<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
-------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ---------------------
Commission File No. 1-3560
------
P. H. GLATFELTER COMPANY
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-0628360
- - ------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
228 South Main Street, Spring Grove, Pennsylvania 17362
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(717) 225-4711
--------------
(Registrant's telephone number, including area code)
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 the past 90 days. Yes X No
------ ------.
Shares of Common Stock outstanding at August 11, 1994 were 44,097,588.
<PAGE>
P. H. GLATFELTER COMPANY
INDEX
Part I - Financial Information
- - ------------------------------
Financial Statements:
Condensed Consolidated Statements of Income and Retained
Earnings - Three Months and Six Months Ended June 30,
1994 and June 30, 1993 (Unaudited)..................... 2
Condensed Consolidated Balance Sheets - June 30, 1994
(Unaudited) and December 31, 1993....................... 3
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1994 and June 30, 1993 (Unaudited)...... 4
Notes to Condensed Consolidated Financial Statements...... 5-6
Independent Accountants' Report........................... 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 8-10
Part II - Other Information..................................... 11-12
- - ---------------------------
Signature....................................................... 13
- - ---------
Index of Exhibits............................................... 14
Exhibit 11 - Computation of Net Income Per Share............. 15
Exhibit 15 - Letter in Lieu of Consent Regarding Review
Report of Unaudited Interim Financial
Information..................................... 16
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(dollars in thousands except number of shares and per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
6/30/94 6/30/93 6/30/94 6/30/93
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 115,328 $ 122,351 $ 226,143 $ 244,880
Other income - net
Energy sales - net 1,245 1,328 2,755 2,811
Interest on short-term investments 183 1,094 603 1,601
Gain (loss) from property dispositions,
etc., - net 122 3 139 (114)
----------- ----------- ----------- -----------
Total 116,878 124,776 229,640 249,178
Costs and expenses
Cost of products sold 105,492 101,144 207,513 203,688
Selling, general and administrative
expenses 6,833 8,217 13,912 16,995
Interest on debt - net 1,209 1,102 1,960 1,541
----------- ----------- ----------- -----------
Total 113,534 110,463 223,385 222,224
Unusual items - - - 13,229
----------- ----------- ----------- -----------
Total costs and expenses 113,534 110,463 223,385 235,453
----------- ----------- ----------- -----------
Income before income taxes and
accounting changes 3,344 14,313 6,255 13,725
Provision for income taxes
Current taxes 234 2,504 283 4,105
Deferred taxes 901 2,474 1,729 484
----------- ----------- ----------- -----------
Total 1,135 4,978 2,012 4,589
Income before accounting changes 2,209 9,335 4,243 9,136
Accounting changes - - - (4,193)
----------- ----------- ----------- -----------
Net income 2,209 9,335 4,243 4,943
Retained earnings at beginning of period 540,098 548,280 545,770 560,388
----------- ----------- ----------- -----------
Total 542,307 557,615 550,013 565,331
----------- ----------- ----------- -----------
Cash dividends declared
Preferred stock - 2 - 3
Common stock 7,717 7,714 15,423 15,429
----------- ----------- ----------- -----------
Total 7,717 7,716 15,423 15,432
----------- ----------- ----------- -----------
Retained earnings at end of period $ 534,590 $ 549,899 $ 534,590 $ 549,899
=========== =========== =========== ===========
Weighted average number of common shares
outstanding 44,218,932 44,369,511 44,203,111 44,424,730
Earnings (loss) per common share
Income before accounting changes $ .05 $ .21 $ .10 $ .21
Accounting changes - - - (.10)
----------- ----------- ----------- -----------
Net Income $ .05 $ .21 $ .10 $ .11
=========== =========== =========== ===========
Cash dividends declared per common share $ .175 $ .175 $ .35 $ .35
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
------
June 30 December 31
1994 1993
(unaudited)
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,240 $ 19,182
Marketable securities 1,611 22,184
Accounts receivable - net 40,222 34,340
Inventories:
Raw materials 31,904 37,340
In process and finished products 34,534 33,503
Supplies 28,655 28,087
-------- --------
Total inventory 95,093 98,930
Prepaid expenses and deferred income taxes 1,638 1,305
-------- --------
Total current assets 142,804 175,941
Plant, equipment and timberlands - net 637,796 621,113
Other assets 48,265 45,033
-------- --------
Total assets $828,865 $842,087
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Short-term bank borrowings $ 4,700 $ -
Accounts payable 32,516 39,935
Dividends payable 7,717 7,698
Federal, state and local taxes 3,928 4,872
Accrued compensation, other expenses
and deferred income taxes
25,386 28,972
Total current liabilities --------- ---------
74,247 $ 81,477
Long-term debt 150,000 150,000
Deferred income taxes 134,599 130,509
Other long-term liabilities 37,988 38,701
Shareholders' equity:
Common stock 544 544
Capital in excess of par value 39,602 39,323
Retained earnings 534,590 545,770
--------- ---------
Total 574,736 585,637
Less cost of treasury stock (142,705) (144,237)
--------- ---------
Total shareholders' equity 432,031 441,400
--------- ---------
Total liabilities and
shareholders' equity $ 828,865 $ 842,087
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
6/30/94 6/30/93
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 4,243 $ 4,943
Accounting changes - 4,193
Items included in net income not using (providing) cash:
Depreciation and depletion 21,591 19,374
Loss (gain) on disposition of fixed assets 277 (1,074)
Expense related to employee stock purchase plans 401 447
Change in assets and liabilities:
Accounts receivable (5,882) (3,227)
Inventories 3,837 1,395
Prepaid expenses and other assets (3,565) (7,469)
Accounts payable, accrued compensation, other expenses,
deferred income taxes and other long-term liabilities (7,615) (3,827)
Federal, state and local taxes (944) (2,786)
Deferred income taxes - noncurrent 4,090 484
-------- --------
Net cash provided by operating activities 16,433 12,453
-------- --------
Cash Flows from Investing Activities:
Sale (purchase) of marketable securities and
long-term investments 20,573 (34,134)
Proceeds from disposal of fixed assets 575 1,752
Additions to plant, equipment and timberlands (39,030) (47,042)
Decrease in liabilities related to fixed
asset acquisitions (3,922) (4,376)
-------- --------
Net cash used in investing activities (21,804) (83,800)
-------- --------
Cash Flows from Financing Activities:
Proceeds of long-term debt issuance - 150,000
Borrowing (repayment) of short-term debt 4,700 (10,100)
Dividends paid (15,404) (15,427)
Treasury stock purchases - (1,206)
Employees' contribution - common stock issued under
employee stock purchase plans 1,133 1,236
-------- --------
Net cash provided by (used in) financing activities (9,571) 124,503
-------- --------
Net increase (decrease) in cash and cash equivalents (14,942) 53,156
Cash and Cash Equivalents:
At beginning of period 19,182 3,093
-------- --------
At end of period $ 4,240 $ 56,249
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest (net of amount capitalized) $ 1,707 $ 238
Income taxes 1,716 7,245
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. A reconciliation between the provision for income taxes, computed by
applying the statutory federal income tax rate of 35% and 34% for 1994 and
1993, respectively, to income before income taxes and accounting changes,
and the actual provision for income taxes follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
6/30/94 6/30/93 6/30/94 6/30/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Federal income tax provision at
statutory rate $ 1,170 $ 4,867 $ 2,189 $ 4,667
State income taxes after deducting
Federal income tax benefit 34 652 162 625
Other (69) (541) (339) (703)
------ -------- -------- --------
Actual provision
for income taxes $ 1,135 $ 4,978 $ 2,012 $ 4,589
====== ======== ======== ========
</TABLE>
The deferred income tax provision for the six-month periods ended June 30, 1994
and 1993 results from the following temporary differences (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
6/30/94 6/30/93
-------- --------
<S> <C> <C>
Depreciation $ 3,698 $ 3,979
Pensions 978 (2,847)
Alternative Minimum Tax (2,373) -
Other (574) (648)
-------- --------
$ 1,729 $ 484
========= ========
</TABLE>
The provision for deferred income taxes is, in part, estimated based on an
allocation of the appropriate amount relative to the number of months
reported herein and in conformance with existing tax regulations.
2. The number of shares of common stock outstanding increased by 110,260 in
the first six months of 1994 due to the sale of 95,248 treasury shares
pursuant to the various Employee Stock Purchase Plans of the Registrant and
the delivery of 15,012 treasury shares pursuant to the 1988 Restricted
Common Stock Award Plan of the Registrant. At June 30, 1994, 10,264,392
shares of common stock were held in treasury.
3. The Registrant's Board of Directors has authorized the repurchase in the
open market or in privately negotiated transactions of up to 10,000,000
shares of the Registrant's common stock in the aggregate. Repurchased
shares are added to the treasury and are available for future sale. Under
these authorizations, as of June 30, 1994, the Registrant had repurchased
8,998,030 shares for a total consideration of $149,523,823.
4. Pursuant to the Registrant's 1992 Key Employee Long-Term Incentive Plan, on
May 1, 1994, the Registrant granted to certain key employees, excluding
officers and other participants in the Registrant's Management Incentive
Plans, non-qualified stock options to purchase an aggregate of 246,000
shares of common stock. The stock options, which expire on April 30, 2004,
were granted at an exercise price of $15.4375 per share, representing the
average fair market value of the Registrant's common stock on Friday, April
29, 1994 and Monday, May 2, 1994. Subject to certain conditions, these
stock options are exercisable for 174,000 shares of common stock beginning
on November 1, 1994. Stock options for the remaining 72,000 shares of
common stock, subject to certain conditions, are exercisable for 25% of
such common stock beginning on January 1, 1995 and for an additional 25% of
such common stock beginning on January 1 of each of the next three years.
5
<PAGE>
5. Effective January 1, 1994, the Registrant changed its method of accounting
for investments in debt and equity securities to conform to Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS No. 115"). The adoption of this
standard did not have a material impact on the Registrant's Condensed
Consolidated Balance Sheets or Condensed Consolidated Statements of Income
and Retained Earnings.
6. Effective January 1, 1993, the Registrant adopted the provisions of
Statements of Financial Accounting Standards No. 106, "Employers Accounting
for Postretirement Benefits Other Than Pensions" ("SFAS No. 106"), No. 112,
"Employers Accounting for Postemployment Benefits" ("SFAS No. 112"), and
No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). The net of tax
charges (credits), impacting the first quarter of 1993, due to the adoption
of these Standards, was as follows:
<TABLE>
<CAPTION>
<S> <C>
SFAS No. 106 $ 12,850,000
SFAS No. 112 1,967,000
SFAS No. 109 (10,624,000)
------------
Total accounting changes $ 4,193,000
============
</TABLE>
7. During the first quarter of 1993, the Registrant incurred unusual charges
in connection with rightsizing and restructuring of $16,363,000, partially
offset by a gain of $1,492,000 on the disposal of its Ecusta Division's
airplane and a credit of $1,642,000 resulting from the updating of
estimates relating to SFAS No. 106, subsequent to its adoption on January
1, 1993. The charge includes provisions for the costs of early retirements
and other terminations in the second quarter of 1993 and other one-time net
costs relating to the rightsizing and restructuring of the Company's
operations.
8. In the opinion of the Registrant, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which comprise
only normal recurring accruals) necessary for a fair presentation of the
financial information contained therein. These unaudited condensed
consolidated financial statements should be read in conjunction with the
more complete disclosures contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1993. Certain reclassifications have
been made of previously reported amounts in order to conform with
classifications used in the current year. The accompanying unaudited
condensed consolidated financial statements have been reviewed by the
Registrant's independent public accountants, Deloitte & Touche, in
accordance with the established professional standards and procedures for
such limited review. No additional adjustments or disclosures were
required as a result of this review.
6
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
- - -------------------------------
P. H. Glatfelter Company:
We have reviewed the accompanying condensed consolidated balance sheet of P. H.
Glatfelter Company and subsidiaries as of June 30, 1994 and the related
condensed consolidated statements of income and retained earnings for the three-
month and six-month periods ended June 30, 1994 and 1993 and of cash flows for
the six-months ended June 30, 1994 and 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of P. H. Glatfelter Company and
subsidiaries as of December 31, 1993 and the related consolidated statements of
income and retained earnings and of cash flows for the year then ended (not
presented herein); and in our report dated February 11, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1993 is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
Deloitte & Touche
Philadelphia, Pennsylvania
July 15, 1994
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
FINANCIAL CONDITION:
- - -------------------
Liquidity:
The Registrant's cash and marketable securities decreased by $35,515,000 during
the first six months of 1994. In addition, the Registrant incurred $4,700,000
in short-term bank borrowings. This use of funds was primarily due to the
funding of capital related projects of $42,952,000, and the payment of
$15,404,000 in dividends, which were partially offset by $16,433,000 of cash
provided by operating activities.
During the second quarter of 1994, in addition to incurring $4,700,000 in short-
term bank borrowings, the Registrant's cash and marketable securities decreased
by $6,090,000. This decrease was primarily due to the funding of capital
related projects of $22,242,000 and the payment of $7,706,000 in dividends,
which were partially offset by $18,450,000 of cash provided by operating
activities.
The Company expects to meet all its near and long-term cash needs from
internally generated funds, cash, cash equivalents, marketable securities and
existing bank lines of credit, or a combination of these sources.
Capital Resources:
The Registrant has continued its work on a major project to modernize the
pulpmill in Spring Grove, Pennsylvania. The project began in 1990 with
completion expected in the third quarter of 1994 for a total cost of
approximately $170,000,000. By June 30, 1994, the Registrant had spent a total
of $155,437,000 on this project, of which $16,215,000 was spent in the first six
months of 1994. The project's focus is almost entirely for improvement to the
environment, with a modest increase in pulping capacity.
The Registrant intends to spend approximately $21,000,000 for the installation
of a turbine generator at the Spring Grove mill. The project began in 1993 with
completion expected in the first quarter of 1995. By June 30, 1994, the
Registrant had spent a total of $6,863,000 on this project, of which $5,855,000
was spent in the first six months of 1994. Total capital spending by the
Registrant in 1994 for this project is expected to approximate $15,500,000.
RESULTS OF OPERATIONS:
- - ---------------------
A summary of the period-to-period changes in the principal items included in the
consolidated statements of income is shown below.
<TABLE>
<CAPTION>
Comparison of
Three Months Ended Six Months Ended
June 30, 1994 and June 30, 1994 and
June 30, 1993 June 30, 1993
-------------------------------------------
Increase (Decrease)
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales $ (7,023) (5.7%) $(18,737) (7.7%)
Other income - net (875) (36.1%) (801) (18.6%)
Cost of products sold 4,348 4.3% 3,825 1.9%
Selling, general and
administrative expenses (1,384) (16.8%) (3,083) (18.1%)
Interest on debt - net 107 9.7% 419 27.2%
Unusual items - expenses - NC (13,229) (100.0%)
Provision for taxes on income (3,843) (77.2%) (2,577) (56.2%)
Income before accounting changes (7,126) (76.3%) (4,893) (53.6%)
Accounting changes - NC (4,193) (100.0%)
Net income (7,126) (76.3%) (700) (14.2%)
NC - not calculable
</TABLE>
8
<PAGE>
Net Sales
- - ---------
The Registrant classifies product sales into two groups: 1) printing papers;
and 2) tobacco and other specialty papers. Net sales decreased by $7,023,000
and $18,737,000 for the second quarter and first six months of 1994,
respectively, compared to the corresponding periods in 1993.
Net sales of printing papers were 12.6% lower in both the second quarter and the
first six months of 1994 compared to the corresponding periods of 1993. Reduced
orders due to increased capacity within the paper industry, as well as extreme
weather conditions, led to approximately eight days and thirteen days of
unplanned downtime at the Registrant's Spring Grove, Pennsylvania and Neenah,
Wisconsin mills, respectively, during the first quarter of 1994. Demand for
printing papers at the Spring Grove and Neenah mills has improved in the second
quarter of 1994 and additional unplanned downtime was limited to three days at
the Neenah mill during the beginning of April.
The Registrant's average net selling price per ton of printing papers was 6.5%
lower in the second quarter of 1994 compared to the second quarter of 1993 and
2.8% lower for the first six months of 1994 compared to the corresponding period
in 1993. Pricing for some of the Registrant's printing paper products produced
at the Spring Grove and Neenah mills has recently shown signs of modest
improvement. The Registrant is cautiously optimistic that market conditions
will allow additional price increases on certain printing paper products in the
second half of this year.
Net sales of tobacco and other specialty papers were 15.1% higher in the second
quarter of 1994 compared to the second quarter of 1993, and 7.2% higher in the
first six months of 1994 compared to the same period in 1993. A significant
volume increase of 19.5% has more than offset an 11.8% drop in average net
selling price, primarily for tobacco papers, for the first six months of 1994
compared to the first six months of 1993. Net sales of the Registrant's other
specialty papers increased by approximately 26.3% in the first six months of
1994 compared to the corresponding period in 1993, due primarily to increased
volume.
The Registrant's Pisgah Forest, North Carolina mill experienced a moderate
operating loss during the second quarter and first half of 1994 and has incurred
an additional moderate operating loss in July, 1994. The Registrant's
continuing efforts to improve the results of operations for the Pisgah Forest
mill have not yet been successful, with the result that further restructuring
and cost cutting or other measures may be required.
Other Income (net)
- - ------------------
Other income (net) in the second quarter and first six months of 1994 decreased
$875,000 and $801,000, respectively, compared to the same periods in 1993.
These decreases are primarily due to a reduction in the amount of interest
earned on short-term investments. Funds available for investment have decreased
since the Registrant's issuance of $150,000,000 principal amount of its 5-7/8%
Notes in March, 1993. This decrease is primarily due to the funding of capital
related projects and the payment of dividends, as described under Liquidity
above.
Cost of Products Sold
- - ---------------------
The Registrant's gross margins fell from 16.8% for the first six months of 1993
to 8.2% for the first six months of 1994, and from 17.3% for the second quarter
of 1993 to 8.5% for the second quarter of 1994. These decreases were due to
lower average selling prices and an increased cost of products sold per ton.
This increased cost per ton was largely due to fewer tons of products
manufactured because of the unplanned mill downtime mentioned above and the
Registrant's high fixed cost manufacturing process. The cost of products sold
also increased as a result of higher costs for market pulp and increased
depreciation costs.
In July, 1994, in connection with the annual Spring Grove mill maintenance
shutdown, the Registrant began integrating various components of new equipment
related to the pulpmill modernization project. The complexity of integrating
the new equipment has led to more downtime in the pulpmill than would normally
be incurred during the annual shutdown. This will have an unfavorable impact on
the Registrant's earnings in the third quarter of 1994 compared to the third
quarter of 1993.
9
<PAGE>
Selling, General and Administrative Expenses
- - --------------------------------------------
The Registrant's selling, general and administrative expenses for the second
quarter and first six months of 1994 decreased by $1,304,000 and $3,083,000,
respectively, compared to the same periods of 1993. These decreases occurred
primarily in salaries, wages and other compensation related expenses resulting
from the Registrant's 1993 restructuring efforts. Profit sharing and incentive
expenses were also lower in 1994 than in 1993 due to lower earnings.
Interest on Debt (net)
- - ----------------------
The Registrant's interest on debt (net) increased $419,000 for the first six
months of 1994 compared to the corresponding period of 1993. As noted above,
the Registrant issued $150,000,000 principal amount of its 5-7/8% Notes in
March, 1993. These Notes were outstanding for only four months during the first
six months of 1993 compared to six months during the 1994 period. The resulting
increase in interest expense was offset somewhat by an increase in capitalized
interest.
Unusual Items
- - -------------
During the first quarter of 1993, the Registrant incurred unusual charges in
connection with rightsizing and restructuring of $16,363,000, partially offset
by a gain of $1,492,000 on the disposal of its Ecusta Division's airplane, and a
credit of $1,642,000 resulting from the updating of estimates relating to SFAS
No. 106, subsequent to its adoption on January 1, 1993. The charge includes
provisions for the cost of early retirements and other terminations of employees
in the second quarter of 1993 and other one-time net costs relating to the
rightsizing and restructuring of the Registrant's operations.
Accounting Changes
- - ------------------
Effective January 1, 1993, the Registrant adopted the provisions of SFAS No.
106, SFAS No. 112, and SFAS No. 109. The cumulative charge, net of tax,
resulting from the adoption of these Standards was $4,193,000. See Note 6 to
the condensed consolidated financial statements for a further description of the
accounting changes.
10
<PAGE>
PART II OTHER INFORMATION
- - --------------------------
Item 1. Legal Proceedings
--------------------------
The Registrant owns and operates a pulp and paper mill located on the
lower Fox River in Neenah, Wisconsin. The Registrant acquired that mill in
1979 in its merger with Bergstrom Paper Company. In the 1980s,
investigations into the presence of polychlorinated biphenyls ("PCBs") in
sediments in the lower Fox River were begun. One source of such PCBs is
claimed to be the recycling of NCR(R) carbonless paper which contained PCBs
in its coating formulation. The Registrant previously recycled such paper
at its Neenah Mill. As an outgrowth of the investigation, the Fox River
Coalition, an ad hoc group comprised of members of private industry, local
governmental entities, publicly-owned wastewater treatment plants and the
Wisconsin Department of Natural Resources ("DNR"), was formed to develop
and implement a quick and cost-effective clean up of the contaminated
sediments in the lower Fox River. The Registrant is a member of the Fox
River Coalition.
As reported in the Registrant's report on Form 8-K dated June 22,
1994, despite the efforts of the Fox River Coalition, in a letter dated
June 20, 1994 (received by the Registrant June 22, 1994), pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. (S)(S) 9601-75, and the Federal Water Pollution
Control Act, 33 U.S.C. (S)(S) 1251-1387, the United States Department of
the Interior, Fish and Wildlife Service ("FWS"), notified the Registrant
and four other paper companies that they had been identified as Potentially
Responsible Parties ("PRPs") under CERCLA for injuries to natural resources
resulting from releases of hazardous substances to the Fox River and Bay of
Green Bay (the "Site"). Further, the PRPs were advised of the FWS' intent
to perform a Natural Resources Damage Assessment for the Site. Prior to
notification from the FWS, DNR declined to join or support the FWS in its
proposed action and urged the FWS not to assess damages for natural
resources, stating that it believed that the voluntary approach of the Fox
River Coalition was the fastest way to reduce any contamination in the
lower Fox River. The Registrant is in the process of investigating this
matter and is presently unable to determine the extent and materiality of
liability, if any, associated with the action taken by the FWS, for which
the Registrant may be responsible.
On June 6, 1994, the Registrant settled, without any obligation on
its part, the action captioned United States v. Modern Trash Removal of
York, Inc., Civil No. 92-0819.
Item 4. Submission of Matters to a Vote of Security Holders
- - ------------------------------------------------------------
(a) The Registrant's Annual Meeting of Shareholders was held on April
27, 1994.
(b) The shareholders elected all of management's nominees for
Directors.
(c) The votes cast for election of voting applied): Directors were as
follows (cumulative voting applied):
<TABLE>
<CAPTION>
For Withheld
------------ ----------
<S> <C> <C>
R. E. Chappell 37,464,561 302,861
G. H. Glatfelter II 37,491,589 302,861
T. C. Norris 37,490,242 302,861
R. L. Smoot 37,464,232 302,861
</TABLE>
No other matters were voted upon at the meeting.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits
--------
Number Description of Documents
------ ------------------------
11 Computation of Net Income per Share
15 Letter in Lieu of Consent Regarding Review
Reports of Unaudited Interim Financial
Information
(b) Reports on Form 8-K
-------------------
The Registrant filed a report on Form 8-K dated June 22, 1994
under Item 5, Other Information.
12
<PAGE>
SIGNATURE
Pursuant to the requirements 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
Date: August 12, 1994 ------------------------------------
R. P. Newcomer
Vice President and Treasurer
(Principal Financial Officer)
13
<PAGE>
INDEX OF EXHIBITS
-----------------
Number Description of Documents
------ ------------------------
11 Computation of Net Income per Share
15 Letter in Lieu of Consent Regarding
Review Reports of Unaudited Interim
Financial Information
14
<PAGE>
EXHIBIT 11
P. H. GLATFELTER COMPANY
AND CONSOLIDATED SUBSIDIARIES
=============================
Computation of Net Income Per Share
<TABLE>
<CAPTION>
For the 3 Months Ended For the 6 Months Ended
6/30/94 6/30/93 6/30/94 6/30/93
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average number of common and common
share equivalents:
Common Shares:
Shares outstanding, beginning of period........ 44,034,856 44,083,936 43,987,328 44,057,273
Less shares purchased for treasury......... - (39,691)(1) - (43,574)(1)
Shares issued - Employee Stock Purchase
Plans........... 524(2) 474 (3) 24,422(2) 26,447 (3)
Shares issued - 1988 Restricted Common
Stock Award Plan. 9,898(4) - 4,976(4) -
----------- ----------- ----------- -----------
Total...... 44,045,278 44,044,719 44,016,726 44,040,146
----------- ----------- ----------- -----------
Common share equivalents applicable to
outstanding stock awards 173,654(5) 324,792 (5) 186,385(5) 384,584 (5)
----------- ----------- ----------- -----------
Total.......... 44,218,932 44,369,511 44,203,111 44,424,730
Net income.............. $ 2,208,811 $ 9,334,868 $ 4,243,114 $ 4,942,786
Preferred dividends..... - (1,820) - (3,639)
----------- ----------- ----------- -----------
Net income applicable to common shares.......... $ 2,208,811 $ 9,333,048 $ 4,243,114 $ 4,939,147
----------- ----------- ----------- -----------
Net income per common share $ .05 $ .21 $ .10 $ .11
=========== =========== =========== ===========
</TABLE>
(1) Weighted average effect of 45,500 common shares repurchased in the second
Quarter of 1993 and 70,400 common shares repurchased in the first six
months of 1993.
(2) Weighted average effect of 47,720 common shares sold from treasury on June
30, 1994 and 95,248 common shares sold from treasury in the first six
months of 1994.
(3) Weighted average effect of 43,113 common shares sold from treasury on June
30, 1993 and 94,676 common shares sold from treasury in the first six
months of 1993.
(4) Weighted average effect of 15,012 common shares issued from treasury in
the second quarter of 1994.
(5) Weighted average effect of shares subject to outstanding awards under the
Registrant's 1988 Restricted Common Stock Award Plan and weighted average
effect of shares issuable under the Registrant's 1992 Key Employee Long-
Term Incentive Plan.
15
<PAGE>
EXHIBIT (15)
LETTER IN LIEU OF CONSENT REGARDING REVIEW REPORT OF UNAUDITED
--------------------------------------------------------------
INTERIM FINANCIAL INFORMATION
-----------------------------
P. H. Glatfelter Company:
We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited condensed consolidated
financial statements of P. H. Glatfelter Company and subsidiaries for the three-
month and six-month periods ended June 30, 1994 and 1993, as indicated in our
report dated July 15, 1994; because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, is
incorporated by reference in Registration Statements Nos. 33-24858, 33-25884,
33-37198, 33-49660, 33-53338 and 33-54409 on Form S-8.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act, is not considered a part of the Registration Statement
prepared or certified by an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche
Philadelphia, Pennsylvania
July 15, 1994
16
