<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 2, 1998
P. H. GLATFELTER COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 1-3560 23-0628360
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Spring Grove, Pennsylvania 17362
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 225-4711
Not Applicable
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7
Financial Statements and Exhibits
On January 2, 1998, two wholly-owned German subsidiaries of
the Registrant acquired all of the capital stock of S&H Papier-Holding GmbH, the
German company holding the specialty paper business of the Schoeller & Hoesch
group ("S&H"), from Deutsche Beteiligungs AG and EVOBESTRA
Vermogensverwaltungsgesellschaft mbh (the "Sellers") pursuant to a Stock
Purchase Agreement, dated as of November 14, 1997. Included below are certain
financial statements and pro forma financial information of the S&H specialty
paper business.
(a) Financial statements of the S&H specialty paper business
filed as part of this report:
1. Independent Auditors' Reports.
2. Consolidated Statement of Income for the year
ended December 31, 1997.
3. Consolidated Balance Sheet dated December 31,
1997.
4. Consolidated Statement of Shareholders' Equity for
the year ended December 31, 1997.
5. Consolidated Statement of Cash Flows for the year
ended December 31, 1997.
6. Notes to Consolidated Financial Statements.
2
<PAGE> 3
S&H Papier-Holding GmbH
Postfach 1155
76584 Gernsbach March 20, 1998
Dear Sirs,
We have audited the accompanying consolidated balance sheet of S&H
Papier-Holding GmbH and subsidiaries as of December 31, 1997, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statements of Papeteries de Cascadec SA (a 50% owned consolidated subsidiary),
which statements reflect total assets constituting 17% of consolidated total
assets at December 31, 1997 and total revenues constituting 12% of consolidated
total revenues for the year then ended. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Papeteries de Cascadec SA is based solely on
the report of such other auditors.
We conducted our audit 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 audit and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of S&H Papier-Holding GmbH and subsidiaries at December 31,
1997 and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
3
<PAGE> 4
Our audit also comprehended the translation of Deutsche Mark amounts into US
dollar amounts, and in our opinion, such translation has been made in conformity
with the basis stated in note 1 to the consolidated financial statements. Such
US dollar amounts are presented solely for the convenience of readers in the
United States of America.
Yours truly,
DELOITTE &
TOUCHE GmbH
Wirtschaftsprufungsgesellschaft
4
<PAGE> 5
CONSTANTIN ASSOCIES SEGEC AUDIT SA
Commissaire aux Comptes Commissaire aux Comptes
26 rue de Marignan Chemin Departemental 63
75008 PARIS 67116 REICHSTETT
REPORT OF STATUTORY AUDITORS
ANNUAL ACCOUNTS
YEAR ENDED DECEMBER 31, 1997
PAPETERIES DE CASCADEC
ODET-ERGUE GABERIC/France
We have audited the accompanying balance sheet of Papeteries de Cascadec as of
December 31, 1997 and the related statements of income for the year then ended.
These financial statements are the responsibility of the Papeteries de
Cascadec's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Papeteries de Cascadec as of
December 31, 1997, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Paris and Reichstett, March 12, 1998
CONSTANTIN ASSOCIES SEGEC AUDIT SA
Commissaire aux Competes Commissaire aux Competes
<PAGE> 6
CONSOLIDATED STATEMENT OF INCOME
S&H Papier-Holding GmbH
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
(in thousands) 1997 1997
------- -------
(DM) (USD)
<S> <C> <C>
NET SALES 299,277 166,998
OTHER INCOME:
Interest on investment and 320 178
other - net
Currency exchange gain and 3,435 1,917
other - net
------- -------
Total revenues 303,032 169,093
------- -------
COSTS AND EXPENSES:
Cost of products sold 238,107 132,865
Selling, general and
administrative expenses 28,863 16,106
Interest on debt 5,938 3,313
------- -------
Total costs and expenses 272,908 152,284
------- -------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 30,124 16,809
------- -------
INCOME TAX PROVISION
Current 9,201 5,134
Deferred 960 536
------- -------
Total 10,161 5,670
------- -------
INCOME BEFORE MINORITY
INTEREST 19,963 11,139
Minority interest 1,280 714
------- -------
NET INCOME 18,683 10,425
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 7
CONSOLIDATED BALANCE SHEET
S&H Papier-Holding GmbH
December 31, 1997
<TABLE>
<CAPTION>
(in thousands) 1997 1997
------- -------
(DM) (USD)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 5,611 3,131
Securities 5,823 3,249
Accounts receivable (less
allowance for doubtful
accounts: 1997, DM 582; USD 325) 48,352 26,981
Inventories 55,182 30,791
Prepaid expenses 698 390
------- -------
Total current assets 115,666 64,542
PLANT AND EQUIPMENT - NET 133,795 74,658
OTHER ASSETS 12,568 7,013
------- -------
Total assets 262,029 146,213
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt 13,933 7,775
Short-term debt 17,688 9,870
Accounts payable 12,747 7,113
Federal, trade and local taxes 13,863 7,736
Accrued compensation, other
expenses and deferred
income taxes 18,283 10,201
------- -------
Total current liabilities 76,514 42,695
LONG-TERM DEBT 45,431 25,351
DEFERRED INCOME TAXES 34,244 19,108
OTHER LONG-TERM LIABILITIES 14,438 8,056
------- -------
Total liabilities 170,627 95,210
MINORITY INTEREST 17,125 9,556
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock 100 56
Capital in excess of par value 22,402 12,500
Retained earnings 53,980 30,121
Cumulative translation adjustment (2,205) (1,230)
------- -------
Total shareholders' equity 74,277 41,447
Total liabilities and
shareholders' equity 262,029 146,213
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 8
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
S&H Papier-Holding GmbH
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
(in thousand DM) Common Capital in Retained Cumulative Total
Stock Excess of Earnings Translation Shareholder
Par Value Adjustment Equity
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 100 3,343 61,350 (68) 64,725
Net income 18,683 18,683
Dividends (26,053) (26,053)
Contribution of capital 19,059 19,059
Change in cumulative
translation adjustment (2,137) (2,137)
--- ------ ------- ------ -------
Balance, December 31, 1997 100 22,402 53,980 (2,205) 74,277
=== ====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 9
CONSOLIDATED STATEMENT OF CASH FLOWS
S&H Papier-Holding GmbH
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
(in thousands) 1997 1997
------- -------
(DM) (USD)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 18,683 10,425
Items included in net income not using (providing)
cash:
Depreciation and depletion 15,496 8,647
Deferred income taxes (668) (373)
Minority interest 1,280 714
Changes in assets and liabilities:
Accounts receivable (4,066) (2,269)
Inventories (4,632) (2,585)
Other assets and prepaid expenses (250) (139)
Accounts payable, accrued compensation, other
expenses, deferred income taxes
and other long-term liabilities 6,756 3,770
Federal, trade and local taxes 6,222 3,472
------- -------
Net cash provided by operating activities 38,821 21,662
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in securities - net (5,806) (3,240)
Additions to plant and equipment (14,569) (8,129)
------- -------
Net cash used in investing activities (20,375) (11,369)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing of short-term debt - net 15,712 8,767
Repayment of long-term debt (24,605) (13,730)
Dividends (26,053) (14,538)
Contributed capital 19,059 10,635
------- -------
Net cash used in financing activities (15,887) (8,866)
------- -------
Effect of exchange rates on cash and cash equivalents (2,137) (1,192)
Net increase in cash and cash equivalents 422 235
CASH AND CASH EQUIVALENTS:
At beginning of year 5,189 2,896
------- -------
At end of year 5,611 3,131
======= =======
</TABLE>
8
<PAGE> 10
Supplemental disclosure of cash flow information:
Cash paid for:
<TABLE>
<S> <C> <C>
Interest 5,795 3,234
Income taxes 2,979 1,662
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
1. BASIS OF PRESENTATION
On May 10, 1997, Schoeller & Hoesch GmbH & Co. KG ("S&H KG"), the parent company
of Papierfabrik Schoeller & Hoesch GmbH ("Papierfabrik"), was sold to RQPO
Beteiligungs GmbH & Co. Papier KG ("RQPO") and EVOBESTRA
Vermogensverwaltungsgesellschaft mbH. The principal partners of RQPO are
Deutsche Beteiligungs AG ("DBAG") and Papierfabrik management.
During July 1997, as part of a corporate reorganization, S&H Papier-Holding GmbH
(the "Company") was established as a German holding company of Papierfabrik and
all of its subsidiaries. Subsequently, 99.99% of the share capital of
Papierfabrik was contributed to the Company. The consolidated financial
statements reflect the results of operations, financial position, changes in
shareholders' equity and cash flows of the Company, Papierfabrik and all its
subsidiaries as if the Company was in existence for the entire year. The assets
and liabilities presented in the accompanying consolidated financial statements
are presented at historical cost and do not reflect the May 1997 acquisition
cost. The consolidated financial statements have been prepared using accounting
principles that conform with those generally accepted in the United States using
the historical costs of assets and liabilities and historical results of
operations related to the Company's businesses.
The accompanying consolidated financial statements are stated in Deutsche Marks
("DM") except that, solely for the convenience of the reader, certain Deutsche
Mark amounts presented as of and for the year ended December 31, 1997 have been
translated into US dollars using the exchange rate in effect on December 31,
1997 of DM 1.7921 = US $ 1.00. Such translations should not be construed as
representations that the Deutsche Mark amounts could be converted into US
dollars at that or any other rate. The basis of presentation of the financial
information included herein may not necessarily reflect the consolidated results
of operations, financial position, changes in shareholders' equity and cash
flows of the Company in the period presented, had it been a separate,
stand-alone entity not affiliated with S&H KG during the period presented, and
may not be indicative of future results of the Company.
9
<PAGE> 11
The Company principally manufactures long fiber papers, tobacco papers, overlay
and thin printing papers as well as metallized papers. Headquartered in
Gernsbach, Germany, the Company's manufacturing facilities are located in
Gernsbach, Germany, Wisches, France and Lanao del Norte in the Philippines. The
Company also has a 50% ownership interest in manufacturing facilities in Odet,
France. The Company has a purchase option to acquire, which may be exercised
between September 1, 1998 and December 31, 1998 (completion between January 1
and January 31, 1999) and the partner has a sale option to sell, which may be
exercised between February 1, 1999 and May 31, 1999 (completion 30 days after
notice) the remaining 50% ownership interest under a predetermined pricing
formula. In addition, the Company has a facility in the United States which
converts and distributes specialty papers. The Company's products are mainly
marketed in Germany and in the rest of Europe and, to a lesser extent, in many
foreign countries, either through brokers and agents, or direct to customers.
On November 14, 1997 the Company's owners entered into an agreement to sell the
Company to P. H. Glatfelter Company, an unrelated third party. The sale became
effective on January 2, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accounts of the Company and its subsidiaries, including its controlled
50%-owned French subsidiary, are included in the consolidated financial
statements. All intercompany transactions have been eliminated.
(b) Earnings (Loss) per Common Share
Earnings (loss) per share of common stock is not presented as it is not
meaningful. The total share capital of the Company is divided into two shares of
DM 99,500 and DM 500, respectively. Such shares were held by two German parent
companies as of December 31, 1997.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid financial instruments with
effective maturities at the date of purchase of three months or less.
(d) Securities
Securities are acquired principally for the purpose of selling them in the near
term and are recorded at fair value, with unrealized gains and losses included
in earnings. As of December 31, 1997, the recorded value of the securities
approximated historical cost.
10
<PAGE> 12
(e) Inventories
Inventories are stated at the lower of cost or market. In-process and finished
inventories are valued using the retail method which approximates the average
cost method. Inventories at December 31, 1997 are summarized in thousand DM's as
follows:
<TABLE>
<S> <C>
Raw materials and supplies 27,231
In-process 10,593
Finished goods 17,358
------
Total 55,182
======
</TABLE>
(f) Plant and Equipment
Depreciation is computed for financial reporting using the straight-line method
over the estimated useful lives of the respective assets with a range of 5 to 20
years and for income taxes principally using accelerated methods over lives
established by statue. Provision is made for deferred income taxes applicable to
this difference.
Repairs and maintenance expenses are expensed as incurred 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.
Property, plant and equipment accounts at December 31, 1997 are summarized in
thousand DM as follows:
<TABLE>
<S> <C>
Land and buildings 35,235
Machinery and equipment 198,796
Other 18,010
Less accumulated depreciation (125,087)
--------
Total 126,954
Construction in progress 6,841
--------
Plant and equipment-net 133,795
========
</TABLE>
(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". Deferred
taxes are provided for differences between amounts shown for financial reporting
purposes and those included in tax return filings that will reverse in future
periods.
11
<PAGE> 13
(h) Fair Market Value of Financial Instruments
The amounts reported in the Consolidated Balance Sheet for cash and cash
equivalents, marketable securities, accounts receivable, short-term debt and
long-term debt approximate fair value. See Note 11 for the fair value of
derivative financial instruments.
(i) 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.
(j) Foreign Currency Translation
The financial information for all subsidiaries located outside of Germany is
measured using the local currency as the functional currency. Assets and
liabilities are translated using the appropriate exchange rates in effect at the
balance sheet date. Income and expenses are translated at the appropriate
average exchange rates for the year. Gains and losses from foreign currency
transactions are included in net earnings. Foreign currency translation
adjustments are recorded directly to "Cumulative Translation Adjustment" on the
Consolidated Balance Sheet. The Company recognized DM 3,233,000 of net foreign
currency transaction gains during 1997.
(k) Foreign Currency Management
The Company enters into foreign exchange contracts from time-to-time as a hedge
against foreign currency exposures. The Company does not enter into forward
exchange contracts for speculative purposes and enters into such contracts only
with creditworthy institutions. Forward exchange contracts must be designated at
inception as hedges, and are measured for effectiveness both at inception and on
an ongoing basis. For qualifying foreign currency hedges, gains and losses are
deferred and recognized as adjustments to the carrying amounts of the hedged
items.
(l) Revenue Recognition
Net revenues are recognized at the time products are shipped to customers. Net
revenues are comprised of gross revenues less discounts, customer allowances and
freight.
(m) Interest Rate Arrangements
The Company occasionally enters into interest rate swaps to effectively hedge
its interest rate exposure. Changes to interest rates relating to such swaps
result in increases or decreases in interest expense and are recorded in the
period of the change in interest rate. If a swap arrangement is terminated or
effectively terminated prior to maturity, realized or unrealized gains or losses
are recorded as a basis adjustment to the hedged instrument if the hedged
instrument remains outstanding, or are immediately recognized in the
consolidated statement of income, if the underlying hedged instrument does not
remain outstanding.
12
<PAGE> 14
3. EMPLOYEE BENEFITS
RETIREMENT PLANS
Papierfabrik and one of its subsidiaries have defined benefit pension plans
covering certain of their respective employees.
The Papierfabrik plan is unfunded. The following table sets forth the status of
Papierfabrik's defined benefit pension plan in thousands at December 31, 1997.
<TABLE>
<CAPTION>
(DM)
----
<S> <C>
Actuarial present value of benefit obligation:
Vested (11,113)
Nonvested (248)
-------
Accumulated benefit obligation (11,361)
Projected benefit obligation for services rendered to date (11,361)
Plan assets at fair value --
-------
Plan assets in excess of (less than) projected benefit obligation (11,361)
Unrecognized net (gain) loss from past experience different from
that assumed (357)
Other unrecognized pension cost (income) 2,682
-------
Accrued pension cost (9,036)
Adjustment required to recognize minimum liability (2,325)
-------
Net pension liability included in other long-term liabilities (11,361)
=======
Net periodic pension cost includes the following components:
Service cost earned during period 103
Interest cost on projected benefit obligation 715
Net amortization and deferral 206
-------
Net periodic pension cost 1,024
=======
</TABLE>
The assumptions used in computing the information above were as follows:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Discount rate - pension expense 6.5%
Discount rate - projected benefit obligation 6.5%
Future compensation growth rate 3.5%
</TABLE>
13
<PAGE> 15
The Company also provides certain retirement and other benefits to substantially
all of its employees and, to a lesser extent, certain foreign employees who
become eligible for these benefits when they meet minimum age and service
requirements. Generally, the retirement benefit plans require contribution from
the employees during the service period. The Company and its subsidiaries have
the ability to change certain of these benefits at any time. These benefits are
partially funded through employee contributions, as well as certain other assets
contributed by the Company and its subsidiaries. The aggregate charge to
earnings for the year ended December 31, 1997 was DM 1,409,000.
4. 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.
Following are the domestic and foreign components of pre-tax income for 1997:
<TABLE>
<CAPTION>
(in thousand DM)
<S> <C>
German 19,032
Foreign 11,092
------
Total pre-tax income 30,124
======
</TABLE>
The 1997 income tax provision consists of the following:
<TABLE>
<CAPTION>
(in thousand DM)
<S> <C>
Current:
- --------
Federal 4,152
Trade 2,893
Foreign 2,156
------
Total current tax provision 9,201
Deferred:
- ---------
Federal 675
Trade 230
Foreign 55
------
Total deferred tax provision 960
Total income tax provision 10,161
======
</TABLE>
14
<PAGE> 16
The net deferred tax amounts reported on the Company's Consolidated Balance
Sheet as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(in thousand DM)
Federal Trade Foreign Total
------- ----- ------- -----
<S> <C> <C> <C> <C>
Current liability -- -- -- --
Long-term liability 25,092 9,097 55 34,244
</TABLE>
The following are components of the net deferred tax balances as of December 31,
1997:
<TABLE>
<CAPTION>
(in thousand DM)
Federal Trade Foreign Total
------- ----- ------- -----
<S> <C> <C> <C> <C>
Deferred tax assets:
Current -- -- -- --
Long-term 1,198 498 -- 1,696
------ ----- -- ------
Total 1,198 498 -- 1,696
====== ===== == ======
Deferred tax liabilities:
Current -- -- -- --
Long-term 26,290 9,595 55 35,940
------ ----- -- ------
Total 26,290 9,595 55 35,940
====== ===== == ======
</TABLE>
The tax effects of temporary differences as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(in thousand DM)
<S> <C>
Net deferred tax liabilities:
Property 34,310
Pension (240)
Other 174
------
Deferred income taxes 34,244
======
</TABLE>
A reconciliation between the 1997 provision for income taxes, computed by
applying the statutory federal income tax rate of 45% to income before income
taxes, and the actual 1997 provision for income taxes follows:
15
<PAGE> 17
<TABLE>
<CAPTION>
(in thousand DM)
<S> <C>
Federal income tax provision at statutory rate 13,556
Tax credits from distribution of earnings (4,519)
Trade taxes, net of federal income tax benefit 2,507
Tax holiday for Philippine subsidiary (2,357)
Solidarity tax 555
Other 419
------
Actual provision for income taxes 10,161
======
</TABLE>
On November 14, 1996, the Philippine Board of Investments extended an income tax
holiday until February 1999. As a result, no income taxes were provided for the
Company's Philippine subsidiary during 1997.
5. LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings incident to the
ordinary course of its business. 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 condition or results of operations or
liquidity.
6. SIGNIFICANT CUSTOMER AND FOREIGN SALES
Net sales to customers in countries outside of Germany were DM 204,428,000 or
68.3% of the Company's total net sales in 1997. There were no customers who
accounted for 10% or more of the Company's sales.
7. GEOGRAPHICAL INFORMATION
Geographic regions are aligned into three regions: "Germany", "Western Europe"
and "Rest of the World". The following table summarizes net revenues, operating
income and identifiable assets of the Company's operations by geographical
regions for the year ended December 31, 1997:
16
<PAGE> 18
<TABLE>
<CAPTION>
(in thousand DM) Western Rest of Elimin- Consol-
Germany Europe the ations idated
World
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales 234,797 45,269 19,211 -- 299,277
Transfer between geographic
areas 18,652 7,250 29,261 (55,163) --
------- ------ ------ ------- -------
Total revenue 253,449 52,519 48,472 (55,163) 299,277
======= ====== ====== ======= =======
Operating profit 23,348 3,999 6,819 (1,859) 32,307
======= ====== ====== ======= =======
Identifiable assets at December
31, 1997 230,335 53,564 20,490 (42,360) 262,029
======= ====== ====== ======= =======
</TABLE>
8. DEBT OBLIGATIONS
Short-term lines of credit - The Company and its subsidiaries have short-term
lines of credit aggregating DM 33,295,000 of which DM 11,750,000 is unsecured.
The Company had borrowings of DM 17,688,000 at interest rates ranging between
4.5% and 8.0% under these lines of credit as of December 31, 1997.
Long-term debt - The following table sets forth the outstanding long term debt
in DM and certain of its terms as of December 31, 1997:
<TABLE>
<S> <C>
Fixed rate term loans (interest rates ranging from 5.75% to 8.13%) 34,310
Fixed rate equipment loans (interest rates ranging from 2.5% to 8.61%) 24,457
Variable rate term loan (interest rate as of December 31, 1997 - 8.0%) 597
------
59,364
======
</TABLE>
17
<PAGE> 19
Long-term debt amounts mature as follows (in DM):
<TABLE>
<S> <C>
1998 13,933
1999 13,451
2000 11,579
2001 8,598
2002 3,494
Thereafter 8,309
-------
59,364
=======
</TABLE>
Certain long-term loans are secured by mortgages. Beside the general business
terms or specific conditions concerning the use of the borrowed amounts, the
loans include certain restrictions: the shareholders' equity under German
generally accepted accounting principles of Papierfabrik and of the Company may
not be less than 15.0% of their respective total assets with the percentage of
Papierfabrik increasing to 27.9% as of December 31, 1999. Dividends are only
paid when distributable profits exist according to commercial law.
9. COMMITMENTS AND CONTINGENCIES
Description of Leasing Arrangements- The Company has operating lease commitments
expiring at various dates, primarily for buildings and equipment such as cars,
EDP equipment and transportation equipment. The operating leases expire during
the next 53 months.
The Company expects that most leases will be renewed or replaced by other leases
in the normal course of business.
Rental expense relating to operating leases for 1997 totaled DM 873,219.
The following is a schedule, by years, of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1997:
<TABLE>
<CAPTION>
Year ending December 31, (in DM)
<S> <C>
1998 824,128
1999 694,948
2000 503,250
2001 297,364
2002 115,319
Later years 574,121
---------
Total minimum payments 3,009,130
required
=========
</TABLE>
18
<PAGE> 20
10. RELATED PARTY TRANSACTIONS
During the year the Company had the following transactions with related parties:
Deutsche Bank AG- Deutsche Bank AG, a lender to the Company, is a shareholder of
the Deutsche Beteiligungs AG, Frankfurt/ Germany, a shareholder of the parent
company of the Company as of December 31, 1997. The Company has several bank
accounts and short and long-term loan agreements with the Deutsche Bank AG.
Total borrowings from Deutsche Bank AG as of December 31, 1997 were DM
76,814,621. The Company expensed DM 5,523,000 and DM 175,000 for interest and
additional fees, respectively, during 1997, relating to these borrowings. The
Company believes these borrowings were made on an arm's length basis. A US-$
working capital loan in the amount of DM 1,792,100 was repaid and interest
payments of DM 88,929 were made in 1997.
Bollore Technologies SA ("Bollore")- Effective January 1, 1995, Papeteries de
Cascadec SA ("PdC"), which is a 50% joint venture of Papierfabrik and Bollore,
entered into a services agreement pursuant to which Bollore agreed to provide or
cause to be provided to PdC certain specified services. Each party has the right
to discontinue the agreement with six months notice prior to the end of each
year. During 1997, PdC was invoiced DM 743,625 for these services and paid DM
371,813.
Effective April 4, 1995, PdC also entered into a three-year agreement with
Bollore. PdC agreed to buy and deliver fibres necessary for pulp to a
manufacturing subsidiary of Bollore in Troyes/ France that, in turn, would
provide PdC with long fiber pulp. The agreement was canceled at the end of 1997.
During 1997, PdC paid DM 2,306,958 to Bollore.
Effective April 4, 1995, PdC entered into a four-year agreement with Bollore
whereby Bollore would act as a commercial agent of PdC concerning the sale of
electrolytic paper. The agreement will be extended indefinitely with three
months notice for cancellation if not canceled three months before expiration.
Bollore received DM 199,555 in commission during 1997.
Bolmet Inc.- The American subsidiary of Bollore, Bolmet Inc., acts as a
distributor for PdC in the US. During 1997, Bolmet sold DM 4,676,630 on behalf
of PdC.
Gizeh Raucherbedarf GmbH und Co. KG ("Gizeh")- Before the Company was sold in
January 1998 to a new shareholder, Gizeh and the Company had the same parent
company. The Company had DM 3,400,000 of sales to Gizeh in 1997. The Company
believes these sales were made on an arm's length basis.
Gizeh-Werk GmbH ("Gizeh-Werk") - Gizeh-Werk has signed an agreement with the
Company recognizing Gizeh-Werk's obligation concerning withholding taxes and
solidarity charges to be paid by the Company on its behalf. These amounts relate
to a dividend payment from the
19
<PAGE> 21
Company to Gizeh-Werk. The Company has classified this DM 5,328,000 receivable
due from Gizeh-Werk as "Other assets" on its Consolidated Balance Sheet as of
December 31, 1997.
11. DERIVATIVE FINANCIAL INSTRUMENTS
The Company is party to financial instruments with off-balance sheet risk. These
financial instruments are used in the normal course of business to manage the
Company's exposure to fluctuations in interest rates and foreign exchange risk.
The primary classes of derivatives used by the Company are interest rate swaps
and foreign currency options. These instruments involve to varying degrees,
market risk, as the instruments are subject to rate and price fluctuations, and
elements of credit risk in the event a counterparty should default. Credit risk
is managed through the approval and periodic monitoring of financially sound
counterparties.
At December 31, 1997 the Company had acquired options to sell 2,550,000 Great
Britain Pounds at various prices which expire on various dates beginning January
13, 1998 through December 15, 1998.
Interest rate swaps are contractual agreements between the Company and another
party to exchange fixed and floating rate interest payments periodically over
the life of the agreements without the exchange of the underlying principal
amounts. At December 31, 1997 the total notional amount of such agreements was
DM 19,827,500, on which the Company has agreed to pay fixed rates of interest
ranging from 6.70% to 7.37% and receive the six month London Interbank Offered
Rate ("LIBOR"). LIBOR as of December 31, 1997 was 3.75%. The swaps expire at
various dates beginning October 29, 1999 through October 23, 2000. As of
December 31, 1997, the cost to terminate the swap agreements aggregated DM
1,088,000.
(b) Pro forma financial information filed as part of this
report:
1. Unaudited Condensed Consolidated Pro Forma
Statement of Operations for the year ended December 31, 1997.
2. Unaudited Condensed Consolidated Pro Forma Balance
Sheet dated December 31, 1997.
UNAUDITED PRO FORMA
FINANCIAL INFORMATION
On January 2, 1998, P. H. Glatfelter Company (the "Registrant") acquired all of
the issued and outstanding share capital of S&H Papier-Holding GmbH ("S&H").
The following unaudited condensed consolidated pro forma financial statements
(the "Pro Forma Financial Statements") of the Registrant are based on historical
consolidated financial statements
20
<PAGE> 22
of the Registrant, as adjusted to give effect to the S&H acquisition, as
described in the notes to the Pro Forma Financial Statements below. This
information is being provided pursuant to an amendment to the initial Form 8-K
filing with respect to the acquisition of S&H, as permitted and required under
the applicable rules and regulations. The unaudited condensed consolidated pro
forma statement of operations for the year ended December 31, 1997 gives effect
to the S&H acquisition as if it had occurred as of January 1, 1997. The
unaudited condensed consolidated pro forma balance sheet gives effect to the S&H
acquisition as if it had occurred as of December 31, 1997. The allocation of
purchase price for the S&H acquisition is based on an estimate of the fair value
of the assets acquired.
The pro forma adjustments are based upon available information and upon certain
assumptions that the Registrant believes are reasonable under the circumstances.
The Pro Forma Financial Statements and accompanying notes should be read in
conjunction with the historical consolidated financial statements of the
Registrant and S&H, including the notes thereto, and other financial information
pertaining to the Registrant. The Pro Forma Financial Statements do not purport
to represent what the Registrant's actual results of operations or actual
financial position would have been if the S&H acquisition had, in fact, occurred
on such dates or to project the Registrant's results of operations or financial
position for any future period or date. The Pro Forma Financial Statements do
not give effect to any transactions other than the S&H acquisition, as discussed
in the notes hereto.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------
HISTORICAL RESULTS
-------------------------
THE PRO FORMA
REGISTRANT S&H (a) ADJUSTMENTS PRO FORMA
---------- ------- ----------- ---------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Net sales $567,072 $171,515 $ -- $738,587
Other income:
Interest on investments and other - net 7,785 183 -- 7,968
Energy sales - net 9,189 -- -- 9,189
Other income and gains - net 3,166 1,969 -- 5,135
-------- -------- ------- --------
Total revenues 587,212 173,667 -- 760,879
Costs and expenses
Cost of products sold 458,126 136,459 854 (b) 595,439
Selling, general and administrative 36,809 16,541 842 (c) 54,192
Interest on debt 18,700 3,403 6,663 (d) 28,766
-------- -------- ------- --------
Total costs and expenses 513,635 156,403 8,359 678,397
Income before income taxes and minority interest 73,577 17,264 (8,359) 82,482
Income tax provision 28,293 5,823 (2,819) (e) 31,297
Income before minority interest 45,284 11,441 (5,540) 51,185
Minority interest -- 733 -- 733
-------- -------- ------- --------
Net income $ 45,284 $ 10,708 $(5,540) $ 50,452
======== ======== ======= ========
Basic earnings per share 1.07 $ 1.19
Diluted earnings per share 1.07 $ 1.19
Shares used in basic earnings per share computation 42,220 42,220
Shares used in diluted earnings per share computation 42,442 42,442
</TABLE>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA STATEMENT OF OPERATIONS
(a) Reflects the inclusion of the historical statement of operations for the
year ended December 31, 1997 of S&H. The historical statement of operations,
denominated in Deutsche Marks, was converted into U.S. dollars using an average
annual exchange rate of 1.7449 for the year ended December 31, 1997.
(b) Reflects additional depreciation expense relating to cost of products sold
resulting from an increase in property and equipment valuation recorded as a
part of the purchase price allocation of the S&H acquisition.
(c) Reflects additional depreciation relating to selling, general and
administrative expenses resulting from an increase in property and equipment
valuation recorded as a part of the purchase price allocation of the S&H
acquisition and amortization expense resulting from the recognition of goodwill
recorded as a part of the S&H acquisition.
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<PAGE> 23
(d) Reflects interest expense resulting from total borrowings of $150,662,000,
at an average interest rate at 4.3%, to complete the S&H acquisition.
(e) Adjusts the income tax provision for the effect of the pro forma adjustments
above.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------------------
HISTORICAL RESULTS
----------------------------
PRO FORMA
THE REGISTRANT S&H (a) ADJUSTMENTS PRO FORMA
-------------- ------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 66,919 $ 3,131 $ (48,665) (b) $ 21,385
Marketable securities 155,174 3,249 -- 158,423
Accounts receivable 50,187 26,981 -- 77,168
Inventories 101,232 30,791 -- 132,023
Prepaid expenses 2,967 390 -- 3,357
--------- --------- --------- -----------
Total current assets 376,479 64,542 (48,665) 392,356
PLANT, EQUIPMENT AND TIMBERLANDS - NET 475,189 74,658 75,264 (c) 625,111
GOODWILL -- -- 14,936 (d) 14,936
OTHER ASSETS 85,915 7,013 17,488 (e) 110,416
--------- --------- --------- -----------
Total assets $ 937,583 $ 146,213 $ 59,023 $ 1,142,819
========= ========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 150,000 $ 7,775 $ -- $ 157,775
Short-term debt 48,665 9,870 (48,665) (b) 9,870
Accounts payable 36,218 7,113 -- 43,331
Dividends payable 7,390 -- -- 7,390
Federal, state and local taxes 5,106 7,736 -- 12,842
Accrued compensation, other expenses
and deferred income taxes 41,506 10,201 -- 51,707
--------- --------- --------- -----------
Total current liabilities 288,885 42,695 (48,665) 282,915
LONG-TERM DEBT 150,000 25,351 150,662 (f) 326,013
DEFERRED INCOME TAXES 101,995 19,108 (1,527) (e) 119,576
OTHER LONG-TERM LIABILITIES 56,287 8,056 -- 64,343
--------- --------- --------- -----------
Total liabilities 597,167 95,210 100,470 792,847
MINORITY INTEREST -- 9,556 -- 9,556
SHAREHOLDERS' EQUITY
Common stock 544 56 (56) (g) 544
Capital in excess of par value 42,623 12,500 (12,500) (g) 42,623
Retained earnings 478,073 30,121 (30,121) (g) 478,073
Cumulative translation adjustment -- (1,230) 1,230 (g) --
--------- --------- --------- -----------
Total 521,240 41,447 (41,447) 521,240
Less cost of common stock in treasury (180,824) -- -- (180,824)
--------- --------- --------- -----------
Total shareholders' equity 340,416 41,447 (41,447) 340,416
--------- --------- --------- -----------
Total liabilities and shareholders' equity $ 937,583 $ 146,213 $ 59,023 $ 1,142,819
========= ========= ========= ===========
</TABLE>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA BALANCE SHEET
(a) Reflects the net assets of S&H as of December 31, 1997, which were acquired
on January 2, 1998. The historical balance sheet of S&H, denominated in Deutsche
Marks, was converted into U.S. dollars using a year-end exchange rate of 1.7921
as of December 31, 1997.
(b) Reflects the amount of cash used by the Company to pay a portion of the
purchase price. This amount was borrowed by the Company on December 30, 1997
under a revolving credit facility to capitalize two German subsidiaries in order
to facilitate the acquisition. The borrowings were classified as "Short-term
debt" on the Company's consolidated balance sheet as of December 31, 1997. These
proceeds were reclassified to "Long-term debt" of the Unaudited Condensed
Consolidated Pro Forma Balance Sheet as described in (f).
(c) Gives effect to the net increase in valuation of property, plant and
equipment acquired with remaining useful lives ranging from 5 to 25 years.
(d) Recognizes goodwill for the amount of the purchase price in excess of the
fair market value of the net assets acquired to be amortized over 20 years.
(e) Reflects adjustments to deferred tax assets and deferred tax liabilities
created by the difference between the book and tax basis of assets and
liabilities recorded within purchase accounting in connection with the
acquisition. Other assets are reduced due to the recognition of the projected
benefit obligation resulting from the acquisition.
(f) Reflects the total borrowings used to complete the acquisition. A portion of
these borrowings were made on December 30, 1997 as described in Note (b). The
additional proceeds were borrowed on January 2, 1998 in order to complete the
acquisition as of that date. The total amount of $150,662,000 borrowed to
purchase the stock of S&H is classified as "Long-term debt" in the "Pro forma"
column of the Unaudited Condensed Consolidated Pro Forma Balance Sheet.
(g) Reflects the elimination, on a consolidated basis, of the net assets of S&H
as of December 31, 1997.
22
<PAGE> 24
(c) Exhibits:
<TABLE>
<CAPTION>
Number Description of Document
- ------ -----------------------
<S> <C>
2.1 Stock Purchase Agreement dated as of November 14, 1997 by and
among certain subsidiaries of P. H. Glatfelter Company, the
Stockholders of S&H Papier Holding GmbH and Deutsche
Beteiligungs Aktiengesellschaft
Unternehmensbeteiligungsgesellschaft and P.H. Glatfelter
Company (incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K dated January 2,
1998).
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
</TABLE>
23
<PAGE> 25
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 hereunto duly authorized.
P. H. GLATFELTER COMPANY
(Registrant)
Date: March 23, 1998 By:/s/ Robert S. Wood
---------------------------
Robert S. Wood
Secretary and Treasurer
24
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
P.H. Glatfelter Company:
We consent to the incorporation by reference in the Registration Statements of
P.H. Glatfelter Company on 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 March 20, 1998 with respect to the financial statements of S&H
Papier-Holding GmbH for the year ended December 31, 1997, appearing in this
Amendment No. 1 on Form 8-K/A to the Current Report on Form 8-K dated January 2,
1998 of P.H. Glatfelter Company.
Deloitte & Touche GmbH
Wirtschaftsprufungsgesellschaft
Frankfurt, Germany
March 20, 1998
25
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS CONSENT
We consent to the use in the Registration Statements of P.H. Glatfelter Company
on 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 March 12, 1998
(relating to the financial statements of Papeteries de Cascadec -Odet Ergue
Gaberic/France for the year ended December 31, 1997 - not presented separately
herein) appearing in this Amendment No. 1 on Form 8-K/A to the Current Report on
Form 8-K dated January 2, 1998 of P.H. Glatfelter Company.
Paris and Reichstett, March 13, 1998
CONSTANTIN ASSOCIES SEGEC AUDIT SA
Commissaire aux Comptes Commissaire aux Comptes
Jean Paul Seguret Jean-Claude Klein
26
