7 million has been received in cash, $10.9 million was used to reduce
estimated interim tax payments and $34.9 million will be claimed as refundable income tax credits.
We are subject to loss contingencies resulting from regulation by various federal, state,
local and foreign governmental authorities with respect to the environmental impact of mills we
operate, or have operated. To comply with environmental laws and regulations, we have incurred
substantial capital and operating expenditures in past years. We anticipate that environmental
regulation of our operations will continue to become more burdensome and that capital and operating
expenditures necessary to comply with environmental regulations will continue, and perhaps
increase, in the future. In addition, we may incur obligations to remove or mitigate any adverse
effects on the environment resulting from our operations, including
the restoration of natural
resources and liability for personal injury and for damages to property and natural resources. See
Item 1 Financial Statements Note 15 for a summary of significant environmental matters.
We expect to meet all of our near- and longer-term cash needs from a combination of operating
cash flow, cash and cash equivalents, our existing credit facility or other bank lines of credit
and other long-term debt. However, as discussed in Item 1 Financial Statements Note 15, an
unfavorable outcome of various environmental matters could have a material adverse impact on our
consolidated financial position, liquidity and/or results of operations.
Our credit agreement, as amended, contains a number of customary compliance covenants. A
breach of these requirements, of which we were not aware of any at September 30, 2009, would give
rise to certain remedies under the credit agreement as amended, among which are the termination of
the agreement and accelerated repayment of the outstanding borrowings plus accrued and unpaid
interest under the credit facility. In addition, the
71/8% Notes contain a cross default provision
that in the event of a default under the credit agreement, the 71/8% Notes would become payable
immediately.
Off-Balance-Sheet Arrangements As of September 30, 2009 and December 31, 2008, we had not
entered into any off-balance-sheet arrangements.
Outlook For Specialty Papers, we expect shipping volumes in the fourth quarter of 2009 to be
approximately 10% less than the third quarter reflecting normal seasonality. Selling prices and
input costs for most products are expected to be relatively in line with the third quarter.
In the Composite Fibers business unit, we anticipate shipping volumes in the fourth quarter of
2009 to be relatively consistent with the third quarter. Selling prices, input costs and capacity
utilization are expected to be in line with the third quarter.
GLATFELTER
-30-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
At September 30, 2009 |
Dollars in thousands |
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
Carrying Value |
|
Fair Value |
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average principal outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At fixed interest rates Bond |
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
$ |
200,000 |
|
|
$ |
187,750 |
|
At variable interest rates |
|
|
58,867 |
|
|
|
50,268 |
|
|
|
38,908 |
|
|
|
36,695 |
|
|
|
1,407 |
|
|
|
60,587 |
|
|
|
61,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
260,587 |
|
|
$ |
249,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On fixed rate debt Bond |
|
|
7.13 |
% |
|
|
7.13 |
% |
|
|
7.13 |
% |
|
|
7.13 |
% |
|
|
7.13 |
% |
|
|
|
|
|
|
|
|
On variable rate debt |
|
|
2.65 |
|
|
|
2.90 |
|
|
|
3.40 |
|
|
|
3.52 |
|
|
|
3.52 |
|
|
|
|
|
|
|
|
|
|
The table above presents average principal outstanding and related interest rates
for the next five years. Fair values included herein have been determined based upon rates
currently available to us for debt with similar terms and remaining maturities. Our market risk
exposure primarily results from changes in interest rates and currency exchange rates. At September
30, 2009, we had long-term debt outstanding of $260.6 million,
of which $60.6 million or 23.3% was
at variable interest rates.
Variable-rate debt outstanding represents borrowings under (i) credit facility that incur
interest based on the domestic prime rate or a Eurocurrency rate, at our option, plus a margin;
(ii) the term loan that matures in April 2011, under which we are required to make quarterly
repayments and (iii) the 2008 Term Loan that bears interest at a six-month reserve adjusted LIBOR
plus a margin rate of 1.2% per annum. At September 30, 2009, the weighted average interest rate
paid on variable rate debt was 2.65%. A hypothetical 100 basis point increase or decrease in the
interest rate on variable rate debt would increase or decrease annual interest expense by $0.6
million.
We are subject to certain risks associated with changes in foreign currency exchange rates to
the extent our operations are conducted in currencies other than the U.S. Dollar. During the first
nine months of 2009, Euro functional currency operations generated approximately 19.5% of our sales
and 18.6% of operating expenses and British Pound Sterling operations represented 10.3% of net
sales and 10.5% of operating expenses.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures Our chief executive officer and our principal
financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2009, have concluded
that, as of the evaluation date, our disclosure controls and procedures are effective.
Changes in Internal Controls There were no changes in our internal control over financial
reporting during the three months ended September 30, 2009, that have materially affected or are
reasonably likely to materially affect our internal control over financial reporting.
GLATFELTER
-31-
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, the Company
inadvertently reported the vote totals for the Companys Amended and Restated Long-Term Incentive
Plan as the vote totals for the ratification of Deloitte & Touche LLP and reported vote totals
for the ratification of Deloitte & Touche LLP as the vote totals for the Companys Amended and
Restated Long-Term Incentive Plan. In each case, the ultimate outcome of the vote that was
initially reported was correct. The vote totals for each proposal are restated below.
The Annual Meeting of holders of Glatfelter common stock was held on April 30, 2009 at which
shareholders voted on the following matters (with the indicated tabulated results).
|
i. |
|
The election of three members of the Board of Directors to serve for a term of one year
expiring on the date of the 2010 Annual Meeting of Shareholders. |
|
|
|
|
|
|
|
|
|
Director Nominee |
|
|
For |
|
|
Withheld |
|
George H. Glatfelter II |
|
|
38,127,310 |
|
|
|
2,434,352 |
|
Ronald J. Naples |
|
|
37,608,966 |
|
|
|
2,952,696 |
|
Richard L. Smoot |
|
|
34,571,938 |
|
|
|
5,989,724 |
|
In addition, five directors continued their term after the Annual Meeting. Those directors
are Kathleen A. Dahlberg, Richard C. Ill, Lee C. Stewart, Nicholas DeBenedictis and J. Robert
Hall.
|
ii. |
|
A proposal to approve an increase in the number of shares of the Companys common stock
that are available to be awarded under the Companys Amended and Restated Long-Term
Incentive Plan and to approve the Amended and Restated Long-Term Incentive Plan for purposes
of complying with Section 162(m) of the Internal Revenue Code. |
|
|
|
|
|
|
|
For |
|
Against |
|
Abstained |
|
Broker Non Votes |
|
29,610,305
|
|
6,486,515
|
|
650,603
|
|
3,814,239 |
|
iii. |
|
the ratification of the appointment of Deloitte & Touche LLP as the independent
registered public accounting firm for the Company for the fiscal year ending December 31,
2009. |
|
|
|
|
|
For |
|
Against |
|
Abstained |
|
37,639,373
|
|
2,867,995
|
|
54,294 |
ITEM 6. EXHIBITS
The following exhibits are filed herewith or incorporated by reference as indicated.
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
Certification of George H. Glatfelter II, Chairman and Chief
Executive Officer of Glatfelter, pursuant to Section 302(a) of the
Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
|
Certification of John P. Jacunski, Senior Vice President and Chief
Financial Officer of Glatfelter, pursuant to Section 302(a) of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
|
|
Certification of George H. Glatfelter II, Chairman and Chief
Executive Officer of Glatfelter, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. |
|
|
|
32.2 |
|
|
Certification of John P. Jacunski, Senior Vice President and Chief
Financial Officer of Glatfelter, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. |
GLATFELTER
-32-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
P. H. GLATFELTER COMPANY
(Registrant)
|
|
November 6, 2009 |
By |
/s/ David C. Elder
|
|
|
|
David C. Elder |
|
|
|
Vice President and Corporate Controller |
|
|
GLATFELTER
-33-
EXHIBIT INDEX
|
|
|
Exhibit |
|
|
Number |
|
Description |
31.1
|
|
Certification of George H. Glatfelter II, Chairman and
Chief Executive Officer of Glatfelter, pursuant to Section
302(a) of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350 Chief Executive Officer, filed herewith. |
31.2
|
|
Certification of John P. Jacunski, Senior Vice President
and Chief Financial Officer of Glatfelter, pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002 Chief
Financial Officer, filed herewith. |
32.1
|
|
Certification of George H. Glatfelter II, Chairman and
Chief Executive Officer of Glatfelter, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 Chief Executive
Officer, filed herewith. |
32.2
|
|
Certification of John P. Jacunski, Senior Vice President
and Chief Financial Officer of Glatfelter, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350 Chief Financial Officer, filed herewith. |
GLATFELTER
-34-