<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 1996 1-3560
P. H. GLATFELTER COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 23-0628360
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
228 South Main Street
Spring Grove, Pennsylvania 17362
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (717) 225-4711
including area code
Securities registered pursuant to Section 12(b) of the Act:
Common Stock American Stock Exchange Inc.
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates at February 26, 1997 was $392,022,040.
Common Stock outstanding at February 26, 1997: 42,330,048 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference in this Report on Form 10-K.
1. Proxy Statement dated March 14, 1997 (Part III)
<PAGE> 2
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
Common Stock Prices and Dividends Paid Information
The table below shows the high and low prices of the Registrant's common stock
on the American Stock Exchange (Ticket Symbol "GLT") and the dividends paid per
share for each quarter during the past two years.
<TABLE>
<CAPTION>
1996 1995
==============================================================================================================
Quarter High Low Dividends High Low Dividends
<C> <C> <C> <C> <C> <C> <C>
1st $18 $15 5/8 $.175 $18 3/8 $15 3/8 $.175
2nd 18 3/8 16 1/4 .175 20 1/4 17 1/2 .175
3rd 18 5/8 16 3/4 .175 23 5/8 19 3/4 .175
4th 19 5/8 16 3/4 .175 22 3/8 15 7/8 .175
</TABLE>
As of December 31, 1996, the Registrant had 4,290 shareholders of record. A
number of the shareholders of record are nominees.
Item 6. Selected Financial Data.
Seven-Year Summary of Selected Consolidated Financial Data
Year Ended December 31
(in thousands except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $566,084 $623,709 $ 478,302 $473,509 $540,057 $567,764 $625,429 $598,777
Income (loss) before 60,399 65,828 (118,251)(a) 20,409(c) 56,544 76,049 88,332 92,864
accounting changes
Income (loss) per 1.41 1.49 (2.67)(a) .46(c) 1.27 1.67 1.88 1.93
common share before
accounting changes
Total assets 715,310 673,107 650,810(b) 842,087(d) 648,464 630,115 598,842 550,015
Debt 150,000 150,000 174,100 150,000 10,100 __ __ 1,100
Cash dividends $ .70 $ .70 $ .70 $ .70 $ .70 $ .60 $ .575 $ .50
declared per
common share
</TABLE>
- --------------
(a) After impact of an after tax charge for a writedown of impaired assets
(unusual items) of $127,981,000.
11
<PAGE> 3
(b) After impact of writedown of impaired assets (unusual items)
of $208,949,000.
(c) After impact of an after tax charge for rightsizing and restructuring
(unusual items) of $8,430,000 and the effect of an increased federal
corporate income tax rate of $3,587,000.
(d) Includes an increase of $61,062,000 resulting from the adoption of
Statement of Financial Accounting Standards No. 109.
12
<PAGE> 4
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
OVERVIEW
The Company classifies its sales into two product groups: 1) printing papers;
and 2) tobacco and other specialty papers. The Spring Grove, Pennsylvania and
Neenah, Wisconsin mills produce printing papers and specialty papers. The Pisgah
Forest mill (hereinafter referred to as the "Ecusta Division" or "Ecusta")
produces printing papers and tobacco and other specialty papers. Sales of
certain paper grades have been reclassified during 1996 to be consistent with
the Company's definition of other specialty papers. Prior year amounts have been
restated to be in conformity with the 1996 classification.
Most of the Company's printing paper products are directed at the uncoated
free-sheet portion of the industry, which experienced weak demand in the
beginning of 1996. It is generally believed that this situation was caused by
abnormally high customer inventory levels at the beginning of the year. The
Company believes such customer inventory levels were lower at the end of 1996
than as of the beginning of the year. Prices for the Company's printing paper
products declined during the year. While demand for the Company's printing paper
products declined during 1996, the Company believes that demand and pricing for
papers sold to the book publishing industry, which is a significant part of the
Company's printing paper business, remained stronger as compared to paper sold
to the rest of the printing paper market. The Company expects that sluggish
conditions in the printing paper market will continue during the first half of
1997. The Company believes that demand will improve during the second half of
the year and that some price relief may occur during the last six months of
1997.
Demand and pricing for tobacco and other specialty products were not
significantly impacted by the softer printing paper market and remained fairly
constant during the year. Domestic cigarette consumption was flat in 1996
compared to 1995 and international cigarette consumption continued to grow.
Overall demand and pricing for tobacco and other specialty papers is expected to
remain relatively stable throughout the coming year. A significant portion of
Ecusta's sales are made to a limited number of major tobacco companies. The
current legal and regulatory pressures on that industry could have an adverse
effect on the future tobacco paper sales and profitability of Ecusta. Under such
conditions, the Company would attempt to replace any lost sales and
profitability with lightweight printing and other specialty papers.
1996 COMPARED TO 1995
Net sales in 1996 decreased $57,625,000, or 9.2%, compared to 1995. This
decrease was principally caused by a decrease in average selling prices at the
Spring Grove and Neenah mills. The sales volume at all the Company's mills was
also down slightly in 1996 compared to 1995.
Printing paper sales decreased by $66,540,000, or 15.8%, in 1996 compared to
1995. The annual average net printing paper selling price decreased 12.2% in
1996 from 1995 due to the decrease in demand for printing papers. Demand for
these papers was slow early in the year, improved in the second and third
quarters, and then slowed again in the fourth quarter.
Net tobacco and other specialty paper sales increased $8,915,000, or 4.4%, in
1996 compared to 1995. The Company had a slight decrease in tobacco paper sales
in 1996 compared to 1995. Tobacco paper sales volume was down 3.4% in 1996
versus 1995; however, demand was sufficient for the Company to improve its sales
mix for these papers. This resulted in a slight increase in average tobacco
paper selling price in 1996 compared to 1995. Other specialty paper sales
increased by 12.5% in 1996 compared to 1995 as sales volume increased by 7.3%.
The average selling price of other specialty papers increased by 4.9%, in part
due to improved product mix.
Profit from operations before interest income and expense and taxes was
$105,639,000 in 1996 compared to $116,501,000 in 1995. This decrease was the
result of decreased selling prices and sales volume. Despite these decreases,
gross margin increased from 22.7% in 1995 to 23.2% in 1996. The increase in
gross margin was primarily a result of lower costs for market pulp, pulp
substitutes and wastepaper. These cost reductions particularly benefited the
Ecusta and Neenah mills which rely more on purchased fiber than the Spring Grove
mill. The Company's 1996 gross margins also increased due to favorable changes
in its product mix. On average, tobacco and other specialty paper sales, which
increased in 1996, have a higher margin than printing paper sales. The raw
material price decreases and changes in product mix more than offset the
unfavorable impact of lower production during 1996 compared to 1995. The
Company's lower production resulted in higher fixed costs per ton as fixed
costs were absorbed over fewer tons produced.
Selling, general and administrative expenses were $886,000 lower in 1996 than in
1995. This decrease was primarily the result of lower profit sharing and
incentive expenses, which were partially offset by increased miscellaneous
general and administrative expenses. Selling, general and administrative
expenses were 6.3% and 5.8% of net sales for 1996 and 1995, respectively.
Interest on debt in 1996 decreased $957,000 from 1995. This decrease was
primarily the result of reduced short-term bank borrowings. The Company had
average net short-term borrowings of $20,000 and $9,447,000 during 1996 and
1995, respectively, at an average interest rate of 6.1% and 6.2%, respectively.
The Company had no short-term borrowings at the end of 1996. Interest on debt
also decreased as a result of a lower variable interest rate on the Company's
interest rate swap agreement which has a total notional principal amount of
$50,000,000.
13
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
RESULTS BY MILL
The Spring Grove mill's profit from operations decreased by $27,073,000 in 1996
compared to 1995. Net sales decreased $32,738,000 in 1996 compared to 1995 due
primarily to a decrease in average selling price. Sales volume was less than 1%
lower in 1996 than 1995. Cost of sales decreased slightly, primarily due to
lower raw material costs, offsetting increases in other costs including
depreciation. Selling, general and administrative expenses also decreased,
primarily due to lower profit sharing and incentive expenses.
Despite a decrease in net sales of $24,185,000 in 1996 compared to 1995, profit
from operations at the Neenah mill increased by $2,404,000. The net sales
decrease was primarily the result of lower average selling price. Sales volume
was approximately 2% lower in 1996 than 1995. Neenah's cost of sales decreased
by $27,147,000, primarily due to significantly lower wastepaper, pulp and pulp
substitute costs. Wastepaper costs were extremely high in 1995 and the 1996
costs represented a return closer to historical levels.
Profit from operations at Ecusta increased $13,807,000 in 1996 compared to 1995.
Net sales were flat in 1996 compared to 1995. A slight increase in average
selling price due to improved product mix offset a slight reduction in sales
volume. Ecusta's cost of sales decreased significantly during the year,
primarily as a result of decreased pulp costs. During the second half of 1996,
the Ecusta mill purchased a significant amount of pulp, much of which remains in
the Company's inventory at the end of the year.
1995 COMPARED TO 1994
Net sales in 1995 increased $145,407,000, or 30.4%, over 1994. The Company's
sales volume also increased in 1995 compared to 1994. Overall demand for the
Company's products was very strong into the third quarter of 1995. The demand
for printing papers weakened towards the end of the third quarter and incoming
orders remained below normal levels during the fourth quarter of 1995. Strong
market conditions resulted in significant price increases during the first nine
months of 1995, tempered somewhat by a marginal decline during the fourth
quarter of 1995.
Printing paper sales increased by $119,468,000, or 39.5%, in 1995 compared to
1994. The annual average net printing paper selling price increased 29.4% in
1995 from 1994 due to the significant increase in demand for printing papers as
well as the Company's ability to offset increased raw material costs,
particularly for market pulp, pulp substitutes and wastepaper. The increased
demand for printing papers resulted in a 7.8% increase in sales volume in 1995
compared to 1994. Weakening demand resulted in some marginal price decreases
during the fourth quarter of 1995. Despite these decreases, the average selling
price during the fourth quarter of 1995 was significantly higher than the
average selling price during the fourth quarter of 1994.
Net tobacco and other specialty paper sales increased $25,939,000, or 14.7%, in
1995 compared to 1994. The Company had a 14.2% increase in tobacco paper sales
volume in 1995 over 1994. An increase in worldwide demand for tobacco paper
products in general and flax based tobacco papers specifically, and a lack of
industry capacity increases allowed the Company to sell more tobacco paper
volume and improve its sales mix. These factors also resulted in a slight
increase in average tobacco paper selling price in 1995, compared to 1994. Other
specialty paper sales increased by 13.3% in 1995 compared to 1994 due to a 13.9%
increase in average selling prices.
Increased sales volumes and selling prices led to a significant increase in
operating profit in 1995 compared to 1994. Profit from operations, before
unusual items, interest income and expense and taxes was $116,501,000 compared
to $21,541,000 in 1994. The increase in average selling prices more than offset
the increase in cost of products sold resulting in an increase in gross margin
from 8.5% in 1994 to 22.7% in 1995. The cost of products sold increased
primarily as a result of higher costs for market pulp, pulp substitutes and
wastepaper. These cost increases more than offset (i) the ability of the Company
to spread its fixed manufacturing costs over more tons of products manufactured
during 1995 compared to 1994, and (ii) the favorable impact of lower
depreciation expense of approximately $10,000,000 during 1995 compared to 1994.
Increased depreciation expense at the Spring Grove mill, due primarily to the
completion of the pulpmill modernization project in the fourth quarter of 1994,
was more than offset by a reduction in depreciation at Ecusta in 1995 of
approximately $14,400,000 compared to 1994. The decrease in Ecusta's
depreciation resulted from the writedown of the net assets of Ecusta in the
fourth quarter of 1994.
Selling, general and administrative expenses were $9,157,000 higher in 1995 than
in 1994. This increase occurred primarily from higher profit sharing and
incentive related expenses during 1995 compared to 1994. Selling, general and
administrative expenses were 5.8% and 5.7% of net sales for 1995 and 1994,
respectively.
Interest on debt in 1995 increased $3,901,000 over 1994. The Company capitalized
$3,066,000 of interest expense in 1994. No interest expense was capitalized
during 1995. The increase in interest on debt was also due to a higher variable
interest rate on the Company's interest rate swap agreement which has a total
notional principal amount of
14
<PAGE> 6
$50,000,000. Interest on short-term borrowings during 1995 was $50,000 less than
in 1994. The Company had no short-term borrowings at the end of 1995.
RESULTS BY MILL
The Spring Grove mill's profit from operations increased by $56,792,000 in 1995
compared to 1994. Net sales increased $78,426,000 in 1995 compared to 1994 due
to a significant increase in sales volume and average selling price. Cost of
sales increased primarily due to increased depreciation. Depreciation increased
due to the completion of the pulpmill modernization project during the fourth
quarter of 1994. This project, undertaken primarily for environmental reasons,
resulted in an increase in total pulp production capacity at the mill. The
corresponding reduction in volume of purchased market pulp resulted in increased
profitability at Spring Grove during 1995.
Profit from operations at the Neenah mill increased by $9,298,000 in 1995
compared to 1994. Net sales increased $42,370,000 in 1995 due to a significant
increase in sales volume and average selling price. Neenah's 1995 profit from
operations was negatively impacted by a significant increase in the cost of
wastepaper. Wastepaper costs decreased during the second half of 1995 and by the
end of 1995 had returned closer to historical levels.
Profit from operations at Ecusta increased $28,870,000 in 1995 compared to 1994.
Net sales increased $24,611,000 in 1995, primarily due to an increase in average
selling price due to improved product mix and Ecusta's ability to offset
increased raw material costs, particularly for market pulp. Ecusta's increase in
raw material costs was more than offset through a combination of price increases
and by a decrease of approximately $14,400,000 in depreciation costs, due to the
writedown of the net assets of Ecusta in the fourth quarter of 1994. Ecusta's
profitability was also significantly enhanced through comprehensive cost
reduction efforts.
1994 - UNUSUAL CHARGES
During 1994, the Company closely monitored the Ecusta Division and continued its
efforts to maximize utilization of Ecusta's assets by attempting to direct sales
volume to its more profitable grades and by controlling costs. Despite these
efforts, Ecusta experienced a 1994 operating loss before an unfavorable LIFO
inventory charge, unusual items, interest expense and taxes of $4,921,000.
Ecusta continued to be negatively impacted by the continuing trend of declining
domestic tobacco consumption, a trend which was expected to continue. Increased
competition for foreign tobacco paper sales had also negatively impacted
Ecusta's profitability.
Based on 1994 Ecusta operating results, which indicated that market conditions
were unlikely to improve significantly in the near future, the Company
determined that its efforts to return Ecusta to an acceptable level of
profitability would not be successful. As a result, the Company decided to
evaluate other strategic alternatives. As part of its consideration of such
alternatives, the Company solicited offers to buy the Ecusta Division during the
fourth quarter of 1994. In January 1995, the Company rejected all offers which
it received to buy the Ecusta Division because the offers were less than the
Company's valuation of the net assets. Nevertheless, as a result of these
offers, as well as the Company's revised valuation of the net assets of Ecusta,
the Company concluded that the fair value of the net assets was less than the
book value. Accordingly, during the fourth quarter of 1994, the net assets of
Ecusta were written down to fair value, resulting in a $198,189,000 charge to
pre-tax earnings. This writedown had no cash impact on the Company.
The Company concluded that asset impairment recognition was required as the
revised projected undiscounted future cash flows of the Ecusta Division were
less than the carrying value. In developing the revised projections, the Company
considered 1994 actual results and the Company's conclusions concerning future
market conditions and the resulting impact on prices. To determine the fair
value of the Ecusta Division net assets, the Company projected the present value
of future cash flows using a 13% discount rate. The resulting fair value, which
exceeded the offers received, was used to determine the amount of the writedown.
The writedown of Ecusta's net assets reduced depreciation expense in 1995 by
approximately $14,400,000 and will reduce depreciation in subsequent periods by
declining amounts.
During the fourth quarter of 1994, the Company also identified impaired assets
at its Spring Grove and Neenah mills, resulting in a pre-tax charge of
$10,760,000. This writedown primarily related to solid waste disposal assets,
specifically, a sludge combustor at the Neenah mill and an unused landfill at
the Spring Grove mill. During the fourth quarter of 1994, the Company identified
more economical means, acceptable to the appropriate environmental agencies, by
which to dispose of its solid waste at these locations and concluded that the
significant additional expenditures necessary to make the assets operational
were not prudent, resulting in unusable assets.
FINANCIAL CONDITION
Liquidity
During 1996, the Company's cash and cash equivalents increased by $12,938,000.
This increase in cash and cash equivalents was due to cash generated by
operations of $96,608,000 which was largely offset by the funding of $35,644,000
for capital-related projects, the payment of
15
<PAGE> 7
$29,977,000 for dividends and the expenditure of $19,068,000 to purchase common
stock for the treasury, the purpose of which was to increase shareholder value.
During 1996, the Company's inventory increased by $14,153,000. This increase
was primarily due to the purchase at low cost of a significant amount of market
pulp for the Ecusta mill. The Company plans to reduce Ecusta's market pulp
inventory to historical levels by the end of 1997.
The Company's interest rate risk is limited to its level of variable rate
borrowings. In March 1993, the Company issued $150,000,000 principal amount of
its 5-7/8% Notes due March 1, 1998 and immediately entered into an interest rate
swap agreement having a total notional principal amount of $50,000,000. Under
the agreement, the Company receives a fixed rate of 5-7/8% and pays a floating
rate (London Interbank Offered Rate (LIBOR) plus sixty basis points), as
determined at six month intervals. The floating rate is 6.37344% for the six
month period ending February 28, 1997. Although the Company can pay to terminate
the swap agreement at any time, the Company intends to hold the swap agreement
until its March 1, 1998 maturity. The cost to the Company to terminate the
agreement fluctuates with prevailing market interest rates. As of December 31,
1996, the cost to terminate the swap agreement was approximately $430,000.
In February 1997, the Company completed a transaction pursuant to which the
Company deposited approximately $155,500,000 into a trust to defease certain
covenants under the indenture under which the Company's $150,000,000 5-7/8%
Notes are outstanding. The amount deposited in the trust and the Company's
$150,000,000 5-7/8% Notes will continue to be reported on the Company's
Consolidated Balance Sheets.
The Company expects to meet all its near-term cash needs from a combination of
internally generated funds, cash, cash equivalents, marketable securities and
existing bank lines of credit.
Capital Resources
During 1996, the Company expended $35,644,000 for capital projects. Most of
these expenditures were for maintenance related capital projects; however,
approximately $2,000,000 was expended for environmental capital projects.
Capital spending in 1997 is expected to increase significantly as certain large
projects begun in 1996 are expected to be completed during 1997. The Company
expects to complete the installation of a gravure coater and a precipitated
calcium carbonate plant at the Spring Grove mill during the latter part of 1997.
These projects are expected to cost approximately $15,000,000 and $9,500,000,
respectively, including some minor expenditures made during 1996.
ENVIRONMENTAL MATTERS
The Company is subject to loss contingencies resulting from regulation by
various federal, state, local and foreign governmental authorities with respect
to the environmental impact of air and water emissions and noise from its mills
as well as its disposal of solid waste generated by its operations. In order to
comply with environmental laws and regulations, the Company has incurred
substantial capital and operating expenditures over the past several years.
During 1996, 1995 and 1994, the Company incurred approximately $15,200,000,
$14,600,000 and $15,300,000, respectively, in operating costs related to
complying with environmental laws and regulations. The Company anticipates that
environmental regulation of the Company's operations will continue to become
more burdensome and that capital and operating expenditures will continue, and
perhaps increase, in the future. In addition, the Company may incur obligations
to remove or mitigate any adverse effects on the environment resulting from its
operations, including the restoration of natural resources, and liability for
personal injury and damage to property, including natural resources. In
particular, while the Company continues to negotiate with the State of Wisconsin
(and expects to resume negotiations with the United States Fish and Wildlife
Service) regarding natural resources restoration and damages related to the
discharge of polychlorinated biphenyls (PCBs) and other hazardous substances
into the lower Fox River, on which the Company's Neenah mill is located, the
cost of such restoration and damages is presently unknown but could be
substantial. Management's current assessment, after consultation with legal
counsel, is that such expenditures are not likely to have a material adverse
effect on the Company's financial condition or liquidity, but could have a
material adverse effect on the Company's results from operations in a given
year; however, there can be no assurance that the Company's reserves will be
adequate or that a material adverse effect on the Company's financial condition
or liquidity will not occur at some future time.
EFFECTS OF CHANGING PRICES
The moderate levels of inflation during recent years have not had a material
effect on the Company's net sales, revenues or income from operations. Although
the replacement cost of assets increases during inflationary periods, earnings
and cash flow may be maintained through an increase in selling prices.
FORWARD-LOOKING STATEMENTS
Any statements set forth in this annual report or otherwise made in writing or
orally by the Company with regard to its expectations as to industry conditions
and its financial results, demand and pricing for its products and other aspects
of its business may constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Although the Company makes
such statements based on assumptions which it believes to be reasonable, there
can be no assurance that actual
16
<PAGE> 8
results will not differ materially from the Company's expectations. Accordingly,
the Company hereby identifies the following important factors, among others,
which could cause its results to differ from any results which might be
projected, forecasted or estimated by the Company in any such forward-looking
statements: (i) variations in demand for its products; (ii) changes in the cost
or availability of raw materials used by the Company, in particular market pulp,
pulp substitutes and wastepaper; (iii) 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; (iv)
the gain or loss of significant customers; (v) cost and other effects of
environmental compliance, cleanup, damages, remediation or restoration, or
personal injury or property damage related thereto, such as the cost of natural
resource restoration or damages related to the presence of PCBs in the lower Fox
River on which the Company's Neenah mill is located; (vi) significant changes in
cigarette consumption, both domestically and internationally; (vii) enactment of
adverse state or federal legislation or changes in government policy or
regulation; (viii) adverse results in litigation; and (ix) disruptions in
production and/or increased costs due to labor disputes.
17
<PAGE> 9
Item 8. Financial Statements and Supplementary Data.
CONSOLIDATED STATEMENTS OF INCOME
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
(in thousands except per share amounts) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $566,084 $623,709 $ 478,302
OTHER INCOME:
Interest on investments and other -- net 1,574 1,376 998
Energy sales -- net 8,559 9,455 5,645
Gain from property dispositions, etc. -- net 977 1,852 2,558
-------- -------- ---------
Total 577,194 636,392 487,503
-------- -------- ---------
COSTS AND EXPENSES:
Cost of products sold 434,491 482,139 437,745
Selling, administrative and general expenses 35,490 36,376 27,219
Interest on debt (Notes 1(h) and 10) 9,308 10,265 6,364
-------- -------- ---------
479,289 528,780 471,328
Unusual items (Note 2) -- -- 208,949
-------- -------- ---------
Total costs and expenses 479,289 528,780 680,277
-------- -------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 97,905 107,612 (192,774)
-------- -------- ---------
INCOME TAX PROVISION (CREDIT) (Note 6):
Current 20,604 18,123 526
Deferred 16,902 23,661 (75,049)
-------- -------- ---------
Total 37,506 41,784 (74,523)
-------- -------- ---------
NET INCOME (LOSS) $ 60,399 $ 65,828 $(118,251)
======== ======== =========
INCOME (LOSS) PER COMMON SHARE (Notes 1(b) and 3): $ 1.41 $ 1.49 $ (2.67)
</TABLE>
The accompanying notes are an integral part of these financial statements
18
<PAGE> 10
CONSOLIDATED BALANCE SHEETS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
December 31, 1996 and 1995
<TABLE>
<CAPTION>
(in thousands except share information) 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1(c)) $ 31,802 $ 18,864
Marketable securities (Note 1(f)) 811 111
Accounts receivable (less allowance for doubtful accounts:
1996, $1,913; 1995, $1,979) 49,703 52,052
Inventories (Note 1(d)) 101,231 87,078
Prepaid expenses 4,522 2,318
--------- ---------
Total current assets 188,069 160,423
PLANT, EQUIPMENT AND TIMBERLANDS -- NET (Notes 1(e), 1(h), 2 and 7) 455,190 451,461
OTHER ASSETS (Notes 1(f) and 4) 72,051 61,223
--------- ---------
Total assets $ 715,310 $ 673,107
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 35,249 $ 34,623
Dividends payable 7,444 7,597
Federal, state and local taxes (Note 6) 4,305 235
Accrued compensation, other expenses and deferred income taxes 39,185 41,553
--------- ---------
Total current liabilities 86,183 84,008
LONG-TERM DEBT (Note 10) 150,000 150,000
DEFERRED INCOME TAXES (Notes 1(g) and 6) 99,139 80,682
OTHER LONG-TERM LIABILITIES (Notes 3 and 5) 48,958 43,011
--------- ---------
Total liabilities 384,280 357,701
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
SHAREHOLDERS' EQUITY (Note 3):
Common stock, $.01 par value; authorized -- 120,000,000 shares; issued
(including shares in treasury:
1996, 11,822,152; 1995, 10,926,668) -- 54,361,980 shares 544 544
Capital in excess of par value 41,601 40,921
Retained earnings 462,337 431,762
--------- ---------
Total 504,482 473,227
Less cost of common stock in treasury (173,452) (157,821)
--------- ---------
Total shareholders' equity 331,030 315,406
--------- ---------
Total liabilities and shareholders' equity $ 715,310 $ 673,107
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 11
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Common Capital in Total
(in thousands except Shares Common Excess of Par Retained Treasury Shareholders'
shares outstanding) Outstanding Stock Value Earnings Stock Equity
- ----------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 43,987,328 $544 $39,323 $ 545,770 $(144,237) $ 441,400
Net loss (118,251) (118,251)
Cash dividends declared (30,884) (30,884)
Delivery of treasury shares:
Restricted stock award plan 15,012 67 209 276
Employee stock purchase plans 197,489 448 2,745 3,193
---------- ---- ------- --------- --------- ---------
Balance, December 31, 1994 44,199,829 544 39,838 396,635 (141,283) 295,734
Net income 65,828 65,828
Cash dividends declared (30,701) (30,701)
Delivery of treasury shares:
Employee stock purchase and
401(k) plans 174,929 955 2,402 3,357
Employee stock options
exercised (net) 16,754 128 138 266
Purchase of stock for treasury (956,200) (19,078) (19,078)
---------- ---- ------- --------- --------- ---------
Balance, December 31, 1995 43,435,312 544 40,921 431,762 (157,821) 315,406
Net income 60,399 60,399
Cash dividends declared (29,824) (29,824)
Delivery of treasury shares:
Restricted stock award plan 72,193 223 1,054 1,277
Employee stock purchase and
401(k) plans 151,265 447 2,207 2,654
Employee stock options
exercised (net) 12,131 10 176 186
Purchase of stock for treasury (1,131,073) (19,068) (19,068)
---------- ---- ------- --------- --------- ---------
Balance, December 31, 1996 42,539,828 $544 $41,601 $ 462,337 $(173,452) $ 331,030
========== ==== ======= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOWS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 60,399 $ 65,828 $(118,251)
Unusual item -- writedown of impaired assets -- -- 208,949
Items included in net income (loss) not using (providing) cash:
Depreciation and depletion 33,570 32,599 42,906
Expense related to employee stock purchase and 401(k) plans 1,224 975 814
Loss (gain) on disposition of fixed assets 169 (476) (345)
Changes in assets and liabilities:
Accounts receivable 2,349 (3,140) (14,572)
Inventories (14,153) (5,247) 11,459
Other assets and prepaid expenses (14,885) (13,252) (4,779)
Accounts payable, accrued compensation, other expenses,
deferred income taxes and other long-term liabilities 3,555 17,096 (950)
Federal, state and local taxes 4,070 (2,254) (2,383)
Deferred income taxes -- noncurrent 18,457 20,369 (70,196)
-------- --------- ---------
Net cash provided by operating activities 94,755 112,498 52,652
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) or maturity of investments -- net 1,153 6,114 15,736
Proceeds from disposal of fixed assets 102 987 1,569
Additions to plant, equipment and timberlands (37,477) (25,777) (83,499)
Increase (decrease) in liabilities related to fixed asset acquisitions 1,833 (6,716) 1,860
-------- --------- ---------
Net cash used in investing activities (34,389) (25,392) (64,334)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing (repayment) of short-term debt -- net -- (24,100) 24,100
Dividends paid (29,977) (30,839) (30,847)
Purchases of common stock (19,068) (19,078) --
Employees' contribution -- common stock issued under
employee benefit plans 1,617 2,642 2,380
-------- --------- ---------
Net cash used in financing activities (47,428) (71,375) (4,367)
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents 12,938 15,731 (16,049)
CASH AND CASH EQUIVALENTS
At beginning of year 18,864 3,133 19,182
-------- --------- ---------
At end of year $ 31,802 $ 18,864 $ 3,133
======== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid For:
Interest (net of amount capitalized) $ 9,684 $ 10,366 $ 5,832
Income taxes 20,480 21,571 2,899
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Operations and Principles of Consolidation
P. H. Glatfelter Company and subsidiaries are principally manufacturers of
printing papers and tobacco and other specialty papers. Headquartered in Spring
Grove, Pennsylvania, the Company's paper mills are located in Spring Grove,
Pisgah Forest, North Carolina and Neenah, Wisconsin. The Pisgah Forest mill is
also known as the Ecusta Division. The Company's products are marketed in most
parts of the United States and in many foreign countries, either through
wholesale paper merchants, brokers and agents, or direct to customers. The
accounts of the Company, and its wholly-owned, significant subsidiaries, are
included in the consolidated financial statements. All inter-company
transactions have been eliminated.
(b) Income (Loss) per Common Share
Income (loss) per share of common stock is computed on the basis of the weighted
average number of shares of common stock and common stock equivalents (Note 3)
outstanding during each year.
(c) Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with effective
maturities at date of purchase of three months or less to be cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost or market. Raw materials and
in-process and finished inventories are valued using the last-in, first-out
(LIFO) method, and the supplies inventory is valued principally using the
average cost method. Inventories at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
Raw materials $ 36,355 $ 25,577
In-process and finished 33,073 30,821
Supplies 31,803 30,680
-------- --------
Total $101,231 $ 87,078
======== ========
</TABLE>
If the Company had valued all inventories using the average cost method,
inventories would have been $2,571,000 and $14,563,000 higher than reported at
December 31, 1996 and 1995, respectively. During 1994, the Company liquidated
certain LIFO inventories. The effect of the liquidation did not have a
significant impact on net income.
At December 31, 1996 and 1995, the value of the above inventories exceeded
inventories for income tax purposes by approximately $20,400,000 and
$22,800,000, respectively.
(e) Plant, Equipment, and Timberlands
Depreciation is computed for financial reporting on the straight-line method
over the estimated useful lives of the respective assets and for income taxes
principally on accelerated methods over lives established by statute or Treasury
Department procedures. Provision is made for deferred income taxes applicable to
this difference (Notes 1(g) and 6).
Maintenance and repairs are charged to income and major renewals and betterments
are capitalized. At the time property is retired or sold, the cost and related
reserve are eliminated and any resultant gain or loss is included in income.
Depletion of the cost of timber is computed on a unit rate of usage by growing
area based on estimated quantities of recoverable material.
Plant, equipment and timberlands accounts are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Land and buildings $ 112,973 $ 110,348
Machinery and equipment 870,116 847,535
Other 28,286 27,557
Less accumulated
depreciation (Note 2) (585,954) (557,075)
--------- ---------
Total 425,421 428,365
Construction in progress 12,342 6,220
Timberlands, less depletion 17,427 16,876
--------- ---------
Plant, equipment and
timberlands -- net $ 455,190 $ 451,461
========= =========
</TABLE>
Estimated service lives of principal items of property, plant and equipment are
as follows:
<TABLE>
<S> <C>
Buildings 10-45 years
Machinery & Equipment 7-35 years
Other 4-40 years
</TABLE>
(f) Investments in Debt and Equity Securities
The Company accounts for investments in debt and equity securities under the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities".
Long-term investments, which are due ratably over an 18-year period and are
classified as held-to-maturity, are included in "Other assets" on the
Consolidated Balance Sheets at December 31, 1996 and 1995. The investments
consist of approximately $11,900,000 and $13,200,000 in U.S. Treasury and
government obligations in 1996 and 1995, respectively. The estimated fair value
of the investments in such securities approximated the amortized cost, and
therefore, there were no significant unrealized gains or losses as of December
31, 1996 and 1995. Investments in municipal debt and equity securities of
$811,000 and $111,000 classi-
22
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
fied as available-for-sale, are reported as "Marketable securities" on the
Consolidated Balance Sheets at December 31, 1996 and 1995, respectively. The
fair market value for such securities approximates cost.
(g) Income Tax Accounting
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (Note 6).
Deferred taxes are provided for differences between amounts shown for financial
reporting purposes and those included with tax return filings that will reverse
in future periods.
(h) Capitalized Interest
The Company capitalizes interest incurred in connection with qualified additions
to property. The Company capitalized $3,066,000 of interest in 1994. The Company
did not capitalize any interest in 1996 or 1995.
(i) Fair Market Value of Financial Instruments
The amounts reported in the Consolidated Balance Sheets for cash and cash
equivalents, marketable securities, trade receivables, other assets and
long-term debt approximate fair value.
(j) Long-Lived Asset Impairment
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," assets are reviewed for impairment on an annual basis in
conjunction with the preparation of the annual budget or when a specific event
indicates that the carrying value of an asset may not be recoverable.
Recoverability is assessed based on estimates of future cash flows expected to
result from the use and eventual disposition of the asset. If the sum of
expected undiscounted cash flows is less than the carrying value of the asset,
an impairment loss is recognized. The impairment loss is measured as the amount
by which the carrying amount of the asset exceeds its fair value.
(k) Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates and
assumptions. Management believes the estimates and assumptions used in the
preparation of these consolidated financial statements are reasonable based upon
currently available facts and known circumstances but recognizes that actual
results may differ from those estimates and assumptions (see Note 7).
(l) Revenue Recognition
The Company recognizes revenue on product sales upon shipment and on energy
sales when electricity is delivered to its customer. Certain costs associated
with the production of electricity, such as fuel, labor, depreciation and
maintenance are netted against the energy sales for presentation in the
Consolidated Statements of Income. The Company's current contract to sell excess
electricity it produces expires in the year 2010 and requires that the customer
purchase all of the Company's excess electricity up to a certain level. The
price for the electricity is determined pursuant to a formula and varies
depending upon the amount sold in any given year.
(m) Environmental Liabilities
Accruals for losses associated with environmental obligations are recorded when
it is probable that a liability has been incurred and that the amount of the
liability can be reasonably estimated based on existing legislation and
remediation technologies. These accruals are adjusted periodically as assessment
and remediation actions continue and/or further legal or technical information
develops. Accrued environmental liabilities are classified as "Other long-term
liabilities" on the balance sheet. Such undiscounted liabilities are exclusive
of any insurance or other claims against third parties.
Costs related to environmental remediation are charged to expense. Environmental
costs are capitalized if the costs extend the life of the property, increase its
capacity and/or mitigate or prevent contamination from future operations.
2. WRITEDOWN OF IMPAIRED ASSETS (UNUSUAL ITEMS)
During the fourth quarter of 1994, the Company recognized a noncash, pre-tax
writedown of impaired assets of $208,949,000. Of this amount, $198,189,000
related to the pre-tax writedown of the Company's Ecusta Division to its fair
value primarily due to writedowns related to property, plant and equipment of
$189,441,000 and inventory of $6,406,000.
The Company concluded that asset impairment recognition was required as the
revised projected undiscounted future cash flows of the Ecusta Division were
less than the carrying value. In developing the revised projections, the Company
considered 1994 actual results and the Company's conclusions concerning future
market conditions and the resulting impact on prices. To determine the fair
value of the Ecusta Division net assets, the Company projected the present value
of future cash flows using a 13% discount rate. The resulting fair value was
used to determine the amount of the writedown.
During the fourth quarter of 1994, the Company also identified impaired property
and equipment at its Spring Grove, Pennsylvania and Neenah, Wisconsin mills,
resulting in a pre-tax charge of $10,760,000. This writedown primarily related
to solid waste disposal assets, specifically, a sludge combustor at the Neenah
mill and an unused landfill at the Spring Grove mill. During the fourth quarter
of 1994, the Company identified more economical means, acceptable to the
appropriate environmental agencies, by which to dispose of its solid waste at
these locations and concluded that the significant additional expenditures
necessary to make the assets operational were not prudent, resulting in unusable
assets.
The aggregate after tax impact of this writedown in 1994 was $127,981,000.
3. KEY EMPLOYEE LONG-TERM INCENTIVE PLAN, RESTRICTED COMMON STOCK AWARD PLAN AND
EMPLOYEE STOCK PURCHASE PLANS
On April 22, 1992, the common shareholders approved the 1992 Key Employee
Long-Term Incentive Plan ("1992 Plan") which authorizes the issuance of up to
3,000,000 shares of the Company's common stock to eligible participants. The
1992 Plan provides for incentive stock options, non-qualified stock options,
restricted stock awards, performance shares and performance units. The Company's
1988 Restricted Common Stock Award Plan ("1988 Plan") was simultaneously amended
to provide that no further awards of common shares may be made thereunder.
On May 1, 1995, January 1, 1996 and January 1, 1997, the Company awarded, under
the 1992 Plan, 59,620, 44,860 and 40,060 shares, respectively, subject to
certain conditions, to certain key employees to be issued in whole or in part
depending on the Company's degree of success in achieving certain financial
performance goals during defined four-year performance periods. The May 1, 1995,
January 1, 1996
23
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
and January 1, 1997 awards are for the performance periods ending December 31,
1998, 1999 and 2000, respectively, and if earned will be distributed the
following year. Compensation expense is recognized over the performance period
and is affected by the likelihood of achieving the performance goals and the
fair value of the Company's common stock at the end of each reporting period.
The Company expensed $504,000 and $186,000 related to these awards in 1996 and
1995, respectively. The fair market value of the shares awarded during 1997,
1996 and 1995 was $17.88, $17.16 and $17.81, respectively.
During 1988 and 1991, 755,000 and 76,000 shares of common stock, respectively,
were awarded under the 1988 Plan. Awarded shares are subject to forfeiture, in
whole or in part, if the recipient ceases to be an employee within a specified
period of time. Compensation expense equal to the fair market value of awarded
shares on the award date is recognized over the period from the award date to
the date the forfeiture provisions lapse. The Company may reduce the number of
shares otherwise required to be delivered by an amount which would have a fair
market value equal to the taxes withheld by the Company on delivery. The Company
may also, at its sole discretion, elect to pay to the recipients in cash an
amount equal to the fair market value of the shares that would otherwise be
required to be delivered.
On March 1, 1994, under the 1988 Plan, in lieu of delivering 28,000 shares, the
Company elected to pay in cash an amount equal to the fair market value of such
shares. On May 2, 1994, 15,012 shares were delivered from treasury (after
reduction of 8,988 shares for taxes). On May 1, 1996, in lieu of delivering
60,303 shares, the Company elected to pay in cash an amount equal to the fair
value of such shares. Also on May 1, 1996, 72,193 shares were delivered from
treasury (after reduction of 49,504 shares for taxes). The Company expensed
$283,000, $615,000 and $740,000 related to these awards in 1996, 1995 and 1994,
respectively. Shares awarded under the 1988 Plan cease to be subject to
forfeiture as follows: 20,000 in each of 1997, 1998 and 1999.
The following summarizes the activity with respect to non-qualified options to
purchase shares of common stock for the years ended December 31, 1996, 1995 and
1994:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- ------------------------- ------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Shares Exer. Price Shares Exer. Price Shares Exer. Price
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,235,910 $17.48 1,115,000 $17.42 924,000 $17.97
Options granted 202,030 16.91 229,660 17.81 246,000 15.44
Options exercised (12,300) 15.44 (39,025) 17.42 -- --
Options canceled (22,000) 17.48 (69,725) 17.61 (55,000) 17.83
--------- --------- ---------
Outstanding at end of year 1,403,640 17.42 1,235,910 17.48 1,115,000 17.42
Exercisable at end of year 816,046 $17.39 556,362 $17.17 389,000 $16.86
</TABLE>
An additional 317,991 options became exercisable January 1, 1997 at a weighted
average exercise price of $17.66. Options typically become exercisable for 25%
of the shares of common stock issuable on exercise thereof, beginning January 1
of the year following the date of grant, assuming six months have passed, with
options for an additional 25% of such shares becoming exercisable on January 1
of each of the next three years. Options not exercisable under this schedule are
exercisable in full six months from the date of grant. All options expire on the
earlier of termination of employment or ten years from the date of grant.
The exercise price represents the fair market value of the Company's common
stock on the date of grant, or the average fair market value of the Company's
common stock on the first day before and after the date of grant for which fair
market value information was available if such information was not available on
the date of grant. The exercise prices presented above are rounded to the
nearest cent.
On January 1, 1997, the Company granted to certain key employees non-qualified
options to purchase an aggregate of 205,750 shares of common stock. Subject to
certain conditions, these stock options are exercisable as to 25% of such shares
beginning on January 1, 1998 and an additional 25% of such shares beginning on
January 1 of each of the next three years. These stock options, which expire on
December 31, 2006, were granted at an exercise price of $17.875 per share,
representing the average fair market value of the Company's common stock on
Tuesday, December 31, 1996 and Thursday, January 2, 1997.
The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized for the non-qualified stock options and
for which compensation cost has been recognized for stock awards, as described
above. Had compensation cost for these plans been determined consistent with
Statement of Financial Accounting Standards No. 123,
24
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
"Accounting for Stock-Based Compensation", the Company's net income and income
per common share for the years ended December 31, 1996 and 1995 would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1995
------- -------
(in thousands)
<S> <C> <C> <C>
Net income: As Reported $60,399 $65,828
Pro Forma 60,289 65,793
Income per common
share: As Reported $ 1.41 $ 1.49
Pro Forma 1.41 1.49
</TABLE>
The exercise price for the options outstanding as of December 31, 1996 is
between $15.44 and $17.97. Such options will expire on average in 7.2 years. The
weighted average fair value of options granted during 1996 and 1995 was $4.24
and $4.46, respectively, on the date of grant.
The fair value of each option on the date of grant is estimated using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1995: risk-free interest rate of 6.12%,
expected dividend yield of 3.99%; expected lives of 10 years and expected
volatility of 24%.
Under the employee stock purchase plans, eligible hourly employees may acquire
shares of the Company's common stock at its fair market value. Employees may
contribute up to 10% of their compensation, as defined. For employee
contributions up to 6% of their compensation, the Company shall contribute, as
specified in the plans, 15% of the employee's contribution.
4. RETIREMENT PLANS
The Company and its subsidiaries have trusteed noncontributory defined benefit
pension plans covering substantially all of their employees. The benefits are
based, in the case of certain plans, on average salary and years of service and,
in the case of other plans, on a fixed amount for each year of service. Plan
provisions and funding met the requirements of the Employee Retirement Income
Security Act of 1974. Pension income of $9,246,000, $6,623,000 and $6,082,000
was recognized in 1996, 1995 and 1994, respectively.
The following table sets forth the status of the Company's defined benefit
pension plans at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
Overfunded Underfunded Overfunded Underfunded
Plans Plans Plans Plans
---------- ----------- ---------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested employees $(112,164) $(38,165) $(122,716) $(10,347)
Nonvested employees (5,583) (3,614) (7,352) (622)
--------- -------- --------- --------
Total $(117,747) $(41,779) $(130,068) $(10,969)
========= ======== ========= ========
Projected benefit obligation for services rendered to date $(134,657) $(42,202) $(145,766) $(11,936)
Plan assets at fair value (primarily stocks, bonds and
cash equivalents) 311,567 23,854 289,772 --
--------- -------- --------- --------
Plan assets in excess of (less than) projected benefit
obligation 176,910 (18,348) 144,006 (11,936)
Unrecognized net (gain) loss from past experience different
from that assumed (101,050) (420) (80,824) 1,302
Unrecognized prior service cost 6,910 9,142 9,978 --
Unrecognized net (asset) liability at January 1 (14,901) 2,251 (17,014) 2,639
--------- -------- --------- --------
Prepaid (accrued) pension cost $ 67,869 $ (7,375) $ 56,146 $ (7,995)
========= ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Net pension income includes the following components: 1996 1995 1994
-------- --------- --------
(in thousands)
<S> <C> <C> <C>
Service cost -- benefits earned during period $ (4,076) $ (3,671) $ (3,572)
Interest cost on projected benefit obligation (11,708) (10,951) (10,361)
Actual return on plan assets 51,210 68,583 2,676
Net amortization and deferral (26,180) (47,338) 17,339
-------- --------- --------
Net pension income $ 9,246 $ 6,623 $ 6,082
======== ========= ========
</TABLE>
25
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
The assumptions used in computing the information above were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate --
pension expense 7.5% 8.0% 8.0%
Expected long-term rate of
return on plan assets 9.0% 8.5% 8.5%
Discount rate -- projected
benefit obligation 7.5% 7.5% 8.0%
Future compensation
growth rate 3.5% 3.5% 3.5%
</TABLE>
During 1995, the Company established a 401(k) plan for all salaried employees.
Salaried employees may contribute up to 15% of their salary to this plan,
subject to certain restrictions. The Company will contribute up to 50% of the
employee's contribution, but not more than 3% of the employee's compensation, as
defined, in the form of shares of the Company's common stock into the Company
stock fund maintained under the 401(k) plan. During 1996 and 1995, the Company
contributed shares of its common stock valued at $1,048,000 and $235,000,
respectively, to the 401(k) plan.
5. OTHER POSTRETIREMENT BENEFITS
The Company provides certain health care benefits to eligible retired employees.
These benefits include a comprehensive medical plan for retirees prior to age 65
and fixed supplemental premium payments to retirees over age 65 to help defray
the costs of Medicare. The plan is not funded; claims are paid as incurred. The
following table sets forth the plan's status as of December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 9,024 $ 9,753
Fully eligible active plan participants 5,414 4,718
Other active plan participants 13,392 13,860
-------- --------
Accumulated postretirement
benefit obligation 27,830 28,331
Unrecognized net loss (4,594) (5,970)
Unrecognized prior service cost 1,356 1,506
-------- --------
Accrued postretirement benefit cost $ 24,592 $ 23,867
======== ========
</TABLE>
Net periodic postretirement benefit cost includes the following components (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost $ 732 $ 730 $ 585
Interest on accumulated
benefit obligation 2,003 2,171 1,740
Net amortization and
deferral 75 112 20
------ ------ ------
Net periodic
postretirement
benefit cost $2,810 $3,013 $2,345
====== ====== ======
</TABLE>
The Company assumes an increase in the per capita cost of covered health
benefits of 8.0% for 1997 decreasing to 7.0%, 6.0% and 5.5% in 1998, 1999 and
2000, respectively. The weighted average discount rates used in determining the
accumulated postretirement benefit obligation were 7.5% in 1996 and 1995 and
8.0% in 1994. If the health care cost trend rate increased by 1.0%, the
accumulated postretirement benefit obligation as of December 31, 1996 would have
been approximately $2,190,000 greater and the net periodic postretirement
benefit cost would have been approximately $265,000 greater.
6. INCOME TAXES
Income taxes are recognized for (a) the amount of taxes payable or refundable
for the current year, and (b) deferred tax liabilities and assets for the future
tax consequences of events that have been recognized in the Company's
consolidated financial statements or tax returns. The effects of income taxes
are measured based on effective tax law and rates.
The Company has a federal alternative minimum tax credit carryforward of
$1,168,000 which has no expiration period.
Following are the domestic and foreign components of pre-tax income (loss):
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- ---------
(in thousands)
<S> <C> <C> <C>
United States $94,457 $104,989 $(194,512)
Foreign 3,448 2,623 1,738
------- -------- ---------
Total pre-tax income
(loss) $97,905 $107,612 $(192,774)
======= ======== =========
</TABLE>
The income tax provision (credit) consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $17,816 $ 15,851 $ (202)
State 1,801 1,711 --
Foreign 987 561 728
------- -------- --------
Total current tax
provision 20,604 18,123 526
------- -------- --------
Deferred:
Federal 14,570 20,234 (67,446)
State 2,297 3,823 (7,515)
Foreign 35 (396) (88)
------- -------- --------
Total deferred tax
provision (credit) 16,902 23,661 (75,049)
------- -------- --------
Total income tax
provision (credit) $37,506 $ 41,784 $(74,523)
======= ======== ========
</TABLE>
26
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
The net deferred tax amounts reported on the Company's Consolidated Balance
Sheets as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------- -------
Federal State Foreign Total Total
(in thousands)
<S> <C> <C> <C> <C> <C>
Current liability $ 2,653 $ 499 $ -- $ 3,152 $ 4,708
Long-term liability $82,965 $15,587 $587 $99,139 $80,682
</TABLE>
The following are components of the net deferred tax balances as of December 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------- --------
Federal State Foreign Total Total
(in thousands)
<S> <C> <C> <C> <C> <C>
Deferred tax assets:
Current $ 4,237 $ 798 $ -- $ 5,035 $ 4,320
Long-term 20,236 3,591 -- 23,827 26,105
-------- ------- -------- -------- --------
$ 24,473 $ 4,389 $ -- $ 28,862 $ 30,425
======== ======= ======== ======== ========
Deferred tax liabilities:
Current $ 6,890 $ 1,297 $ -- $ 8,187 $ 9,028
Long-term 103,201 19,178 587 122,966 106,787
-------- ------- -------- -------- --------
$110,091 $20,475 $ 587 $131,153 $115,815
======== ======= ======== ======== ========
</TABLE>
The tax effects of temporary differences as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets: (in thousands)
Reserves $ 8,693 $ 6,570
Compensation 7,335 7,678
Postretirement benefits 9,558 9,308
Federal alternative minimum tax credit 1,168 5,090
Other 2,108 1,779
-------- --------
$ 28,862 $ 30,425
======== ========
Deferred tax liabilities:
Property $ 97,406 $ 85,640
Pension 23,433 18,363
Inventories 8,031 8,961
Other 2,283 2,851
-------- --------
$131,153 $115,815
======== ========
</TABLE>
A reconciliation between the provision (credit) for income taxes, computed by
applying the statutory federal income tax rate of 35%, to income (loss) before
income taxes, and the actual provision (credit) for income taxes follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Federal income tax provision (credit) at statutory rate $ 34,267 $ 37,664 $(67,471)
State income taxes, net of federal income tax benefit (provision) 2,663 4,201 (10,043)
Tax effect of exempt earnings of foreign sales corporation (431) (422) (19)
SFAS No. 109 impact of rate increase -- State -- -- 2,645
Other 1,007 341 365
-------- -------- --------
Actual provision (credit) for income taxes $ 37,506 $ 41,784 $(74,523)
======== ======== ========
</TABLE>
27
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
7. COMMITMENTS AND CONTINGENCIES
The Company is subject to loss contingencies resulting from regulation by
various federal, state, local and foreign governmental authorities with respect
to the environmental impact of air and water emissions and noise from its mills
as well as its disposal of solid waste generated by its operations. In order to
comply with environmental laws and regulations, the Company has incurred
substantial capital and operating expenditures over the past several years. The
Company anticipates that environmental regulation of the Company's operations
will continue to become more burdensome and that capital and operating
expenditures will continue, and perhaps increase, in the future. In addition,
the Company may incur obligations to remove or mitigate any adverse effects on
the environment resulting from its operations, including the restoration of
natural resources, and liability for personal injury and damage to property,
including natural resources. Because other paper companies located in the United
States are generally subject to the same environmental regulations, the Company
does not believe that its competitive position in the United States paper
industry will be materially adversely affected by its capital expenditures for,
or operating costs of, pollution abatement facilities for its present mills or
the limitations which environmental compliance may place on its operations.
The Pennsylvania DEP has proposed to reissue the Company's wastewater discharge
permit for the Spring Grove mill on terms with which the Company does not agree.
In addition, the Wisconsin DNR has reissued the Company's wastewater discharge
permit for the Neenah mill on terms unacceptable to the Company. The Company has
requested an adjudication hearing on the terms of the Wisconsin permit. The
Company cannot determine the impact that the Pennsylvania DEP and Wisconsin DNR
wastewater discharge permits will have on the Company if they contain
objectionable terms because it is too soon to determine what material terms will
be in the permits' final form. Issues with regard to the permits have been
identified by the respective governmental authorities, however no resolution has
been suggested by either governmental party. As a result, the Company is not in
a position to know what form such permits will ultimately take.
The Company, along with six other companies which operate or formerly operated
facilities along the Fox River in Wisconsin, has been in discussions with the
Wisconsin Department of Natural Resources and the United States Fish and
Wildlife Service ("USFWS") regarding the alleged discharge of polychlorinated
biphenyls ("PCBs") and other hazardous substances to the Fox River below Lake
Winnebago ("the lower Fox River") and the Bay of Green Bay.
On January 30, 1997, the Company and six other companies entered into an
agreement with the State of Wisconsin establishing a framework for the final
resolution of claims for natural resources damages and other relief which the
State asserts against the companies. Under the agreement, the companies will
provide in the aggregate $10 million in work and funds to facilitate natural
resources damages assessment activities, including, among other things, modeling
and risk assessment, as well as field scale demonstration of sediment dredging
and the enhancement of certain environmental amenities. The State has indicated
that the $10 million in work and funds is expected to be spent over the next
four years. The final allocated portion of the $10 million which the Company is
required to pay is unknown at present. The State will act as "lead authorized
official" under federal law for purposes of any assessment of damages to natural
resources within Wisconsin, except those within the administrative jurisdiction
of a federal agency. In general, the parties have agreed to toll all limitations
periods and to forbear from litigation during the term of the agreement. The
parties intend to conclude a final resolution of all of the State's claims
during the course of, or after completion of, the work called for by the
agreement.
By letter dated January 31, 1997, and received by the Company on February 3,
1997, the USFWS provided 60 days' notice of the intention of the United States
Departments of the Interior and Commerce to commence an action for natural
resources damages against the Company and the six other companies referred to
above similarly relating to the discharge of hazardous substances into the lower
Fox River. The federal trustees invited the Company to resume negotiations
toward a non-litigated resolution of the federal trustees' claims; the
negotiations had been suspended at the federal trustees' request. The Company
does not know the amount which the federal trustees will claim as natural
resources damages, but the Company believes that it will be substantial.
The agreement with the State of Wisconsin specifically contemplates a
modification to address the claims of the federal trustees and the roles of the
State and the federal trustees. The parties to that agreement have invited the
federal trustees to begin negotiations towards such a modification.
The amount and timing of future expenditures for environmental compliance,
cleanup, remediation and personal injury and property damage liability,
including but not limited to those related to the lower Fox River and the Bay of
Green Bay, cannot be ascertained with any certainty due to among other things,
the unknown extent and nature of any contamination, the extent and timing of any
technological advances for pollution control, the remedial actions which may be
required and the number and financial resources of any other responsible
parties. The Company continues to evaluate its exposure and the level of its
reserves including, but not limited to, its share of the agreement reached with
the State regarding the lower Fox River and the Bay of Green Bay, its future
negotiations with the State concerning these areas and the unknown amount which
could be claimed by the federal trustees as natural resource damages related to
the lower Fox River. The Company believes that it is insured against certain
losses related to the lower Fox River, depending on the nature and amount
thereof. Coverage, which is currently being investigated under reservation of
rights by various insurance companies, is dependent upon the identity of the
plaintiff, the procedural posture of the claims asserted and how such claims are
characterized. The Company does not expect that the insurers' investigation as
to coverage will be completed prior to the time these factors become known. The
Company's current assessment, after consultation with legal counsel, is that
future expenditures for these matters are not likely to have a material adverse
impact on the Company's financial condition or liquidity, but could have a
material adverse effect on the Company's results from operations in a given
year; however, there can be no assurances that the Company's reserves will be
adequate or that a material adverse effect on the Company's financial condition
or liquidity will not occur at some future time.
During 1996, the Company expended approximately $2,000,000 on environmental
capital projects. The Company estimates that $12,000,000 and $8,000,000 will be
expended for environmental capital projects in 1997 and 1998, respectively.
28
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
8. LEGAL PROCEEDINGS
The Company is involved in various lawsuits. Although the ultimate outcome of
these lawsuits cannot be predicted with certainty, the Company's management,
after consultation with legal counsel, does not expect that such lawsuits will
have a material adverse effect on the Company's financial position or results of
operations or liquidity.
9. SIGNIFICANT CUSTOMER AND FOREIGN SALES
The Company sells a significant portion of its printing and writing papers
through wholesale paper merchants. During 1994, two of the Company's wholesale
paper merchants merged into one company, and as a result, during 1996, 1995 and
1994, this customer accounted for 12.1%, 13.9% and 13.0% of the Company's net
sales, respectively. Net sales in dollars to foreign customers were 9.8%, 8.8%
and 9.4% of total net sales in 1996, 1995 and 1994, respectively.
10. BORROWINGS
At December 31, 1996, the Company had available lines of credit from two
different banks aggregating $100,000,000 at interest rates approximating money
market rates. The Company had no short-term borrowings as of December 31, 1996
and December 31, 1995. The Company had average net short-term borrowings of
$20,000 and $9,447,000 during 1996 and 1995, respectively, at an average
interest rate of 6.1% and 6.2%, respectively. Maximum short-term borrowings
during 1996 and 1995 were $4,000,000 and $29,400,000, respectively.
In March 1993, the Company issued $150,000,000 principal amount of its 5-7/8%
Notes. These Notes will mature on March 1, 1998 and may not be redeemed prior to
maturity. Interest on the Notes is payable semiannually on March 1 and September
1. The Notes are unsecured obligations of the Company.
In March 1993, the Company entered into an interest rate swap agreement having a
total notional principal amount of $50,000,000. Under the agreement, the Company
receives a fixed rate of 5-7/8% and pays a floating rate (London Interbank
Offered Rate (LIBOR) plus sixty basis points), as determined at six month
intervals. The floating rate is 6.37344% for the six month period ending
February 28, 1997. The agreement converts a portion of the Company's debt
obligation from a fixed rate to a floating rate basis. Under the agreement, the
Company recognized net interest expense of $174,000 and $453,000 in 1996 and
1995, respectively, and net interest income of $433,000 in 1994. These amounts
are included in "Interest on debt" on the Company's Consolidated Statements of
Income. The Company has pledged $2,100,000 of its other assets as security under
the swap agreement. Although the Company can pay to terminate the swap agreement
at any time, the Company intends to hold the swap agreement until its March 1,
1998 maturity. The cost to the Company to terminate the agreement fluctuates
with prevailing market interest rates. As of December 31, 1996, the cost to
terminate the swap agreement was approximately $430,000.
The Company has approximately $9,226,000 of letters of credit outstanding as of
December 31, 1996. The Company bears the credit risk on this amount to the
extent that the Company does not comply with the provisions of certain
agreements. The letters of credit do not reduce the amount available under the
Company's lines of credit.
11. SUBSEQUENT EVENT
In February 1997, the Company invested approximately $122,500,000 to acquire
approximately 99.9% of the voting Class A common stock of a company that intends
to qualify as a qualified real estate investment trust (REIT). The REIT also
issued $150,000,000 of Step-Down Preferred Stock, with an initial dividend of
approximately 13.9%, to other investors. Prospectively, the REIT will be
consolidated in the Company's consolidated financial statements and a "minority
interest" will be reported. The REIT's dividend payments will include an
amortization component of the minority interest for financial reporting
purposes; the effective yield on the preferred stock is approximately 8.1%.
Also in February 1997, the Company borrowed $270,000,000 from the REIT under a
Note to be secured by certain of the Company's real estate assets with a value
of 110% of the principal amount of the Note.
Using the proceeds of the Note and other available cash, the Company immediately
repaid, with interest, the amount borrowed to purchase the common stock of the
REIT. The Company also deposited approximately $155,500,000 into a trust to
defease certain covenants under the Company's indenture dated as of January 15,
1993 under which the Company's $150,000,000 5-7/8% Notes due March 1, 1998, are
outstanding. The amount deposited will be applied solely to pay principal and
interest due on the 5-7/8% Notes. In accordance with Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", the amount deposited in
the trust and the Company's $150,000,000 5-7/8% Notes will be reported on the
Company's Consolidated Balance Sheets until March 1, 1998.
Subsequently, the Internal Revenue Service announced that it expects to issue
regulations that could cause the Company to lose certain expected benefits of
the transaction, but which would not otherwise materially adversely affect the
Company.
29
<PAGE> 21
MANAGEMENT'S
RESPONSIBILITY REPORT
The management of P.H. Glatfelter Company has prepared and is responsible for
the Company's consolidated financial statements and other corroborating
information contained herein. Management bears responsibility for the integrity
of these statements which have been prepared in accordance with generally
accepted accounting principles and include management's best judgments and
estimates. All information in this annual report consistently reflects the data
contained in the consolidated financial statements.
The Company maintains a system of internal controls designed to provide
reasonable assurance that assets are safeguarded, transactions are executed and
recorded in accordance with their authorizations and financial records are
maintained so as to permit the preparation of reliable financial statements. The
system of internal controls is enhanced by written policies and procedures, an
organizational structure providing appropriate segregation of duties, careful
selection and training of qualified people and periodic reviews performed by
both its internal audit department and independent auditors.
The Audit Committee of the Board of Directors, consisting exclusively of
directors who are not Company employees, provides oversight of financial
reporting. The Company's internal audit department and independent auditors meet
with the Audit Committee on a periodic basis to discuss financial reporting and
internal control issues and have completely free access to the Audit Committee.
T. C. Norris
Chairman of the Board, President
and Chief Executive Officer
R.P. Newcomer
Senior Vice President, Treasurer
and Chief Financial Officer
30
<PAGE> 22
P. H. GLATFELTER COMPANY
AND SUBSIDIARIES
Financial Statement Schedule
For Each of the Three Years in the
Period Ended December 31, 1996 and
Independent Auditors' Report
Prepared for Filing As Part of
Annual Report (Form 10-K)
to the Securities and Exchange Commission
<PAGE> 23
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
P. H. Glatfelter Company,
Its Shareholders and Directors:
We have audited the accompanying consolidated balance sheets of P. H. Glatfelter
Company and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and the financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of P. H. Glatfelter Company and
subsidiaries at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles. Also, in
our opinion, the financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 24, 1997
31
<PAGE> 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
(a) 1. A. Financial Statements filed as part of
this report:
Consolidated Statements of Income for the Years
Ended December 31, 1996, 1995 and 1994
Consolidated Balance Sheets, December 31, 1996
and 1995
Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for
the Years Ended December 31, 1996, 1995 and
1994
B. Supplementary Data for each of the three
years in the period ended December 31, 1996.
2. Financial Statement Schedules (Consolidated):
For Each of the Three Years in the Period Ended
December 31, 1996:
II - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because of
the absence of conditions under which they are required or
because the required information is included in the Notes to
the Consolidated Financial Statements.
Individual financial statements of the Registrant are not
presented inasmuch as the Registrant is primarily an operating
company and its consolidated subsidiaries are wholly-owned.
3. Executive Compensation Plans and Arrangements: see
Exhibits 10(a) through 10(g), described below.
(b) Exhibits:
Number Description of Documents
- ------ ------------------------
(23) Consent of Independent Certified Public Auditors
34
<PAGE> 25
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 12, 1997
By /s/ T. C. Norris
----------------------------
T. C. Norris
Chairman, President,
Chief Executive Officer
and Director
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
P.H. Glatfelter Company:
We consent to the incorporation by reference in the Registration Statements of
P.H. Glatfelter Company of Form S-8 (Registration Nos. 33-25884, 33-37198,
33-49660, 33-53338, 33-54409, 33-62331, 333-12089, 333-26581 and 333-34797) of
our report dated February 24, 1997 on the consolidated financial statements of
P.H. Glatfelter Company and subsidiaries appearing in and incorporated by
reference in the Annual Report on Form 10-K and Amendment No. 1 thereto on
Form 10-K/A for the year ended December 31, 1996.
/s/ Deloitte Touche LLP
Philadelphia, Pennsylvania
November 11, 1997
