<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
P.H. GLATFELTER COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[P.H. GLATFELTER LOGO]
P. H. GLATFELTER COMPANY
228 SOUTH MAIN STREET
SPRING GROVE, PENNSYLVANIA 17362
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1999
---------------------
TO THE SHAREHOLDERS:
The annual meeting of shareholders of P. H. Glatfelter Company will be held
at the Company's principal office, 228 South Main Street, Spring Grove,
Pennsylvania, on Wednesday, April 28, 1999 at 10:00 A.M. for the following
purposes:
1. To elect five members of the Board of Directors to serve for full
three-year terms expiring in 2002; and
2. To transact such other business as may properly come before the
Meeting.
Only holders of Common Stock of record on the transfer books of the Company
at the close of business on March 3, 1999 will be entitled to notice of and to
vote at the Meeting.
It is important that your shares be represented and voted at the Annual
Meeting. Whether or not you currently intend to be present personally at the
Annual Meeting, you are urged to complete, date, sign and return the
accompanying proxy in the enclosed, self-addressed envelope requiring no postage
if mailed in the United States. You may still vote in person if you do attend
the Annual Meeting.
/s/ R. S. Wood
R. S. WOOD,
Secretary
March 19, 1999
<PAGE> 3
P. H. GLATFELTER COMPANY
PROXY STATEMENT
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of P. H.
Glatfelter Company (the "Company"), 228 South Main Street, Spring Grove,
Pennsylvania 17362, in connection with the 1999 annual meeting of shareholders
of the Company (the "Annual Meeting" or "Meeting"). Copies of this proxy
statement and the accompanying proxy are being mailed to the holders of Common
Stock on or after March 19, 1999. The proxy may be revoked by a shareholder at
any time prior to its use by giving written notice of such revocation to the
Secretary of the Company, by appearing at the Meeting and voting in person or by
the timely submission of a properly executed later dated proxy. The expense of
this solicitation will be paid by the Company. Some of the officers and other
employees of the Company may solicit proxies personally and by telephone.
Holders of Common Stock of record at the close of business on March 3, 1999
will be entitled to one vote per share so held of record on all business of the
Meeting, except that the holders have cumulative voting rights in elections of
directors. Therefore, each shareholder is entitled to as many votes in the
election of directors of each class as shall equal the number of his shares of
Common Stock multiplied by the number of directors of such class to be elected.
A shareholder may cast all such votes for a single nominee or may distribute
them between two or more nominees within such class as he sees fit. The Company
had 42,130,000 shares of Common Stock outstanding on the record date. Under
Pennsylvania law and the by-laws of the Company, the presence at the Annual
Meeting, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter will constitute a quorum for the purposes of consideration and action on
such matter. If the proxy is signed and returned without directions, the shares
will be voted as indicated in the Proxy Statement by the persons named in the
accompanying proxy. The votes will be counted by judges of election appointed by
the Company.
ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting to serve three-year
terms expiring on the date of the 2002 annual meeting of shareholders and until
their respective successors are elected and shall qualify. The persons named in
the accompanying proxy intend to vote for the election of Nicholas DeBenedictis,
Patricia G. Foulkrod, George H. Glatfelter, M. A. Johnson II and Richard W.
Kelso for terms expiring in 2002, unless authority to vote for one or more of
such nominees is specifically withheld in the proxy. Messrs. DeBenedictis,
Glatfelter, Johnson and Kelso are currently directors of the Company. The
persons named in the proxy will have the right to vote cumulatively and to
distribute their votes among the nominees as they consider advisable. The five
nominees for election as directors for terms expiring in 2002 receiving the
highest number of votes cast by shareholders entitled to vote thereon, will be
elected to serve on the Board of Directors. Votes that are withheld will be
counted in determining the presence of a quorum, but will have no effect on the
vote. The Board of Directors is informed that all the nominees are willing to
serve as directors, but if any of them should decline to serve or become
unavailable for election as a director at the Meeting, an event which the Board
of Directors does not anticipate, the persons named in the proxy will vote for
such nominee or nominees as may be designated by the Board of Directors unless
the Board of Directors reduces the number of directors accordingly.
The following table sets forth information as to the nominees and the other
persons who are to continue as directors of the Company after the Annual
Meeting. The offices referred to in the table are offices of the Company unless
otherwise indicated. For information concerning the number of shares of Common
Stock of
<PAGE> 4
the Company owned by each director, each nominee and all directors and officers
as a group as of March 3, 1999, see "Ownership of Common Stock."
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
<S> <C> <C> <C>
Nominees to be elected for terms expiring in 2002:
Nicholas DeBenedictis 53 1995 Chairman and Chief Executive Officer of
Philadelphia Suburban Corporation; Director of
Philadelphia Suburban Corporation, Met-Pro
Corp. and Provident Mutual Life Insurance
Company
Patricia G. Foulkrod(1) 54 -- Homemaker and community volunteer
George H. Glatfelter(1) 72 1970 Retired; former Vice President - Manufacturing,
Spring Grove Mill
M. A. Johnson II 65 1970 Retired; former Executive Vice President,
Treasurer and Chief Financial Officer
Richard W. Kelso 61 1997 President and Chief Executive Officer, PQ
Corporation, a manufacturer of industrial
inorganic chemicals; Director of SPS
Technologies and PQ Corporation
Directors continuing for terms expiring in 2001:
Roger S. Hillas 71 1964 Retired; Chairman and Chief Executive Officer,
Meritor Savings Bank, prior to December 1992;
Director of Toll Bros., Inc.
Robert P. Newcomer 50 1998 Executive Vice President and Chief Financial
Officer since June 1998; Senior Vice President
and Chief Financial Officer from October 1995
to June 1998; Vice President, Treasurer and
Chief Financial Officer from January 1995 to
October 1995; Vice President and Treasurer
prior to January 1995
Paul R. Roedel 71 1992 Retired; Chairman and Chief Executive Officer,
Carpenter Technology Corporation, manufacturer
of specialty metals, prior to July 1992;
Director of GPU, Inc.
John M. Sanzo 49 1992 Private Financial Consultant since June 1994;
President, Edison Control Corporation,
manufacturer of circuit indicators for electric
utility industry, from November 1991 to June
1994; Managing Director, The First Boston
Corporation, an investment bank, prior to
August 1991
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
<S> <C> <C> <C>
Directors continuing for terms expiring in 2000:
Robert E. Chappell 54 1989 Chairman and Chief Executive Officer, Penn
Mutual Life Insurance Company since January
1997; President and Chief Executive Officer,
Penn Mutual Life Insurance Company from April
1995 to December 1996; President and Chief
Operating Officer, Penn Mutual Life Insurance
Company prior to April 1995; Director of Quaker
Chemical Corporation.
George H. Glatfelter II(1) 47 1992 President and Chief Executive Officer since
June 1998; Senior Vice President from September
1995 to June 1998; Vice President -- General
Manager, Glatfelter Paper Division prior to
September 1995
Thomas C. Norris 60 1976 Chairman since June 1998; Chairman, President
and Chief Executive Officer prior to June 1998
Richard L. Smoot 58 1994 President and Chief Executive Officer, PNC
Bank, National Association, Philadelphia/South
Jersey markets since October 1995; President
and Chief Executive Officer, PNC Bank, National
Association, Philadelphia prior to October
1995; Director of Philadelphia Suburban
Corporation
</TABLE>
- ---------------
(1) Patricia G. Foulkrod is the niece of George H. Glatfelter and the first
cousin of George H. Glatfelter II. George H. Glatfelter is the father of
George H. Glatfelter II.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND ITS COMMITTEES
BOARD OF DIRECTORS
The Board of Directors held seven meetings during 1998. Each of the
incumbent directors attended at least 75% of the aggregate of all meetings of
the Board of Directors and committees thereof on which he served in 1998. The
standing committees of the Board are the Executive Committee, the Audit
Committee, the Compensation Committee, the Finance Committee, the Nominating
Committee and the Employee Benefits Committee. The members of all of these
committees are appointed by the Board.
COMMITTEES
Executive Committee
The Executive Committee consists of six members of the Board: G. H.
Glatfelter, G. H. Glatfelter II, R. S. Hillas, M. A. Johnson II, T. C. Norris
and R. L. Smoot. The Executive Committee has the authority to exercise all of
the powers of the Board of Directors between meetings of the Board, except the
power to amend the Company's by-laws, submit matters to shareholders for
approval, create or fill vacancies in the Board of Directors and repeal or
modify any prior action of the Board of Directors that by its terms can be
repealed or amended only by the Board. The Executive Committee held no meetings
during 1998.
3
<PAGE> 6
Audit Committee
The Audit Committee consists of five members of the Board: R. E. Chappell,
N. DeBenedictis, R. S. Hillas, P. R. Roedel and J. M. Sanzo, none of whom are
members of the Company's management. Generally, the Audit Committee (i)
recommends to the Board of Directors the independent accountants to be appointed
for the Company, (ii) meets with the independent accountants, the chief internal
auditor and corporate officers to review matters relating to corporate financial
reporting and accounting procedures and policies, adequacy of financial,
accounting and operating controls and the scope of the audits of the independent
accountants and internal auditors, including in the case of the independent
accountants, the fees for such services and (iii) reviews and reports on the
results of such audits to the Board of Directors. The Audit Committee held three
meetings during 1998.
In accordance with the recommendations of the Audit Committee, the Board of
Directors has appointed Deloitte & Touche LLP, independent certified public
accountants, to audit the consolidated financial statements of the Company and
its consolidated subsidiaries for the year ending December 31, 1999. A
representative of Deloitte & Touche is expected to attend the Annual Meeting and
will be given the opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions.
Compensation Committee
The Compensation Committee consists of five members of the Board: N.
DeBenedictis, R. S. Hillas, R. W. Kelso, P. R. Roedel and R. L. Smoot, none of
whom are members of the Company's management. The responsibilities of the
Compensation Committee are described below (see "Report of Compensation
Committee on Executive Compensation"). The Compensation Committee held eight
meetings during 1998.
Finance Committee
The Finance Committee consists of seven members of the Board: R. E.
Chappell, G. H. Glatfelter II, M. A. Johnson II, R. W. Kelso, R. P. Newcomer, T.
C. Norris and J. M. Sanzo. The Finance Committee is responsible for overseeing
the Company's financial affairs and recommending such financial actions and
policies, including those with respect to dividends, as are most appropriate to
accommodate the Company's strategic and operating strategies while maintaining
its sound financial condition. The Finance Committee held four meetings during
1998.
Nominating Committee
The Nominating Committee consists of five members of the Board: G. H.
Glatfelter II, R. S. Hillas, T. C. Norris, J. M. Sanzo and R. L. Smoot. The
responsibilities of the Nominating Committee include the identification and
recruitment of effective candidates for nomination as directors and officers of
the Company. The Nominating Committee held three meetings during 1998. The
Nominating Committee will consider as nominees for election to the Board persons
recommended by the holders of Common Stock of the Company. Any shareholder
desiring to recommend a nominee for election at the 2000 annual meeting of
shareholders should submit such nomination in writing to the Secretary of the
Company by November 20, 1999.
Employee Benefits Committee
The Employee Benefits Committee consists of three members of the Board, G.
H. Glatfelter II, R. P. Newcomer and T. C. Norris, and two officers or employees
of the Company, D. H. Landis and R. S. Wood. The responsibilities of the
Employee Benefits Committee include the general overview of the provisions of
various pension plans of the Company and periodic review of pension fund
performance. The Employee Benefits Committee is also responsible for
administering the Company's various profit sharing,
4
<PAGE> 7
401(k) savings and stock ownership plans and for conducting a periodic review of
profit sharing and savings plan fund performance. The Employee Benefits
Committee held two meetings during 1998.
COMPENSATION OF DIRECTORS
Non-employee directors are paid a retainer fee of $12,500 (the "Retainer").
In addition, non-employee directors are paid $1,000 for every board meeting
attended plus $800 for every committee meeting attended. Non-employee committee
chairpersons also receive an annual committee-related retainer of $2,500.
Pursuant to the Company's Deferred Compensation Plan for Directors (the
"Plan"), each year directors may elect to defer 50%, 75% or 100% of their
Retainer to be earned in that year and following years. For each director who
participates in the Plan, the Company will credit a deferred fee account with
phantom shares of the Company's Common Stock ("Stock Units") at such time as the
Retainer would otherwise have been paid. The number of Stock Units credited to a
director's deferred account is the quotient of the amount of the deferred
Retainer divided by the fair market value of the Company's Common Stock on such
date. Additional Stock Units are credited to each director's account as of each
payment date for dividends on the Company's Common Stock, based on the number of
Stock Units credited to a director's account on the record date for such
dividends. Once a participant in the Plan ceases to be a member of the Board of
Directors, such participant is entitled to receive an amount in cash equal to
the product of the number of Stock Units credited to his deferred account
multiplied by the fair market value of the Company's Common Stock, payable in
lump sum or in installments.
Each non-employee director automatically receives, on May 1st of each year,
non-qualified stock options to purchase 1,500 shares of Common Stock of the
Company for a purchase price per share equal to the fair market value per share
of the Common Stock of the Company on the date such options are granted. The
options vest in full on the first anniversary of the date of the grant and
expire on the earlier of the date on which the optionee ceases to be a member of
the Board of Directors and ten years from the date of the grant; provided,
however, that (i) in the event of the optionee's retirement from the Board, such
options are exercisable until the first to occur of five years from the date of
such retirement and ten years from the date of the grant and (ii) in the event
that an optionee ceases to be a member of the Board by reason of death or
disability, such options are exercisable until the first to occur of one year
from the date of such death or disability or ten years from the date of the
grant.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
from the Company and its subsidiaries which was awarded to, earned by, or paid
to the person who served as Chief Executive Officer of the Company at the end of
1998 and each of the Company's four other most highly compensated executive
officers in 1998 (one of whom was Chief Executive Officer of the Company for a
portion of 1998):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
NAME AND ----------------------- ------------------------- -------------
PRINCIPAL RESTRICTED SECURITIES
POSITION FISCAL STOCK UNDERLYING LTIP ALL OTHER
AT DECEMBER 31, 1998 YEAR SALARY($) BONUS($)(1) AWARDS($)(2) OPTIONS PAYOUTS($)(3) COMPENSATION($)(4)
- ------------------------- ------ --------- ----------- ------------ ---------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. H. Glatfelter II...... 1998 254,580 63,459 0 81,196 92,293 0
President and Chief 1997 191,580 97,468 0 12,930 0 0
Executive Officer 1996 177,330 143,837 0 13,450 0 0
T. C. Norris............. 1998 418,658 165,518 0 200,000 366,250 4,825
Chairman 1997 409,250 274,807 0 100,000 317,500 4,775
1996 390,002 399,483 0 0 1,662,500 4,525
R. P. Newcomer........... 1998 224,880 61,600 0 50,720 107,960 4,825
Executive Vice 1997 191,880 97,596 0 12,930 0 4,750
President
and Chief Financial 1996 167,880 143,069 0 13,450 0 4,500
Officer
J. F. Myers.............. 1998 199,800 48,385 0 9,040 107,960 4,778
Vice President-- 1997 192,000 77,218 0 8,760 0 4,482
Manufacturing 1996 182,952 113,348 0 9,115 831,250 4,498
Technology
R. S. Lawrence........... 1998 201,054 28,513 0 27,347 92,293 4,800
Vice President-- 1997 181,620 23,108 0 7,490 0 4,750
General Manager, 1996 167,880 143,069 0 13,450 0 4,500
Ecusta Division
</TABLE>
- ---------------
(1) Reflects distributions under a broad-based profit sharing plan payable to
all salaried employees and bonuses under the Management Incentive Plan for
executive officers and other senior level employees.
(2) At December 31, 1998, Messrs. Glatfelter, Newcomer and Lawrence held
restricted stock awards for 16,520, 9,101, and 4,456 shares of Common Stock,
respectively, which will vest on December 31, 2002. At December 31, 1998,
the fair market value of the shares subject to awards held by Messrs.
Glatfelter, Newcomer and Lawrence was $206,500, $113,763 and $55,700,
respectively. With respect to Messrs. Glatfelter, Newcomer and Lawrence, an
amount equal to the cash dividends per share paid on the Company's Common
Stock during the four-year period shall accrue with respect to each share of
restricted stock and be payable at the end of the four-year period. At
December 31, 1998, Mr. Norris held restricted stock awards for 20,000 shares
of Common Stock, which will vest on May 1, 1999. At December 31, 1998, the
fair market value of the shares subject to awards held by Mr. Norris was
$247,500. With respect to Mr. Norris, no dividends are paid on shares
subject to restricted stock awards which have not vested. The table does not
include performance shares or restricted stock described under "Long-Term
Incentive Plan Awards".
(3) For 1998 with respect to Messrs. Glatfelter, Newcomer, Myers and Lawrence,
represents the payout for performance shares, which were awarded in 1995
pursuant to the 1992 Key Employee Long-Term Incentive Plan, for the
four-year performance period ended December 31, 1998. For 1998 and 1997 with
respect to Mr. Norris, reflects payouts of awards made in 1991, which vested
on May 1, 1998 and 1997,
6
<PAGE> 9
respectively, pursuant to the 1988 Restricted Common Stock Award Plan. For
1996, reflects payouts of awards made in 1988, which vested on May 1, 1996
pursuant to the 1988 Restricted Common Stock Award Plan.
(4) Other compensation reported for 1998 represents (a) matching contributions
under the Company's 401(k) Savings Plan and (b) in the case of Mr. Norris
and Mr. Newcomer, the $25 payable to them as employees at the Company's
Spring Grove Mill with service in excess of 25 years.
OPTION GRANTS
The following table sets forth information concerning the number of options
granted during 1998 and the value of unexercised options to purchase Common
Stock held by the named executive officers at December 31, 1998. Under the terms
of the stock options granted during 1998, none of the options were exercisable
until 1999.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#) DURING 1998 ($/SH)(1) DATE VALUE ($#)
---- ---------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
G. H. Glatfelter II.............. 13,330(1) .8 18.38 12/31/07 62,952(3)
67,866(2) 4.1 12.34 12/16/08 193,847(4)
T. C. Norris..................... 100,000(1) 6.1 18.38 12/31/07 472,262(3)
100,000(2) 6.1 12.34 12/16/08 285,632(4)
R. P. Newcomer................... 13,330(1) .8 18.38 12/31/07 62,952(3)
37,390(2) 2.3 12.34 12/16/08 106,798(4)
J. F. Myers...................... 9,040(1) .5 18.38 12/31/07 42,692(3)
R. S. Lawrence................... 9,040(1) .5 18.38 12/31/07 42,692(3)
18,307(2) 1.1 12.34 12/16/08 52,291(4)
</TABLE>
- ---------------
(1) Options granted to Mr. Norris on January 1, 1998 became exercisable in full
on January 1, 1999. Upon retirement Mr. Norris may exercise options until
the first to occur of five years from the date of his retirement or December
31, 2007. Options granted to the other named executive officers on January
1, 1998 are exercisable with respect to 25% of the total number of shares
subject to option on each of January 1, 1999 and January 1 of the following
three years. Upon retirement, the grantees may exercise options until the
first to occur of three years from the date of such retirement or December
31, 2007.
(2) Options granted to Mr. Norris on December 17, 1998 become exercisable in
full on January 1, 2000. Upon retirement Mr. Norris may exercise options
until the first to occur of five years from the date of his retirement or
December 16, 2008. Options granted to the other named executive officers on
December 17, 1998 are exercisable with respect to 25% of the total number of
shares subject to option on each of January 1, 2000 and January 1 of the
following three years. Upon retirement, the grantees may exercise options
until the first to occur of three years from the date of such retirement or
December 16, 2008.
(3) The estimated present value at grant date of options granted on January 1,
1998 has been calculated using the Black-Scholes option pricing model, based
upon the following assumptions: estimated time until exercise: ten years; a
risk-free interest rate of 5.24%, representing the interest rate on a U.S.
Government zero-coupon bond on the date of grant with a maturity
corresponding to the estimated time until exercise; a volatility rate of
25.77%; and a dividend yield of 3.672%, representing the current $0.70 per
share annualized dividends divided by the fair market value of the Common
Stock on the date of grant. The
7
<PAGE> 10
approach used in developing the assumptions upon which the Black-Scholes
valuation was done is consistent with the requirements of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
(4) The estimated present value at grant date of options granted on December 17,
1998 has been calculated using the Black-Scholes option pricing model, based
upon the following assumptions: estimated time until exercise: ten years; a
risk-free interest rate of 4.89%, representing the interest rate on a U.S.
Government zero-coupon bond on the date of grant with a maturity
corresponding to the estimated time until exercise; a volatility rate of
29.25%; and a dividend yield of 4.60%, representing the current $0.70 per
share annualized dividends divided by the fair market value of the Common
Stock on the date of grant. The approach used in developing the assumptions
upon which the Black-Scholes valuation was done is consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."
YEAR-END OPTION VALUES
The following table sets forth information concerning options exercised in
1998 and the value of unexercised options to purchase Common Stock held by the
named executive officers at December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT 12/31/98 12/31/98($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. H. Glatfelter II.... 0 n/a 46,643 101,513 0 0
T. C. Norris........... 0 n/a 145,000 200,000 0 0
R. P. Newcomer......... 0 n/a 48,629 71,701 0 0
J. F. Myers............ 0 n/a 45,420 24,725 0 0
R. S. Lawrence......... 0 n/a 42,453 40,754 0 0
</TABLE>
- ---------------
(1) The exercise prices exceeded the market value of the Company's Common Stock
on December 31, 1998.
8
<PAGE> 11
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information concerning the number of
performance shares and the number of shares of restricted stock granted in 1998
under the Company's 1992 Key Employee Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLAN AWARDS IN 1998
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE BASED PLAN
SHARES, UNITS OTHER PERIOD ---------------------------------
OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS OR PAYOUT SHARES(#) SHARES(#) SHARES(#)
---- ------------- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
G. H. Glatfelter II............... 3,380(1) 4 years(2) 958 3,380 7,660
16,520(3) 4 years(4) -- 16,520 --
T. C. Norris...................... 0 -- -- -- --
R. P. Newcomer.................... 3,380(1) 4 years(2) 958 3,380 7,660
9,101(3) 4 years(4) -- 9,101 --
J. F. Myers....................... 2,600(1) 4 years(2) 650 2,600 5,200
R. S. Lawrence.................... 2,600(1) 4 years(2) 650 2,600 5,200
4,456(3) 4 years(4) -- 4,456 --
</TABLE>
- ---------------
(1) Performance shares awarded in 1998 under the 1992 Key Employee Long-Term
Incentive Plan will be paid at the end of the performance period in amounts
based upon the Company's success in achieving certain performance goals,
which are a combination of (i) return on average shareholders' equity and
(ii) pre-tax earnings relative performance. Payouts of earned performance
shares will be made at the discretion of the Company's Compensation
Committee in cash or Common Stock of the Company. The performance shares
will be forfeited upon termination of a participant's employment with the
Company during the performance period for any reason other than retirement,
death or disability.
(2) The performance period is from January 1, 1998 to December 31, 2001.
(3) Restricted stock awarded in 1998 under the 1992 Key Employee Long-Term
Incentive Plan will vest at the end of four years, subject to the
achievement by the Company of a minimum level of earnings per share over the
four-year period. An amount equal to the cash dividends per share paid on
the Company's Common Stock during the four-year period shall accrue with
respect to each share of restricted stock and be payable at the end of the
four-year period. The restricted stock will be forfeited upon termination of
employment during the four-year period for any reason other than retirement,
death or disability.
(4) Restricted stock will vest on December 31, 2002.
EMPLOYEE BENEFIT PLANS
Salary Continuation Plan
The Company has a Salary Continuation Plan which provides for the payment
for ten years following the retirement or death of the participant of an amount
which on an actuarial basis as computed in 1987, was expected to equal the
difference between 55% of the participant's then projected compensation at age
60 and the sum of then projected Social Security and Company pension plan
retirement benefits to which the participant is entitled. If the participant
dies prior to retirement, the benefits are payable to the participant's
beneficiary. Compensation for purposes of the Salary Continuation Plan generally
includes salary plus cash received and deferred compensation accrued under the
Company's Management Incentive Plan and the former Salaried Employees' Profit
Sharing Plan and Company contributions under the Employee Stock Purchase Plan.
The Company has purchased insurance on the lives of the participants to provide
funds to help
9
<PAGE> 12
offset the costs of benefits payable under the Plan. Mr. Norris is the only
active employee who participates in the Plan.
Pension Plan
Officers and directors who are full time employees of the Company
participate in the P. H. Glatfelter Company Retirement Plan for Salaried
Employees (the "Pension Plan"). Benefits payable under the Pension Plan are
based upon years of service and average annual compensation for the five
consecutive calendar years during the ten years preceding the year of retirement
that yield the highest average. Retirement benefits under the Pension Plan are
not subject to any deduction for Social Security benefits. Retirement benefits
accrued under the Pension Plan for employees of the Ecusta Division are reduced
by any pension benefits payable under a pension plan maintained by a predecessor
employer. Annual compensation for purposes of the Pension Plan generally
includes salary as listed in the Summary Compensation Table on page 6
("Compensation Table") plus bonus listed in the Compensation Table for the prior
year. To the extent deferral of an award under the Company's Management
Incentive Plan causes a reduction in a participant's pension under the Pension
Plan, there will be paid a pension supplement (the "MIP Adjustment Supplement")
from the Company's Supplemental Management Pension Plan.
Employees of the Spring Grove mill who earned a vested benefit under the
Pension Plan before May 1, 1970 ("Grandfathered Spring Grove Participants") may
receive a benefit, if greater than the usual benefit, which does not give effect
to years of service and is based on plan earnings, which consist of the sum of
average compensation in excess of annual base salary for the five year period
prior to the year of actual retirement, or, if earlier, the year in which the
employee attains age 60, and the annual base salary as of the April 30th (or
other effective date for annual compensation adjustments) closest to the
retirement date or, if earlier, the April 30th (or other effective date for
annual compensation adjustments) closest to the participant's 60th birthday.
Annual compensation for such participants generally means the salary and bonus
amounts listed in the Compensation Table.
The Pension Plan was amended in 1998 to reflect the voluntary early
retirement enhancement programs (the "VEREPs") for eligible salaried employees
of the Company. Eligible employees who have elected to participate in one of the
VEREPs generally receive enhanced benefits under the Pension Plan based on the
addition of five years of credited service and five years of additional age, but
not beyond age 65. Of the named executive officers at December 31, 1998, Mr.
Myers elected to retire under the VEREP, which provided him with an age 65
benefit approximately two years early.
The Company has a Supplemental Executive Retirement Plan ("SERP")
consisting of two benefits, either or both of which are available to those
management and executive employees who have been selected by the Company's
Compensation Committee for participation therein. The first benefit, known as
the "Restoration Pension," provides an additional pension benefit based on the
participant's pension benefit earned under the terms of the Pension Plan, which
is intended to restore that portion of the Pension Plan's benefit which cannot
be paid from that plan due to legal limitations on the compensation and total
benefits payable thereunder. Participants may receive the Restoration Pension in
a single sum or in any form permitted under the Pension Plan, as elected by the
participant at the time he first becomes a participant.
The second benefit, known as the "FAC Pension," pays a monthly pension
benefit equal to a designated percentage of the participant's Final Average
Compensation (as defined below), offset by the actuarially equivalent value of
the participant's benefits under the Pension Plan and certain Company-sponsored
nonqualified defined benefit pension arrangements, including (if applicable) the
Restoration Pension. The designated percentage is 2% multiplied by the
participant's years of credited service under the Pension Plan, but not in
excess of 55%. The FAC Pension is payable following the participant's retirement
at or after age 62 in the form of a joint and 75% survivor annuity with the
participant's spouse or, if so requested by the participant and approved by the
Company's Compensation Committee, as a single sum. The FAC Pension can
10
<PAGE> 13
also be paid on an early retirement basis as early as age 55, but reduced by
2.5% for each year by which the early benefit commencement precedes the
participant's attainment of age 62. A survivor benefit is also payable to the
participant's surviving spouse if the participant dies before his benefit
commencement date. "Final Average Compensation" means the annualized average of
the participant's eligible compensation for the sixty (60) calendar months
immediately preceding his retirement, which generally means the salary and bonus
amounts listed in the Compensation Table.
The following table shows the estimated annual retirement benefits, payable
in the form of a joint and 75% survivor annuity beginning at age 62, to those
executives, including Messrs. Glatfelter II, Newcomer and Lawrence, who are
eligible for the FAC Pension under the SERP. This benefit consists of the sum of
the executive's Pension Plan benefits and the additional amount necessary to
yield the benefit calculated under the FAC Pension.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT
AVERAGE ANNUAL BENEFIT BASED ON YEARS OF SERVICE
FIVE YEAR PLAN ---------------------------------------------
COMPENSATION($) 15 20 25 27.5 OR MORE
--------------- ------- ------- ------- ------------
<S> <C> <C> <C> <C>
125,000....................... 37,500 50,000 62,500 68,750
150,000....................... 45,000 60,000 75,000 82,500
175,000....................... 52,500 70,000 87,500 96,250
200,000....................... 60,000 80,000 100,000 110,000
250,000....................... 75,000 100,000 125,000 137,500
300,000....................... 90,000 120,000 150,000 165,000
400,000....................... 120,000 160,000 200,000 220,000
500,000....................... 150,000 200,000 250,000 275,000
600,000....................... 180,000 240,000 300,000 330,000
700,000....................... 210,000 280,000 350,000 385,000
800,000....................... 240,000 320,000 400,000 440,000
</TABLE>
The following executive officers who participate in the Pension Plan had the
indicated credited years of service at December 31, 1998: G. H. Glatfelter II:
22 years; T. C. Norris: 39 years; R. P. Newcomer: 26 years; J. F. Myers: 31
years; and R. S. Lawrence: 38 years.
The foregoing table assumes that the executive is a participant in the FAC
Pension under the SERP. Of the named executive officers at December 31, 1998,
Mr. Norris and Mr. Myers are not eligible for the FAC Pension and therefore
receive a pension determined under the Pension Plan, together with, as
applicable, the Restoration Pension and the MIP Adjustment Supplement. Both Mr.
Norris and Mr. Myers are Grandfathered Spring Grove Participants and their
accrued annual benefits under the Pension Plan, the Restoration Pension and the
MIP Adjustment Supplement, payable in the form of a single life annuity
beginning at age 65, are $243,449 and $106,117, respectively. Mr. Norris is
eligible to receive a 3-year Early Retirement Supplement (under the Company's
Supplemental Management Pension Plan) which is paid if he retires before
attaining age 65 and elects to defer receipt of benefits under the Pension Plan
until age 65 or, if earlier, until the first day of the 36th month following his
retirement. This benefit pays, for up to three years, a monthly benefit equal to
that calculated under the Pension Plan and (if applicable) the Restoration
Pension under the SERP, but with the addition of up to three years to Mr.
Norris' age. Mr. Myers was also eligible to receive a 3-year Early Retirement
Supplement but, as noted above, has elected to retire under the VEREP.
COMPENSATION COMMITTEE INTERLOCK
AND INSIDER PARTICIPATION
The Compensation Committee consists of five members of the Board of
Directors: P. R. Roedel (Chairman), N. DeBenedictis, R. S. Hillas, R. W. Kelso
and R. L. Smoot.
11
<PAGE> 14
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and approves the elements of the
Company's executive compensation program and assesses the effectiveness of the
program as a whole. The Compensation Committee's responsibilities include: (i)
reviewing annually (A) with the Company's Chief Executive Officer the job
performance of corporate officers and key senior management employees of the
Company and (B) the job performance of the Company's Chief Executive Officer as
measured against financial and other objectives and the Company's achievements
as compared to certain other companies in the paper and forest products
industry, (ii) reviewing and establishing the level of salaries and benefits for
the Chief Executive Officer, other corporate officers and other key senior
management employees of the Company, including but not limited to benefits under
the Company's long-term incentive plan, profit sharing plans, defined benefit
and contribution plans and other welfare benefit plans, and (iii) reviewing and
approving the participants in, and the operating rules for awards under, the
Company's Management Incentive Plan.
The Compensation Committee from time to time reviews the Company's entire
executive compensation structure through an examination of compensation
information for comparable companies and certain broader-based data, including
data relating to the geographic areas in which the Company has facilities,
compiled by the Company and by compensation and other consulting firms. As used
herein, comparable companies refer to other companies in the paper and forest
products industry (both publicly and privately owned) selected by management as
being the companies in the industry which on an overall basis are most similar
to the Company in relation to size, products and financial and other
characteristics and in certain cases to general industry and nondurable
manufacturing companies of roughly the same revenue size as the Company. The
companies that comprise the Peer Group in the Stock Performance Chart below are
the Company's industry-based comparable companies. Certain of the comparable
companies are included in the S&P 500, and therefore are represented in the
Stock Performance Chart. In examining the compensation paid by the comparable
companies, the Compensation Committee does not analyze the stock performance of
such companies, but does examine their general financial performance.
Executive Compensation Policies. The Compensation Committee has generally
structured the Company's executive compensation program (i) to be competitive
with compensation programs of comparable companies to enable the Company to
attract, retain and motivate a highly qualified executive management team, (ii)
to provide a significant portion of variable-based compensation that is
contingent upon objectively-measured performance to align executive officers'
interests with those of the Company's shareholders, and (iii) to include
appropriate and flexible design features in such programs which will be
responsive to the peculiarities of the paper industry and to the changing needs
of the Company. The elements of the Company's executive compensation program are
salary, profit sharing, annual incentive compensation, long-term incentive
compensation and other benefits. From time to time the Compensation Committee
solicits the advice of compensation and other consulting firms to evaluate the
Company's executive compensation program in order to ensure that such program is
competitive with compensation programs of comparable companies.
The Compensation Committee intends that awards made under the Long-Term
Incentive Plan and the Management Incentive Plan will qualify as
performance-based compensation that will be deductible for federal income tax
purposes under Section 162(m) of the Code.
Salary. The Company's policy is to pay fair salaries at levels which are
sufficient to attract and retain high caliber individuals based on the relative
value of each position, as measured against comparable companies. The
Compensation Committee assigns each executive position a salary grade with a
salary range based on the salary level for similar positions at comparable
companies. Ranges are adjusted by the Compensation Committee periodically and
executives are moved to different salary grades as their job responsibilities or
titles change.
12
<PAGE> 15
Generally, executive officer salaries are reviewed and approved annually.
The salary for each executive is set by the Compensation Committee after an
assessment of his or her performance and the relation of his or her salary to
the midpoint for the relevant salary range, as well as the Company's financial
results and general economic conditions. The factors that were considered in
granting salary increases to executive officers for 1998 were as follows: (i)
the Company's financial performance in 1997, (ii) the salary levels for certain
of the executive officers were below the minimum salary levels of the salary
grades for their respective positions and the salary levels for positions of
similar scope and responsibility at comparable companies and (iii) the
Compensation Committee's assessment of the executive officer's performance as
evaluated and reported to the Compensation Committee by the Chief Executive
Officer.
In addition, the Compensation Committee approved the payment of cash
bonuses in 1998 to two executive officers in view of their extraordinary
performance in connection with the Company's 1998 acquisition of S&H
Papier-Holding GmbH, the specialty paper division of the Schoeller and Hoesch
Group.
Annual Incentive Compensation. The Company has established a profit
sharing plan which covers all of its domestic salaried employees. The plan is
intended to incentivize participants to enhance Company performance by offering
them a shared interest in profits each year, up to a maximum of 15% of base
salary.
The Compensation Committee establishes additional incentive bonus
opportunities under its Management Incentive Plan, which are designed to
encourage greater efforts on the part of key salaried employees to increase the
profits of the Company. The incentive bonus opportunities potentially represent
a significant portion of total compensation and are intended to correlate with
the financial performance of the Company or one or more divisions thereof. The
underlying objectives of the Company's Management Incentive Plan are to assure
that incentive bonus awards are at risk annually, to reward senior executives on
the basis of corporate financial results and key mill management personnel on
the basis of mill financial results and to provide an incentive bonus award
structure for key salaried employees of the Company that is similar to that of
comparable companies.
To establish financial targets for payment of profit sharing and incentive
awards, the Committee has established separate profit centers for the Company's
Global operations: the U.S. Corporate operations, the Glatfelter Paper Group
(representing a combination of the Spring Grove and Neenah mills) and for each
of its domestic mills. The Company's senior executives are participants in the
Global, U.S. Corporate and Ecusta mill profit centers.
The operating rules established by the Compensation Committee for profit
sharing in 1998 provide for awards of up to 15% of base salary depending on the
percentage return on shareholders' equity for the operations included in the
profit center or, in the case of the domestic mill profit centers, on the
individual mill financial performance for the year.
Under the operating rules established by the Compensation Committee for the
Management Incentive Plan for 1998, the incentive bonus awards for the Global
and U.S. Corporate profit centers are based on the return on shareholders'
equity of the Company. The incentive bonus award for all other profit centers is
based primarily on return on capital employed for each profit center.
The Compensation Committee establishes annual maximum, target and minimum
financial objectives to be achieved for each profit center. Under the Plan, when
establishing such financial objectives, the Compensation Committee considers the
current economic climate, the forecast for the Company's business and the
historical financial results of the Company. This methodology is intended to
induce management to enhance the profitability of the Company throughout the
full business cycle, and therefore to provide value to the shareholders of the
Company. The Compensation Committee believes that executive officers should not
receive any incentive bonus if the Company does not achieve annually established
minimum financial objectives. If the minimum financial objectives are achieved,
the incentive award for an executive officer
13
<PAGE> 16
would be determined by multiplying a percentage derived from the financial
performance of such executive officer's respective profit center by the midpoint
of the salary range for such officer.
The 1998 financial performance of the Company's profit centers in which
senior executives are participants resulted in profit sharing awards of less
than half the maximum award attainable under the plan.
For purposes of the Management Incentive Plan, the financial performances
of the Global and U.S. Corporate profit centers for 1998 were slightly above the
minimum financial objectives established by the Compensation Committee and the
financial performance of the Ecusta mill profit center for 1998 was below the
minimum financial objective established by the Compensation Committee. The
incentive bonus payments generally were lower in 1998 than in 1997 as a result
of a decline in the Company's net income in 1998 from 1997.
Long-Term Incentive Compensation. The Company's Long-Term Incentive Plan
enables the Company to offer key employees equity interests in the Company and
other incentive awards, including performance-based stock incentives. Certain
features of the Plan (i.e., stock options, performance shares, performance units
and restricted stock) are similar to long-term incentives offered by many of the
comparable companies. The primary purposes of the Plan are to (i) attract,
retain, motivate and reward key employees, (ii) provide target long-term
incentive award opportunities which are competitive with comparable companies,
(iii) assure that the awards issued pursuant to the Plan reflect the cyclical
and long-term nature of the paper industry, (iv) enable senior executives to
acquire appropriate levels of equity interest in the Company in order to
increase the alignment of their interests with those of shareholders and (v)
otherwise strengthen the mutuality of interests between key employees and the
Company's shareholders.
In 1995, the Company adopted a long-term incentive program, developed at
the direction of the Compensation Committee by an executive compensation
consulting firm, under which stock options and/or performance shares have been
granted annually through January 1998 to key employees. The value of such awards
has been based upon the value of awards granted to positions of similar scope
and responsibility within comparable companies. Stock options have an exercise
price equal to the fair market value of the Company's Common Stock at the time
of the grant and generally become exercisable in annual 25% increments
commencing one year after the date of grant. Contingent awards of performance
shares have generally been made on the first day of the four-year performance
period. At the end of the four-year performance period, the number of shares
earned is based upon the level of achievement of two factors: return on average
shareholders' equity and pre-tax earnings relative performance. If the threshold
return on average shareholders' equity is not attained, no shares are earned.
Above the threshold goals, the contingent award is reduced if the target goals
are not met and such contingent award is supplemented if the target goals are
exceeded. Payouts of earned performance shares are made at the discretion of the
Committee in cash or in Common Stock of the Company at the end of the four-year
performance period. The first four-year performance period under the long-term
incentive program ended on December 31, 1998. The payouts were between the
target and maximum amounts which could have been earned for such period. The
primary factor considered by the Compensation Committee in setting the amounts
of options and performance shares granted effective January 1, 1998 was the
dollar value of long-term incentive awards granted to executive officers in
positions of similar scope and responsibility in comparable companies.
In December 1998, the Compensation Committee revised the long-term
incentive program by making awards of restricted stock in lieu of awards of
performance shares. The grant of stock options continued. In addition, the
grants and awards were made effective in December, whereas in prior years such
grants and awards were approved in December, but made effective on January 1 of
the following year. Restricted stock was substituted by the Committee for
performance shares because the Committee viewed restricted stock, subject to
future vesting, as simpler, more understandable and better serving the objective
of retaining key senior executives. Stock options continue to provide the
necessary long-term incentive. The value of the stock option grants and
restricted stock awards made in December 1998 is based upon the value of awards
granted to
14
<PAGE> 17
positions of similar scope and responsibility within comparable companies. The
stock options that were granted had terms and conditions similar to the stock
options granted effective on January 1, 1998. Certain executive officers were
also granted restricted stock awards which are subject to the continued service
of such executive officers for four years, except in cases of death, disability
or retirement, and a threshold earnings level established by the Committee.
CEO Compensation. The salary of T. C. Norris, Chief Executive Officer of
the Company until June 24, 1998, was increased by 2.3% effective January 1,
1998. In granting this increase, the Committee considered Mr. Norris' leadership
of the Company during 1997, which was a difficult year for the industry, when
the Company's financial results exceeded its peer group on a relative basis. The
Committee also considered that Mr. Norris' base salary was below the minimum for
his salary grade.
Mr. Norris' annual incentive bonus award for 1998 reflected the fact that
the financial performance of the Company's Global profit center for 1998 was
slightly above the minimum financial objectives established by the Compensation
Committee.
The Committee also granted Mr. Norris nonqualified stock options under the
Long-Term Incentive Plan effective January 1, 1998 and December 17, 1998. The
options vest on January 1, 1999 and January 1, 2000, respectively. The value of
the options granted January 1, 1998 was estimated to be similar to the value of
options granted to chief executive officers of comparable companies. The value
of the options granted December 17, 1998 was determined by the Committee to
represent appropriate incentive for Mr. Norris to undertake the responsibilities
assigned to him in his role as Chairman. The Committee believes that this form
of stock compensation more closely aligns Mr. Norris' interests with those of
the shareholders of the Company.
On June 24, 1998, George A. Glatfelter II was elected President and Chief
Executive Officer of the Company. Mr. Norris has continued as Chairman. In
connection with his promotion, the Committee advanced Mr. Glatfelter to a higher
salary grade and increased his annual salary by 47% to reflect his increased
responsibilities and to move him closer to the minimum for his new salary grade.
Effective December 17, 1998, the Committee granted Mr. Glatfelter nonqualified
stock options under the Long-Term Incentive Plan with a value intended to
approximate 50% of long-term incentive compensation granted to chief executive
officers of comparable companies. The remaining 50% consisted of an award of
restricted stock by the Compensation Committee vesting December 31, 2002,
subject to the achievement of a minimum net income level over the four-year
vesting period.
P. R. Roedel
N. DeBenedictis
R. S. Hillas
R. W. Kelso
R. L. Smoot
15
<PAGE> 18
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total return on the Company's Common Stock during the five years ended December
31, 1998 with the cumulative total return on the S&P 500 Composite Index, the
Dow Jones Paper Products Industry Group and the Company's Peer Group(1). This
year the Company has included the Peer Group, in addition to the Dow Jones Paper
Products Industry Group, in the Stock Performance Chart because the Dow Jones
Paper Products Industry Group includes only very large domestic paper companies
that are not necessarily comparable to the Company. The companies comprising the
Peer Group are more closely related to the Company in terms of size and from a
competitive standpoint. The comparison assumes $100 was invested on December 31,
1993 in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED DECEMBER 31, 1998
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
P. H. GLATFELTER DOW JONES PAPER
COMPANY S&P 500 PRODUCTS PEER GROUP
---------------- ------- --------------- ----------
<S> <C> <C> <C> <C>
'1993' 100.00 100.00 100.00 100.00
'1994' 86.90 101.32 111.03 103.53
'1995' 99.70 139.40 122.62 117.14
'1996' 108.99 171.40 129.39 127.40
'1997' 117.35 228.59 140.56 136.89
'1998' 81.57 293.91 146.65 140.98
</TABLE>
- ---------------
(1) The Company's Peer Group consists of companies in the same industry as the
Company. The returns of each company in the Peer Group have been weighted
according to their respective stock market capitalization for purposes of
arriving at the Peer Group average. The members of the Peer Group are as
follows: Bowater, Inc., Chesapeake Corporation, Consolidated Papers Inc.,
Mead Corporation, Pope and Talbot, Inc., Potlatch Corporation,
Schweitzer-Mauduit International, Inc., Union Camp Corporation, Wausau
Mosinee Paper Mills Corporation, Westvaco Corporation and Willamette
Industries.
16
<PAGE> 19
CERTAIN TRANSACTIONS
Mr. Smoot, a director of the Company, is President and Chief Executive
Officer of PNC Bank, National Association, Philadelphia/South Jersey markets.
PNC Bank, National Association ("PNC Bank"), an indirect subsidiary of PNC Bank
Corp., has a banking relationship with the Company and provides general banking
services and credit facilities. As of December 31, 1998, the Company had a
$25,000,000 line of credit with PNC Bank. During 1998, the PNC Bank line of
credit was used for nine days. The maximum borrowing totaled $950,000 and the
full year interest expense paid was $595.23. In addition, PNC Bank is one of
seven lending institutions under a $200,000,000 Credit Agreement dated December
22, 1997, which was used to finance the Company's acquisition of the Schoeller &
Hoesch specialty paper business. PNC Bank's committed share of this credit
facility is $31,250,000. As of December 31, 1998, the Company's borrowing under
the Credit Agreement was approximately $167,000,000; PNC Bank's portion of this
loan was approximately $26,100,000. All transactions between the Company and PNC
Bank have been made in the ordinary course of business and on substantially the
same terms as those prevailing at the time for comparable transactions with
other persons.
OWNERSHIP OF COMMON STOCK
The following table sets forth as of March 3, 1999 (except as otherwise
noted) the holdings of (i) each person who is known by the Company to own
beneficially more than 5% of the Common Stock of the Company, (ii) each
director, each director nominee and certain executive officers and (iii) all
directors and executive officers of the Company as a group. All stock with
respect to which a person has the right to acquire beneficial ownership within
60 days is considered beneficially owned by that person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
(NUMBER OF SHARES) PERCENTAGE
-------------------------------- OF CLASS
VOTING AND/OR (IF GREATER
NAME DIRECT(1) INVESTMENT POWER(2) THAN 1%)
---- --------- ------------------- -----------
<S> <C> <C> <C>
Principal Holders
PNC Bank Corp...................................... 0 16,415,065(3) 39.0%
Fifth Ave. & Wood St.
Pittsburgh, Pa.
P. H. Glatfelter Family............................ 0 13,494,979(4) 32.0%
Shareholders' Voting Trust
c/o PNC Bank
1600 Market Street
Philadelphia, Pa.
G. H. Glatfelter................................... 0 3,785,819(5) 9.0%
Spring Grove, Pa.
Directors, nominees for director and certain officers
(other than those listed above)
R. E. Chappell..................................... 0 3,500(6) --
N. DeBenedictis.................................... 2,000 2,500(6) --
P. G. Foulkrod..................................... 0 1,893,652(7) 4.5%
G. H. Glatfelter II................................ 1,865 72,143(8) --
R. S. Hillas....................................... 0 17,500(6) --
M. A. Johnson II................................... 10,544 3,036(6) --
R. W. Kelso........................................ 5,000 1,500(6) --
R. S. Lawrence..................................... 6,271 55,349(9) --
J. F. Myers........................................ 41,433 88,919(10) --
R. P. Newcomer..................................... 5,355 68,143(11) --
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
(NUMBER OF SHARES) PERCENTAGE
-------------------------------- OF CLASS
VOTING AND/OR (IF GREATER
NAME DIRECT(1) INVESTMENT POWER(2) THAN 1%)
---- --------- ------------------- -----------
<S> <C> <C> <C>
T. C. Norris....................................... 95,923 271,572(12) --
P. R. Roedel....................................... 200 1,500(6) --
J. M. Sanzo........................................ 500 1,500(6) --
R. L. Smoot........................................ 500 1,500(6) --
All directors and executive officers as a group.... 191,246 4,574,875(13) 11.1%
</TABLE>
- ---------------
(1) Reported in this column are shares held of record.
(2) Does not include shares reported in Direct Ownership column. For purposes
of the table, shares of Common Stock are considered beneficially owned by a
person if such person has or shares voting or investment power with respect
to such stock. As a result, the same security may be beneficially owned by
more than one person and, accordingly, in some cases, the same shares are
listed opposite more than one name in the table. Also includes, in some
cases, shares beneficially held by spouses or minor children, as to which
beneficial ownership is disclaimed.
(3) Consists of 9,265,652 shares as to which PNC Bank Corp. has sole voting
power; 7,049,547 shares as to which PNC Bank Corp. has shared voting power;
8,753,746 shares as to which PNC Bank Corp. has sole investment power; and
7,263,139 shares as to which PNC Bank Corp. has shared investment power.
The amounts specified for shared voting power and shared investment power
both include 89,348 shares held by PNC Bank as co-trustee with G. H.
Glatfelter, 993,619 shares held by PNC Bank as co-trustee or co-fiduciary
with P. G. Foulkrod and 10,648 shares held by PNC Bank as co-trustee with
G. H. Glatfelter II. In addition, 13,494,979 shares of the total amount of
shares beneficially held by PNC Bank Corp. are deposited in the Voting
Trust (see footnotes (4) and (7)). All shares beneficially held by PNC Bank
Corp. are also considered to be beneficially held by its subsidiary, PNC
Bancorp, Inc., and by PNC Bank, a subsidiary of PNC Bancorp, Inc. All of
the above share amounts are as of December 31, 1998.
(4) Consists of shares beneficially owned as of December 31, 1998 by certain
descendants of Philip H. Glatfelter or the spouses of such descendants,
including shares beneficially owned by P. G. Foulkrod, G. H. Glatfelter and
G. H. Glatfelter II, which were deposited in the P. H. Glatfelter Family
Shareholders' Voting Trust dated July 1, 1993 (the "Voting Trust"). Shares
deposited in the Voting Trust may be withdrawn subject to certain
conditions. Co-trustees for the Voting Trust are William M. Eyster II,
Katherine G. Costello, Elizabeth Glatfelter, Phillip H. Glatfelter IV, H.
Clinton Vaughan and PNC Bank. Co-trustees other than PNC Bank each
represent a family group. The shares deposited in the Voting Trust may be
voted only in accordance with a majority of votes cast by the co-trustees
pursuant to a weighted formula in which (i) each co-trustee (other than PNC
Bank) is entitled to cast such number of votes as is equal to the number of
shares deposited in the Voting Trust in which members of his or her family
group have an interest and (ii) PNC Bank is entitled to cast such number of
votes as is equal to the number of shares deposited in the Voting Trust in
which any fiduciary trust of which PNC Bank is a trustee and which is for
the benefit of one or more Glatfelter family members has an interest. The
co-trustees have no dispositive power with regard to the shares deposited
in the Voting Trust. The Voting Trust will continue until it is terminated
by the co-trustees or all of the shares deposited in the Voting Trust are
withdrawn. The address for each of the co-trustees is c/o PNC Bank, 1600
Market Street, Philadelphia, Pa.
(5) Includes 1,500 shares subject to options exercisable May 1, 1999 as well as
89,348 shares held as co-trustee with PNC Bank, 901,161 shares (of which
4,416 shares are also included in the number of shares which he holds as
co-trustee) which G. H. Glatfelter has the right to withdraw from certain
trusts of
18
<PAGE> 21
which PNC Bank is trustee and 2,793,810 shares which G. H. Glatfelter has
the right, on certain conditions, to purchase from certain trusts of which
PNC Bank is trustee. Except for the 1,500 shares subject to options
exercisable May 1, 1999, all shares beneficially owned by G. H. Glatfelter
are deposited in the Voting Trust (see footnote (4)).
(6) Includes 1,500 shares subject to options exercisable May 1, 1999.
(7) Includes 1,000 shares held in a retirement plan of which P. G. Foulkrod's
husband is the trustee, 993,619 shares held as co-trustee or co-fiduciary
with PNC Bank and 899,033 shares which P. G. Foulkrod has the right to
withdraw from a trust of which PNC Bank is trustee. Except for the 1,000
shares held in the retirement plan, all shares beneficially owned by P. G.
Foulkrod are deposited in the Voting Trust (see footnote (4)).
(8) Includes 60,465 shares subject to the currently exercisable portions of
options. Of the shares beneficially owned by G. H. Glatfelter II, 10,648
are held as co-trustee with PNC Bank and are subject to the Voting Trust
(see footnote (4)).
(9) Includes 52,428 shares subject to the currently exercisable portions of
options.
(10) Includes 54,446 shares subject to the currently exercisable portions of
options.
(11) Includes 63,115 shares subject to the currently exercisable portions of
options.
(12) Includes restricted stock awards for 20,000 shares, which will vest on May
1, 1999 and which may be paid either in cash or in the Company's Common
Stock at the Company's discretion, and 245,000 shares subject to the
currently exercisable portions of option.
(13) Includes restricted stock awards for 20,000 shares (see footnote (12)) and
676,343 shares subject to currently exercisable portions of options; also
includes all shares directly and indirectly owned by J. F. Myers, who
retired as an officer of the Company on January 1, 1999.
G. H. Glatfelter, the Voting Trust, PNC Bank Corp., PNC Bancorp, Inc. and
PNC Bank may be deemed to be "control persons" of the Company for purposes of
the proxy rules and regulations of the Securities and Exchange Commission.
19
<PAGE> 22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On July 29, 1998, a trust of which George H. Glatfelter II is a trustee
sold 300 shares of the Company's Common Stock. Mr. Glatfelter did not report
this sale on a Form 4 until December 1998.
Leland R. Hall was required to file a Form 3 with the Securities and
Exchange Commission disclosing his initial ownership of the Company's securities
within 10 days of his becoming an officer of the Company on August 10, 1998. Mr.
Hall did not file the Form 3 until August 26, 1998.
Richard R. Kelso purchased 1,000 shares of the Company's Common Stock on
each of August 5, 1998, August 26, 1998 and August 27, 1998. Mr. Kelso did not
file a Form 4 to report these purchases until September 23, 1998.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors knows of no
business that will be presented for consideration at the Annual Meeting other
than the items referred to above. If any other matter is presented to the
Meeting which under applicable proxy regulations need not be included in this
proxy statement or which the Board of Directors did not know would be presented
a reasonable time before this solicitation, the persons named in the
accompanying proxy will have discretionary authority to vote proxies with
respect to such matter in accordance with their best judgment.
DEADLINE FOR SHAREHOLDER PROPOSALS
If any shareholder wishes to present a proposal to the 2000 annual meeting
of shareholders, such proposal must be submitted to the Secretary of the Company
no later than November 20, 1999 if the proposal is to be considered by the Board
of Directors for inclusion in the Company's proxy statement for that meeting. If
any shareholder wishes to present a proposal to the 2000 annual meeting of
shareholders that is not included in the Company's proxy statement for that
meeting and fails to submit such proposal to the Secretary of the Company on or
before February 3, 2000, then the Company will be allowed to use its
discretionary voting authority when the proposal is raised at the annual
meeting, without any discussion of the matter in its proxy statement.
/S/ R. S. Wood
R. S. WOOD,
Secretary
March 19, 1999
20
<PAGE> 23
(LOGO)
Printed on Ecusta Sparlite
Manufactured by the Ecusta Division of the
P. H. Glatfelter Company
Basis 25x38 -- 37 lb. Recycled.
<PAGE> 24
PROXY P. H. GLATFELTER COMPANY
SPRING GROVE, PENNSYLVANIA
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 28, 1999
The undersigned shareholder of P. H. Glatfelter Company hereby appoints
Roger S. Hillas, Paul R. Roedel and John M. Sanzo and each of them, attorneys
and proxies, with power of substitution in each of them, to vote and act for and
on behalf of the undersigned at the annual meeting of shareholders of the
Company to be held at the Company's principal office, Spring Grove,
Pennsylvania, on Wednesday, April 28, 1999, and at all adjournments thereof,
according to the number of shares which the undersigned would be entitled to
vote if then personally present, as indicated hereon and in their discretion
upon such other business as may come before the meeting, all as set forth in the
notice of the meeting and in the proxy statement furnished herewith, copies of
which have been received by the undersigned; and hereby ratifies and confirms
all that said attorneys and proxies may do or cause to be done by virtue hereof.
IT IS AGREED THAT UNLESS OTHERWISE MARKED ON THE OTHER SIDE SAID
ATTORNEYS AND PROXIES ARE APPOINTED WITH AUTHORITY TO VOTE FOR THE ELECTION OF
DIRECTORS.
(PLEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE)
(Continued and to be signed on reverse side)
<PAGE> 25
/X/ Please mark your
votes as in this
example.
<TABLE>
<S> <C> <C> <C> <C>
VOTE for all
nominees listed VOTE
at right, except as WITHHELD
indicated below from all nominees
1. Election of
Directors: / / / / NOMINEES: Term Expiring in 2002: PLEASE MARK, SIGN, DATE AND
Nicholas DeBenedictis RETURN THIS PROXY PROMPTLY
Patricia G. Foulkrod USING THE ENCLOSED ENVELOPE
George H. Glatfelter
THE BOARD OF DIRECTORS RECOMMENDS M. A. Johnson II
VOTING 'FOR' THE NOMINEES. Richard W. Kelso
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below:
- --------------------------------------------------------------------------------
Signature Date Signature Date
------------------------- ----------- ------------------------- ------------
IF HELD JOINTLY
NOTE: Signature should be the same as the name printed above. Executors,
administrators, trustees, guardians, attorneys, and officers of
corporations should add their title when signing.
</TABLE>
