UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, ~~2015~~2016

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

LOGO

96 South George Street, Suite 520

York, Pennsylvania 17401

(Address of principal executive offices)

(717) 225-4711

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at the past 90 days. Yes þx No ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þx No ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ~~Large accelerated filer~~ þ ~~Accelerated filer~~ ¨ ~~Non-accelerated filer~~ ¨ ~~(Do not check if a smaller reporting company). Small reporting company~~ ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No þx.

Common Stock outstanding on July ~~30, 2015~~29, 2016 totaled ~~43,358,193~~43,547,739 shares.

P. H. GLATFELTER COMPANY AND

SUBSIDIARIES

REPORT ON FORM 10-Q

For the QUARTERLY PERIOD ENDED

June 30, ~~2015~~2016

Table of Contents


		Page
PART I –- FINANCIAL INFORMATION

Item 1	Financial Statements
	Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2016 and 2015 ~~and 2014~~ (unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June ~~30,2015~~30, 2016 and ~~2014~~2015 (unaudited)		3
	Condensed Consolidated Balance Sheets as of June 30, ~~2015~~2016 and December 31, ~~2014~~2015 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 ~~and 2014~~ (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)
	1. Organization		6
	2. Accounting Policies		6
	3. Earnings Per Share		7
	4. Accumulated Other Comprehensive Income		8
	5. Income Taxes		9
	6. Stock-based Compensation		10
	7. Retirement Plans and Other Post-Retirement Benefits		11


		Page
	~~Item 2~~8. Inventories		12
	9. Long-term Debt		12
	10. Asset Retirement Obligations		13
	11. Fair Value of Financial Instruments		13
	12. Financial Derivatives and Hedging Activities		14
	13. Commitments, Contingencies and Legal Proceedings		16
	14. Segment Information		21
	15. Condensed Consolidating Financial Statements		22

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29

Item 3	Quantitative and Qualitative Disclosures About Market Risks		39

Item 4	Controls and Procedures		39

PART II – OTHER INFORMATION

Item 6	Exhibits		40

	SIGNATURES		40

PART I

Item 1 – Financial Statements

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
In thousands, except per share	2015			2014			2015			2014			2016			2015			2016			2015

Net sales	$	410,803		$	445,341		$	828,272		$	901,062		$	406,413		$	410,803		$	808,631		$	828,272
Energy and related sales, net		715			790			2,783			6,052			2,001			715			2,667			2,783

Total revenues		411,518			446,131			831,055			907,114			408,414			411,518			811,298			831,055
Costs of products sold		378,685			404,694			746,114			810,637			365,691			378,685			710,732			746,114

Gross profit		32,833			41,437			84,941			96,477			42,723			32,833			100,566			84,941
Selling, general and administrative expenses		29,137			32,314			60,409			65,865			37,191			29,137			69,049			60,409
Gains on dispositions of plant, equipment and timberlands, net		(111	)		(1,482	)		(2,765	)		(2,291	)
(Gains) losses on dispositions of plant, equipment and timberlands, net														2			(111	)		26			(2,765	)

Operating income		3,807			10,605			27,297			32,903			5,530			3,807			31,491			27,297
Non-operating income (expense)
Interest expense		(4,352	)		(4,762	)		(8,860	)		(9,574	)		(3,953	)		(4,352	)		(8,069	)		(8,860	)
Interest income		77			52			142			113			61			77			152			142
Other, net		215			61			28			272			317			215			(383	)		28

Total non-operating expense		(4,060	)		(4,649	)		(8,690	)		(9,189	)		(3,575	)		(4,060	)		(8,300	)		(8,690	)

Income (loss) before income taxes		(253	)		5,956			18,607			23,714			1,955			(253	)		23,191			18,607
Income tax provision (benefit)		(3,101	)		1,287			1,834			4,397
Income tax (benefit) provision														(10	)		(3,101	)		5,058			1,834

Net income	$	2,848		$	4,669		$	16,773		$	19,317		$	1,965		$	2,848		$	18,133		$	16,773


Earnings per share
Basic	$	0.07		$	0.11		$	0.39		$	0.45		$	0.05		$	0.07		$	0.42		$	0.39
Diluted		0.06			0.11			0.38			0.44			0.04			0.06			0.41			0.38

Cash dividends declared per common share	$	0.12		$	0.11		$	0.24		$	0.22		$	0.125		$	0.12		$	0.25		$	0.24

Weighted average shares outstanding
Basic		43,377			43,287			43,315			43,327			43,558			43,377			43,539			43,315
Diluted		44,032			44,136			43,992			44,251			44,062			44,032			43,963			43,992

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 2 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three months ended June 30						Six months ended June 30					Three months ended June 30						Six months ended June 30
In thousands	2015			2014			2015			2014		2016			2015			2016			2015

Net income	$	2,848		$	4,669		$	16,773		$	19,317	$	1,965		$	2,848		$	18,133		$	16,773

Foreign currency translation adjustments		16,704			(533	)		(24,633	)		195		(14,864	)		16,704			(1,445	)		(24,633	)
Net change in:
Deferred gains (losses) on cash flow hedges, net of taxes of $956, $(408), $(107), and $(381), respectively		(2,501	)		1,080			265			1,001
Unrecognized retirement obligations, net of taxes of $(1,769), $(1,513), $(3,779), and $(2,928), respectively		2,884			2,479			6,170			4,795
Deferred gains on cash flow hedges, net of taxes of $(258), $956, $(201) and $(107), respectively													944			(2,501	)		1,010			265
Unrecognized retirement obligations, net of taxes of $(1,442), $(1,769), $(2,809) and $(3,779), respectively													2,381			2,884			4,638			6,170

Other comprehensive income (loss)		17,087			3,026			(18,198	)		5,991		(11,539	)		17,087			4,203			(18,198	)

Comprehensive income (loss)	$	19,935		$	7,695		($	1,425	)	$	25,308	$	(9,574	)	$	19,935		$	22,336		$	(1,425	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 3 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	June 30			December 31			June 30			December 31
In thousands	2015			2014			2016			2015

Assets
Cash and cash equivalents	$	65,762		$	99,837		$	58,532		$	105,304
Accounts receivable, net		177,582			163,760			175,336			167,199
Inventories		252,197			248,705			257,623			247,214
Prepaid expenses and other current assets		60,092			62,320			33,094			32,650

Total current assets		555,633			574,622			524,585			552,367

Plant, equipment and timberlands, net		693,919			697,608			748,036			698,864
Goodwill		77,924			84,137			77,044			76,056
Intangible assets		68,702			77,098			61,625			63,057

Other assets		134,259			128,039			113,894			110,072

Total assets	$	1,530,437		$	1,561,504		$	1,525,184		$	1,500,416


Liabilities and Shareholders’ Equity
Current portion of long-term debt	$	7,564		$	5,734		$	9,098		$	7,366
Accounts payable		149,377			157,070			169,869			172,735
Dividends payable		5,223			4,775			5,455			5,231
Environmental liabilities		9,957			1,075			11,361			12,544
Other current liabilities		116,260			111,077			115,610			106,444

Total current liabilities		288,381			279,731			311,393			304,320

Long-term debt		383,147			398,878			358,366			353,296

Deferred income taxes		102,437			104,016			75,155			76,458

Other long-term liabilities		117,547			129,770			104,047			103,095

Total liabilities		891,512			912,395			848,961			837,169

Commitments and contingencies		—			—			—			—

Shareholders’ equity
Common stock		544			544			544			544
Capital in excess of par value		51,625			54,342			54,530			54,912
Retained earnings		925,800			919,468			970,374			963,143
Accumulated other comprehensive loss		(173,068	)		(154,870	)		(186,283	)		(190,486	)

		804,901			819,484			839,165			828,113
Less cost of common stock in treasury		(165,976	)		(170,375	)		(162,942	)		(164,866	)

Total shareholders’ equity		638,925			649,109			676,223			663,247

Total liabilities and shareholders’ equity	$	1,530,437		$	1,561,504		$	1,525,184		$	1,500,416

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 4 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six months ended June 30						Six months ended June 30
In thousands	2015			2014			2016			2015
Operating activities
Net income	$	16,773		$	19,317		$	18,133		$	16,773
Adjustments to reconcile to net cash provided by operations:
Depreciation, depletion and amortization		31,602			36,893			33,411			31,602
Amortization of debt issue costs		599			656			574			599
Pension expense, net of unfunded benefits paid		3,699			3,330			1,964			3,699
Deferred income tax provision (benefit)		2,501			(2,724	)
Gains on dispositions of plant, equipment and timberlands, net		(2,765	)		(2,291	)
Deferred income tax (benefit) provision								(2,672	)		2,501
Losses (gains) on dispositions of plant, equipment and timberlands, net								26			(2,765	)
Share-based compensation		3,663			3,617			2,803			3,663
Change in operating assets and liabilities
Accounts receivable		(20,783	)		(23,805	)		(8,471	)		(20,783	)
Inventories		(8,609	)		(21,783	)		(12,295	)		(8,609	)
Prepaid and other current assets		(1,678	)		(6,937	)		(163	)		(1,678	)
Accounts payable		(989	)		(16,870	)		(3,027	)		(989	)
Accruals and other current liabilities		2,735			(11,147	)		5,252			2,735
Other		(1,235	)		378			1,105			(1,235	)

Net cash provided (used) by operating activities		25,513			(21,366	)

Net cash provided by operating activities								36,640			25,513
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(44,575	)		(30,156	)		(80,391	)		(44,575	)
Proceeds from disposals of plant, equipment and timberlands, net		3,051			2,360			53			3,051
Other		(1,600	)		(100	)		(300	)		(1,600	)

Net cash used by investing activities		(43,124	)		(27,896	)		(80,638	)		(43,124	)

Financing activities
Net repayments of revolving credit facility		—			(25,425	)		(11,403	)		—
Payments of borrowing costs		(1,329	)		—			(136	)		(1,329	)
Proceeds from term loans								19,428			—
Repayment of term loans		(1,492	)		—			(3,803	)		(1,492	)
Repurchases of common stock		—			(9,158	)
Payments of dividends		(9,992	)		(9,164	)		(10,679	)		(9,992	)
Proceeds from government grants								4,443			—
Payments related to share-based compensation awards and other		(2,000	)		(1,816	)		(976	)		(2,000	)

Net cash used by financing activities		(14,813	)		(45,563	)		(3,126	)		(14,813	)

Effect of exchange rate changes on cash		(1,651	)		(41	)		352			(1,651	)

Net decrease in cash and cash equivalents		(34,075	)		(94,866	)		(46,772	)		(34,075	)
Cash and cash equivalents at the beginning of period		99,837			122,882			105,304			99,837

Cash and cash equivalents at the end of period	$	65,762		$	28,016		$	58,532		$	65,762

Supplemental cash flow information
Cash paid for:
Interest, net of amounts capitalized	$	8,281		$	9,011		$	7,509		$	8,281
Income taxes, net		10,234			16,323			8,486			10,234

The accompanying notes are an integral part of these condensed consolidated financial statements.

- 5 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.	ORGANIZATION

P. H. Glatfelter Company and subsidiaries (“Glatfelter”) is a manufacturer of specialty papers and fiber-based engineered materials. Headquartered in York, PA, U.S. operations include facilities in Spring Grove, PA and Chillicothe and Fremont, OH. International operations include facilities in Canada, Germany, France, the United Kingdom and the Philippines, and sales and distribution offices in Russia and China. Our products are marketed worldwide, either through wholesale paper merchants, brokers and agents, or directly to customers.

2.	ACCOUNTING POLICIES

Basis of Presentation The unaudited condensed consolidated financial statements (“financial statements”) include the accounts of Glatfelter and its ~~wholly owned~~wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

We prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. In our opinion, the financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. When preparing these financial statements, we have assumed that you have read the audited consolidated financial statements included in our ~~2014~~2015 Annual Report on Form 10-K.

Accounting EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Management believes the estimates and assumptions used in the preparation of these financial statements are reasonable, based upon currently available facts and known circumstances, but recognizes that actual results may differ from those estimates and assumptions.

Recently Issued Accounting Pronouncements In ~~May 2014,~~March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09,Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment

Accounting designed to simplify certain aspects of accounting for share-based awards. The new ASU requires entities to recognize as a component of income tax expense all excess tax benefits or deficiencies arising from the difference between compensation costs recognized and the intrinsic value at the time an option is exercised or, in the case of restricted stock and similar awards, the fair value upon vesting of an award. Previously such differences were recognized in additional paid in capital as part of an “APIC pool.” In addition, the ASU also requires entities to exclude excess tax benefits and tax deficiencies from the calculation of common share equivalents for purposes of calculating earnings per share. The new standard is required to be adopted, either prospectively or retrospectively, in the first quarter of 2017 and early adoption is permitted. We do not believe the adoption of this standard will have a material impact on our reported results of operations or financial position.

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842). This ASU will require organizations such as us that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will be effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. We are in the process of assessing the impact this standard will have on us and expect to follow a modified retrospective method provided for under the standard.

In May 2014, the FASB issued ASU No. 2014-09, - Revenue from Contracts with Customers which clarifies the principles for recognizing revenue and develops a

common revenue standard for GAAP and International Financial Reporting Standards. The ~~FASB deferred the effective date to provide adequate time to effectively implement the new revenue standard. The~~ new standard is ~~now~~ required to be adopted retrospectively for fiscal years beginning after December 15, 2017 and early adoption is ~~not permitted.~~permitted only for reporting periods beginning after December 31, 2016. We are in the process of evaluating the impact this standard may have, if any, on our reported results of operations or financial position.

3.	~~ACQUISITION~~

~~On October 1, 2014, we completed~~In June 2016, the ~~acquisition~~FASB issued ASU No. 2016-13Financial Instruments—Credit Losses (Topic 326): Measurement of ~~all~~Credit Losses on Financial Instruments that changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. Under the new guidance, an allowance is recognized based on an estimate of ~~the outstanding equity of Spezialpapierfabrik Oberschmitten GmbH (SPO) from FINSPO Beteiligungs-GmbH~~expected credit losses. This standard is effective for ~~$8.0 million. SPO has annual sales of approximately $33 million. SPO, located near Frankfurt, Germany, primarily produces highly technical papers for a wide range of capacitors used~~us in consumer and industrial products; insulation papers for cables and transformers; and materials for industrial power inverters, electromagnetic current filters and electric rail traction. SPO also produces glassine products, which are used in cosmetics packaging, food packaging, and pharmaceutical dosage bags. SPO is operated as part of the Composite Fibers business unit, and complements other technical specialties.

4.	~~GAINS ON DISPOSITIONS OF PLANT, EQUIPMENT AND TIMBERLANDS, NET~~

~~During~~ the first ~~six months~~quarter of ~~2015~~2020 and ~~2014, we completed sales of assets as summarized in the following table:~~must be adopted using a modified retrospective

Dollars in thousands
   Acres    Proceeds    Gain
2015

Timberlands
   1,398       $ 2,794       $ 2,705
Other
   n/a       257       60




Total
      $ 3,051       $ 2,765




2014

Timberlands
   935       $ 2,355       $ 2,290
Other
   n/a       5       1




Total
      $ 2,360       $ 2,291

- 6 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

transition approach. We are currently assessing the impact this standard may have on our results of operations and financial position.

5.3.	EARNINGS PER SHARE

The following table sets forth the details of basic and diluted earnings per share (“EPS”):


	Three months ended June 30				Three months ended June 30
In thousands, except per share	2015		2014		2016		2015
Net income	$	2,848	$	4,669	$	1,965	$	2,848

Weighted average common shares outstanding used in basic EPS		43,377		43,287		43,558		43,377
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs		655		849		504		655

Weighted average common shares outstanding and common share equivalents used in diluted EPS		44,032		44,136		44,062		44,032

Earnings per share
Basic	$	0.07	$	0.11	$	0.05	$	0.07
Diluted		0.06		0.11		0.04		0.06


	Six months ended June 30				Six months ended June 30
In thousands, except per share	2015		2014		2016		2015
Net income	$	16,773	$	19,317	$	18,133	$	16,773

Weighted average common shares outstanding used in basic EPS		43,315		43,327		43,539		43,315
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs		677		924		424		677

Weighted average common shares outstanding and common share equivalents used in diluted EPS		43,992		44,251		43,963		43,992

Earnings per share
Basic	$	0.39	$	0.45	$	0.42	$	0.39
Diluted		0.38		0.44		0.41		0.38

The following table sets forth potential common shares outstanding for stock options and restricted stock units that were not included in the computation of diluted EPS for the period indicated, because their effect would be anti-dilutive:


	June 30				June 30
In thousands	2015		2014		2016		2015
Three months ended		687		279		1,368		687
Six months ended		687		273		1,451		687

- 7 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

6.4.	ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table sets forth details of the changes in accumulated other comprehensive income (losses) for the three months and six months ended June 30, ~~2015~~2016 and ~~2014.~~2015.

in thousands
   Currency
translation
adjustments Unrealized gain
(loss) on cash
flow hedges Change in
pensions Change in other
postretirement
defined benefit
plans Total
Balance at April 1, 2015
   $ (75,561 ) $ 5,122    $ (116,994 ) $ (2,722 ) $ (190,155 )
Other comprehensive income before reclassifications (net of tax)
   16,704    (1,220 ) —      —      15,484
Amounts reclassified from accumulated other comprehensive income (net of tax)
   —      (1,281 ) 2,918    (34 ) 1,603


Net current period other comprehensive income (loss)
   16,704    (2,501 ) 2,918    (34 ) 17,087


Balance at June 30, 2015
   $ (58,857 ) $ 2,621    $ (114,076 ) $ (2,756 ) $ (173,068 )


Balance at April 1, 2014
   $ 15,869    $ (1,020 ) $ (87,266 ) $ 25    $ (72,392 )
Other comprehensive income before reclassifications (net of tax)
   (533 ) 618    —      —      85
Amounts reclassified from accumulated other comprehensive income (net of tax)
   —      462    2,444    35    2,941


Net current period other comprehensive income (loss)
   (533 ) 1,080    2,444    35    3,026


Balance at June 30, 2014
   $ 15,336    $ 60    $ (84,822 ) $ 60    $ (69,366 )


in thousands	Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total			Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at April 1, 2016																$	(59,622	)	$	(159	)	$	(118,399	)	$	3,436		$	(174,744	)
Other comprehensive income before reclassifications (net of tax)																	(14,864	)		837			—			—			(14,027	)
Amounts reclassified from accumulated other comprehensive income (net of tax)																	—			107			2,613			(232	)		2,488

Net current period other comprehensive income (loss)																	(14,864	)		944			2,613			(232	)		(11,539	)

Balance at June 30, 2016																$	(74,486	)	$	785		$	(115,786	)	$	3,204		$	(186,283	)

Balance at April 1, 2015																$	(75,561	)	$	5,122		$	(116,994	)	$	(2,722	)	$	(190,155	)
Other comprehensive income before reclassifications (net of tax)																	16,704			(1,220	)		—			—			15,484
Amounts reclassified from accumulated other comprehensive income (net of tax)																	—			(1,281	)		2,918			(34	)		1,603

Net current period other comprehensive income (loss)																	16,704			(2,501	)		2,918			(34	)		17,087

Balance at June 30, 2015																$	(58,857	)	$	2,621		$	(114,076	)	$	(2,756	)	$	(173,068	)


in thousands																Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at January 1, 2016																$	(73,041	)	$	(225	)	$	(120,714	)	$	3,494		$	(190,486	)
Other comprehensive income before reclassifications (net of tax)																	(1,445	)		1,089			—			—			(356	)
Amounts reclassified from accumulated other comprehensive income (net of tax)																	—			(79	)		4,928			(290	)		4,559

Net current period other comprehensive income (loss)																	(1,445	)	$	1,010			4,928			(290	)		4,203

Balance at June 30, 2016																$	(74,486	)	$	785		$	(115,786	)	$	3,204		$	(186,283	)

Balance at January 1, 2015	$	(34,224	)	$	2,356		$	(120,260	)	$	(2,742	)	$	(154,870	)	$	(34,224	)	$	2,356		$	(120,260	)	$	(2,742	)	$	(154,870	)
Other comprehensive income before reclassifications (net of tax)		(24,633	)		2,174			—			—			(22,459	)		(24,633	)		2,174			—			—			(22,459	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(1,909	)		6,184			(14	)		4,261			—			(1,909	)		6,184			(14	)		4,261

Net current period other comprehensive income (loss)		(24,633	)		265			6,184			(14	)		(18,198	)		(24,633	)		265			6,184			(14	)		(18,198	)

Balance at June 30, 2015	$	(58,857	)	$	2,621		$	(114,076	)	$	(2,756	)	$	(173,068	)	$	(58,857	)	$	2,621		$	(114,076	)	$	(2,756	)	$	(173,068	)

Balance at January 1, 2014	$	15,141		$	(941	)	$	(89,547	)	$	(10	)	$	(75,357	)
Other comprehensive income before reclassifications (net of tax)		195			215			—			—			410
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			786			4,725			70			5,581

Net current period other comprehensive income		195			1,001			4,725			70			5,991

Balance at June 30, 2014	$	15,336		$	60		$	(84,822	)	$	60		$	(69,366	)

- 8 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Reclassifications out of accumulated other comprehensive income were as follows:


	Three months ended June 30						Six months ended June 30							Three months ended June 30						Six months ended June 30
In thousands	2015			2014			2015			2014				2016			2015			2016			2015
Description													Line Item in Statements of Income													Line Item in Statements of Income
Cash flow hedges (Note 14)

Cash flow hedges (Note 12)
(Gains) losses on cash flow hedges	$	(1,750	)	$	641		$	(2,623	)	$	1,090		Costs of products sold	$	215		$	(1,750	)	$	(83	)	$	(2,623	)	Costs of products sold
Tax (benefit) expense		469			(179	)		714			(304	)	Income tax provision
Tax expense (benefit)															(108	)		469			4			714		Income tax provision

Net of tax		(1,281	)		462			(1,909	)		786				107			(1,281	)		(79	)		(1,909	)
Retirement plan obligations (Note 9)
Retirement plan obligations (Note 7)
Amortization of deferred benefit pension plan items
Prior service costs		574			695			1,142			1,243		Costs of products sold		509			574			1,013			1,142		Costs of products sold
		187			226			379			412		Selling, general and administrative		166			187			336			379		Selling, general and administrative
Actuarial losses		2,924			2,233			6,288			4,429		Costs of products sold		2,618			2,924			4,900			6,288		Costs of products sold
		1,023			781			2,165			1,525		Selling, general and administrative		915			1,023			1,687			2,165		Selling, general and administrative

		4,708			3,935			9,974			7,609				4,208			4,708			7,936			9,974
Tax benefit		(1,790	)		(1,491	)		(3,790	)		(2,884	)	Income tax provision		(1,595	)		(1,790	)		(3,008	)		(3,790	)	Income tax provision

Net of tax		2,918			2,444			6,184			4,725				2,613			2,918			4,928			6,184
Amortization of deferred benefit other plan items
Prior service costs		(57	)		(59	)		(115	)		(118	)	Costs of products sold		(38	)		(57	)		(75	)		(115	)	Costs of products sold
		(13	)		(13	)		(25	)		(26	)	Selling, general and administrative		(8	)		(13	)		(16	)		(25	)	Selling, general and administrative
Actuarial losses		12			106			94			212		Costs of products sold		(269	)		12			(311	)		94		Costs of products sold
		3			23			21			46		Selling, general and administrative		(58	)		3			(67	)		21		Selling, general and administrative

		(55	)		57			(25	)		114				(373	)		(55	)		(469	)		(25	)
Tax benefit		21			(22	)		11			(44	)	Income tax provision
Tax expense															141			21			179			11		Income tax provision

Net of tax		(34	)		35			(14	)		70				(232	)		(34	)		(290	)		(14	)

Total reclassifications, net of tax	$	1,603		$	2,941		$	4,261		$	5,581			$	2,488		$	1,603		$	4,559		$	4,261

7.5.	INCOME TAXES

Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The effects of income taxes are measured based on enacted tax laws and rates.

As of June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, we had ~~$12.0~~$13.2 million and ~~$14.9~~$12.2 million of gross unrecognized tax benefits. As of June 30, ~~2015,~~2016, if such benefits were to be recognized, approximately ~~$12.0~~$10.6 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate. ~~Gross unrecognized tax benefits reflected a net decrease of $2.9 million during the six months ended June 30, 2015, primarily due to the completion of tax audits during the second quarter.~~

We, or one of our subsidiaries, file income tax returns with the United States Internal Revenue Service, as well as various state and foreign authorities.

The following table summarizes, by major jurisdiction, tax years that remain subject to examination:


	Open Tax Years
Jurisdiction	Examinations not yet initiated		Examination in progress

United States
Federal		2013 - ~~2014~~2015		N/A
State		~~2010~~2011 - ~~2014~~2015		~~N/A~~2011 - 2014
Canada (1)		2010 - ~~2014~~2015		N/A
Germany (1)		2012 - ~~2014~~2015		2007 - 2011
France		2013 - ~~2014~~2015		2011 - 2012
United Kingdom		~~2013~~2014 - ~~2014~~2015		N/A
Philippines		~~2012, 2014~~2015		~~2011,~~ 2013, 2014

(1)	– includes provincial or similar local jurisdictions, as applicable

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax

~~- 9 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these

- 9 -

GLATFELTER

6.30.16 Form 10-Q

reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of federal, state and foreign examinations, and the lapse of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may decrease within the next twelve months by a range of zero to ~~$1.8~~$1.7 million. Substantially all of this range relates to tax positions taken in ~~the U.S. and~~ Germany.

We recognize interest and penalties related to uncertain tax positions as income tax expense. The following table summarizes information related to interest and penalties on uncertain tax positions:


	Six months ended June 30				Six months ended June 30
In millions	2015		2014		2016		2015
Interest expense	$	—	$	0.1	$	0.2	$	—
Penalties		—		—		—		—

	June 30 2015		December 31 2014		June 30		December 31
					2016		2015
Accrued interest payable	$	0.6	$	0.6	$	0.8	$	0.6

8.6.	STOCK-BASED COMPENSATION

The P. H. Glatfelter Amended and Restated Long Term Incentive Plan (the “LTIP”) provides for the issuance of Glatfelter common stock to eligible participants in the form of restricted stock units, restricted stock awards, non-qualified stock options, performance shares, incentive stock options and performance units.

Pursuant to terms of the LTIP, we have issued to eligible participants restricted stock units, performance share awards and stock only stock appreciation rights.

Restricted Stock Units (“RSU”) and Performance Share Awards (“PSAs”)Awards of RSUs and PSAs are made under our LTIP. The RSUs vest on the passage of time, generally on a graded scale over a three, four, and five-year period, or in certain instances the RSUs were issued with five year cliff vesting. PSAs are issued annually to members of management and each respective grant cliff vests each December 31 of the third year following the grant, assuming the achievement of predetermined, ~~three-year~~ cumulative financial performance ~~targets.~~targets covering two or three year periods. The performance measures include a minimum, target and maximum performance level providing the grantees an opportunity to receive more or less shares than targeted depending on actual financial performance. For both RSUs and PSAs, the grant date fair value of the awards, which is equal to the closing price per common share on the date of the award, is used to determine the amount of expense to be recognized over the applicable service period. Settlement of RSUs and PSAs will be made in shares of our common stock currently held in treasury.

The following table summarizes RSU and PSA activity during periods indicated:


Units	2015			2014			2016			2015
Balance at January 1,		888,942			1,001,814			674,523			888,942
Granted		152,531			167,255			295,654			152,531
Forfeited		(77,652	)		(38,458	)		(143,209	)		(77,652	)
Shares delivered		(283,627	)		(239,394	)		(149,475	)		(283,627	)

Balance at June 30,		680,194			891,217			677,493			680,194

The amount granted in ~~2015~~2016 and ~~2014~~2015 includes PSAs of ~~100,801~~199,693 and ~~93,660~~100,801, respectively, exclusive of reinvested dividends.

- 10 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

The following table sets forth aggregate RSU and PSA compensation expense for the periods indicated:


	June 30				June 30
In thousands	2015		2014		2016		2015

Three months ended	$	453	$	441	$	935	$	453

Six months ended		820		1,020		1,402		820

Stock Only Stock Appreciation Rights (“SOSARs”) Under terms of the SOSAR, a recipient receives the right to a payment in the form of shares of common stock equal to the difference, if any, in the fair market value of one share of common stock at the time of exercising the SOSAR and the exercise price. The SOSARs vest ratably over a three year period and have a term of ten years.

The following table sets forth information related to outstanding SOSARS.


	2015					2014					2016					2015
SOSARS	Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price
Outstanding at January 1,		1,864,707		$	16.20		1,977,133		$	13.91		2,199,742		$	17.82		1,864,707		$	16.20
Granted		406,142			24.94		275,529			29.89		743,925			17.54		406,142			24.94
Exercised		(58,343	)		13.52		(19,199	)		15.57		(53,190	)		9.91		(58,343	)		13.52
Canceled / forfeited		(3,349	)		26.53		(24,719	)		18.85		(108,945	)		21.81		(3,349	)		26.53

Outstanding at June 30,		2,209,157		$	17.87		2,208,744		$	15.83		2,781,532		$	17.74		2,209,157		$	17.87

SOSAR Grants
Weighted average grant date fair value per share	$	7.54				$	9.85				$	4.07				$	7.54
Aggregate grant date fair value(in thousands)	$	3,063				$	2,713				$	3,013				$	3,063
Black-Scholes assumptions
Dividend yield		1.92	%				1.47	%				2.85	%				1.92	%
Risk free rate of return		1.64	%				1.73	%				1.34	%				1.64	%
Volatility		36.48	%				37.59	%				31.97	%				36.48	%
Expected life		6 yrs					6 yrs					6 yrs					6 yrs

The following table sets forth SOSAR compensation expense for the periods indicated:


	June 30				June 30
In thousands	2015		2014		2016		2015

Three months ended	$	680	$	559	$	669	$	680

Six months ended		1,268		1,008		1,401		1,268

9.7.	RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

The following tables provide information with respect to the net periodic costs of our pension and post retirement medical benefit plans.

   Three months ended
June 30
In thousands
   2015 2014
Pension Benefits

Service cost
   $ 2,561    $ 2,504
Interest cost
   5,788    6,309
Expected return on plan assets
   (11,454 ) (10,931 )
Amortization of prior service cost
   761    921
Amortization of unrecognized loss
   3,947    3,014


Net periodic benefit cost
   $ 1,603    $ 1,817


Other Benefits

Service cost
   $ 303    $ 615
Interest cost
   436    598
Amortization of prior service cost
   (70 ) (72 )
Amortization of unrecognized loss
   15    129


Net periodic benefit cost
   $ 684    $ 1,270


	Six months ended June 30						Three months ended June 30
In thousands	2015			2014			2016			2015
Pension Benefits
Service cost	$	5,696		$	5,208		$	2,510		$	2,561
Interest cost		11,738			12,480			6,153			5,788
Expected return on plan assets		(22,997	)		(21,938	)		(11,275	)		(11,454	)
Amortization of prior service cost		1,521			1,655			675			761
Amortization of unrecognized loss		8,453			5,954			3,533			3,947

Net periodic benefit cost	$	4,411		$	3,359		$	1,596		$	1,603

Other Benefits
Service cost	$	716		$	1,230		$	250		$	303
Interest cost		999			1,196			456			436
Amortization of prior service cost		(140	)		(144	)		(46	)		(70	)
Amortization of unrecognized (gain)/loss								(327	)		15

Net periodic benefit cost							$	333		$	684


							Six months ended June 30
In thousands							2016			2015
Pension Benefits
Service cost							$	5,240		$	5,696
Interest cost								12,240			11,738
Expected return on plan assets								(22,661	)		(22,997	)
Amortization of prior service cost								1,349			1,521
Amortization of unrecognized loss		115			258			6,587			8,453

Net periodic benefit cost	$	1,690		$	2,540		$	2,755		$	4,411

Other Benefits
Service cost							$	573		$	716
Interest cost								996			999
Amortization of prior service cost								(91	)		(140	)
Amortization of unrecognized (gain)/loss								(378	)		115

Net periodic benefit cost							$	1,100		$	1,690

- 11 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

~~10.~~8.

INVENTORIES

Inventories, net of reserves, were as follows:


	June 30		December 31		June 30		December 31
In thousands	2015		2014		2016		2015
Raw materials	$	63,108	$	61,266	$	62,881	$	60,098
In-process and finished		120,379		117,580		122,322		115,874
Supplies		68,710		69,859		72,420		71,242

Total	$	252,197	$	248,705	$	257,623	$	247,214

~~11.~~9.

LONG-TERM DEBT

Long-term debt is summarized as follows:


	June 30			December 31			June 30			December 31
In thousands	2015			2014			2016			2015
Revolving credit facility, due Mar. 2020	$	83,287		$	—		$	48,851		$	58,792
Revolving credit facility, due Nov. 2016		—			90,555
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		11,179			12,155			9,516			10,109
2.05% Term Loan, due Mar. 2023		46,245			51,902			40,000			42,130
1.30% Term Loan, due Jun. 2023								11,102			—
1.55% Term Loan, due Sep. 2025								10,884			2,839

Total long-term debt		390,711			404,612			370,353			363,870
Less current portion		(7,564	)		(5,734	)		(9,098	)		(7,366	)
Unamortized deferred issuance costs								(2,889	)		(3,208	)

Long-term debt, net of current portion	$	383,147		$	398,878		$	358,366		$	353,296

The amount set forth for Long-term debt, net of current portion as of December 31, 2015, has been restated to retroactively adopt ASU No. 2015-03,Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs to be presented as a direct deduction from the carrying value of the related debt instrument rather than as a deferred asset except for costs associated with a revolving line of credit. We adopted this standard in the first quarter of 2016 retroactive to December 31, 2015.

On March 12, 2015, we ~~entered into an amendment to~~amended our revolving credit agreement with a consortium of banks (the “Revolving Credit Facility”)~~. The amendment~~ which increased the amount available for borrowing to $400 million, extended the maturity of the facility to March 12, 2020, and instituted a revised interest rate pricing grid.

For all US dollar denominated borrowings under the Revolving Credit Facility, the borrowing rate is, at our option, either, (a) the bank’s base rate which is equal to the greater of i) the prime rate; ii) the federal funds rate

plus 50 basis points; or iii) the daily Euro-rate plus 100 basis points plus an applicable spread over either i), ii) or iii) ranging from 12.5 basis points to 100 basis points based on the Company’s leverage ratio and its corporate credit ratings determined by Standard & Poor’s Rating Services and Moody’s Investor Service, Inc. (the “Corporate Credit Rating”); or (b) the daily Euro-rate plus an applicable margin ranging from 112.5 basis points to 200 basis points based on the Company’s leverage ratio and the Corporate Credit Rating. For non-US dollar denominated borrowings, interest is based on (b) above.

The Revolving Credit Facility contains a number of customary covenants for financings of this type that, among other things, restrict our ability to dispose of or create liens on assets, incur additional indebtedness, repay other indebtedness, limits certain intercompany financing arrangements, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios including: i) maximum net debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio (the “leverage ratio”); and ii) a consolidated EBITDA to interest expense ratio. The most restrictive of our covenants is a maximum leverage ratio of 3.5x. As of June 30, ~~2015,~~2016, the leverage ratio, as calculated in accordance with the definition in our credit agreement, was ~~2.1x which is within the limits set forth in our credit agreement.~~1.9x. A breach of these requirements would give rise to certain remedies under the Revolving Credit Facility, among which are the termination of the agreement and accelerated repayment of the outstanding borrowings plus accrued and unpaid interest under the credit facility.

On October 3, 2012, we completed a private placement offering of $250.0 million aggregate principal amount of 5.375% Senior Notes due 2020 (the “5.375% Notes”). The 5.375% Notes, which are now publically registered, are fully and unconditionally guaranteed, jointly and severally, by PHG Tea Leaves, Inc., Mollanvick, Inc., Glatfelter Composite Fibers N. A., Inc., Glatfelter Advanced Materials N.A., LLC., and Glatfelter Holdings, LLC (the “Guarantors”). Interest on the 5.375% Notes is payable semiannually in arrears on April 15 and October 15.

The 5.375% Notes are redeemable, in whole or in part, at anytime on or after October 15, 2016 at the redemption prices specified in the applicable Indenture. Prior to October 15, 2016, we may redeem some or all of the Notes at a “make-whole” premium as specified in the Indenture. These Notes and the guarantees of the notes are senior obligations of the Company and the Guarantors, respectively, rank equally in right of payment with future senior indebtedness of the Company and the Guarantors and will mature on October 15, 2020.

- 12 -

GLATFELTER

6.30.16 Form 10-Q

The 5.375% Notes contain various covenants customary to indebtedness of this nature including limitations on i) the amount of indebtedness that may be incurred; ii) certain restricted payments including common stock dividends; iii) distributions from certain subsidiaries; iv) sales of assets; v) transactions amongst subsidiaries; and vi) incurrence of liens on assets. In addition, the 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the Revolving Credit Agreement at maturity or a default under the Revolving Credit Agreement that accelerates the debt outstanding thereunder. As of June 30, ~~2015,~~2016, we met all of the requirements of our debt covenants.

~~- 12 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

Glatfelter Gernsbach GmbH & Co. KG (“Gernsbach”), a wholly-owned subsidiary of ours, ~~has two separate~~entered into a series of borrowing agreements with IKB Deutsche Industriebank AG, Düsseldorf (“IKB”)~~. Pursuant to~~ as summarized below:


Amounts in thousands	Original Principal		Interest Rate			Maturity
Borrowing date
Apr. 11, 2013	€	42,700		2.05	%		Mar. 2023
Sep. 4, 2014		10,000		2.40	%		Jun. 2022
Oct. 10, 2015		2,608		1.55	%		Sep. 2025
May 4, 2016		7,195		1.55	%		Sep. 2025
Apr. 26, 2016		10,000		1.30	%		Jun. 2023

Each of the ~~first agreement, dated April 11, 2013, Gernsbach borrowed €42.7 million (or $57.6 million) aggregate~~borrowings require quarterly repayments of principal ~~amount (the “2013 IKB Loan”). The 2013 IKB Loan is repayable in 32 quarterly installments beginning on June 30, 2015~~ and ~~ending on March 31, 2023~~interest and ~~bears interest at a rate of 2.05% per annum.~~

Pursuant to the second agreement with IKB dated September 4, 2014, Gernsbach borrowed €10.0 million (or $12.6 million) aggregate principal amount (the “2014 IKB Loan”). The 2014 IKB Loan is repayable in 27 quarterly installments beginning on September 30, 2015 and ending on June 30, 2022 and bears interest at a rate of 2.40% per annum. Interest on the IKB Loan or portion thereof is payable quarterly.

~~The IKB loans~~ provide for representations, warranties and covenants customary for financings of these types. The financial covenants contained in each of the IKB loans, which relate to the minimum ratio of consolidated EBITDA to consolidated interest expense and the maximum ratio of consolidated total net debt to consolidated adjusted EBITDA, ~~will be~~are calculated by reference to our Revolving Credit Agreement.

Aggregated unamortized deferred debt issuance costs incurred in connection with all of our outstanding debt totaled $5.8 million at June 30, 2015 and are reported under the caption “Other assets” in the accompanying condensed consolidated balance sheets. The deferred costs are being amortized on a straight line basis over the life of the underlying instruments.

P. H. Glatfelter Company guarantees all debt obligations of its ~~subsidiaries, including each of the IKB loans.~~subsidiaries. All such obligations are recorded in these condensed consolidated financial statements.

~~As of June 30, 2015 and December 31, 2014, we had $5.3 million of letters~~Letters of credit issued to us by certain financial ~~institutions.~~institutions totaled $5.1 million and $5.3 million as of June 30, 2016 and December 31, 2015, respectively. The letters of credit, which reduce amounts available under our revolving credit facility, primarily provide financial assurances for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance program. We bear the credit risk on this amount to the extent that we do not comply with the provisions of certain agreements. No amounts are outstanding under the letters of credit.

~~12.~~10.

ASSET RETIREMENT OBLIGATION

During 2008, we recorded $11.5 million, net present value, of asset retirement obligations related to the legal requirement to close several lagoons at the Spring Grove, PA facility. Historically, lagoons were used to dispose of residual waste material. Closure of the lagoons ~~is expected to be~~has been substantially completed ~~in 2016 and will be accomplished~~primarily by filling the lagoons, installing a non-permeable liner which will be covered with soil to construct the required cap over the lagoons. The retirement obligation was accrued with a corresponding increase in the carrying value of the property, equipment and timberlands caption on the condensed consolidated balance sheet. The amount capitalized is being amortized as a charge to operations on the straight-line basis in relation to the expected closure period.

Following is a summary of activity recorded during the first six months of ~~2015~~2016 and ~~2014:~~2015:


In thousands	2015			2014			2016			2015
Balance at January 1,	$	4,114		$	5,032		$	419		$	4,114
Accretion		59			77			—			59
Payments		(1,905	)		(429	)		(16	)		(1,905	)
Downward revision		(1,000	)		—			—			(1,000	)
Gain		(286	)		(86	)		(2	)		(286	)

Balance at June 30,	$	982		$	4,594		$	401		$	982

~~During the second quarter~~The amount set forth above as of ~~2015 we~~June 30, 2016, is recorded a downward revision to our estimated cost of closing the lagoons. The revision was recorded as an adjustment to both the carrying value of the associated property, equipment and timberlands as well as the asset retirement obligation.

~~The following table summarizes the line items~~in other current liabilities in the accompanying condensed consolidated balance ~~sheets where the asset retirement obligations are recorded:~~sheet.

   June 30    December 31
In thousands
   2015    2014
Other current liabilities
   $ 982       $ 2,855
Other long-term liabilities
   —         1,259




Total
   $ 982       $ 4,114

~~- 13 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

~~13.~~11.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The amounts reported on the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts ~~receivable~~payable approximate fair value. The following table sets forth carrying value and fair value of long-term debt:


	June 30, 2015				December 31, 2014				June 30, 2016				December 31, 2015
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Variable rate debt	$	83,287	$	83,287	$	90,555	$	90,555	$	48,851	$	48,851	$	58,792	$	58,792
Fixed-rate bonds		250,000		257,813		250,000		255,470		250,000		255,625		250,000		250,938
2.40% Term loan		11,179		11,581		12,155		12,626		9,516		9,406		10,109		10,535
2.05% Term loan		46,245		47,251		51,902		53,106		40,000		38,724		42,130		42,886
1.30% Term Loan										11,102		10,403		—		—
1.55% Term loan										10,884		9,554		2,839		2,524

Total	$	390,711	$	399,932	$	404,612	$	411,757	$	370,353	$	372,563	$	363,870	$	365,675

As of June 30, ~~2015,~~2016, and December 31, ~~2014,~~2015, we had $250.0 million of 5.375% fixed rate bonds. These bonds

- 13 -

GLATFELTER

6.30.16 Form 10-Q

are publicly registered, but thinly traded. Accordingly, the values set forth above for the bonds, as well as our other debt instruments, are based on observable inputs and other relevant market data (Level 2). The fair value of financial derivatives is set forth below in Note ~~14.~~12.

~~14.~~12.

FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES

As part of our overall risk management practices, we enter into financial derivatives primarily designed to either i) hedge foreign currency risks associated with forecasted transactions – “cash flow hedges”; or ii) mitigate the impact that changes in currency exchange rates have on intercompany financing transactions and foreign currency denominated receivables and payables – “foreign currency hedges.”

Derivatives Designated as Hedging ~~Instruments—~~Instruments - Cash Flow HedgesWe use currency forward contracts as cash flow hedges to manage our exposure to fluctuations in the currency exchange rates on certain forecasted production costs or capital expenditures expected to be ~~incurred over a twelve month to eighteen month period of time.~~incurred. Currency forward contracts involve fixing the exchange ~~rate~~ for delivery of a specified amount of foreign currency on a specified date. As of June 30, 2016, the maturity of currency forward contracts ranged from one month to 25 months.

We designate certain currency forward contracts as cash flow hedges of forecasted raw material purchases, or certain production costs or capital expenditures with exposure to changes in foreign currency exchange rates. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is deferred as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance ~~sheets and~~sheets. With respect to hedges of forecasted raw material purchases or production costs, the amount deferred is subsequently reclassified into costs of products sold in the period that inventory produced using the hedged transaction affects earnings. For hedged capital expenditures, deferred gains or losses are reclassified and included in the historical cost of the capital asset and subsequently affect earnings as depreciation is recognized. The ineffective portion of the change in fair value of the derivative is recognized directly to earnings and reflected in the accompanying condensed consolidated statements of income as non-operating income (expense) under the caption “Other, net.”

We had the following outstanding derivatives that were used to hedge foreign exchange risks associated with forecasted transactions and designated as hedging instruments:


In thousands	June 30 2015		December 31 2014		June 30 2016		December 31 2015
*Derivative*
Sell/Buy - sell notional
Euro / British Pound		8,607		4,592		9,237		10,527
Sell/Buy - buy notional
Euro / Philippine Peso		585,476		523,313		670,402		758,634
British Pound / Philippine Peso		443,632		260,535		486,437		542,063
Euro / U.S. Dollar		45,143		32,527		48,574		51,433
U.S. Dollar / Canadian Dollar		18,063		10,036		33,839		34,649
U.S. Dollar / Euro						20,202		—

~~These contracts have maturities of between twelve months and eighteen months from the date originally entered into.~~

Derivatives Not Designated as Hedging ~~Instruments—~~Instruments - Foreign Currency Hedges We also enter into forward foreign exchange contracts to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities. None of these contracts are designated as hedges for financial accounting purposes and, accordingly, changes in value of the foreign exchange forward contracts and in the offsetting underlying on-balance-sheet transactions are reflected in the accompanying condensed consolidated statements of income under the caption “Other, net.”

- 14 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

The following sets forth derivatives used to mitigate the impact changes in currency exchange rates have on balance sheet monetary assets and liabilities:


In thousands	June 30 2015		December 31 2014		June 30 2016		December 31 2015
*Derivative*
Sell/Buy - sell notional
U.S. Dollar / Euro		1,500		4,000
U.S. Dollar / British Pound		6,000		9,000		10,500		10,000
Euro / British Pound		—		2,000
British Pound / Euro						2,500		3,500
Sell/Buy - buy notional
Euro / U.S. Dollar		7,000		—		3,500		12,500
British Pound / Euro		14,500		3,000		19,000		13,500

These contracts have maturities of one month from the date originally entered into.

Fair Value Measurements The following table summarizes the fair values of derivative instruments for the period indicated and the line items in the accompanying condensed consolidated balance sheets where the instruments are recorded:


In thousands	June 30 2015		December 31 2014		June 30 2015		December 31 2014		June 30 2016		December 31 2015		June 30 2016		December 31 2015
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities				Prepaid Expenses and Other Current Assets				Other Current Liabilities
*Designated as hedging:*
Forward foreign currency exchange contracts	$	2,525	$	3,106	$	379	$	394	$	915	$	955	$	15	$	1,545
*Not designated as hedging:*
Forward foreign currency exchange contracts	$	—	$	70	$	34	$	161	$	124	$	68	$	—	$	49

The amounts set forth in the table above represent the net asset or liability giving effect to rights of offset with each counterparty. The effect of netting the amounts presented above did not have a material effect on our consolidated financial position.

The following table summarizes the amount of income or (loss) from derivative instruments recognized in our results of operations for the periods indicated and the line items in the accompanying condensed consolidated statements of income where the results are recorded:

   Three months ended
June 30 Six months ended
June 30
In thousands
   2015 2014 2015    2014
Designated as hedging:

Forward foreign currency exchange contracts:

Effective portion – cost of products sold
   $ 1,750    $ (641 ) $ 2,623       $ (1,090 )
Ineffective portion – other – net
   (62 ) 119    288       100
Not designated as hedging:

Forward foreign currency exchange contracts:

Other – net
   $ (313 ) $ 861    $ 407       $ 1,196


	Three months ended June 30						Six months ended June 30
In thousands	2016			2015			2016			2015
*Designated as hedging:*
Forward foreign currency exchange contracts:
Effective portion – cost of products sold	$	(215	)	$	1,750		$	83		$	2,623
Ineffective portion – other – net		73			(62	)		(330	)		288
*Not designated as hedging*:
Forward foreign currency exchange contracts:
Other – net	$	475		$	(313	)	$	1,064		$	407

The impact of activity not designated as hedging was substantially all offset by the remeasurement of the underlying ~~on-balance sheet~~on-balance-sheet item.

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The fair values of the foreign exchange forward contracts are considered to be Level 2. Foreign currency forward contracts are valued using foreign currency forward and interest rate curves. The fair value of each contract is determined by comparing the contract rate to the forward rate and discounting to present value. Contracts in a gain position are recorded in the condensed consolidated balance sheets under the caption “Prepaid expenses and other current assets” and the value of contracts in a loss position is recorded under the caption “Other current liabilities.”

A rollforward of fair value amounts recorded as a component of accumulated other comprehensive income (loss) is as follows:


In thousands	2015			2014			2016			2015
Balance at January 1,	$	3,282		$	(1,296	)	$	(178	)	$	3,282
Deferred (losses) gains on cash flow hedges		2,995			292
Deferred gains on cash flow hedges								1,294			2,995
Reclassified to earnings		(2,623	)		1,090			(83	)		(2,623	)

Balance at June 30,	$	3,654		$	86		$	1,033		$	3,654

We expect substantially all of the amounts recorded as a component of accumulated other comprehensive income will be recorded as a component of the capital asset or realized in results of operations within the next twelve to twenty-five months and the amount ultimately recognized will vary depending on actual market rates.

~~- 15 -~~

~~GLATFELTER~~

~~6.30.15~~
- 15 -
GLATFELTER
6.30.16 Form 10-Q

Credit risk related to derivative activity arises in the event the counterparty fails to meet its obligations to us. This exposure is generally limited to the amounts, if any, by which the counterparty’s obligations exceed our obligation to them. Our policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings.

~~15.~~13.

COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

Fox ~~River—~~River - Neenah, Wisconsin

Background. We have significant uncertainties associated with environmental claims arising out of the presence of polychlorinated biphenyls (“PCBs”) in sediments in the lower Fox River, on which our former Neenah facility was located, and in the Bay of Green Bay Wisconsin (collectively, the “Site”). Since the early 1990s, the United States, the State of Wisconsin and two Indian tribes (collectively, the “Governments”) have pursued a cleanup of a 39-mile stretch of river from Little Lake Butte des Morts into Green Bay and natural resource damages (“NRDs”).

The United States notified the following parties (“PRPs”) of their potential responsibility to implement response actions, to pay response costs, and to compensate for NRDs at this site: us, Appvion, Inc. (formerly known as Appleton Papers Inc.), CBC Coating, Inc. (formerly known as Riverside Paper Corporation), Georgia-Pacific Consumer Products, L.P. (“Georgia-Pacific”, formerly known as Fort James Operating Company), Menasha Corporation, NCR Corporation (“NCR”), U.S. Paper Mills Corp., and WTM I Company. As described below, many other parties have been joined in litigation. After giving effect to settlements reached with the Governments, the remaining PRPs exposed to continuing obligations to implement the remainder of the cleanup consist of us, Georgia-Pacific and NCR.

The Site has been subject to certain studies and the parties conducted certain demonstration projects and completed certain interim cleanups. The permanent cleanup, known as a “remedial action” under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”), consists of sediment dredging, installation of engineered caps, and placement of sand covers in various areas in the bed of the river.

The United States Environmental Protection Agency (“EPA”) has divided the Site into five “operable units”,

including the most upstream portion of the Site on which our facility was located (“OU1”) and four downstream reaches of the river and bay (“OU2-5”).

We and WTM I Company implemented the remedial action in OU1 under a consent decree with the Governments; Menasha Corporation made a financial contribution to that work. That project began in 2004 and the work is complete other than on-going monitoring and maintenance.

For OU2-5, work has proceeded primarily under a Unilateral Administrative Order (“UAO”) issued in November 2007 by the EPA to us and seven other respondents. The remedial actions from 2007 through 2014 were funded primarily by NCR and its indemnitors, including Appvion, Inc. In ~~late June~~ 2015, we ~~began placing sand caps~~placed certain covering and capping in OU4b as a response to the ~~government’s demands. We expect the~~Government’s demands at a cost of ~~the work to be approximately $10 million during 2015.~~$9.7 million. Georgia Pacific and NCR ~~are funding~~funded work in 2015 pursuant to a proposed consent ~~decree.~~decree that the United States did not move to enter until April 12, 2016; the court has not yet ruled on that motion. Work is scheduled to continue in OU2-5 through ~~2017; although work may be required into~~ 2018, ~~to fully complete the project,~~ with monitoring and maintenance to follow.

~~Although we have not contributed significant funds towards remedial actions other than in OU1 until 2015, as~~As more fully discussed below, significant uncertainties exist pertaining to the ultimate allocation of OU2-5 remediation costs as well as the shorter term funding of the remedial actions for OU2-5.

Cost estimates.Estimates of the Site remediation change over time as we, or others, gain additional data and experience at the Site. In addition, disagreement exists over the likely costs for some of this work. On October 14, 2014, the Governments represented to the United States District Court in Green Bay that $1.1 billion provided an “upper end estimate of total past and future response costs” including a $100 million “uncertainty premium for future response costs.” Based upon estimates made by the Governments and independent estimates commissioned by various potentially responsible parties, we have no reason to disagree with the Governments’ assertion. Much of that amount has already been incurred, including approximately $100 million for OU1 and what we believe to be approximately ~~$500~~$575 million for OU2-5 prior to the ~~2015~~2016 remediation season.

In ~~previous years,~~2016, the Governments ~~indicated their expectation was~~again seek approximately $100 million of work to be completed in OU2-5. The exact work and a more precise estimate of its cost depend on certain unresolved technical issues. We have begun an effort to place the final layer on certain caps. We do not yet know to what extent we will undertake additional work in ~~OU2-5 completed at a rate estimated~~2016; however, we expect to cost at least $70 million annually in 2015 and 2016, and at lower rates thereafter. However, the Governments have revised their estimate per year and the cost for the 2015 dredging season was increased to be approximately $100spend less than $10 million.

- 16 -

GLATFELTER

6.30.16 Form 10-Q

As the result of a partial settlement, Georgia-Pacific has no obligation to pay for work upstream of a line near

~~- 16 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

Georgia-Pacific’s Green Bay West Mill located in OU4. We believe substantially all in-water work upstream of this line ~~has~~had been completed as of the end of the 2014 dredging season.

Allocation Litigation.In January 2008, NCR and Appvion brought an action in the federal district court in Green Bay to allocate among all parties responsible for this Site all of the costs incurred by the Governments, all of the costs incurred by the parties, and all of the NRDs owed to the Natural Resource Trustees. We have previously referred to this case as the “Whiting Litigation.” After several summary judgment rulings and a trial, the trial court entered judgment in the Whiting Litigation allocating to NCR ~~100 percent~~100% of the costs of (a) of the OU2-5 cleanup, (b) NRDs, (c) past and future costs incurred by the Governments in OU2-5, and (d) past and future costs incurred by any of the other parties net of an appropriate equitable adjustment for insurance recoveries. As to Glatfelter, NCR was judged liable to us for $4.28 million and any future costs or damages we may incur. NCR was held not responsible for costs incurred in OU1.

All parties appealed the Whiting Litigation judgment to the United States Court of Appeals for the Seventh Circuit. On September 25, 2014, that court affirmed, holding that if knowledge and fault were the only equitable factors governing allocation of costs and NRDs at the Site, NCR would owe 100% of all costs and damages in OU2-5, but would not have a share of costs in OU1 — which is upstream of the outfall of the facilities for which NCR is responsible — solely as an “arranger for disposal” of PCB-containing waste paper by recycling it at our mill. However, the court of appeals vacated the judgment and remanded the case for the district court’s further consideration of whether any other equitable factors might cause the district court to alter its allocation.

We contend the district court should, after further consideration, reinstate the 100%, or some similar very high, allocation to NCR of all the costs, and should hold that we should bear no share or a very small share. However, NCR has taken a contrary position and has sought contributions from others for future work until all allocation issues are resolved.

In addition, we take the position that the “single site” theory on which the courts held us responsible for cleaning up parts of the Site far downstream of our former mill should, if applied to NCR, make it liable for costs incurred in OU1. The district court agreed with us in an order dated March 3, 2015.

On March 31, 2015, NCR sought review of that order by the court of appeals which review was denied on May 1, 2015. ~~However, on May 15, 2015, the district court issued an opinion in the Government Action, described~~

~~below, containing a sentence suggesting that NCR would not be liable for OU1; we have sought reconsideration, as described below.~~

Appvion and NCR have had a cost-sharing agreement since at least 1998. The court of appeals held if Appvion incurred any recoverable costs because the Governments had named Appvion as a potentially responsible party, then Appvion may have a right to recover those costs under CERCLA. We and Appvion disagree over the proper treatment of amounts that Appvion incurred while a PRP that were also subject to a cost-sharing agreement with NCR; we contend Appvion may not recover costs it was contractually obligated to incur, that it has no other costs, and if it did, we would have a right to contribution of any recovery against NCR and others. However, Appvion takes a contrary position and claims ~~in excess of $170~~approximately $200 million.

The district court has established a schedule for the Whiting Litigation under which it would hold a trial beginning in ~~June 2016~~March 2017 on remaining issues.

Enforcement Litigation.In October 2010, the United States and the State of Wisconsin brought an action (“Government Action”) in the federal district court in Green Bay against us and 13 other defendants seeking (a) to recover all of ~~their~~the United States’ and the State of Wisconsin’s unreimbursed past costs, (b) to obtain a declaration of joint and several liability for all of their future costs, (c) to recover NRDs, and (d) to obtain a declaration of liability of all of the respondents on the UAO to perform the remedy in OU2-5 as required by the UAO and a mandatory permanent injunction to the same effect. The last of these claims was tried in 2012, and in May 2013, the district court enjoined us, NCR, WTM I, and Menasha Corp. to perform the work under the UAO. As the result of partial settlements, U.S. Paper Mills Corp. and Georgia-Pacific Consumer Products L.P. agreed to joint and several liability for some of the work. Appvion was held not liable for this Site under CERCLA.

All other potentially responsible parties, including the United States and the State of Wisconsin, have settled with the Governments. As a result, the remaining defendants consist of us, NCR, and Georgia-Pacific.

We appealed the injunction to the United States Court of Appeals for the Seventh Circuit, as did NCR, WTM I, and Menasha. On September 25, 2014, the court of appeals decided our and NCR’s appeals; the others’ appeals were not decided because they entered into a settlement. The court of appeals vacated the injunction as to us and NCR. However, it affirmed the district court’s ruling that we are liable for response actions in OU2-5 and for complying with the UAO. The court of appeals vacated and remanded the district court’s decision that NCR had failed to prove that liability for OU2-5 could be apportioned, directing the lower court to consider issues it had not considered initially.

- 17 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

On remand, the district court issued an opinion on ~~May 15,~~October 19, 2015, ~~(“May 15 Decision”) in which it held~~holding that ~~the existing trial record allowed it to apportion NCR’s~~NCR had not shown a reasonable basis for apportionment of its liability for ~~OU4 at 28% of~~ the ~~total costs. The district~~site. On January 25, 2016, the court ~~did not apportion liability~~denied NCR’s request to certify that decision for OU2 or OU3. The court’s opinion contains a sentence stating that NCR would not be liable for OU1 because the facilities formerly owned by NCR discharged downstream. The parties disagree over the judgment that the district court should enter, if any, based on the May 15 Decision. Further, we, Georgia-Pacific, andimmediate appeal.

As described below, the United States ~~have moved separately~~has withdrawn its natural resources damages claim against us. The Governments’ remaining claims principally consist of claims for ~~reconsideration~~(1) unreimbursed past costs of the ~~May 15 Decision; other parties have also moved or submitted briefs in support of one~~United States totaling $35.1 million (as incurred through September 30, 2015) and unreimbursed past costs of the ~~three other motions.~~Wisconsin Department of Natural Resources totaling $3.9 million (as incurred through June 30, 2015), and (2) costs incurred and/or to be incurred after September 30, 2015 and June 30, 2015, respectively. The ~~district court has not yet ruled on those motions for reconsideration or entered a final judgment.~~

Except as described above with respect to the claim for NRDs, the pending settlement, and the motion for a judgment on further findings, we do not know the Governments’ intentions concerning further litigation ofremaining issues in the Government Action ~~nor do we know~~are set for trial to commence after the ~~schedule for any further proceedings. We cannot now predict when it will be resolved.~~conclusion of the 2017 trial in the Whiting Litigation.

Interim Funding of Ongoing Work.As described above, the court of appeals vacated the allocation judgment in the Whiting Litigation on September 25, 2014, but neither court has since replaced that allocation with any other. ~~On April 9,~~The 2007 UAO requires the PRPs to submit annual remediation work plans. For 2015, the EPA approved ~~a “Final Phase 2B~~the 2015 Work Plan ~~For 2015 Remedial Action~~for $100 million of ~~Operable Units 2 Through 5” (the “2015 Work Plan”), which sets forth remedial activities for 2015 estimated to cost approximately $100 million.~~remediation activities. NCR, GP, and we were not able to reach agreement on a division of the costs of that work on an interim basis, subject to reallocation in the Whiting Litigation. NCR and GP ~~have~~ entered into a proposed consent decree with the United States under which they ~~will~~agreed to fund certain work estimated to cost approximately $67 million in 2015, and they ~~will~~would not be responsible for completing the remainder of the work in 2015, estimated to cost approximately $33 million. However, NCR and GP did not complete all of the work assigned to them under the consent decree. The United States ~~has~~did not ~~moved~~move to enter that consent ~~decree.~~decree until April 12, 2016, and the court has not yet ruled on that motion. Through the issuance of the 2015 Work Plan the EPA assigned to us those remaining tasks. Under the proposed consent decree, all parties would remain jointly and severally liable for work in the 2015 Work Plan not completed in 2015, except for a small amount of work upstream of the area for which GP is responsible.

~~Accordingly, we have~~ We contracted for and have begun certain portions of the work assigned to us under the 2015 Work Plan estimated to cost approximately $5 million, and we anticipate contracting for further work in 2015 estimated to cost an additional $5 million. We do not know whether all of the work assigned to us can be completed practically in 2015.

~~As noted above, we are in the process of completing~~remediation work in OU4 ~~estimated to~~at a total ~~approximately $10~~cost of $9.7 million, an amount of work less than the amount assigned to us in the 2015 Work Plan and any such work is subject to a reallocation of costs in the pending Whiting litigation. With respect to the 2015 Work Plan, we disagree with the United States over i) whether the work purportedly assigned to us could be completed in the specified timeframe; ii) whether the EPA has the legal authority to assign remedial tasks as it purports to have done under the terms of the UAO; iii) whether we have available to us avenues for relief from the purported obligation to perform the assigned work in 2015; iv) whether we have any other responses of which we may avail our self; v) whether an arbitrary per capita allocation of one-third can be imposed on us in light of the multiple rulings by the courts since 2009 that appear inconsistent with a per capita allocation; and vi) whether the 2015 Work Plan affects the Company’s ultimate liability for this Site. Further, we contend that if the district court does not reconsider the May 15 Decision described above, we believe our apportioned share of liability in OU4 to be about one-eighth of the work performed in any period.Plan. We anticipate that ~~$10 million~~the amount of work performed by us in 2015 ~~would satisfy~~satisfied our share of the obligation if NCR and GP perform the work assigned to them in the 2015 Work Plan. The United States disagrees. We cannot predict the outcome of these disagreements or any possible resulting litigation.

~~Therefore,~~The 2016 Work Plan similarly calls for completion of work that is estimated to cost in the range of $100 million. However, unlike the 2015 Work Plan, it does not allocate

the work among NCR, GP, and us. The parties have again not come to agreement on an interim allocation among them of responsibility for completing the work called for by the 2016 Work Plan. NCR and GP have begun certain work. We have begun placement of certain capping material.

Because we may not be able to obtain an agreement with the other parties or a ruling in litigation defining our obligation to contribute to work in 2016 prior to the time that work would have to be implemented, it is conceivable that we may have to choose an amount of work that we believe satisfies any obligation we may have to complete work in 2016, which selection we will have to defend after the fact. We expect to spend less than $10 million in connection with the 2016 Work Plan. In addition, it is conceivable we may be ~~required to complete more of the tasks assigned to us~~ in the ~~2015 Work Plan than those described above. It is also conceivable we may be required~~same position with respect to ~~continue to perform~~ work in OU2-5 beyond the ~~2015~~2016 season. Although we are unable to determine with any degree of certainty the amount we may be required to complete or to fund, those amounts could be significant. Any amounts we pay or any other party pays in the interim may be subject to reallocation when the Whiting Litigation is resolved.

NRDs.The Governments’ NRD assessment documents originally claimed we are jointly and severally responsible for NRDs with a value between $176 million and $333 million. The Governments claimed this range should be inflated to current dollars and then certain unreimbursed past assessment costs should be added, so the range of their claim was $287 million to $423 million in 2009.

However, on October 14, 2014, the Governments represented to the district court that if certain settlements providing $45.9 million toward compensation of NRDs

~~- 18 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

were approved, the total NRD recovery would amount to $105 million. The Governments stated they would consider those recoveries adequate and they would withdraw their claims against us and NCR for additional compensation of NRDs. ~~The~~On October 19, 2015, the district court granted the Governments ~~have subsequently sought~~ leave to withdraw their NRD claims against ~~us. The district court has yet to decide whether it will permit the Governments to withdraw those claims~~us without prejudice to re-filing them at some later ~~time, or whether their NRD claims have been satisfied.~~time. Some of the settling parties, including all of the settling parties contributing the $45.9 million, have waived their rights to seek contribution from us of the settlement amounts. We previously paid a portion of the earlier settlements that the Governments value at $59 million and that we contend may be somewhat more.

Reserves for the Site.Our reserve including ongoing monitoring obligations in OU1, our share of remediation of the downstream portions of the Site, ~~the 2015 Work Plan,~~ NRDs and all pending, threatened or asserted and unasserted claims against us relating to PCB contamination ~~totaled $16.2 million~~is set forth below:

- 18 -

GLATFELTER

6.30.16 Form 10-Q


	Six months ended
	June 30
In thousands	2016			2015
Balance at January 1,	$	17,105		$	16,223
Payments		(1,189	)		(21	)
Accruals		—			—

Balance at June 30,	$	15,916		$	16,202

The payments set forth above represent cash paid towards completion of remediation activities in connection with the 2015 and ~~$16.3 million,~~2016 Work Plans. Our reserve as of June 30, ~~2015 and December 31, 2014, respectively. We have not increased~~2016, includes our ~~reserve as a result~~estimate of costs to be incurred for remediation work, pending clarity from the ~~issuance of the 2015 Work Plan nor for any of the courts’ actions during the year.~~Whiting litigation. If we are unsuccessful in the allocation litigation or in the enforcement litigation described above, we may be required to record additional charges and such charges could be significant.

Of our total reserve for the Fox River, ~~$10.0~~$11.4 million is recorded in the accompanying June 30, ~~2015~~2016 condensed consolidated balance sheet under the caption “Environmental liabilities” and the remainder is recorded under the caption “Other long term liabilities.”

As described above, the appellate court vacated and remanded for reconsideration the district court’s ruling in the Whiting Litigation that NCR would bear 100% of costs for the downstream portion of the Site. We continue to believe we will not be allocated a significant share of liability in any final equitable allocation of the response costs for OU2-5 or for NRDs. The parties take contrary positions, however, as to whether costs incurred in satisfying apportioned liability – that is, liability for which the parties are not jointly and severally liable – may be reallocated equitably, and the district court has yet to resolve that issue. The accompanying condensed consolidated financial statements do not include reserves for any future defense costs, which could be significant, related to our involvement at the Site.

In setting our reserve for the Site, we have assessed our legal defenses, including our successful defenses to the allegations made in the Whiting Litigation and the original determination in the Whiting Litigation that NCR owes us “full contribution” for response costs and for NRDs that we may become obligated to pay except in OU1. We assume we will not bear the entire cost of remediation or damages to the exclusion of other known parties at the Site, who are also jointly and severally liable. The existence and ability of other parties to participate has also been taken into account in setting our reserve, and setting our reserve is generally based on our evaluation of recent publicly available financial information on certain of the responsible parties and any known insurance, indemnity or cost sharing agreements between responsible parties and third parties. In addition, we have considered the magnitude, nature, location and circumstances associated with the various discharges of PCBs to the river and the relationship of those discharges to identified contamination. We will continue to evaluate

our exposure and the level of our reserves ~~including, but not limited to, our potential share of the costs and NRDs, if any,~~ associated with the Site.

Other Information.The Governments have published studies estimating the amount of PCBs discharged by each identified potentially responsible party to the lower Fox River and Green Bay. These reports estimate our Neenah mill’s share of the mass of PCBs discharged to be as high as 27%. The district court has found the discharge mass estimates used in these studies not to be accurate. We believe the Neenah mill’s absolute and relative contribution of PCB mass is significantly lower than the estimates set forth in these studies. The ~~trial~~district court in the Government Action has found that the Neenah mill discharged an unknown amount of PCBs.

Based upon the rulings in the Whiting Litigation and the Government Action, neither of which endorsed an equitable allocation in proportion to the mass of PCBs discharged, we continue to believe an allocation in proportion to mass of PCBs discharged would not constitute an equitable allocation of the potential liability for the contamination at the Fox River. We contend other factors, such as a party’s role in causing costs, the location of discharge, and the location of contamination must be considered in order for the allocation to be equitable. The May 15 Decision raises the possibility that certain costs, but not others, may be apportioned and not equitably allocated, and that apportionment may be related in some manner to the mass of PCBs contributed to the sediment bed in a given operable unit (which differs from the mass discharged). All parties other than NCR and Appvion disagree, and have sought reconsideration.

~~- 19 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

Range of Reasonably Possible Outcomes. Based on our analysis of all available information, including but not limited to decisions of the courts, official documents such as records of decision, as well as discussions with legal counsel and cost estimates for work to be performed at the Site, and substantially dependent on the resolution of the allocation issues discussed above, we believe it is reasonably possible that our costs associated with the Fox River matter could exceed the aggregate amounts accrued for the Fox River matter by amounts ranging from insignificant to ~~$185~~$190 million. We believe the likelihood of an outcome in the upper end of the monetary range is less than other possible outcomes within the range and the possibility of an outcome in excess of the upper end of the monetary range is remote.

We expect remediation costs to be incurred primarily over the next two to three years, although we are unable to determine with any degree of certainty the amount we may be required to fund for interim remediation work. To the extent we provide such interim funding, we contend that NCR or another party would be required to reimburse us once the final allocation is determined.

Summary.Our current assessment is we will be able to manage this environmental matter without a long-term, material adverse impact on the Company. This matter could, however, at any particular time or for any particular year or years, have a material adverse effect on

- 19 -

GLATFELTER

6.30.16 Form 10-Q

our consolidated financial position, liquidity and/or results of operations or could result in a default under our debt covenants. Moreover, there can be no assurance our reserves will be adequate to provide for future obligations related to this matter, or our share of costs and/or damages will not exceed our available resources, or those obligations will not have a long-term, material adverse effect on our consolidated financial position, liquidity or results of operations. Should a court grant the United States or the State of Wisconsin relief requiring us

individually either to perform directly or to contribute significant amounts towards remedial action downstream of Little Lake Butte des Morts those developments could have a material adverse effect on our consolidated financial position, liquidity and results of operations and might result in a default under our loan covenants.

- 20 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

~~16.~~14.

SEGMENT INFORMATION

The following tables set forth financial and other information by business unit for the period indicated:


Three months ended June 30 Dollars in millions	Composite Fibers				Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
Three months ended June 30																											Composite Fibers				Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
Dollars in millions																															Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
	2015		2014		2015		2014		2015			2014			2015			2014			2015			2014			Composite Fibers		2016		2015		2016		2015			2016			2015			2016			2015			2016			2015
Net sales	$	140.4	$	157.0	$	57.5	$	70.5	$	212.9		$	217.9		$	—		$	—		$	410.8		$	445.3		$	136.4	$	140.4	$	60.8	$	57.5	$	209.3		$	212.9		$	—		$	—		$	406.4		$	410.8
Energy and related sales, net		—		—		—		—		0.7			0.8			—			—			0.7			0.8			—		—		—		—		2.0			0.7			—			—			2.0			0.7

Total revenue		140.4		157.0		57.5		70.5		213.6			218.7			—			—			411.5			446.1			136.4		140.4		60.8		57.5		211.3			213.6			—			—			408.4			411.5
Cost of products sold		112.4		126.9		52.3		62.0		211.9			214.1			2.1			1.7			378.7			404.7			109.0		112.4		51.8		52.3		202.9			211.9			2.0			2.1			365.7			378.7

Gross profit (loss)		28.0		30.1		5.2		8.5		1.7			4.6			(2.1	)		(1.7	)		32.8			41.4			27.4		28.0		9.0		5.2		8.4			1.7			(2.0	)		(2.1	)		42.7			32.8
SG&A		11.3		12.8		2.1		2.3		11.7			11.8			4.0			5.4			29.1			32.3			12.1		11.3		2.2		2.1		14.2			11.7			8.7			4.0			37.2			29.1
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—			—			(0.1	)		(1.5	)		(0.1	)		(1.5	)		—		—		—		—		—			—			—			(0.1	)		—			(0.1	)

Total operating income (loss)		16.7		17.3		3.1		6.2		(10.0	)		(7.2	)		(6.0	)		(5.6	)		3.8			10.6			15.3		16.7		6.8		3.1		(5.8	)		(10.0	)		(10.7	)		(6.0	)		5.5			3.8
Non-operating expense		—		—		—		—		—			—			(4.1	)		(4.6	)		(4.1	)		(4.6	)		—		—		—		—		—			—			(3.6	)		(4.1	)		(3.6	)		(4.1	)

Income (loss) before income taxes	$	16.7	$	17.3	$	3.1	$	6.2	$	(10.0	)	$	(7.2	)	$	(10.1	)	$	(10.2	)	$	(0.3	)	$	6.0		$	15.3	$	16.7	$	6.8	$	3.1	$	(5.8	)	$	(10.0	)	$	(14.3	)	$	(10.1	)	$	2.0		$	(0.3	)


Supplementary Data
Net tons sold(thousands)		39.4		39.4		22.6		24.6		191.3			190.7			—			—			253.3			254.8			40.7		39.4		24.4		22.6		194.7			191.3			—			—			259.7			253.3
Depreciation, depletion and amortization	$	6.7	$	7.6	$	2.1	$	2.3	$	6.3		$	7.9		$	0.5		$	0.5		$	15.6		$	18.3		$	7.2	$	6.7	$	2.4	$	2.1	$	6.5		$	6.3		$	0.7		$	0.5		$	16.8		$	15.6
Capital expenditures		5.6		5.4		1.5		1.4		15.6			8.6			0.1			0.3			22.8			15.7			2.3		5.6		6.1		1.5		28.7			15.6			—			0.1			37.1			22.8

Six months ended June 30 Dollars in millions	Composite Fibers				Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
Six months ended June 30																											Composite Fibers				Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
Dollars in millions																															Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
	2015		2014		2015		2014		2015			2014			2015			2014			2015			2014			Composite Fibers		2016		2015		2016		2015			2016			2015			2016			2015			2016			2015
Net sales	$	275.7	$	315.6	$	119.8	$	141.8	$	432.8		$	443.7		$	—		$	—		$	828.3		$	901.1		$	259.9	$	275.7	$	121.5	$	119.8	$	427.2		$	432.8		$	—		$	—		$	808.6		$	828.3
Energy and related sales, net		—		—		—		—		2.8			6.1			—			—			2.8			6.1			—		—		—		—		2.7			2.8			—			—			2.7			2.8

Total revenue		275.7		315.6		119.8		141.8		435.6			449.8			—			—			831.1			907.1			259.9		275.7		121.5		119.8		429.9			435.6			—			—			811.3			831.1
Cost of products sold		221.5		252.9		107.3		125.1		412.3			429.1			5.0			3.5			746.1			810.6			210.3		221.5		104.1		107.3		394.0			412.3			2.3			5.0			710.7			746.1

Gross profit (loss)		54.2		62.7		12.5		16.7		23.3			20.7			(5.0	)		(3.5	)		84.9			96.5			49.6		54.2		17.4		12.5		35.9			23.3			(2.3	)		(5.0	)		100.6			84.9
SG&A		22.9		26.1		4.0		4.7		23.9			25.5			9.5			9.6			60.4			65.9			23.2		22.9		4.2		4.0		26.6			23.9			15.0			9.5			69.0			60.4
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—			—			(2.8	)		(2.3	)		(2.8	)		(2.3	)		—		—		—		—		—			—			—			(2.8	)		—			(2.8	)

Total operating income (loss)		31.3		36.6		8.5		12.0		(0.6	)		(4.8	)		(11.7	)		(10.8	)		27.3			32.9			26.4		31.3		13.2		8.5		9.3			(0.6	)		(17.3	)		(11.7	)		31.5			27.3
Non-operating expense		—		—		—		—		—			—			(8.7	)		(9.2	)		(8.7	)		(9.2	)		—		—		—		—		—			—			(8.3	)		(8.7	)		(8.3	)		(8.7	)

Income (loss) before income taxes	$	31.3	$	36.6	$	8.5	$	12.0	$	(0.6	)	$	(4.8	)	$	(20.4	)	$	(20.0	)	$	18.6		$	23.7		$	26.4	$	31.3	$	13.2	$	8.5	$	9.3		$	(0.6	)	$	(25.6	)	$	(20.4	)	$	23.2		$	18.6


Supplementary Data
Net tons sold(thousands)		77.3		79.4		46.7		49.7		390.0			392.9			—			—			514.0			522.1			77.6		77.3		48.9		46.7		400.5			390.0			—			—			527.0			514.0
Depreciation, depletion and amortization	$	13.4	$	15.3	$	4.3	$	4.6	$	12.9		$	16.1		$	1.0		$	0.9		$	31.6		$	36.9		$	14.3	$	13.4	$	4.7	$	4.3	$	13.2		$	12.9		$	1.2		$	1.0		$	33.4		$	31.6
Capital expenditures		11.5		11.4		2.8		2.9		28.8			14.8			1.5			1.1			44.6			30.2			8.6		11.5		20.7		2.8		50.8			28.8			0.3			1.5			80.4			44.6

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.

Business UnitsResults of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. The costs incurred by support areas not directly aligned with the business unit are allocated primarily based on an estimated utilization of support area services or are included in “Other and Unallocated” in the Business Unit Performance table.

Management evaluates results of operations of the business units before pension expense, certain corporate level costs, and the effects of certain gains or losses not considered to be related to the core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of business units and the extent of cash flow generated from these core operations. Such amounts are presented under the caption “Other and Unallocated.” In the evaluation of business unit results, management does not use any measures of total assets. This presentation is aligned with the management and operating structure of our company. It is also on this basis that the Company’s performance is evaluated internally and by the Company’s Board of Directors.

- 21 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

~~17.~~15.

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Our 5.375% Notes issued by P. H. Glatfelter Company (the “Parent”) are fully and unconditionally guaranteed, on a joint and several basis, by certain of our 100%-owned domestic subsidiaries, PHG Tea Leaves, Inc., Mollanvick, Inc., Glatfelter Composite Fibers N. A., Inc. (“CFNA”), Glatfelter Advance Materials N.A., Inc. (“GAMNA”), and Glatfelter Holdings, LLC. The guarantees are subject to certain customary release provisions including i) the designation of such subsidiary as an unrestricted or excluded subsidiary; (ii) in connection with any sale or disposition of the capital stock of the subsidiary guarantor; and (iii) upon our exercise of our legal defeasance option or our covenant defeasance option, all of which are more fully described in the Indenture dated as of October 3, 2012 and the First Supplemental Indenture dated as of October 27, 2015, among us, the Guarantors and US Bank National Association, as Trustee, relating to the 5.375% Notes.

The following presents ~~the~~our condensed consolidating statements of income, including comprehensive income for the three months and six months ended June 30, ~~2015 and 2014, the condensed consolidating balance sheets as of June 30, 2015 and December 31, 2014 and the~~2016, our condensed consolidating cash flows for the six months ended June 30, 2016 and 2015 and 2014. These financial statements reflect the Parent, the guarantor subsidiaries (on a combined basis), the non-guarantor subsidiaries (on a combined basis) and elimination entries necessary to combine such entities on a consolidated basis. Our presentation of the Guarantors’ statement of income for the three months and six months ended June 30, 2014 has been restated to correctly apply the equity method of accounting to reflect the Guarantors’ equity interests in certain Non Guarantors. Such changes are reflected under the caption “Equity in earnings of subsidiaries” in the accompanying condensed consolidating statements of income. The correction had no impact on any financial information of the Parent Company, the Non Guarantors or on theour condensed consolidating balance ~~sheet or~~sheets as of June 30, 2016 and December 31, 2015. The condensed consolidating financial statements set forth below include the ~~statement~~addition of ~~cash flows.~~CFNA and GAMNA as guarantors during 2015.

Condensed Consolidating Statement of Income for the

~~three~~ Three months ended June 30, ~~2015~~2016


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	212,920		$	—		$	197,883		$	—		$	410,803		$	209,269		$	17,561		$	196,675		$	(17,092	)	$	406,413
Energy and related sales, net		715			—			—			—			715			2,001			—			—			—			2,001

Total revenues		213,635			—			197,883			—			411,518			211,270			17,561			196,675			(17,092	)		408,414
Costs of products sold		213,316			—			165,369			—			378,685			204,495			16,711			161,577			(17,092	)		365,691

Gross profit		319			—			32,514			—			32,833			6,775			850			35,098			—			42,723
Selling, general and administrative expenses		15,661			15			13,461			—			29,137			22,622			(36	)		14,605			—			37,191
Gains on dispositions of plant, equipment and timberlands, net		(51	)		—			(60	)		—			(111	)
Loss on dispositions of plant, equipment and timberlands, net																	2			—			—			—			2

Operating income (loss)		(15,291	)		(15	)		19,113			—			3,807			(15,849	)		886			20,493			—			5,530
Other non-operating income (expense)
Interest expense		(4,608	)		—			(6,370	)		6,626			(4,352	)		(4,289	)		—			(814	)		1,150			(3,953	)
Interest income		169			6,498			36			(6,626	)		77			169			1,001			41			(1,150	)		61
Equity in earnings of subsidiaries		17,879			11,761			—			(29,640	)		—			16,385			16,071			—			(32,456	)		—
Other, net		(745	)		(20	)		980			—			215			(575	)		(1,421	)		2,313			—			317

Total other non-operating income (expense)		12,695			18,239			(5,354	)		(29,640	)		(4,060	)		11,690			15,651			1,540			(32,456	)		(3,575	)

Income (loss) before income taxes		(2,596	)		18,224			13,759			(29,640	)		(253	)		(4,159	)		16,537			22,033			(32,456	)		1,955
Income tax provision (benefit)		(5,444	)		445			1,898			—			(3,101	)		(6,124	)		152			5,962			—			(10	)

Net income		2,848			17,779			11,861			(29,640	)		2,848			1,965			16,385			16,071			(32,456	)		1,965
Other comprehensive income (loss)		17,087			13,680			(9,958	)		(3,722	)		17,087			(11,539	)		(13,937	)		(13,490	)		27,427			(11,539	)

Comprehensive income	$	19,935		$	31,459		$	1,903		$	(33,362	)	$	19,935
Comprehensive income (loss)																$	(9,574	)	$	2,448		$	2,581		$	(5,029	)	$	(9,574	)

- 22 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Condensed Consolidating Statement of Income for the

~~three~~ Six months ended June 30, ~~2014~~2016


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	217,864		$	4		$	227,478		$	(5	)	$	445,341		$	427,157		$	36,207		$	381,141		$	(35,874	)	$	808,631
Energy and related sales, net		790			—			—			—			790			2,667			—			—			—			2,667

Total revenues		218,654			4			227,478			(5	)		446,131			429,824			36,207			381,141			(35,874	)		811,298
Costs of products sold		215,756			4			188,939			(5	)		404,694			396,454			34,761			315,391			(35,874	)		710,732

Gross profit		2,898			—			38,539			—			41,437			33,370			1,446			65,750			—			100,566
Selling, general and administrative expenses		16,555			143			15,616			—			32,314			41,067			(221	)		28,203			—			69,049
Gains on dispositions of plant, equipment and timberlands, net		(162	)		(1,316	)		(4	)		—			(1,482	)
Loss on dispositions of plant, equipment and timberlands, net																	4			—			22			—			26

Operating income (loss)		(13,495	)		1,173			22,927			—			10,605			(7,701	)		1,667			37,525			—			31,491
Other non-operating income (expense)
Interest expense		(4,756	)		—			(2,815	)		2,809			(4,762	)		(8,704	)		—			(1,601	)		2,236			(8,069	)
Interest income		164			2,656			41			(2,809	)		52			350			1,993			45			(2,236	)		152
Equity in earnings of subsidiaries		19,021			15,482			—			(34,503	)		—			29,257			27,825			—			(57,082	)		—
Other, net		(338	)		11			389			(1	)		61			(1,117	)		(1,401	)		2,135			—			(383	)

Total other non-operating income (expense)		14,091			18,149			(2,385	)		(34,504	)		(4,649	)		19,786			28,417			579			(57,082	)		(8,300	)

Income before income taxes		596			19,322			20,542			(34,504	)		5,956			12,085			30,084			38,104			(57,082	)		23,191
Income tax provision (benefit)		(4,073	)		715			4,645			—			1,287			(6,048	)		827			10,279			—			5,058

Net income		4,669			18,607			15,897			(34,504	)		4,669			18,133			29,257			27,825			(57,082	)		18,133
Other comprehensive income (loss)		3,026			(550	)		1,098			(548	)		3,026			4,203			(384	)		(373	)		757			4,203

Comprehensive income	$	7,695		$	18,057		$	16,995		$	(35,052	)	$	7,695		$	22,336		$	28,873		$	27,452		$	(56,325	)	$	22,336

- 23 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Condensed Consolidating Statement of Income for the

~~six~~ Three months ended June 30, 2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	432,796		$	—		$	395,476		$	—		$	828,272		$	212,920		$	22,667		$	194,779		$	(19,563	)	$	410,803
Energy and related sales, net		2,783			—			—			—			2,783			715			—			—			—			715

Total revenues		435,579			—			395,476			—			831,055			213,635			22,667			194,779			(19,563	)		411,518
Costs of products sold		415,835			—			330,279			—			746,114			212,472			21,921			163,855			(19,563	)		378,685

Gross profit		19,744			—			65,197			—			84,941			1,163			746			30,924			—			32,833
Selling, general and administrative expenses		32,843			205			27,361			—			60,409			15,661			458			13,018			—			29,137
Gains on dispositions of plant, equipment and timberlands, net		(1,522	)		(1,183	)		(60	)		—			(2,765	)
Loss on dispositions of plant, equipment and timberlands, net																	(51	)		—			(60	)		—			(111	)

Operating income (loss)		(11,577	)		978			37,896			—			27,297			(14,447	)		288			17,966			—			3,807
Other non-operating income (expense)
Interest expense		(9,425	)		—			(12,764	)		13,329			(8,860	)		(4,608	)		—			(6,370	)		6,626			(4,352	)
Interest income		332			13,097			41			(13,328	)		142			169			6,498			36			(6,625	)		77
Equity in earnings of subsidiaries		34,242			21,236			—			(55,478	)		—			17,478			11,305			—			(28,783	)		—
Other, net		(1,460	)		(146	)		1,635			(1	)		28			(746	)		(29	)		990			—			215

Total other non-operating income (expense)		23,689			34,187			(11,088	)		(55,478	)		(8,690	)		12,293			17,774			(5,344	)		(28,782	)		(4,060	)

Income before income taxes		12,112			35,165			26,808			(55,478	)		18,607
Income (loss) before income taxes																	(2,154	)		18,062			12,622			(28,782	)		(253	)
Income tax provision (benefit)		(4,661	)		1,349			5,146			—			1,834			(5,002	)		584			1,317			—			(3,101	)

Net income		16,773			33,816			21,662			(55,478	)		16,773			2,848			17,478			11,305			(28,782	)		2,848
Other comprehensive income (loss)		(18,198	)		(24,870	)		28,890			(4,020	)		(18,198	)		17,087			13,680			(9,958	)		(3,722	)		17,087

Comprehensive income (loss)	$	(1,425	)	$	8,946		$	50,552		$	(59,498	)	$	(1,425	)
Comprehensive income																$	19,935		$	31,158		$	1,347		$	(32,504	)	$	19,935

- 24 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Condensed Consolidating Statement of Income for the

~~six~~ Six months ended June 30, ~~2014~~2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	443,695		$	21		$	457,367		$	(21	)	$	901,062		$	432,796		$	42,817		$	392,877		$	(40,218	)	$	828,272
Energy and related sales, net		6,052			—			—			—			6,052			2,783			—			—			—			2,783

Total revenues		449,747			21			457,367			(21	)		907,114			435,579			42,817			392,877			(40,218	)		831,055
Costs of products sold		432,472			21			378,165			(21	)		810,637			416,154			41,255			328,923			(40,218	)		746,114

Gross profit		17,275			—			79,202			—			96,477			19,425			1,562			63,954			—			84,941
Selling, general and administrative expenses		34,347			156			31,362			—			65,865			32,843			955			26,611			—			60,409
Gains on dispositions of plant, equipment and timberlands, net		(974	)		(1,317	)		—			—			(2,291	)		(1,522	)		(1,183	)		(60	)		—			(2,765	)

Operating income (loss)		(16,098	)		1,161			47,840			—			32,903			(11,896	)		1,790			37,403			—			27,297
Other non-operating income (expense)
Interest expense		(9,494	)		—			(5,545	)		5,465			(9,574	)		(9,425	)		—			(12,764	)		13,329			(8,860	)
Interest income		316			5,214			48			(5,465	)		113			331			13,097			41			(13,327	)		142
Equity in earnings of subsidiaries		41,520			35,944			—			(77,464	)		—			34,562			21,499			—			(56,061	)		—
Other, net		(1,220	)		21			1,471			—			272			(1,460	)		(159	)		1,649			(2	)		28

Total other non-operating income (expense)		31,122			41,179			(4,026	)		(77,464	)		(9,189	)		24,008			34,437			(11,074	)		(56,061	)		(8,690	)

Income before income taxes		15,024			42,340			43,814			(77,464	)		23,714			12,112			36,227			26,329			(56,061	)		18,607
Income tax provision (benefit)		(4,293	)		1,628			7,062			—			4,397			(4,661	)		1,665			4,830			—			1,834

Net income		19,317			40,712			36,752			(77,464	)		19,317			16,773			34,562			21,499			(56,061	)		16,773
Other comprehensive income (loss)		5,991			(549	)		1,983			(1,434	)		5,991			(18,198	)		(24,870	)		28,890			(4,020	)		(18,198	)

Comprehensive income	$	25,308		$	40,163		$	38,735		$	(78,898	)	$	25,308
Comprehensive income (loss)																$	(1,425	)	$	9,692		$	50,389		$	(60,081	)	$	(1,425	)

- 25 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Condensed Consolidating Balance Sheet as of

June 30, ~~2015~~2016


In thousands	Parent Company		Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated		Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated

Assets
Cash and cash equivalents	$	34,316	$	308		$	31,138		$	—		$	65,762	$	6,512	$	2,545		$	49,475	$	—		$	58,532
Other current assets		233,505		217,912			284,051			(245,597	)		489,871		207,168		255,574			266,025		(262,714	)		466,053
Plant, equipment and timberlands, net		278,537		961			414,421			—			693,919		329,041		18,507			400,488		—			748,036
Investments in subsidiaries		723,851		400,722			—			(1,124,573	)		—		783,479		535,117			—		(1,318,596	)		—
Other assets		129,829		95,693			151,541			(96,178	)		280,885		112,876		—			139,687		—			252,563

Total assets	$	1,400,038	$	715,596		$	881,151		$	(1,466,348	)	$	1,530,437	$	1,439,076	$	811,743		$	855,675	$	(1,581,310	)	$	1,525,184


Liabilities and Shareholders’ Equity
Current liabilities	$	359,940	$	1,939		$	178,455		$	(251,953	)	$	288,381	$	401,540	$	28,180		$	144,387	$	(262,714	)	$	311,393
Long-term debt		250,000		—			659,770			(526,623	)		383,147		247,381		—			110,985		—			358,366
Deferred income taxes		50,564		(452	)		51,305			1,020			102,437		26,905		(229	)		48,479		—			75,155
Other long-term liabilities		100,609		—			107,279			(90,341	)		117,547		87,027		313			16,707		—			104,047

Total liabilities		761,113		1,487			996,809			(867,897	)		891,512		762,853		28,264			320,558		(262,714	)		848,961
Shareholders’ equity		638,925		714,109			(115,658	)		(598,451	)		638,925		676,223		783,479			535,117		(1,318,596	)		676,223

Total liabilities and shareholders’ equity	$	1,400,038	$	715,596		$	881,151		$	(1,466,348	)	$	1,530,437	$	1,439,076	$	811,743		$	855,675	$	(1,581,310	)	$	1,525,184

Condensed Consolidating Balance Sheet as of

December 31, ~~2014~~2015


In thousands	Parent Company		Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated		Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated

Assets
Cash and cash equivalents	$	42,208	$	514		$	57,115		$	—		$	99,837	$	59,130	$	465		$	45,709	$	—		$	105,304
Other current assets		218,544		420,451			263,567			(427,777	)		474,785		199,690		238,515			239,367		(230,509	)		447,063
Plant, equipment and timberlands, net		255,255		991			441,362			—			697,608		286,334		1,114			411,416		—			698,864
Investments in subsidiaries		824,480		399,931			—			(1,224,411	)		—		737,450		507,116			—		(1,244,566	)		—
Other assets		121,125		—			186,129			(17,980	)		289,274		106,586		—			142,599		—			249,185

Total assets	$	1,461,612	$	821,887		$	948,173		$	(1,670,168	)	$	1,561,504	$	1,389,190	$	747,210		$	839,091	$	(1,475,075	)	$	1,500,416


Liabilities and Shareholders’ Equity
Current liabilities	$	403,662	$	3,394		$	307,737		$	(435,062	)	$	279,731	$	363,037	$	9,725		$	162,081	$	(230,523	)	$	304,320
Long-term debt		250,000		—			721,457			(572,579	)		398,878		247,075		—			106,221		—			353,296
Deferred income taxes		46,483		(453	)		70,275			(12,289	)		104,016		28,561		(79	)		47,976		—			76,458
Other long-term liabilities		112,358		—			11,633			5,779			129,770		87,270		—			15,825		—			103,095

Total liabilities		812,503		2,941			1,111,102			(1,014,151	)		912,395		725,943		9,646			332,103		(230,523	)		837,169
Shareholders’ equity		649,109		818,946			(162,929	)		(656,017	)		649,109		663,247		737,564			506,988		(1,244,552	)		663,247

Total liabilities and shareholders’ equity	$	1,461,612	$	821,887		$	948,173		$	(1,670,168	)	$	1,561,504	$	1,389,190	$	747,210		$	839,091	$	(1,475,075	)	$	1,500,416

- 26 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Condensed Consolidating Statement of Cash Flows for the

~~six~~ Six months ended June 30, ~~2015~~2016


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(4,343	)	$	(684	)	$	30,540		$	—		$	25,513		$	17,067		$	2,821		$	16,752		$	—		$	36,640
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(30,241	)		—			(14,334	)		—			(44,575	)		(51,043	)		(18,861	)		(10,487	)		—			(80,391	)
Proceeds from disposal plant, equipment and timberlands, net		1,581			1,213			257			—			3,051
Proceeds from disposals of plant, equipment and timberlands, net																	41			—			12			—			53
Repayments from intercompany loans		—			48,855			—			(48,855	)		—			—			7,500			—			(7,500	)		—
Advances of intercompany loans		—			(38,690	)		—			38,690			—			—			(7,880	)		—			7,880			—
Intercompany capital (contributed) returned		10,500			(300	)		—			(10,200	)		—
Intercompany capital contributed																	(17,000	)		(500	)		—			17,500			—
Other		(1,600	)		—			—			—			(1,600	)		(300	)		—			—			—			(300	)

Total investing activities		(19,760	)		11,078			(14,077	)		(20,365	)		(43,124	)		(68,302	)		(19,741	)		(10,475	)		17,880			(80,638	)
Financing activities
Net repayments of indebtedness		—			—			(1,492	)		—			(1,492	)
Net long-term borrowings																	—			—			4,222			—			4,222
Payments of borrowing costs		(1,329	)		—			—			—			(1,329	)		(51	)		—			(85	)		—			(136	)
Payment of dividends to shareholders		(9,992	)		—			—			—			(9,992	)		(10,679	)		—			—			—			(10,679	)
Repayments of intercompany loans		(9,158	)		—			(39,697	)		48,855			—			—			—			(7,500	)		7,500			—
Borrowings of intercompany loans		38,690			—			—			(38,690	)		—			7,880			—			—			(7,880	)		—
Intercompany capital received (returned)		—			(10,600	)		400			10,200			—
Intercompany capital (returned) received																	—			17,000			500			(17,500	)		—
Proceeds from government grants																	2,443			2,000			—			—			4,443
Payments related to share-based compensation awards and other		(2,000	)		—			—			—			(2,000	)		(976	)		—			—			—			(976	)

Total financing activities		16,211			(10,600	)		(40,789	)		20,365			(14,813	)		(1,383	)		19,000			(2,863	)		(17,880	)		(3,126	)
Effect of exchange rate on cash		—			—			(1,651	)		—			(1,651	)		—			—			352			—			352

Net (decrease) increase in cash		(7,892	)		(206	)		(25,977	)		—			(34,075	)
Net increase (decrease) in cash																	(52,618	)		2,080			3,766			—			(46,772	)
Cash at the beginning of period		42,208			514			57,115			—			99,837			59,130			465			45,709			—			105,304

Cash at the end of period	$	34,316		$	308		$	31,138		$	—		$	65,762		$	6,512		$	2,545		$	49,475		$	—		$	58,532

- 27 -

GLATFELTER

~~3.30.15~~6.30.16 Form 10-Q

Condensed Consolidating Statement of Cash Flows for the

~~six~~ Six months ended June 30, ~~2014~~2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated

Net cash provided (used) by
Operating activities	$	(15,054	)	$	1,773		$	(8,085	)	$			$	(21,366	)	$	(4,343	)	$	(695	)	$	30,551		$	—		$	25,513
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(15,963	)		—			(14,193	)		—			(30,156	)		(30,241	)		—			(14,334	)		—			(44,575	)
Proceeds from disposal plant, equipment and timberlands, net		1,000			1,355			5			—			2,360
Proceeds from disposals of plant, equipment and timberlands, net																	1,581			1,213			257			—			3,051
Repayments from intercompany loans																	—			48,855			—			(48,855	)		—
Advances of intercompany loans		—			(3,450	)		—			3,450			—			—			(38,690	)		—			38,690			—
Intercompany capital (contributed) returned																	10,500			(300	)		—			(10,200	)		—
Other		(100	)		—			—			—			(100	)		(1,600	)		—			—			—			(1,600	)

Total investing activities		(15,063	)		(2,095	)		(14,188	)		3,450			(27,896	)		(19,760	)		11,078			(14,077	)		(20,365	)		(43,124	)
Financing activities
Net proceeds from indebtedness		—			—			(25,425	)		—			(25,425	)
Net repayments of indebtedness																	—			—			(1,492	)		—			(1,492	)
Payments of borrowing costs																	(1,329	)		—			—			—			(1,329	)
Payment of dividends to shareholders		(9,164	)		—			—			—			(9,164	)		(9,992	)		—			—			—			(9,992	)
Repurchases of common stock		(9,158	)		—			—			—			(9,158	)
Repayments of intercompany loans																	(9,158	)		—			(39,697	)		48,855			—
Borrowings of intercompany loans		3,450			—			—			(3,450	)		—			38,690			—			—			(38,690	)		—
Intercompany capital (returned) received																	—			(10,500	)		300			10,200			—
Payments related to share-based compensation awards and other		(1,816	)		—			—			—			(1,816	)		(2,000	)		—			—			—			(2,000	)

Total financing activities		(16,688	)		—			(25,425	)		(3,450	)		(45,563	)		16,211			(10,500	)		(40,889	)		20,365			(14,813	)
Effect of exchange rate on cash		—			—			(41	)		—			(41	)		—			—			(1,651	)		—			(1,651	)

Net decrease in cash		(46,805	)		(322	)		(47,739	)		—			(94,866	)		(7,892	)		(117	)		(26,066	)		—			(34,075	)
Cash at the beginning of period		56,216			501			66,165			—			122,882			42,208			509			57,120			—			99,837

Cash at the end of period	$	9,411		$	179		$	18,426		$	—		$	28,016		$	34,316		$	392		$	31,054		$	—		$	65,762

- 28 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein and Glatfelter’s Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2014~~2015 Annual Report on Form 10-K.

Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects and future consolidated financial position or results of operations, made in this Report on Form 10-Q are forward looking. We use words such as “anticipates”, “believes”, “expects”, “future”, “intends” and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from such expectations. The following discussion includes forward-looking statements regarding expectations of, among others, shipping volumes, selling prices, input costs, non-cash pension expense, environmental costs, capital expenditures and liquidity, all of which are inherently difficult to predict. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from our expectations. Accordingly, we identify the following important factors, among others, which could cause our results to differ from any results that might be projected, forecasted or estimated in any such forward-looking statements:

i.	variations in demand for our products including the impact of unplanned market-related downtime, variations in product pricing, or product substitution;

ii.	~~changes in the cost or availability of raw materials we use, in particular pulpwood, pulp, pulp substitutes, caustic soda, and abaca fiber;~~

~~iii.~~

~~changes in energy-related costs and commodity raw materials with an energy component;~~

~~iv.~~

~~our ability to develop new, high value-added products;~~

v.	~~the impact of exposure to volatile market-based pricing for sales of excess electricity;~~

~~vi.~~

the impact of competition, both domestic and international, changes in industry production capacity, including the construction of new mills or new machines, the closing of mills and incremental changes due to capital expenditures or productivity increases;

iii.	risks associated with our international operations, including local economic and political environments and fluctuations in currency exchange rates;

iv.	geopolitical events, including the impact of conflicts such as Russia and Ukraine;

v.	our ability to develop new, high value-added products;

vi.	changes in the cost or availability of raw materials we use, in particular pulpwood, pulp, pulp substitutes, caustic soda, and abaca fiber;

vii.	changes in energy-related costs and commodity raw materials with an energy component;

viii.

the impact of unplanned production interruption;

ix.	disruptions in production and/or increased costs due to labor disputes;

x.	the impact of exposure to volatile market-based pricing for sales of excess electricity;

xi.	the gain or loss of significant customers and/or on-going viability of such customers;

~~viii.~~

~~the impact of unplanned production interruption;~~

~~ix.~~xii.

cost and other effects of environmental compliance, cleanup, damages, remediation or restoration, or personal injury or property damages related thereto, such as the costs of natural resource restoration or damages related to the presence of polychlorinated biphenyls (“PCBs”) in the lower Fox River on which our former Neenah mill was located;

x.xiii.

adverse results in litigation ofin the Fox River matter;

~~xi.~~

~~risks associated with our international operations, including local economic and political environments and fluctuations in currency exchange rates;~~

~~xii.~~

~~geopolitical events, including the impact of conflicts such as Russia and Ukraine;~~

~~xiii.~~xiv.

the impact of war and terrorism;

~~xiv.~~

~~disruptions in production and/or increased costs due to labor disputes;~~

xv.	the impact of unfavorable outcomes of audits by various state, federal or international tax authorities;

xvi.	enactment of adverse state, federal or foreign tax or other legislation or changes in government policy or regulation; and

xvii.

our ability to finance, consummate and integrate ~~acquisitions;~~acquisitions.

We manufacture a wide array of specialty papers and fiber-based engineered materials. We manage our company along three business units:

•

Composite Fibers with revenue from the sale of single-serve ~~coffee~~tea and ~~tea~~coffee filtration papers, ~~non-woven~~nonwoven wall covering ~~papers for battery and capacitor applications,~~materials, metallized papers, composite laminates papers, and ~~other technical specialty papers;~~

many technically special papers including substrates for electrical applications;

•

Advanced Airlaid Materials with revenue from the sale of airlaid ~~non-woven fabric like~~nonwoven fabric-like materials used in feminine hygiene ~~products,~~and adult incontinence products, ~~cleaning pads, food pads, napkins, tablecloths,~~wipes, and ~~baby wipes;~~other airlaid applications; and

•

Specialty Papers with revenue from the sale of papers for carbonless ~~papers, non-carbonless~~and other forms, envelopes, book publishing, ~~envelope & converting~~and engineered products such as papers for high-speed ink jet printing, office specialty products, greeting cards, packaging, casting, release, transfer, playing card, postal, FDA-compliant food and ~~fiber-based engineered products.~~

beverage applications, and other niche specialty applications.

- 29 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

RESULTS OF OPERATIONS

Six months ended June 30, ~~2015~~2016 versus the six

months ended June 30, ~~2014~~2015

OverviewFor the first six months of ~~2015,~~2016 net income was $18.1 million, or $0.41 per diluted share compared with $16.8 million, or $0.38 per diluted share ~~compared with $19.3~~in the first six months of 2015. Adjusted earnings, a non-GAAP measure, were $19.1 million, or ~~$0.44~~$0.43 per diluted share infor the first six months of 2016 compared with $15.2 million, or $0.35 per diluted share, for the same period ~~of 2014. On an adjusted earnings basis,~~ a non-GAAP measure that excludes non-core business items discussed below, earnings per share were $0.35 compared with $0.41 in 2014. The year-over-year comparison of results of operations reflects the adverse impact of i) the stronger U.S. dollar on our euro-denominated businesses; ii) weaker demand and pricing for nonwoven wall cover products primarily due to economic conditions in Russia and Ukraine; and iii) weaker demand for certainyear ago. Our Advanced Airlaid ~~Materials’ products. These unfavorable factors were~~Materials and Specialty Papers businesses reported significantly higher operating income in the comparison driven by higher demand, improved operations within Advanced Airlaid Materials, and, with respect to Specialty Papers, less costly annual maintenance outages and lower input costs. The improved performance of these two businesses was partially offset by lower operating income in the ~~improved performance of Specialty Papers.~~

Composite Fibers business, which was impacted by lower average selling prices. The following table sets forth summarized results of operations:


	Six months ended June 30				Six months ended June 30
In thousands, except per share	2015		2014		2016		2015
Net sales	$	828,272	$	901,062	$	808,631	$	828,272
Gross profit		84,941		96,477		100,566		84,941
Operating income		27,297		32,903		31,491		27,297
Net income		16,773		19,317		18,133		16,773
Earnings per diluted share		0.38		0.44		0.41		0.38

In addition to the results reported in accordance with GAAP, we evaluate our performance using adjusted net income and adjusted earnings per diluted share. We disclose this information to allow investors to evaluate our performance exclusive of certain items that impact the comparability of results from period to period and we believe it is helpful in understanding underlying operating trends and cash flow generation.

Adjusted net income consists of net income determined in accordance with GAAP adjusted to exclude the impact of the following:

Specialty Papers environmental compliance.These adjustments reflect non-capitalized costs incurred by the business unit directly related to the compliance with the U.S. EPA Best Available Retrofit Technology rule (BART; otherwise known as the Regional Haze Rule) and the Boiler Maximum Achievable Control Technology rule (Boiler MACT).

Airlaid capacity expansion costs.These adjustments reflect non-capitalized costs incurred directly related to the start-up of a new production facility for Advanced Airlaid Materials.

Timberland sales and related costs. These adjustments exclude gains from the sales of timberlands as these items are not considered to be part of our core business, ongoing results of operations or cash flows. These adjustments are irregular in timing and amount and may significantly impact our operating performance. As such, these items may not be indicative of past orand future performance of the Company and therefore are excluded for comparability purposes.

Workforce efficiency charges. ~~These adjustments include~~This includes costs that are directly related to actions undertaken to reduce costs and improve operating efficiencies. Such costs were specifically incurred as part of our initiative to reduce global headcount as part of a more broad based cost reduction effort initiated in the fourth quarter of 2014.

Acquisition and integration related costs. These adjustments include costs directly related to the consummation of the acquisition process and those related to integrating recently acquired businesses. These costs are irregular in timing and as such may not be indicative of our past orand future performance.

~~Adjusted earnings per diluted share is calculated by dividing adjusted net income by diluted weighted-average shares outstanding.~~ Adjusted earnings and adjusted earnings per diluted share are considered measures not calculated in accordance with GAAP, and therefore are non-GAAP measures. ~~These non-GAAP measures may differ from other companies.~~ The non-GAAP financial information should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with GAAP. The following table sets ~~forth~~for the reconciliation of net income to adjusted earnings for the six months ended June 30, ~~2015~~2016 and ~~2014:~~2015:


							2016					2015
In thousands, except per share	After-tax amounts			Diluted EPS			Amount			Diluted EPS		Amount			Diluted EPS
2015
Net income	$	16,773		$	0.38		$	18,133		$	0.41	$	16,773		$	0.38
Timberland sales and related costs⁽¹⁾		(3,078	)		(0.07	)
Adjustments(pre-tax)
Specialty Papers’ environmental compliance								1,125					—
Airlaid capacity expansion costs								257					—
Timberland sales and related costs								—					(2,705	)
Workforce efficiency charges		1,410			0.03			88					1,953
Acquisition and integration related costs		113			—			—					160

Adjusted earnings (non-GAAP)	$	15,218		$	0.35
Total adjustments(pre-tax)								1,470					(592	)
Income taxes⁽¹⁾⁽²⁾								(543	)				(963	)

2014
Net income	$	19,317		$	0.44
Timberland sales and related costs		(1,379	)		(0.03	)
Total after-tax adjustments								927			0.02		(1,555	)		(0.04	)

Adjusted earnings (non-GAAP)	$	17,938		$	0.41
Adjusted earnings							$	19,060		$	0.43	$	15,218		$	0.35

(1)	Tax effect for adjustments calculated based on the tax rate of the jurisdiction in which each adjustment originated.

(2)	Includes release of $1.4 million of tax ~~reserves.~~reserves on timberland sales in 2015.

The sum of individual per share amounts set forth above may not agree to adjusted earnings per share due to rounding.

- 30 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Business Unit Performance


Six months ended June 30 Dollars in millions	Composite Fibers				Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
Six months ended June 30																											Composite Fibers				Advanced Airlaid Materials				Specialty Papers					Other and Unallocated						Total
Dollars in millions																															Advanced Airlaid Materials				Specialty Papers					Other and Unallocated						Total
	2015		2014		2015		2014		2015			2014			2015			2014			2015			2014			Composite Fibers		2016		2015		2016		2015		2016			2015			2016			2015			2016			2015
Net sales	$	275.7	$	315.6	$	119.8	$	141.8	$	432.8		$	443.7		$	—		$	—		$	828.3		$	901.1		$	259.9	$	275.7	$	121.5	$	119.8	$	427.2	$	432.8		$	—		$	—		$	808.6		$	828.3
Energy and related sales, net		—		—		—		—		2.8			6.1			—			—			2.8			6.1			—		—		—		—		2.7		2.8			—			—			2.7			2.8

Total revenue		275.7		315.6		119.8		141.8		435.6			449.8			—			—			831.1			907.1			259.9		275.7		121.5		119.8		429.9		435.6			—			—			811.3			831.1
Cost of products sold		221.5		252.9		107.3		125.1		412.3			429.1			5.0			3.5			746.1			810.6			210.3		221.5		104.1		107.3		394.0		412.3			2.3			5.0			710.7			746.1

Gross profit (loss)		54.2		62.7		12.5		16.7		23.3			20.7			(5.0	)		(3.5	)		84.9			96.5			49.6		54.2		17.4		12.5		35.9		23.3			(2.3	)		(5.0	)		100.6			84.9
SG&A		22.9		26.1		4.0		4.7		23.9			25.5			9.5			9.6			60.4			65.9			23.2		22.9		4.2		4.0		26.6		23.9			15.0			9.5			69.0			60.4
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—			—			(2.8	)		(2.3	)		(2.8	)		(2.3	)		—		—		—		—		—		—			—			(2.8	)		—			(2.8	)

Total operating income (loss)		31.3		36.6		8.5		12.0		(0.6	)		(4.8	)		(11.7	)		(10.8	)		27.3			32.9			26.4		31.3		13.2		8.5		9.3		(0.6	)		(17.3	)		(11.7	)		31.5			27.3
Non-operating expense		—		—		—		—		—			—			(8.7	)		(9.2	)		(8.7	)		(9.2	)		—		—		—		—		—		—			(8.3	)		(8.7	)		(8.3	)		(8.7	)

Income (loss) before income taxes	$	31.3	$	36.6	$	8.5	$	12.0	$	(0.6	)	$	(4.8	)	$	(20.4	)	$	(20.0	)	$	18.6		$	23.7		$	26.4	$	31.3	$	13.2	$	8.5	$	9.3	$	(0.6	)	$	(25.6	)	$	(20.4	)	$	23.2		$	18.6

Supplementary Data
Net tons sold(thousands)		77.3		79.4		46.7		49.7		390.0			392.9			—			—			514.0			522.1			77.6		77.3		48.9		46.7		400.5		390.0			—			—			527.0			514.0
Depreciation, depletion and amortization	$	13.4	$	15.3	$	4.3	$	4.6	$	12.9		$	16.1		$	1.0		$	0.9		$	31.6		$	36.9		$	14.3	$	13.4	$	4.7	$	4.3	$	13.2	$	12.9		$	1.2		$	1.0		$	33.4		$	31.6
Capital expenditures		11.5		11.4		2.8		2.9		28.8			14.8			1.5			1.1			44.6			30.2			8.6		11.5		20.7		2.8		50.8		28.8			0.3			1.5			80.4			44.6

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.

- 31 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Sales and Costs of Products Sold


	Six months ended June 30									Six months ended June 30
In thousands	2015			2014			Change			2016			2015			Change
Net sales	$	828,272		$	901,062		$	(72,790	)	$	808,631		$	828,272		$	(19,641	)
Energy and related sales, net		2,783			6,052			(3,269	)		2,667			2,783			(116	)

Total revenues		831,055			907,114			(76,059	)		811,298			831,055			(19,757	)
Costs of products sold		746,114			810,637			(64,523	)		710,732			746,114			(35,382	)

Gross profit	$	84,941		$	96,477		$	(11,536	)	$	100,566		$	84,941		$	15,625

Gross profit as a percent of Net sales		10.3	%		10.7	%					12.4	%		10.3	%

The following table sets forth the contribution to consolidated net sales by each business unit:


	Six months ended June 30						Six months ended June 30
Percent of Total	2015			2014			2016			2015
Business Unit
Composite Fibers		33.3	%		35.0	%		32.1	%		33.3	%
Advanced Airlaid Material		14.5			15.7			15.0			14.5
Specialty Papers		52.2			49.3			52.9			52.2

Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled $808.6 million and $828.3 million in the first ~~six months~~half of 2016 and 2015, ~~compared with $901.1~~respectively. The $19.7 million ~~in the first six months~~decline was primarily driven by $18.1 million of ~~2014. Currency translation adjustments unfavorably impacted the year-over-year comparison by $56.9~~lower selling prices and $4.5 million ~~reflecting a significantly stronger U.S. dollar.~~of currency translation. Shipping volumes increased 2.5%.

Composite Fibers’ net sales declined ~~$39.9~~$15.8 million, or ~~12.6%~~5.7%, primarily due to ~~$42.8~~$4.7 million of lower selling prices and $4.5 million of unfavorable currency translation together with lower shipping volumes and $4.5 million from lower selling prices, partially offset by the inclusion of Spezialpapierfabrik Oberschmitten GmbH (SPO), which was acquired in the fourth quarter of 2014. Shipping volumes declined 2.6% primarily due to a 20.5% decline in shipments of nonwoven wall cover, which is directly impacted by the economic conditions in Russia and Ukraine, partially offset by higher shipments of technical specialties and food and beverage segments.translation.

Composite Fibers’ operating income for the first half of ~~2015~~2016 decreased ~~$5.3~~$4.9 million to ~~$31.3~~$26.4 million compared to the year-ago period. The ~~decline~~primary drivers are summarized in operating income was primarily related to lower selling prices and $6.4 million of unfavorable currency translation. These factors were partially offset by a $3.5 million benefit from lower raw material and energy prices.the following chart:

~~On a year-over-year basis,~~

LOGO

Advanced Airlaid Materials’ net sales ~~decreased $22.0~~increased $1.7 million ~~largely~~in the year-over-year comparison as $5.6 million of lower selling prices from the contractual pass through of lower raw material costs more than offset higher shipping volumes. Shipping volumes increased 4.7% primarily due to ~~$14.2 million~~higher shipments of ~~unfavorable foreign currency translation and a~~hygiene products.

~~6.0% decline in shipping volumes. These factors were partially offset by $1.6 million of higher selling prices.~~

Advanced Airlaid Materials’ operating income ~~for the first six months~~totaled $13.2 million, an increase of ~~2015 declined $3.5~~$4.7 million, or 55.3% compared to the same period a ~~year-ago as~~year ago. The primary drivers are summarized in the ~~combined impact of soft market demand and related production downtime and $2.7 million from the adverse impact of foreign currency translation more than offset the benefit of higher selling prices.~~following chart:

~~On a year-over-year basis,~~

LOGO

Specialty Papers’ net sales ~~declined $10.9~~decreased $5.6 million, or ~~2.5%~~1.3% due to a $7.9 million impact from lower ~~shipping volumes and mix changes. Lower average~~ selling prices ~~impacted~~partially offset by a 2.7% increase in shipping volumes. The business unit again outperformed the ~~comparison by $0.7 million.~~broader uncoated free sheet market which increased 0.1%.

~~This business unit’s operating loss~~Operating income totaled ~~$0.6~~$9.3 million, ~~for~~an increase of $9.9 million compared to the first six months of ~~2015 compared to a loss of $4.8~~2015. The primary drivers are summarized in the following chart:

LOGO

The $5.7 million ~~a year ago, a $4.2~~improvement in “Operations & Other” in the chart above includes the $7.1 million ~~improvement. Operating results for both periods are impacted by the cost of annual maintenance outages at the unit’s two facilities. Due to an expanded scope of work, the~~lower cost of the outages was $33.4 million in 2015 compared with $28.2 million in 2014. Excluding the cost of the outages from the comparison, operating results improved by $9.4 million primarily due to lower raw material and energy costs and operating performance partially offset by $3.3 million of lower energy and related sales. Energy and related sales decreased in the comparison as severe weather conditions in 2014 resulted in higher selling prices for excess power and a boiler outage in the first quarter of 2015 reduced power sales.annual maintenance outages.

- 32 -

GLATFELTER

6.30.16 Form 10-Q

We sell excess power generated by the Spring Grove, PA facility. The following table summarizes this activity for the first six months of ~~2015~~2016 and ~~2014:~~2015:


	Six months ended June 30									Six months ended June 30
In thousands	2015			2014			Change			2016			2015			Change
Energy sales	$	3,328		$	9,202		$	(5,874	)	$	1,818		$	3,328		$	(1,510	)
Costs to produce		(2,256	)		(4,021	)		1,765			(2,042	)		(2,256	)		214

Net		1,072			5,181			(4,109	)		(224	)		1,072			(1,296	)
Renewable energy credits		1,711			871			840			2,891			1,711			1,180

Total	$	2,783		$	6,052		$	(3,269	)	$	2,667		$	2,783		$	(116	)

Renewable energy credits (“RECs”) represent sales of certified credits earned related to burning renewable sources of energy such as black liquor and wood waste. We sell RECs into an illiquid market. The extent and value of future revenues from REC sales is dependent on many factors outside of management’s control. Therefore, we may not be able to generate consistent additional sales of RECs in future periods.

Other and Unallocated The amount of net operating expenses not allocated to a business unit and reported as

~~- 32 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

~~“Other~~ “Other and Unallocated” in our table of Business Unit Performance, totaled $17.3 million in the first six months of 2016 compared with $11.7 million in the first six months of ~~2015 compared with $10.8~~2015. Excluding $2.8 million of gains in ~~the first six months of 2014. Excluding the gains~~2015 from sales of timberlands in the comparison, unallocated net operating expenses increased ~~$1.4~~$2.8 million primarily due ~~severance charges related~~ to ~~our workforce efficiency initiative.~~higher incentive compensation and professional services partially offset by lower pension expense.

Pension Expense The following table summarizes the amounts of pension expense recognized for the periods indicated:


	Six months ended June 30						Six months ended June 30
In thousands	2015		2014		Change		2016		2015		Change
Recorded as:
Recorded as:
Costs of products sold	$	3,495	$	3,306	$	189	$	1,178	$	3,495	$	(2,317	)
SG&A expense		916		53		863		1,577		916		661

Total	$	4,411	$	3,359	$	1,052	$	2,755	$	4,411	$	(1,656	)

The amount of pension expense recognized each year is dependent on various actuarial assumptions and certain other factors, including discount rates and the fair value of our pension assets. Pension expense for the full year of ~~2015~~2016 is expected to be approximately ~~$9.1~~$5.5 million compared with ~~$6.7~~$9.1 million in ~~2014.~~2015. The ~~increase~~decrease reflects the ~~higher amortization~~impact of ~~deferred actuarial losses related to lower~~higher discount rates ~~and mortality assumptions.~~partially offset by a lower assumed long term rate of return on plan assets.

Income taxes For the first six months of ~~2015,~~2016, we recorded a provision for income taxes of ~~$1.8~~$5.1 million on pretax income of $23.2 million. The comparable amounts in the period of 2015 were $1.8 million and $18.6 ~~million. During~~million, respectively. The effective tax rate in 2015 ~~we released reserves for uncertain tax positions totaling~~includes the impact of a $2.6 million release of income tax reserves in connection with the completion of certain federal and state tax examinations. For the first six months of 2014, we recorded a provision for income taxes of $4.4 million on pretax income of $23.7 million. The effective tax rate in the first half of 2014 includes a $2.2 million tax benefit related to the revaluation of deferred taxes.

Foreign CurrencyWe own and operate facilities in Canada, Germany, France, the United Kingdom and the Philippines. The functional currency of our Canadian operations is the U.S. dollar. However, in Germany and France it is the Euro, in the UK, it is the British Pound Sterling, and in the Philippines the functional currency is the Peso. On an annual basis, our euro denominated revenue exceeds euro expenses by approximately €120 million. For the six months ended June 30, 2016, the average currency exchange rate increased slightly to 1.12 U.S. dollars to 1.00 euro compared with 1.11 to 1.00 for the first six months of 2015. With respect to the British Pound Sterling, Canadian dollar, and Philippine Peso, we have ~~greater~~differing amounts of inflows and outflows ~~than inflows~~ of these currencies, although to a lesser ~~degree.~~degree than the euro. As a result, ~~particularly with respect to the euro,~~ we are exposed to changes in currency exchange rates and such changes could be significant. The translation of the results from international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

The table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the first six months of ~~2015.~~2016.


~~In thousands~~	~~Six months ended~~ ~~June 30, 2015~~
	~~Favorable~~ ~~(unfavorable)~~
~~Net sales~~		~~$(56,931~~	)
~~Costs of products sold~~		~~42,922~~
~~SG&A expenses~~		~~4,935~~
~~Income taxes and other~~		~~1,772~~

~~Net income~~		~~$ (7,302~~	)


In thousands	Six months ended June 30, 2016
	Favorable (unfavorable)
Net sales	$	(4,518	)
Costs of products sold		3,211
SG&A expenses		375
Income taxes and other		37

Net income	$	(895	)

The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in ~~2015~~2016 were the same as ~~2014.~~2015. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

- 33 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Three months ended June 30, ~~2015~~2016 versus the three

months ended June 30, ~~2014~~2015

OverviewFor the second-quarter of 2016, net income totaled $2.0 million, or $0.04 per diluted share compared with $2.8 million, or $0.06 per diluted share in the second quarter of ~~2015, net income was~~2015. Adjusted earnings for the second quarter of 2016 were $2.8 million, or $0.06 per diluted share compared with ~~$4.7~~$1.8 million, or ~~$0.11~~$0.04 per diluted share, infor the ~~second quarter of 2014.~~same period a year ago.

The following table sets forth summarized results of operations:


	Three months ended June 30				Three months ended June 30
In thousands, except per share	2015		2014		2016		2015
Net sales	$	410,803	$	445,341	$	406,413	$	410,803
Gross profit		32,833		41,437		42,723		32,833
Operating income		3,807		10,605		5,530		3,807
Net income		2,848		4,669		1,965		2,848
Earnings per diluted share		0.06		0.11		0.04		0.06

~~Adjusted earnings, a non-GAAP financial measure, is set forth in the~~The following table sets for the ~~second quarters~~reconciliation of ~~2015~~net income to adjusted earnings for the three months ended June 30, 2016 and ~~2014:~~2015:


							2016					2015
In thousands, except per share	After-tax amounts			Diluted EPS			Amount			Diluted EPS		Amount			Diluted EPS
2015
Net income	$	2,848		$	0.06		$	1,965		$	0.04	$	2,848		$	0.06
Timberland sales and related costs⁽¹⁾		(1,461	)		(0.03	)
Adjustments(pre-tax)
Specialty Papers’ environmental compliance								1,088					—
Airlaid capacity expansion costs								201					—
Timberland sales and related costs								—					(51	)
Workforce efficiency charges		457			0.01			—					614

Adjusted earnings (non-GAAP)	$	1,844		$	0.04
Total adjustments(pre-tax)								1,289					563
Income taxes⁽¹⁾⁽²⁾								(487	)				(1,567	)

2014
Net income	$	4,669		$	0.11
Timberland sales and related costs		(872	)		(0.02	)
Total after-tax adjustments								802			0.02		(1,004	)		(0.02	)

Adjusted earnings (non-GAAP)	$	3,797		$	0.09
Adjusted earnings							$	2,767		$	0.06	$	1,844		$	0.04

(1)	Tax effect for adjustments calculated based on the tax rate of the jurisdiction in which each adjustment originated.

(2)	Includes release of $1.4 million of tax ~~reserves.~~reserves on timberland sales in 2015.

Business Unit Performance


Three months ended June 30 Dollars in millions	Composite Fibers				Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
Three months ended June 30																											Composite Fibers				Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
Dollars in millions																															Advanced Airlaid Materials				Specialty Papers						Other and Unallocated						Total
	2015		2014		2015		2014		2015			2014			2015			2014			2015			2014			Composite Fibers		2016		2015		2016		2015			2016			2015			2016			2015			2016			2015
Net sales	$	140.4	$	157.0	$	57.5	$	70.5	$	212.9		$	217.9		$	—		$	—		$	410.8		$	445.3		$	136.4	$	140.4	$	60.8	$	57.5	$	209.3		$	212.9		$	—		$	—		$	406.4		$	410.8
Energy and related sales, net		—		—		—		—		0.7			0.8			—			—			0.7			0.8			—		—		—		—		2.0			0.7			—			—			2.0			0.7

Total revenue		140.4		157.0		57.5		70.5		213.6			218.7			—			—			411.5			446.1			136.4		140.4		60.8		57.5		211.3			213.6			—			—			408.4			411.5
Cost of products sold		112.4		126.9		52.3		62.0		211.9			214.1			2.1			1.7			378.7			404.7			109.0		112.4		51.8		52.3		202.9			211.9			2.0			2.1			365.7			378.7

Gross profit (loss)		28.0		30.1		5.2		8.5		1.7			4.6			(2.1	)		(1.7	)		32.8			41.4			27.4		28.0		9.0		5.2		8.4			1.7			(2.0	)		(2.1	)		42.7			32.8
SG&A		11.3		12.8		2.1		2.3		11.7			11.8			4.0			5.4			29.1			32.3			12.1		11.3		2.2		2.1		14.2			11.7			8.7			4.0			37.2			29.1
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—			—			(0.1	)		(1.5	)		(0.1	)		(1.5	)		—		—		—		—		—			—			—			(0.1	)		—			(0.1	)

Total operating income (loss)		16.7		17.3		3.1		6.2		(10.0	)		(7.2	)		(6.0	)		(5.6	)		3.8			10.6			15.3		16.7		6.8		3.1		(5.8	)		(10.0	)		(10.7	)		(6.0	)		5.5			3.8
Non-operating expense		—		—		—		—		—			—			(4.1	)		(4.6	)		(4.1	)		(4.6	)		—		—		—		—		—			—			(3.6	)		(4.1	)		(3.6	)		(4.1	)

Income (loss) before income taxes	$	16.7	$	17.3	$	3.1	$	6.2	$	(10.0	)	$	(7.2	)	$	(10.1	)	$	(10.2	)	$	(0.3	)	$	6.0		$	15.3	$	16.7	$	6.8	$	3.1	$	(5.8	)	$	(10.0	)	$	(14.3	)	$	(10.1	)	$	2.0		$	(0.3	)

Supplementary Data
Net tons sold(thousands)		39.4		39.4		22.6		24.6		191.3			190.7			—			—			253.3			254.8			40.7		39.4		24.4		22.6		194.7			191.3			—			—			259.7			253.3
Depreciation, depletion and amortization	$	6.7	$	7.6	$	2.1	$	2.3	$	6.3		$	7.9		$	0.5		$	0.5		$	15.6		$	18.3		$	7.2	$	6.7	$	2.4	$	2.1	$	6.5		$	6.3		$	0.7		$	0.5		$	16.8		$	15.6
Capital expenditures		5.6		5.4		1.5		1.4		15.6			8.6			0.1			0.3			22.8			15.7			2.3		5.6		6.1		1.5		28.7			15.6			—			0.1			37.1			22.8

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.

- 34 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

Sales and Costs of Products Sold


	Three months ended June 30									Three months ended June 30
In thousands	2015			2014			Change			2016			2015			Change
Net sales	$	410,803		$	445,341		$	(34,538	)	$	406,413		$	410,803		$	(4,390	)
Energy and related sales, net		715			790			(75	)		2,001			715			1,286

Total revenues		411,518			446,131			(34,613	)		408,414			411,518			(3,104	)
Costs of products sold		378,685			404,694			(26,009	)		365,691			378,685			(12,994	)

Gross profit	$	32,833		$	41,437		$	(8,604	)	$	42,723		$	32,833		$	9,890

Gross profit as a percent of Net sales		8.0	%		9.3	%					10.5	%		8.0	%

The following table sets forth the contribution to consolidated net sales by each business unit:


	Three months ended June 30						Three months ended June 30
Percent of Total	2015			2014			2016			2015
Business Unit
Composite Fibers		34.2	%		35.3	%		33.6	%		34.2	%
Advanced Airlaid Material		14.0			15.8			15.0			14.0
Specialty Papers		51.8			48.9			51.4			51.8

Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled $406.4 million and $410.8 million in the second ~~quarter~~quarters of 2016 and 2015, ~~compared~~respectively, with ~~$445.3 million in~~ the ~~second quarter of 2014. The~~decline primarily reflecting lower average selling prices. Currency translation ~~of non-U.S. dollar sales unfavorably~~adjustments favorably impacted the year-over-year comparison by ~~$29.3~~$0.7 million ~~reflecting the effect of a weaker Euro on the Composite Fibers and Advanced Airlaid Materials business units.~~

Composite Fibers’ net sales declined ~~$16.6~~$4.0 million, or ~~10.6%~~2.9%, primarily due to ~~$22.4 million of unfavorable currency translation and $1.7~~$1.6 million from lower selling prices. ~~These unfavorable factors were partially offset by mix changes and the inclusion of SPO, which was acquired in the fourth quarter of 2014.~~ Shipping volumes were ~~essentially flat as record shipments~~higher in ~~Food & Beverage offset a 19% decline in nonwoven wall cover.~~the comparison primarily due to improved demand for wallcover.

Composite Fibers’ second-quarter ~~2015~~2016 operating income ~~totaled $16.7~~decreased $1.4 million ~~a $0.6~~to $15.3 million ~~decline~~ compared to the year-ago ~~period as~~period. The primary drivers are summarized in the ~~lower selling prices and $1.9 million of unfavorable currency translation were partially offset by improved operations.~~following chart:

LOGO

Advanced Airlaid Materials’ net sales ~~decreased $13.0~~increased $3.3 million ~~largely~~in the year-over-year comparison as shipping volumes increased 7.8% primarily due to ~~$6.9 million of unfavorable currency translation and an 8.3% decline in shipping volumes.~~higher shipments

of hygiene products. Lower selling prices impacted the comparison by $1.8 million.

Advanced Airlaid Materials’ operating income ~~declined $3.1~~totaled $6.8 million, ~~in the second quarter compared to~~more than double the same quarter a ~~year-ago as lower shipments and~~year ago. The primary drivers are summarized in the ~~related market downtime negatively impacted results by $3.4 million.~~following chart:

~~In the~~

LOGO

Specialty ~~Papers business unit,~~Papers’ net sales decreased ~~$4.9~~$3.7 million, or ~~2.3%~~1.7%, due to a $3.7 million impact from lower ~~average~~ selling ~~prices totaling $2.6 million and mix changes.~~prices.

Specialty Papers’ operating loss ~~increased $2.7~~narrowed by $4.2 million in the year-over-year comparison and totaled ~~$10.0~~$5.8 million in the second quarter of ~~2015.~~ 2016. The primary drivers are summarized in the following chart:

LOGO

Operating results for both quarters ~~are impacted by~~reflect the cost of annual maintenance outages at the Company’s Chillicothe, OH and Spring Grove, PA facilities. ~~Due to an expanded scope of work,~~The outages adversely impacted second-quarter 2016 results by $26.3 million, which was $7.1 million less than the cost of the outages ~~was $33.4~~in 2015. The $0.9 million improvement in “Operations & Other” in the ~~second quarter of 2015 compared with $28.2 million in 2014. Excluding~~chart above includes the lower cost of the annual maintenance outages ~~from the comparison, operating results increased $2.5 million primarily due to lower raw material and energy costs partially~~which was offset by lower ~~average selling prices.~~pulp production and an increase in incentive compensation and other costs.

- 35 -

GLATFELTER

6.30.16 Form 10-Q

We sell excess power generated by the Spring Grove, PA facility. The following table summarizes this activity for the second quarters of ~~2015~~2016 and ~~2014:~~2015:


	Three months ended June 30									Three months ended June 30
In thousands	2015			2014			Change			2016			2015			Change
Energy sales	$	1,163		$	1,880		$	(717	)	$	836		$	1,163		$	(327	)
Costs to produce		(1,211	)		(1,428	)		217			(934	)		(1,211	)		277

Net		(48	)		452			(500	)		(98	)		(48	)		(50	)
Renewable energy credits		763			338			425			2,099			763			1,336

Total	$	715		$	790		$	(75	)	$	2,001		$	715		$	1,286

~~- 35 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

Other and Unallocated The amount of net operating expenses not allocated to a business unit and reported as “Other and Unallocated” in our table ofBusiness Unit Performance, totaled $10.7 million in the second quarter of 2016 compared with $6.0 million in the second quarter of ~~2015 compared with $5.6 million in the second quarter of 2014. Excluding the impact of sales of timberlands in the comparison, unallocated net operating expenses decreased $1.0 million~~2015. The increase was primarily due ~~lower corporate spending.~~to higher incentive compensation and professional service fees.

Pension Expense The following table summarizes the amounts of pension expense recognized for the periods indicated:


	Three months ended June 30							Three months ended June 30
In thousands	2015		2014		Change			2016		2015		Change
Recorded as:
Costs of products sold	$	1,468	$	1,687	$	(219	)	$	742	$	1,468	$	(726	)
SG&A expense		135		130		5			854		135		719

Total	$	1,603	$	1,817	$	(214	)	$	1,596	$	1,603	$	(7	)

Income taxes For the second quarter of ~~2015,~~2016, we recorded zero tax on a pretax income of $2.0 million due to the jurisdiction in which taxable earnings and discrete items were generated. The comparable amounts in the second quarter of 2015 were an income tax benefit of $3.1 million on a pretax loss of $0.3 ~~million~~million. The tax benefit was primarily due to the release ofincome tax reserves ~~for uncertain tax positions totaling $2.6 million~~ in connection with the completion of certain federal and state tax ~~audits.~~examinations.

Foreign CurrencyThe table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the second quarter of ~~2015 compared to the second quarter of 2014:~~2016.


~~In thousands~~	~~Three months ended~~ ~~June 30, 2015~~
	~~Favorable~~ ~~(unfavorable)~~
~~Net sales~~		~~$(29,316~~	)
~~Costs of products sold~~		~~22,210~~
~~SG&A expenses~~		~~2,529~~
~~Income taxes and other~~		~~198~~

~~Net income~~		~~$ (4,379~~	)


In thousands	Three months ended June 30, 2016
	Favorable (unfavorable)
Net sales	$	709
Costs of products sold		(1,354	)
SG&A expenses		(22	)
Income taxes and other		(9	)

Net income	$	(676	)

LIQUIDITY AND CAPITAL RESOURCES

Our business is capital intensive and requires significant expenditures for new or enhanced equipment, to support our research and development efforts, for environmental compliance matters including, but not limited to, the Clean Air Act, and to support our business strategy. In addition, we have mandatory debt service requirements of both principal and interest. The following table summarizes cash flow information for each of the periods presented:


	June 30						Six months ended June 30
In thousands	2015			2014			2016			2015
Cash and cash equivalents at beginning of period	$	99,837		$	122,882		$	105,304		$	99,837
Cash provided (used) by
Operating activities		25,513			(21,366	)		36,640			25,513
Investing activities		(43,124	)		(27,896	)		(80,638	)		(43,124	)
Financing activities		(14,813	)		(45,563	)		(3,126	)		(14,813	)
Effect of exchange rate changes on cash		(1,651	)		(41	)		352			(1,651	)

Net cash used		(34,075	)		(94,866	)		(46,772	)		(34,075	)

Cash and cash equivalents at end of period	$	65,762		$	28,016		$	58,532		$	65,762

At June 30, ~~2015,~~2016, we had ~~$65.8~~$58.5 million in cash and cash equivalents held by both domestic and foreign subsidiaries. ~~Although unremitted~~Unremitted earnings of our foreign subsidiaries are deemed to be ~~permanently reinvested, substantially all~~indefinitely reinvested; however, as of June 30, 2016, the majority of our cash and cash equivalents

- 36 -

GLATFELTER

6.30.16 Form 10-Q

is either held by domestic entities or is available for use domestically. In addition to our cash and cash equivalents, ~~$205.8~~$258.4 million is available under our revolving credit agreement, which matures in March 2020.

Cash provided by operating activities totaled ~~$25.5~~$36.6 million in the first six months of ~~2015~~2016 compared with ~~a use of $21.4~~$25.5 million in the same period a year ago. The increase in cash from operations primarily reflects a decrease in cash used for working ~~capital primarily related to lower inventory and improved payment terms with suppliers together with lower income tax payments.~~capital.

Net cash used by investing activities increased by ~~$15.2~~$37.5 million in the year-over-year comparison primarily due to capital expenditures ~~largely related to~~for Specialty Papers’ environmental ~~compliance.~~compliance and Advanced Airlaid Materials’ capacity expansion projects which totaled $55.6 million in 2016. Capital expenditures ~~in 2015~~ are expected to betotal between $150 million and $170 million for 2016, including approximately ~~$105~~$45 million to ~~$115 million including approximately $35~~$50 million for Specialty Papers’ environmental compliance ~~projects.~~projects and approximately $40 million to $45 million for the Airlaid capacity expansion.

Net cash used by financing activities totaled ~~$14.8~~$3.1 million in the first six months of ~~2015~~2016 compared with ~~$45.6~~$14.8 million in the same period of ~~2014. In 2014, we used $25.4~~2015. The net decline in use of cash for financing activities primarily reflects lower revolver borrowings, offset by additional term loan borrowings and receipt of $4.4 million of ~~cash~~government grants primarily related to ~~reduce amounts outstanding on~~ our ~~revolving credit facility compared with no changes in the first six months of 2015.~~

Airlaid capacity expansion and Specialty Papers’ compliance projects.

~~- 36 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

~~At June 30, 2015, our net debt (defined as total debt less cash) totaled $324.9 million compared to $304.8 million at the end of 2014.~~ The following table sets forth our outstanding long-term indebtedness:


	June 30			December 31			June 30			December 31
In thousands	2015			2014			2016			2015
Revolving credit facility, due Mar. 2020	$	83,287		$	—		$	48,851		$	58,792
Revolving credit facility, due Nov. 2016		—			90,555
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		11,179			12,155			9,516			10,109
2.05% Term Loan, due Mar. 2023		46,245			51,902			40,000			42,130
1.30% Term Loan, due Jun. 2023								11,102			—
1.55% Term Loan, due Sep. 2025								10,884			2,839

Total long-term debt		390,711			404,612			370,353			363,870
Less current portion		(7,564	)		(5,734	)		(9,098	)		(7,366	)
Unamortized deferred issuance costs								(2,889	)		(3,208	)

Long-term debt, net of current portion	$	383,147		$	398,878		$	358,366		$	353,296

Our revolving credit facility contains a number of customary compliance covenants, the most restrictive of which is a maximum leverage ratio of 3.5x. As of June 30, ~~2015,~~2016, the leverage ratio, as calculated in accordance with the definition in our credit agreement, was ~~2.1x,~~1.9x, within the limits set forth in our

credit agreement. Based on our expectations of future results of operations and capital needs, we do not believe the debt covenants will impact our operations or limit our ability to undertake financings that may be necessary to meet our capital needs.

The 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the credit agreement at maturity, or a default under the credit agreement that accelerates the debt outstanding thereunder. As of June 30, ~~2015,~~2016, we met all of the requirements of our debt covenants. The significant terms of the debt instruments are more fully discussed in Item 1—1 - Financial Statements – Note ~~11.~~9.

~~Cash used for financing~~Financing activities includes cash used for common stock dividends ~~and, with respect to~~which increased in the ~~the first six months of 2014, stock repurchases. In February 2015, our Board of Directors authorized~~comparison reflecting a 9%4% increase in our quarterly cash dividend. In the first six months of ~~2015,~~2016, we used ~~$10.0~~$10.7 million of cash for dividends on our common stock compared with ~~$9.2~~$10.0 million in the same period of ~~2014. The~~2015. Our Board of Directors determines what, if any, dividends will be paid to our shareholders. Dividend payment decisions are based upon then-existing factors and conditions and, therefore, historical trends of dividend payments are not necessarily indicative of future payments.

On May 1, 2014, we announced that our Board of Directors approved a $25 million increase to our share repurchase program and extended the expiration date to May 1, 2016. Under the revised program, we may repurchase up to $50 million of our outstanding common stock of which $33.4 million remains available as of June 30, 2015. No repurchases were made in the first six months of 2015 and repurchases used $9.2 million of cash in the first half of 2014.

We are subject to various federal, state and local laws and regulations intended to protect the environment as well as human health and safety. At various times, we have incurred significant costs to comply with these regulations and we could incur additional costs as new regulations are developed or regulatory priorities change. We will incur material capital costs to comply with new air quality regulations including the U.S. EPA Best Available Retrofit Technology rule (BART; otherwise known as the Regional Haze Rule) and the Boiler Maximum Achievable Control Technology rule (Boiler MACT). These rules will require process modifications and/or installation of air pollution controls on boilers at two of our facilities. We have begun converting or replacing ~~four~~five coal-fired boilers to natural gas and upgrading site infrastructure to accommodate the new boilers, including connecting to gas pipelines. ~~The~~Net of government grants, the total cost of these projects is estimated at $85 million to $90 million, of which ~~$17.9~~approximately $67.9 million has been ~~spent to date.~~incurred through the end of the second quarter of 2016. The balance of the ~~costs~~related spending will be ~~incurred~~ substantially ~~over the next eighteen months. The amount of capital spending ultimately incurred may differ, and the difference could be material. Enactment of new environmental laws or regulations or changes~~completed in ~~existing laws or regulations could significantly change our estimates.~~2016.

As more fully discussed in Item 1 - Financial Statements – Note 1513 – Commitments, Contingencies and Legal Proceedings ~~during the second half 2015,~~(“Note 13”), we ~~expect to spend approximately $10 million to remediate a portion of~~are involved in the Lower Fox River in Wisconsin (the “Fox River”), an EPA Superfund ~~site.~~site for which we remain potentially liable for contributions to the clean-up activity. During 2015, we used $9.7 million and expect to spend less than $10.0 million in 2016 for remediation activities. It is conceivable we may need to fund amounts in excess of this to fund a

- 37 -

GLATFELTER

6.30.16 Form 10-Q

portion of the on-going costs ~~beyond 2015.~~in 2016 or beyond. Although we are unable to determine with any degree of certainty the amount we may be required to fund for interim remediation work, such amounts could be significant. The ultimate allocation of such costs is the subject of extensive ongoing litigation amongst three potentially responsible parties. See ~~Item 1 – Financial Statements –~~ Note 1513 for a summary of significant environmental matters.

During 2016, we expect our use of cash for capital expenditures, strategic investments and environmental compliance projects will exceed cash generated from operations. We expect to meet all of our ~~near-~~near and ~~longer-term~~long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility ~~or other bank lines of credit~~ and other long-term debt. However, as discussed in ~~Item 1 – Financial Statements –~~ Note ~~15,~~13, an unfavorable outcome of the Fox River matters could have a material adverse impact on our consolidated financial position, liquidity and/or results of operations.

~~- 37 -~~

~~GLATFELTER~~

~~6.30.15 Form 10-Q~~

Off-Balance-Sheet ArrangementsAs of June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, we had not entered into any off-balance-sheet arrangements. Financial derivative instruments, to which we are a party, and guarantees of indebtedness, which solely consist of obligations of subsidiaries, ~~and a partnership,~~ are reflected in the condensed consolidated balance sheets included herein in Item 1 – Financial Statements.

OutlookComposite Fibers’ shipping volumes in the third quarter are expected to be slightly higher ~~in the third quarter~~ than the second ~~quarter of 2015.~~quarter. Selling prices and raw material and energy prices are expected to be in-line with the second quarter.

~~Shipping volumes for~~ Advanced Airlaid ~~Materials in the third quarter of 2015~~Materials’ shipping volumes are expected to ~~be 5% higher than the~~

~~second quarter. Average selling prices are expected to decline~~increase slightly in the third ~~quarter compared to the second quarter~~quarter. Customer selling prices and raw material and energy prices are expected to be ~~in-line.~~in-line with the second quarter.

For Specialty Papers, we expect shipping volumes in the third quarter ~~of 2015~~ to increase by approximately 5% compared with the second ~~quarter reflecting normal seasonal patterns. Overall, we expect selling~~quarter. Selling prices ~~to decline slightly in the third quarter compared to the second quarter due to continued pressure on commodity products. Input costs~~ are expected to be ~~in-line with the second quarter of 2015.~~slightly higher while increases in raw material and energy prices are expected to slightly outpace selling price increases. We also expect maintenance spending to decrease by ~~$31~~approximately $23 million reflecting ~~more~~ normal patterns of maintenance ~~spending.~~expense.

Corporate costs are expected to be approximately $1 million to $2 million less in the third quarter than in the second quarter.

- 38 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

~~ITEM 3.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS


	Year Ended December 31															June 30, 2015				Year Ended December 31															June 30, 2016
Dollars in thousands	2015			2016			2017			2018			2019			Carrying Value		Fair Value		2017			2018			2019			2020			2021			Carrying Value		Fair Value
Long-term debt
Average principal outstanding
At fixed interest rates – Bond	$	250,000		$	250,000		$	250,000		$	250,000		$	250,000		$	250,000	$	257,813	$	250,000		$	250,000		$	250,000		$	250,000		$	250,000		$	250,000	$	255,625
At fixed interest rates – Term Loans		57,424			52,150			44,586			37,022			29,458			57,424		58,832		62,403			52,625			42,166			31,708			21,249			71,502		68,087
At variable interest rates		83,287			83,287			83,287			83,287			83,287			83,287		83,287		48,851			48,851			48,851			48,851			48,851			48,851		48,851

																$	390,711	$	399,932																$	370,353	$	372,563

Weighted-average interest rate
On fixed rate debt – Bond		5.375	%		5.375	%		5.375	%		5.375	%		5.375	%						5.375	%		5.375	%		5.375	%		5.375	%		5.375	%
On fixed rate debt – Term Loans		2.12	%		2.12	%		2.12	%		2.12	%		2.12	%						2.17	%		2.17	%		2.17	%		2.17	%		2.17	%
On variable rate debt		1.25	%		1.25	%		1.25	%		1.25	%		1.25	%						1.25	%		1.25	%		1.25	%		1.25	%		1.25	%

The table above presents the average principal outstanding and related interest rates for the next five years for debt outstanding as of June 30, ~~2015.~~2016. Fair values included herein have been determined based upon rates currently available to us for debt with similar terms and remaining maturities.

Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At June 30, ~~2015,~~2016, we had ~~$390.7~~$370.4 million of long-term debt, of which ~~21.3%~~13.2% was at variable interest rates. Variable-rate debt outstanding represents borrowings under our revolving credit agreement that accrues interest based on LIBOR plus a margin. At June 30, ~~2015,~~2016, the interest rate paid was approximately 1.25%. A hypothetical 100 basis point increase or decrease in the interest rate on variable rate debt would increase or decrease annual interest expense by ~~$0.8~~$0.5 million.

We are subject to certain risks associated with changes in foreign currency exchange rates to the extent our operations are conducted in currencies other than the U.S. Dollar. ~~Our~~On an annual basis, our euro denominated revenue exceeds euro expenses by approximately €120 million. With respect to the British Pound Sterling, Canadian dollar, and Philippine Peso, we have ~~greater~~differing amounts of inflows and outflows ~~than inflows~~ of these currencies, although to a lesser ~~degree.~~degree than the euro. As a result, particularly with respect to the euro, we are exposed to changes in currency exchange rates and such changes could be significant.

ITEM 4. CONTROLS AND PROCEDURES

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

Evaluation of Disclosure Controls and ProceduresOur chief executive officer and our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, ~~2015,~~2016, have concluded that, as of the evaluation date, our disclosure controls and procedures are effective.

Changes in Internal ControlsThere were no changes in our internal control over financial reporting during the three months ended June 30, ~~2015,~~2016, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

PART II

ITEM 6. EXHIBITS

~~ITEM 6.~~

~~EXHIBITS~~

The following exhibits are filed herewith or incorporated by reference as indicated.



31.1		Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2		Certification of John P. Jacunski, Executive Vice President, ~~and~~ Chief Financial Officer and President, Specialty Papers of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.2		Certification of John P. Jacunski, Executive Vice President, ~~and~~ Chief Financial Officer and President, Specialty Papers of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

101.INS		XBRL Instance Document, filed herewith

101.SCH		XBRL Taxonomy Extension Schema, filed herewith

101.CAL		XBRL Extension Calculation Linkbase, filed herewith

101.DEF		XBRL Extension Definition Linkbase, filed herewith

101.LAB		XBRL Extension Label Linkbase, filed herewith

101.PRE		XBRL Extension Presentation Linkbase, filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	P. H. GLATFELTER COMPANY
	(Registrant)

August ~~4, 2015~~2, 2016

	By	/s/ David C. Elder
		David C. Elder
		~~David C. Elder~~
		Vice President, Finance

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GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q

EXHIBIT INDEX


Exhibit Number		Description

31.1		Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 – Chief Executive Officer, filed herewith.

31.2		Certification of John P. Jacunski, Executive Vice President, ~~and~~ Chief Financial Officer and President, Specialty Papers of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer, filed herewith.

32.1		Certification of Dante C. Parrini, Chairman and Chief Executive Officer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer, filed herewith.

32.2		Certification of John P. Jacunski, Executive Vice President, ~~and~~ Chief Financial Officer ofand President, Specialty Papers Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 – Chief Financial Officer, filed herewith.

101.INS		XBRL Instance Document, filed herewith

101.SCH		XBRL Taxonomy Extension Schema, filed herewith

101.CAL		XBRL Extension Calculation Linkbase, filed herewith

101.DEF		XBRL Extension Definition Linkbase, filed herewith

101.LAB		XBRL Extension Label Linkbase, filed herewith

101.PRE		XBRL Extension Presentation Linkbase, filed herewith

- 41 -

GLATFELTER

~~6.30.15~~6.30.16 Form 10-Q


Dollars in thousands	Acres		Proceeds		Gain
2015
Timberlands		1,398	$	2,794	$	2,705
Other		n/a		257		60

Total			$	3,051	$	2,765


2014
Timberlands		935	$	2,355	$	2,290
Other		n/a		5		1

Total			$	2,360	$	2,291

Commission
file number

Exact name of registrant as
specified in its charter

IRS Employer
Identification No.

State or other jurisdiction of
incorporation or organization

P. H. Glatfelter Company

Pennsylvania