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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
P. H. Glatfelter Company
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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[P.H. GLATFELTER LOGO]
P. H. GLATFELTER COMPANY
96 SOUTH GEORGE STREET, SUITE 500
YORK, PENNSYLVANIA 17401
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2001
---------------------
TO THE SHAREHOLDERS:
The 2001 annual meeting of shareholders of P. H. Glatfelter Company will be
held at the company's Spring Grove mill, 228 South Main Street, Spring Grove,
Pennsylvania, on Wednesday, April 25, 2001 at 10:00 a.m. for the following
purposes:
1. To elect two members of the Board of Directors to serve for full
three-year terms expiring in 2004; and
2. To transact such other business as may properly come before the
meeting.
Only holders of record of the company's common stock at the close of
business on March 1, 2001 will be entitled to notice of and to vote at the
annual meeting.
It is important that your shares be represented and voted at the annual
meeting. Whether or not you currently plan to attend the meeting, please
complete, date and sign the accompanying proxy card and return it promptly in
the enclosed, self-addressed envelope requiring no postage if mailed in the
United States. If you choose, you may still vote in person at the meeting even
though you previously submitted a proxy card.
/s/ M.R. MUELLER
M. R. MUELLER,
Secretary
March 19, 2001
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P. H. GLATFELTER COMPANY
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being solicited by
the Board of Directors of P. H. Glatfelter Company (the company), 96 South
George Street, Suite 500, York, Pennsylvania 17401, in connection with the 2001
annual meeting of shareholders of the company (the annual meeting or meeting).
This proxy statement and the accompanying proxy card are being mailed to the
company's shareholders on or after March 19, 2001.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, shareholders will act upon the following matters:
- electing two directors of the company, each to serve for a three-year
term expiring at the company's 2004 annual meeting; and
- transacting any other business that may properly be brought before the
meeting.
In addition, the company's management will report on the company's business
during the year ended December 31, 2000 and respond to questions from
shareholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Only holders of record of the company's common stock at the close of
business on the record date, March 1, 2001, are entitled to receive notice of
and to vote at the meeting. Each share of the company's common stock is entitled
to one vote per share on all business presented at the meeting, except that
shareholders have cumulative voting rights in electing directors. Cumulative
voting means that each shareholder is entitled to as many votes in electing
directors as is equal to the number of his or her shares of common stock
multiplied by the number of directors to be elected. A shareholder may cast all
such votes for a single nominee or may distribute them between two or more
nominees as he or she sees fit. The persons named in the accompanying proxy card
as proxy holders will have the right to vote cumulatively and to distribute
their votes among the nominees as they see fit.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the company, it will be voted as you specify. If you are a holder of record
of the company's common stock on the record date and attend the meeting, you may
deliver your completed proxy card in person or vote in person at the meeting.
The votes will be counted by judges of election appointed by the company.
WHAT CONSTITUTES A QUORUM?
A quorum is necessary to permit a particular matter to be considered and
acted upon at the meeting. The presence at the meeting, in person or by proxy,
of shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter will constitute a
quorum for the purposes of such matter. The company had 42,435,131 shares of
common stock outstanding on the record date.
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WHAT VOTE IS REQUIRED TO ELECT A DIRECTOR?
The two nominees for director receiving the highest number of votes cast,
in person or by proxy, by shareholders entitled to vote thereon will be elected
to serve on the Board. Votes withheld with respect to the election of a director
will not be voted with respect to such director, although they will be counted
in determining whether there is a quorum. Accordingly, votes withheld will have
no effect on the result of the vote.
HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?
If you sign and return the accompanying proxy card, but do not make any
selections, you give discretionary authority to the persons named as proxy
holders in the proxy card. Your shares will then be voted as indicated in this
proxy statement.
WHAT IS THE BOARD'S RECOMMENDATION?
The Board of Directors recommends a vote FOR election of its two nominees
for director, Robert P. Newcomer and John M. Sanzo, for terms expiring in 2004.
Unless you give other instructions on the accompanying proxy card, the
persons named in the proxy card as proxy holders will vote in accordance with
the recommendation of the Board.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the company's
Secretary either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders to vote your proxy will be revoked if you
attend the meeting in person and request to change your vote or vote in person,
although attendance at the meeting will not by itself revoke a previously
granted proxy.
WHO BEARS THE COST OF SOLICITATION OF PROXIES?
The company bears the cost of preparing, printing, assembling and mailing
this proxy statement and other Board proxy solicitation materials. In addition
to the solicitation of proxies by mail, some of the officers and other employees
of the company may solicit proxies personally, by telephone and by other means.
These persons receive no special compensation for any solicitation activities.
WHEN ARE SHAREHOLDER PROPOSALS DUE FOR THE 2002 ANNUAL MEETING?
To be included in the proxy statement for the company's 2002 annual
meeting, shareholder proposals must be submitted in writing to the company's
Secretary no later than November 19, 2001. If any shareholder proposal is
submitted after February 2, 2002, the proxy holders will be allowed to use their
discretionary voting authority when the proposal is made at the company's 2002
annual meeting, without any discussion of the matter in the proxy statement for
that meeting.
WHO ARE THE COMPANY'S AUDITORS?
In accordance with the recommendations of the company's Audit Committee,
the Board of Directors has appointed Deloitte & Touche LLP, independent
certified public accountants, to audit the consolidated financial statements of
the company and its consolidated subsidiaries for the year ending December 31,
2001. A representative of Deloitte & Touche is expected to attend the annual
meeting, will be given the opportunity to make a statement if he or she desires
to do so and will be available to respond to appropriate shareholder questions.
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WHAT DID THE COMPANY PAY ITS AUDITORS IN 2000?
For the year ended December 31, 2000, the company paid Deloitte & Touche
LLP, its independent auditors, aggregate fees as follows:
Audit Fees................................................ $428,900
Financial Information Systems Design and Implementation
Fees.................................................... $ 0
All Other Fees............................................ $361,197
ELECTION OF DIRECTORS
Two directors are to be elected at the annual meeting to serve three-year
terms expiring on the date of the company's 2004 annual meeting and until their
respective successors are elected and qualified. The Board of Directors proposes
that Robert P. Newcomer and John M. Sanzo, both of whom are currently serving as
directors of the company, be re-elected as directors. The nominees have
consented to serve if elected to the Board. If a nominee is unable to serve as a
director at the time of the meeting, an event which the Board does not
anticipate, the persons named in the accompanying proxy card will vote for such
substitute nominee as may be designated by the Board, unless the Board reduces
the number of directors accordingly.
BOARD OF DIRECTORS
The following table sets forth information as to the nominees and the other
persons who are to continue as directors of the company after the annual
meeting. The offices referred to in the table are offices of the company unless
otherwise indicated. For information concerning the number of shares of the
company's common stock owned by each director and all directors and executive
officers as a group as of March 1, 2001, see "Ownership of Common Stock."
YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
Nominees to be elected for terms expiring in 2004:
Robert P. Newcomer 52 1998 President and Chief Operating Officer since
February 2001; Executive Vice President from
June 1998 to February 2001; Chief Financial
Officer from June 1998 to June 2000; Senior
Vice President and Chief Financial Officer from
October 1995 to June 1998
John M. Sanzo 51 1992 Private Financial Consultant since June 1994
Directors continuing for terms expiring in 2003:
Robert E. Chappell 56 1989 Chairman and Chief Executive Officer, Penn
Mutual Life Insurance Company, since January
1997; President and Chief Executive Officer,
Penn Mutual Life Insurance Company, from April
1995 to December 1996; Director of Quaker
Chemical Corporation
George H. Glatfelter II(1) 49 1992 Chairman since April 2000; Chief Executive
Officer since June 1998; President from June
1998 to February 2001; Senior Vice President
from September 1995 to June 1998
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YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
Ronald J. Naples 55 2000 Chairman and Chief Executive Officer, Quaker
Chemical Corporation, since October 1995
Richard L. Smoot 60 1994 Regional Chairman, PNC Bank, National
Association, Philadelphia/South Jersey markets
since December 2000; President and Chief
Executive Officer, PNC Bank, National
Association, Philadelphia/South Jersey markets,
prior to December 2000; Director of
Philadelphia Suburban Corporation
Directors continuing for terms expiring in 2002:
Nicholas DeBenedictis 55 1995 Chairman, Chief Executive Officer and Director
of Philadelphia Suburban Corporation; Director
of Met Pro Corp. and Provident Mutual Life
Insurance Company
Patricia G. Foulkrod(1) 56 1999 Community volunteer
George H. Glatfelter(1) 74 1970 Retired; former Vice
President -- Manufacturing, Spring Grove mill
M. A. Johnson II 67 1970 Retired; former Executive Vice President,
Treasurer and Chief Financial Officer
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(1) Patricia G. Foulkrod is the niece of George H. Glatfelter and the first
cousin of George H. Glatfelter II. George H. Glatfelter is the father of
George H. Glatfelter II.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
HOW OFTEN DID THE BOARD MEET DURING 2000?
The Board of Directors held six meetings during 2000. Each of the incumbent
directors attended at least 75% of the aggregate of all meetings of the Board
and committees thereof on which he or she served in 2000.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The standing committees of the Board are the Executive Committee, the Audit
Committee, the Compensation Committee, the Finance Committee, the Nominating and
Corporate Governance Committee and the Employee Benefits Committee. The members
of all of these committees are appointed by the Board. As of the end of their
current terms in April 2001, R. S. Hillas and P. R. Roedel will retire from the
Board. R. S. Hillas and P. R. Roedel serve on several of the committees set
forth below and the Board will fill the vacancies created by their retirement as
it deems necessary.
Executive Committee. The Executive Committee currently consists of five
members of the Board: G. H. Glatfelter, G. H. Glatfelter II, R. S. Hillas, M. A.
Johnson II, and R. L. Smoot. The Executive Committee has the authority to
exercise all of the powers of the Board of Directors between meetings of the
Board, except the power to amend the company's by-laws, submit matters to
shareholders for approval, create or fill vacancies on the Board and repeal or
modify any prior action of the Board that by its terms can be repealed or
amended only by the Board. The Executive Committee held two meetings during
2000.
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Audit Committee. The Audit Committee currently consists of five members of
the Board: R. E. Chappell, N. DeBenedictis, R. S. Hillas, P. R. Roedel and J. M.
Sanzo, all of whom are independent from the company and its management as
independence is defined in the New York Stock Exchange's listing standards. In
accordance with its charter, attached as Appendix A to this proxy statement, the
Audit Committee (i) recommends to the Board of Directors the independent
accountants to be appointed for the company, (ii) meets with the independent
accountants, the chief internal auditor and corporate officers to review matters
relating to corporate financial reporting and accounting procedures and
policies, adequacy of financial, accounting and operating controls and the scope
of the audits of the independent accountants and internal auditors, including in
the case of the independent accountants, the fees for such services and (iii)
reviews and reports on the results of such audits to the Board. The Audit
Committee held two meetings during 2000.
Compensation Committee. The Compensation Committee currently consists of
six members of the Board: R. E. Chappell, N. DeBenedictis, R. S. Hillas, R. J.
Naples, P. R. Roedel and R. L. Smoot, none of whom are members of the company's
management. The responsibilities of the Compensation Committee are described
below (see "Report of Compensation Committee on Executive Compensation"). The
Compensation Committee held four meetings during 2000.
Finance Committee. The Finance Committee currently consists of five
members of the Board: P. G. Foulkrod, G. H. Glatfelter II, M. A. Johnson II, R.
P. Newcomer and J. M. Sanzo. The Finance Committee is responsible for overseeing
the company's financial affairs and recommending such financial actions and
policies, including those with respect to dividends, as are most appropriate to
accommodate the company's operating strategies while maintaining its sound
financial condition. The Finance Committee held one meeting during 2000.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee currently consists of four members of the Board:
G. H. Glatfelter II, R. S. Hillas, J. M. Sanzo and R. L. Smoot. The
responsibilities of the Nominating and Corporate Governance Committee include
the identification and recruitment of effective candidates for nomination as
directors and officers of the company and general oversight over corporate
governance issues. The Nominating and Corporate Governance Committee held three
meetings during 2000. The Nominating and Corporate Governance Committee will
consider as nominees for election to the Board persons recommended by the
holders of common stock of the company. Any shareholder desiring to recommend a
nominee for election at the 2002 annual meeting of shareholders should submit
such nomination in writing to the Secretary of the company by November 19, 2001.
Employee Benefits Committee. The Employee Benefits Committee currently
consists of two members of the Board, G. H. Glatfelter II and R. P. Newcomer,
and two officers of the company, J. R. Anke and R. S. Wood. The responsibilities
of the Employee Benefits Committee include the general overview of the
provisions of various pension plans of the company and periodic review of
pension fund performance. The Employee Benefits Committee is also responsible
for administering the company's various profit sharing and 401(k) savings plans
and for conducting a periodic review of profit sharing and savings plan fund
performance. The Employee Benefits Committee held two meetings during 2000.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the company's audited
financial statements with both the company's management and the company's
independent auditors, Deloitte & Touche LLP. The company's management has
advised the Audit Committee that all such audited financial statements were
prepared in accordance with generally accepted accounting principles.
The Audit Committee has discussed with Deloitte & Touche LLP certain
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees. The Audit
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Committee has also discussed with Deloitte & Touche LLP their independence from
the company and its management. The Audit Committee has received the written
disclosures and letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1, Independence with Audit Committees, disclosing
all relationships between Deloitte & Touche LLP and its related entities and the
company. In addition to the information provided by Deloitte & Touche LLP, the
Audit Committee considered the level of non-audit services provided by Deloitte
& Touche LLP in determining that they were independent.
Based on the review and discussions described above, the Audit Committee
has recommended to the company's Board of Directors that the company's audited
financial statements be included in the company's Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission.
N. DeBenedictis (Chairman)
R. E. Chappell
R. S. Hillas
P. R. Roedel
J. M. Sanzo
DIRECTOR COMPENSATION
HOW ARE DIRECTORS COMPENSATED?
Base Compensation. The company pays non-employee directors an annual
retainer fee of $12,500. In addition, the company pays non-employee directors
$1,000 for every board meeting attended plus $800 for every committee meeting
attended. The company also pays non-employee committee chairpersons an annual
committee-related retainer of $2,500.
Deferred Compensation. Pursuant to the company's Deferred Compensation
Plan for Directors (the plan), every year each director may elect to defer 50%,
75% or 100% of his or her retainer to be earned in that year and following
years. For each director who participates in the plan, the company will credit a
deferred fee account with phantom shares of the company's common stock (stock
units) at such time as the retainer would otherwise have been paid. The number
of stock units credited to a director's deferred account is the quotient of the
amount of the deferred retainer divided by the fair market value of the
company's common stock on such date. Additional stock units are credited to each
director's account as of each payment date for dividends on the company's common
stock, based on the number of stock units credited to a director's account on
the record date for such dividends. Once a participant in the plan ceases to be
a member of the Board of Directors, such participant is entitled to receive an
amount in cash equal to the product of the number of stock units credited to his
or her deferred account multiplied by the fair market value of the company's
common stock, payable in lump sum or in installments.
Options. Each non-employee director receives, on May 1st of each year,
non-qualified stock options to purchase 1,500 shares of common stock of the
company for a purchase price per share equal to the fair market value per share
of the common stock of the company on the date such options are granted. The
options vest in full on the first anniversary of the date of the grant and
expire on the earlier of the date on which the optionee ceases to be a member of
the Board of Directors or ten years from the date of the grant; provided,
however, that (i) in the event of the optionee's retirement from the Board, such
options are exercisable until the first to occur of five years from the date of
such retirement or ten years from the date of the grant and (ii) in the event
that an optionee ceases to be a member of the Board by reason of death or
disability, such options are exercisable until the first to occur of one year
from the date of such death or disability or ten years from the date of the
grant.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
from the company and its subsidiaries which was awarded to, earned by, or paid
to the chief executive officer of the company and each of the company's five
other most highly compensated executive officers in 2000, including R. S.
Lawrence, an executive officer who retired on November 1, 2000:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- ------------------------- -------------
NAME AND RESTRICTED SECURITIES
PRINCIPAL POSITION FISCAL STOCK AWARDS UNDERLYING LTIP ALL OTHER
AT DECEMBER 31, 2000 YEAR SALARY($) BONUS($)(1) ($)(2) OPTIONS PAYOUTS($)(3) COMPENSATION($)(4)
- -------------------------- ------ --------- ----------- ------------ ---------- ------------- ------------------
G. H. Glatfelter II....... 2000 425,004 313,166 -- 92,100 41,332 0
Chairman, President and 1999 377,580 251,296 -- 59,400 74,910 0
Chief Executive Officer 1998 254,580 63,459 -- 81,196 92,293 0
R. P. Newcomer............ 2000 333,425 188,030 -- 50,700 41,322 5,125
Executive Vice President 1999 277,884 150,606 -- 32,700 74,910 4,825
1998 224,880 61,600 -- 50,720 107,960 4,825
R. L. Miller.............. 2000 237,125 110,217 -- 24,800 23,991 5,125
Vice President -- 1999 180,025 88,200 -- 16,000 43,382 3,925
Special Projects 1998 156,475 37,060 -- 26,027 0 4,725
R. S. Lawrence............ 2000 192,590 92,904 -- 0 22,992 4,044
Formerly Vice 1999 220,104 90,767 -- 16,000 43,382 4,800
President --
General Manager, 1998 201,054 28,513 -- 27,347 92,293 4,800
Ecusta Division
Leland R. Hall............ 2000 218,521 124,281 -- 24,800 20,879 5,125
Vice President-- 1999 190,008 98,121 -- 16,000 37,717 4,825
New Product 1998 164,035 35,305 -- 25,027 0 4,825
Development...........
Robert S. Wood............ 2000 174,845 67,914 -- 24,800 9,997 5,100
Chief Strategy Officer 1999 138,629 23,220 -- 13,700 18,145 4752
1998 118,566 27,369 -- 19,556 38,598 4,282
- ---------------
(1) Reflects distributions under a broad-based profit sharing plan payable to
all salaried employees and bonuses under the Management Incentive Plan for
executive officers and other senior level employees.
(2) At December 31, 2000, Messrs. Glatfelter, Newcomer, Miller, Lawrence, Hall
and Wood held restricted stock awards for 52,490, 28,921, 14,166, 9,166,
14,166 and 15,086 shares of common stock, respectively. At December 31,
2000, the fair market value of the shares subject to awards held by Messrs.
Glatfelter, Newcomer, Miller, Lawrence, Hall and Wood was $653,501,
$360,066, $176,367, $114,116, $176,367 and $187,821, respectively.
Restricted stock will vest at the end of the fourth year after it is
awarded. An amount equal to the cash dividends per share paid on the
company's common stock during the four-year period shall accrue with respect
to each share of restricted stock and be payable at the end of the four-
year period. Further information concerning restricted stock awarded in 2000
is set forth under "Long-Term Incentive Plan Awards."
(3) For 1998, 1999 and 2000 with respect to Messrs. Glatfelter, Newcomer,
Lawrence and Wood, represents the payout for performance shares which were
awarded in 1994, 1995 and 1996, respectively, pursuant to the 1992 Key
Employee Long-Term Incentive Plan, for the four-year performance periods
ended December 31, 1998, 1999 and 2000, respectively. For 1999 and 2000 with
respect to Messrs. Miller and
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Hall, represents the payout for performance shares which were awarded in
1995 and 1996, respectively, pursuant to the 1992 Key Employee Long-Term
Incentive Plan, for the four-year performance periods ended December 31,
1999 and 2000, respectively.
(4) Other compensation reported for 2000 represents (a) matching contributions
under the company's 401(k) Savings Plan and (b) in the case of Messrs.
Newcomer, Miller and Hall the $25 payable to them as employees at the
company's Spring Grove mill with service in excess of 25 years.
OPTION GRANTS
The following table sets forth information concerning the number of options
granted during 2000 and the value of unexercised options to purchase common
stock held by the named executive officers at December 31, 2000. Under the terms
of the stock options granted during 2000, none of the options are exercisable
until 2002.
OPTION GRANTS IN 2000
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) DURING 2000 ($/SH)(1) DATE VALUE($#)(2)
- ---- ------------- --------------- --------- ---------- ------------
G. H. Glatfelter II........ 92,100 14.8 12.95 12/18/10 272,616
R. P. Newcomer............. 50,700 8.1 12.95 12/18/10 150,072
R. L. Miller............... 24,800 4.0 12.95 12/18/10 73,408
R. S. Lawrence............. 0 0 0 -- 0
L. R. Hall................. 24,800 4.0 12.95 12/18/10 73,408
R. S. Wood................. 24,800 4.0 12.95 12/18/10 73,408
- ---------------
(1) With respect to Messrs. Glatfelter, Newcomer, Miller, Hall and Wood, the
options were granted on December 19, 2000 and are exercisable with respect
to 25% of the total number of shares subject to option on each of January 1,
2002 and January 1 of the following three years. Upon retirement, the
grantees may exercise these options until the first to occur of three years
from the date of such retirement or December 18, 2010.
(2) The estimated present value at grant date of options granted on December 19,
2000 has been calculated using the Black-Scholes option pricing model, based
upon the following assumptions: estimated time until exercise -- ten years;
a risk-free interest rate of 5.24%, representing the interest rate on a U.S.
Government zero-coupon bond on the date of grant with a remaining term
corresponding to the expected life of the options; a volatility rate of
32.3%; and a dividend yield of 5.41% representing the current $.70 per share
annualized dividends divided by the fair market value of the common stock on
the date of grant. The approach used in developing the assumptions upon
which the Black-Scholes valuation was done is consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."
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YEAR-END OPTION VALUES
The following table sets forth information concerning options exercised in
2000 and the value of unexercised options to purchase common stock held by the
named executive officers at December 31, 2000.
AGGREGATED OPTION EXERCISES IN 2000
AND OPTION VALUES AT DECEMBER 31, 2000
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/00 OPTIONS AT 12/31/00($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
G. H. Glatfelter II.... 0 n/a 125,740 173,916 3,733 3,733
R. P. Newcomer......... 0 n/a 106,477 97,253 2,056 2,056
R. L. Miller........... 0 n/a 65,203 47,884 1,007 1,007
R. S. Lawrence......... 0 n/a 9,097 0 503 0
L. R. Hall............. 0 n/a 58,058 47,634 1,007 1,007
R. S. Wood............. 0 n/a 48,090 43,876 861 861
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(1) Value is measured by the difference between the closing price for the
company's common stock on the New York Stock Exchange on December 29, 2000
and the exercise price of the option.
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information concerning the number of shares
of restricted stock granted in 2000 under the company's 1992 Key Employee
Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLAN AWARDS IN 2000
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE BASED PLAN
SHARES, UNITS OTHER PERIOD ---------------------------------
OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS(1) OR PAYOUT(2) SHARES(#) SHARES(#) SHARES(#)
- ---- ------------- ---------------- --------- --------- ---------
G. H. Glatfelter II............... 18,530 4 years -- 18,530 --
R. P. Newcomer.................... 10,210 4 years -- -- --
R. L. Miller...................... 5,000 4 years -- 5,000 --
R. S. Lawrence.................... 0 -- -- 0 --
L. R. Hall........................ 5,000 4 years -- 5,000 --
R. S. Wood........................ 5,000 4 years -- 5,000 --
- ---------------
(1) Represents restricted stock awarded in 2000 under the 1992 Key Employee
Long-Term Incentive Plan that will vest at the end of four years, subject to
the achievement by the company of a minimum level of earnings per share over
the four-year period. An amount equal to the cash dividends per share paid
on the company's common stock during the four-year period shall accrue with
respect to each share of restricted stock and be payable at the end of the
four-year period. The restricted stock will be forfeited upon termination of
employment during the four-year period for any reason other than retirement,
death or disability.
(2) Restricted stock will vest on December 31, 2004.
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EMPLOYEE BENEFIT PLANS
WHAT EMPLOYEE BENEFIT PLANS HAS THE COMPANY ESTABLISHED?
Pension Plan. Officers and directors who are full time employees of the
company participate in the P. H. Glatfelter Company Retirement Plan for Salaried
Employees (the pension plan). Benefits payable under the pension plan are based
upon years of service and average annual compensation for the five consecutive
calendar years during the ten years preceding the year of retirement that yield
the highest average. Retirement benefits under the pension plan are not subject
to any deduction for Social Security benefits. Retirement benefits accrued under
the pension plan for employees of the Ecusta Division are reduced by any pension
benefits payable under a pension plan maintained by a predecessor employer.
Annual compensation for purposes of the pension plan generally includes salary
as listed in the Summary Compensation Table on page 7 plus bonus listed in the
Summary Compensation Table for the prior year. To the extent deferral of an
award under the company's Management Incentive Plan causes a reduction in a
participant's pension under the pension plan, a pension supplement (the MIP
adjustment supplement) will be paid from the company's Supplemental Management
Pension Plan.
Employees of the Spring Grove mill who earned a vested benefit under the
pension plan before May 1, 1970 (grandfathered Spring Grove participants) may
receive a benefit, if greater than the usual benefit, which does not give effect
to years of service and is based on a percentage of the participant's earnings
as defined in the plan for this purpose, which consist of the sum of (i) the
participant's annual base salary as of the April 30th (or other effective date
for annual compensation adjustments) closest to the retirement date or, if
earlier, the April 30th (or other effective date for annual compensation
adjustments) closest to the participant's 60th birthday and (ii) the
participant's average compensation in excess of annual base salary for the five
year period prior to the year of actual retirement, or, if earlier, the year in
which the employee attains age 60. Annual compensation for such participants
generally means the salary and bonus amounts listed in the compensation table.
The pension plan has been amended to reflect three voluntary early
retirement enhancement programs (the VEREPs) effective in 1998, 1999 and 2000
for certain groups of eligible salaried employees of the company. Eligible
employees who have elected to participate in one of the VEREPs generally receive
enhanced benefits under the pension plan based on the addition of five years of
credited service and five years of additional age, but not beyond age 65.
Supplemental Executive Retirement Plan. The company has a Supplemental
Executive Retirement Plan (the SERP) consisting of two benefits, either or both
of which are available to those management and executive employees who have been
selected by the company's Compensation Committee for participation therein. The
first benefit, known as the restoration pension, provides an additional pension
benefit based on the participant's pension benefit earned under the terms of the
pension plan, which is intended to restore that portion of the pension plan's
benefit which cannot be paid from that plan due to legal limitations on the
compensation and total benefits payable thereunder. Participants may receive the
restoration pension in a single sum or in any form permitted under the pension
plan, as elected by the participant at the time he first becomes a participant.
The second benefit, known as the FAC pension, pays a monthly pension
benefit equal to a designated percentage of the participant's final average
compensation (as defined below), offset by the actuarially equivalent value of
the participant's benefits under the pension plan and certain company-sponsored
nonqualified defined benefit pension arrangements, including (if applicable) the
restoration pension. The designated percentage is 2% multiplied by the
participant's years of credited service under the pension plan, but not in
excess of 55%. The FAC pension is payable following the participant's retirement
at or after age 62 in the form of a joint and 75% survivor annuity with the
participant's spouse or, if so requested by the participant and approved by the
company's Compensation Committee, as a single sum. The FAC pension can also be
paid on an early retirement basis as early as age 55, but reduced by 2.5% for
each year by which the
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early benefit commencement precedes the participant's attainment of age 62. A
survivor benefit is also payable to the participant's surviving spouse if the
participant dies before his benefit commencement date. Final average
compensation means the annualized average of the participant's eligible
compensation for the sixty (60) calendar months immediately preceding his
retirement, which generally means the salary and bonus amounts listed in the
compensation table.
WHAT ARE THE ESTIMATED ANNUAL RETIREMENT BENEFITS OF THE COMPANY'S EXECUTIVES?
The following table shows the estimated annual retirement benefits, payable
in the form of a joint and 75% survivor annuity beginning at age 62, to those
executives, including Messrs. Glatfelter, Newcomer, Miller, Lawrence and Wood,
who are eligible for the FAC pension under the SERP. This benefit consists of
the sum of the executive's pension plan benefits and the additional amount
necessary to yield the benefit calculated under the FAC pension.
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT
AVERAGE ANNUAL BENEFIT BASED ON YEARS OF SERVICE(1)
FIVE YEAR PLAN ---------------------------------------------
COMPENSATION($) 15 20 25 27.5 OR MORE
--------------- ------- ------- ------- ------------
125,000....................... 37,500 50,000 62,500 68,750
150,000....................... 45,000 60,000 75,000 82,500
175,000....................... 52,500 70,000 87,500 96,250
200,000....................... 60,000 80,000 100,000 110,000
250,000....................... 75,000 100,000 125,000 137,500
300,000....................... 90,000 120,000 150,000 165,000
400,000....................... 120,000 160,000 200,000 220,000
500,000....................... 150,000 200,000 250,000 275,000
600,000....................... 180,000 240,000 300,000 330,000
700,000....................... 210,000 280,000 350,000 385,000
800,000....................... 240,000 320,000 400,000 440,000
900,000....................... 270,000 360,000 450,000 495,000
- ---------------
(1) Pension benefit paid as a joint and 75% survivor annuity.
The following executive officers who participate in the pension plan had
the indicated credited years of service at December 31, 2000: G. H. Glatfelter
II: 24 years; R. P. Newcomer: 28 years; R. L. Miller: 33 years; R. S. Lawrence:
40 years; L. R. Hall: 41 years; and R. S. Wood: 20 years.
The foregoing table assumes that the executive is a participant in the FAC
pension under the SERP. Of the named executive officers at December 31, 2000,
Mr. Hall is not eligible for the FAC pension and therefore is entitled to
receive a pension determined under the pension plan, together with, as
applicable, the restoration pension and the MIP adjustment supplement.
The accrued annual benefits for Mr. Hall under the pension plan, the
restoration pension and the MIP adjustment supplement are $96,745. These accrued
benefits are payable in the form of a single life annuity beginning at age 65.
Mr. Hall also is eligible to receive a 3-year early retirement supplement (under
the company's Supplemental Management Pension Plan) which is paid if he retires
before attaining age 65 and elects to defer receipt of benefits under the
pension plan until age 65 or, if earlier, until the first day of the 36th month
following his retirement. This benefit pays, for up to three years, a monthly
benefit equal to that calculated under the pension plan and (if applicable) the
restoration pension under the SERP, but with the addition of up to three years
to his age.
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EMPLOYMENT CONTRACTS
WHAT EMPLOYMENT CONTRACTS HAS THE COMPANY ENTERED INTO?
The company has entered into change in control employment agreements, dated
as of December 31, 2000, with each of Messrs. Glatfelter, Newcomer, Miller, Hall
and Wood. Under the agreements, each executive will become entitled to
additional payments and benefits if his employment is terminated under certain
conditions within two years following a change in control (as defined in the
agreements) of the company during the term of the agreements. Under the
agreements, each executive's employment with the company will continue for two
years from the date of a change in control. During such period, the executive
shall continue in the position he held prior to the change in control and shall
receive compensation and benefits from the company at least equal to those paid
to him prior to the change in control.
If, within two years following a change in control, an executive's
employment is terminated by the company other than for cause, death or
disability or is terminated by the executive for good reason (as defined in the
agreements), he will receive his then current base salary through the date of
termination, plus a lump sum payment, payable within thirty days after the date
of termination, representing certain severance benefits (in lieu of further
salary payments and in lieu of any severance benefits otherwise payable by the
company). The severance benefits under the agreements consist of: (i) a prorated
bonus for the year in which the date of termination occurs, on the basis of a
target bonus under the Management Incentive Plan and a 7.5% of base salary
profit-sharing bonus; (ii) an amount equal to two times (three times in the case
of Mr. Glatfelter) (a) the executive's base salary (at the highest rate achieved
before the date of termination) plus (b) his annual bonus for the last full
fiscal year before the date of termination; (iii) continued health, disability
and life insurance coverage for two years (three years in the case of Mr.
Glatfelter) at substantially similar levels of coverage, or at the company's
option payment to the executive of an amount equal to the company's cost of
providing such benefits; and (iv) full vesting and payout under all deferred
compensation plans.
If an executive's employment is terminated by the company for cause, death
or disability or is terminated by the executive (including voluntary retirement)
without good reason, in lieu of the severance benefits above, such executive
will receive a lump sum cash payment of his then current base salary through the
date of termination, together with all compensation and benefits to which he is
entitled under the company's benefit plans for periods preceding the date of
termination.
The agreements provide that if any payment or benefit to an executive,
whether pursuant to the agreements or otherwise, is subject to the excise tax
imposed by the Internal Revenue Code on "excess parachute payments," then an
additional payment will be made to such executive so that the amount he receives
on a net basis will be the same amount that he would have received absent the
applicability of the excise tax.
COMPENSATION COMMITTEE INTERLOCK
AND INSIDER PARTICIPATION
The Compensation Committee currently consists of six members of the Board
of Directors: R. E. Chappell (Chairman), N. DeBenedictis, R. S. Hillas, R. J.
Naples, P. R. Roedel and R. L. Smoot.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
WHAT ARE THE RESPONSIBILITIES OF THE COMPANY'S COMPENSATION COMMITTEE?
The Compensation Committee reviews and approves the elements of the
company's executive compensation program and assesses the effectiveness of the
program as a whole. The Compensation Committee's
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responsibilities include: (i) reviewing annually (A) with the company's chief
executive officer the job performance of corporate officers and key senior
management employees of the company and (B) the job performance of the company's
chief executive officer as measured against financial and other objectives and
the company's achievements as compared to certain other companies in the paper
and forest products industry, (ii) reviewing and establishing the level of
salaries and benefits for the chief executive officer, other corporate officers
and other key senior management employees of the company, including but not
limited to benefits under the company's long-term incentive plan, profit sharing
plans, defined benefit and contribution plans and other welfare benefit plans,
and (iii) reviewing and approving certain participants in, and the operating
rules for awards under, the company's Management Incentive Plan.
The Compensation Committee from time to time reviews the company's entire
executive compensation structure through an examination of compensation
information for comparable companies and certain broader-based data, compiled by
the company and by compensation and other consulting firms. The comparable
companies are other companies in the paper and forest products industry (both
publicly and privately owned) identified by management, which on an overall
basis are most similar to the company in relation to size, products and
financial and other characteristics and in certain cases include general
industry and nondurable manufacturing companies of roughly the same revenue size
as the company. The companies that comprise the Peer Group in the Stock
Performance Chart below are the company's industry-based comparable companies.
Certain of the comparable companies are included in the S&P MidCap 400, and
therefore are represented in two indices in the Stock Performance Chart.
WHAT IS THE COMPANY'S PHILOSOPHY REGARDING EXECUTIVE OFFICER COMPENSATION?
The Compensation Committee has generally structured the company's executive
compensation program (i) to be competitive with compensation programs of
comparable companies to enable the company to attract, retain and motivate a
highly qualified executive management team, (ii) to provide a significant
portion of variable-based compensation that is contingent upon
objectively-measured performance to align executive officers' interests with
those of the company's shareholders, and (iii) to include appropriate and
flexible design features in such programs which will be responsive to the
peculiarities of the paper industry and to the changing needs of the company.
The elements of the company's executive compensation program are salary, profit
sharing, annual incentive compensation, long-term incentive compensation and
other benefits. From time to time the Compensation Committee solicits the advice
of compensation and other consulting firms to evaluate the company's executive
compensation program in order to ensure that such program is competitive with
compensation programs of comparable companies. In establishing executive
compensation for 2000, the Compensation Committee considered a competitive
market compensation analysis for a broad cross-section of benchmark management
positions throughout the company, including all executive officer positions,
prepared by the company's compensation consultant.
WHAT ARE THE COMPONENTS OF EXECUTIVE COMPENSATION?
Base Salary. The company's policy is to pay fair salaries at levels which
are sufficient to attract and retain high caliber individuals based on the
relative value of each position, as measured against comparable companies. The
Compensation Committee assigns each executive position a salary grade with a
base salary range based on the base salary level for similar positions at
comparable companies. Ranges are adjusted by the Compensation Committee
periodically and executives are moved to different salary grades as their job
responsibilities change.
Generally, executive officer base salaries are reviewed and approved
annually. Effective July 1, 2000, salary adjustments were also made in
conjunction with changes in job responsibilities and/or salary grades for
certain executives. The salary for each executive is set by the Compensation
Committee after an assessment of his or her performance and the relation of his
or her salary to the midpoint for the applicable salary range. The factors that
were considered in granting salary increases to executive officers for 2000 were
as follows: (i) the
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base salaries for most executives were below the midpoint of their respective
salary ranges and below the median base salaries for positions of similar scope
and responsibility at comparable companies, (ii) the objective of moving base
salaries to the midpoint of salary ranges within two years, and (iii) the
Compensation Committee's assessment of the executive officer's performance as
reported by the chief executive officer.
Annual Incentive Compensation. The company has established a profit
sharing plan which covers all of its domestic salaried employees. The plan is
intended to incent participants to enhance company performance by offering them
a shared interest in profits each year, up to a maximum of 15% of base salary.
The Compensation Committee establishes additional incentive bonus
opportunities under its Management Incentive Plan, which are designed to
encourage greater efforts on the part of key salaried employees to increase the
profits of the company. The incentive bonus opportunities potentially represent
a significant portion of total compensation and are intended to correlate with
the financial and other performance of the company or one or more divisions
thereof. The underlying objectives of the company's Management Incentive Plan
are to assure that incentive bonus awards are at risk annually, to reward senior
executives on the basis of corporate financial and other results and key mill
management personnel on the basis of mill financial and other results and to
provide an incentive bonus award structure for key salaried employees of the
company that is similar to that of comparable companies.
To establish financial targets for payment of profit sharing and incentive
awards for 2000, the Compensation Committee established separate profit centers
for the company's Global operations, U.S. Corporate operations (profit sharing
only), the Glatfelter Division (representing a combination of the Spring Grove
and Neenah mills), each of its domestic mills and its Schoeller & Hoesch
operations (incentive only). The company's senior executives were participants
in the Global and Glatfelter Division profit centers in 2000.
The operating rules established by the Compensation Committee for profit
sharing in 2000 provide for awards of up to 15% of base salary depending on the
percentage return on shareholders' equity for the operations included in the
profit center or, in the case of the domestic mill profit centers, on the
individual mill financial performance for the year.
Under the operating rules established by the Compensation Committee for the
Management Incentive Plan for 2000, the incentive bonus awards for the Global
profit center were based on the earnings per share of the company. The incentive
bonus awards for all other profit centers were based on the operating profit and
return on capital employed for each profit center.
The Compensation Committee established annual maximum, target and minimum
financial objectives to be achieved for each profit center under the Management
Incentive Plan. When establishing such financial objectives, the Compensation
Committee considered the 2000 budget, the estimated financial results for 1999
and the actual financial results for 1998 for each profit center. This
methodology is intended to induce management to enhance the profitability of the
company throughout the full business cycle, and therefore to provide value to
the shareholders of the company. The Compensation Committee believes that
executive officers should not receive any incentive bonus if the company does
not achieve annually established minimum financial objectives. If the minimum
financial objectives are achieved, the incentive award for an executive officer
would be determined by multiplying a percentage derived from the financial
performance of such executive officer's respective profit center by the midpoint
of the salary range for such officer's salary grade.
The 2000 financial performance of the company's Global and Glatfelter
Division profit centers resulted in profit sharing awards of less than half and
more than half, respectively, of the maximum award attainable under the plan.
For purposes of the Management Incentive Plan, the financial performances
of the Global and Glatfelter Division profit centers for 2000 were modestly less
and slightly more, respectively, than the target financial objectives
established by the Compensation Committee. Although the company's financial
performance in 2000 was below budget, the incentive bonus payments were higher
in 2000 than in 1999 because the
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company's financial performance in 2000 was closer to the target financial
performance established by the Compensation Committee for 2000 than in 1999. In
addition, effective January 1, 2000, the salary ranges for each salary grade
were increased across the board and certain senior executives were promoted into
higher salary grades during 2000 commensurate with increased responsibilities,
so incentive bonuses for 2000 were based on salary grades with higher salary
range midpoints than for 1999.
Long-Term Incentive Compensation. The company's Long-Term Incentive Plan
enables the company to offer key employees equity interests in the company and
other incentive awards, including performance-based stock incentives. Certain
features of the plan (i.e., stock options, performance shares, performance units
and restricted stock) are similar to long-term incentives offered by many of the
comparable companies. The primary purposes of the plan are to (i) attract,
retain, motivate and reward key employees, (ii) provide target long-term
incentive award opportunities which are competitive with comparable companies,
(iii) assure that the awards issued pursuant to the plan reflect the cyclical
and long-term nature of the paper industry, (iv) enable senior executives to
acquire appropriate levels of equity interest in the company in order to
increase the alignment of their interests with those of shareholders and (v)
otherwise strengthen the mutuality of interests between key employees and the
company's shareholders.
In 1995, the company adopted a long-term incentive program, developed at
the direction of the Compensation Committee by an executive compensation
consulting firm, under which stock options and/or performance shares were
granted annually through January 1998 to key employees. The value of such awards
was based upon the value of awards granted to positions of similar scope and
responsibility within comparable companies. Stock options have an exercise price
equal to the fair market value of the company's common stock at the time of the
grant and generally become exercisable in annual 25% increments commencing one
year after the date of grant. Contingent awards of performance shares were
generally made on the first day of a four-year performance period. At the end of
the four-year performance period, the number of shares earned is based upon the
level of achievement of two factors: return on average shareholders' equity and
pre-tax earnings relative performance. If the threshold return on average
shareholders' equity is not attained, no shares are earned. Above the threshold
goals, the contingent award is reduced if the target goals are not met and such
contingent award is supplemented if the target goals are exceeded. Payouts of
earned performance shares are made at the discretion of the Committee in cash or
in common stock of the company at the end of the four-year performance period.
The third four-year performance period under the long-term incentive program
ended on December 31, 2000. The payouts were moderately below the target amounts
for such period.
In December 1998, the Compensation Committee revised the long-term
incentive program by making awards of restricted stock in lieu of awards of
performance shares. The grant of stock options continued. In addition, the
grants and awards were made effective in December, whereas in prior years such
grants and awards were approved in December, but made effective on January 1 of
the following year. Restricted stock was substituted by the Committee for
performance shares because the Committee viewed restricted stock, subject to
future vesting, as simpler, more understandable and better serving the objective
of retaining key senior executives. Stock options continue to provide the
necessary long-term incentive. In December 2000, the Compensation Committee made
stock option grants and restricted stock awards to executives consistent with
the program instituted in December 1998. The value of the stock option grants
and restricted stock awards made in December 2000 was based on a percentage of
the midpoint of the salary range for each executive. The stock options that were
granted in December 2000 had terms and conditions similar to the stock options
granted effective on January 1, 1998, December 17, 1998 and December 14, 1999.
The restricted stock awards made in December 2000, like the restricted stock
awards made in December 1998 and December 1999, are subject to the continued
service of the executive for four years, except in cases of death, disability or
retirement, and achievement of a threshold earnings level established by the
Committee.
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HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
The Compensation Committee intends that awards made under the Long-Term
Incentive Plan and the Management Incentive Plan will qualify as
performance-based compensation that will be deductible for federal income tax
purposes under Section 162(m) of the Internal Revenue Code.
HOW IS THE COMPANY'S CHIEF EXECUTIVE OFFICER COMPENSATED?
The base salary of George H. Glatfelter II, Chairman, President and Chief
Executive Officer of the company, was increased by 13.3% effective January 1,
2000, consistent with the goal of advancing his base salary to the mid-point of
the salary range for his salary grade over the next two or three years. In
approving this increase the Compensation Committee also considered Mr.
Glatfelter's role in guiding the company as its chief executive during 1999, a
period in which dramatic changes occurred in the company's business and in the
paper industry in general.
Mr. Glatfelter's annual incentive bonus award for 2000 reflected the fact
that the financial performance of the company's Global profit center for 2000
was slightly less than the target financial objectives established by the
Compensation Committee. Mr. Glatfelter's incentive bonus payment was higher in
2000 than in 1999 because the company's financial performance was closer to the
target financial performance established by the Compensation Committee for 2000
than for 1999 and because the midpoint of his salary range was higher in 2000
than in 1999.
The Compensation Committee also granted Mr. Glatfelter nonqualified stock
options under the Long-Term Incentive Plan effective December 19, 2000 with a
value intended to approximate 50% of the midpoint of the salary range for Mr.
Glatfelter's salary grade. The remaining 50% consisted of an award of restricted
stock by the Compensation Committee vesting December 31, 2004, subject to the
achievement of a minimum net income level over the four-year vesting period. The
Compensation Committee believes that this form of stock compensation more
closely aligns Mr. Glatfelter's interests with those of the shareholders of the
company.
R. E. Chappell, Chairman
N. DeBenedictis
R. S. Hillas
R. J. Naples
P. R. Roedel
R. L. Smoot
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STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total return on the company's common stock during the five years ended December
31, 2000 with the cumulative total return on the S&P MidCap 400 Index and the
company's Peer Group(1). The comparison assumes $100 was invested on December
31, 1995 in the company's common stock and in each of the foregoing indices and
assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED DECEMBER 31, 2000
[PERFORMANCE GRAPH]
GLATFELTER (P H) S&P MIDCAP 400 PEER GROUP ONLY
---------------- -------------- ---------------
1995 100.00 100.00 100.00
1996 109.33 119.20 113.38
1997 117.71 157.65 118.80
1998 81.82 187.77 113.93
1999 101.54 215.41 148.02
2000 92.55 253.12 136.42
- ---------------
(1) The company's Peer Group consists of companies in the same industry as the
company. The returns of each company in the Peer Group have been weighted
according to their respective stock market capitalization for purposes of
arriving at the Peer Group average. The members of the Peer Group are as
follows: Bowater, Inc., Chesapeake Corporation, Mead Corporation, Pope and
Talbot, Inc., Potlatch Corporation, Schweitzer-Mauduit International, Inc.,
Wausau Mosinee Paper Mills Corporation, Westvaco Corporation and Willamette
Industries.
CERTAIN TRANSACTIONS
Mr. Smoot, a director of the company, was President and Chief Executive
Officer until December 2000, and has been Regional Chairman thereafter, of PNC
Bank, National Association, Philadelphia/South Jersey markets. PNC Bank,
National Association (PNC Bank), an indirect subsidiary of The PNC Financial
Services Group, Inc., has a banking relationship with the company and provides
general banking services and credit facilities. PNC Bank is one of seven lending
institutions under a $200,000,000 Credit Agreement dated December 22, 1997,
which was used to finance the company's acquisition of the Schoeller & Hoesch
specialty paper business. PNC Bank's committed share of this credit facility is
$31,250,000. As of December 31, 2000, the company's borrowing under the Credit
Agreement was approximately $146,250,000; PNC Bank's portion of this loan was
approximately $22,850,000. All transactions between the company and PNC Bank
have been made in the ordinary course of business and on substantially the same
terms as those prevailing at the time for comparable transactions with other
persons.
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OWNERSHIP OF COMMON STOCK
The following table sets forth as of March 1, 2001 (except as otherwise
noted) the holdings of (i) each person who is known by the company to own
beneficially more than 5% of the common stock of the company, (ii) each
director, each director nominee and certain executive officers and (iii) all
directors and executive officers of the company as a group. All stock with
respect to which a person has the right to acquire beneficial ownership within
60 days is considered beneficially owned by that person.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
(NUMBER OF SHARES) PERCENTAGE
-------------------------------- OF CLASS
VOTING AND/OR (IF GREATER
NAME DIRECT(1) INVESTMENT POWER(2) THAN 1%)
---- --------- ------------------- -----------
Principal Holders
The PNC Financial Services Group, Inc.............. 0 16,339,556(3) 38.5%
(formerly PNC Bank Corp.)
Fifth Ave. & Wood St
Pittsburgh, Pa
P. H. Glatfelter Family............................ 0 13,501,864(4) 31.8%
Shareholders' Voting Trust
c/o PNC Bank
1600 Market Street
Philadelphia, Pa
G. H. Glatfelter................................... 0 3,787,319(5) 8.9%
Spring Grove, Pa
Dimensional Fund Advisors Inc...................... 0 2,445,900(6) 5.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Directors, nominees for director and certain officers
(other than those listed above)
R. E. Chappell..................................... 2,000 3,000(7) --
N. DeBenedictis.................................... 10,250 5,750(7) --
P. G. Foulkrod..................................... 0 1,891,932(8) 4.5%
G. H. Glatfelter II................................ 3,981 132,887(9) --
L. R. Hall......................................... 4,076 58,455(10) --
R. S. Hillas....................................... 16,000 3,000(7) --
M. A. Johnson II................................... 10,544 4,536(7) --
R. S. Lawrence..................................... 0 9,097(11) --
R. L. Miller....................................... 2,250 69,224(12) --
R. J. Naples....................................... 1,000 0 --
R. P. Newcomer..................................... 9,645 109,465(13) --
P. R. Roedel....................................... 200 3,000(7) --
J. M. Sanzo........................................ 500 3,000(7) --
R. L. Smoot........................................ 1,500 3,000(7) --
R. S. Wood......................................... 2,513 54,306(14) --
All directors and executive officers as a group...... 74,100 6,277,558(15) 15.0%
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(1) Reported in this column are shares held of record.
(2) Does not include shares reported in Direct Ownership column. For purposes
of the table, shares of common stock are considered beneficially owned by a
person if such person has or shares voting or investment power with respect
to such stock. As a result, the same security may be beneficially owned
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by more than one person and, accordingly, in some cases, the same shares
are listed opposite more than one name in the table. Also includes, in some
cases, shares beneficially held by spouses or minor children, as to which
beneficial ownership is disclaimed.
(3) Consists of 9,211,440 shares as to which The PNC Financial Services Group,
Inc. (PNC) has sole voting power; 7,028,250 shares as to which PNC has
shared voting power; 10,173,478 shares as to which PNC has sole investment
power; and 5,836,711 shares as to which PNC has shared investment power.
The amounts specified for shared voting power and shared investment power
both include 89,348 shares held by PNC Bank, National Association (PNC
Bank) as co-trustee with G. H. Glatfelter, 989,263 shares held by PNC Bank
as co-trustee or co-fiduciary with P. G. Foulkrod and 5,898 shares held by
PNC Bank as co-trustee with G. H. Glatfelter II. In addition, 13,501,864
shares of the total amount of shares beneficially held by PNC are deposited
in the voting trust (see footnotes (4) and (8)). All shares beneficially
held by PNC are also considered to be beneficially held by its subsidiary,
PNC Bancorp, Inc., and by PNC Bank, a subsidiary of PNC Bancorp, Inc. All
of the above share amounts are as of December 31, 2000.
(4) Consists of shares beneficially owned as of December 31, 2000 by certain
descendants of Philip H. Glatfelter or the spouses of such descendants,
including shares beneficially owned by P. G. Foulkrod, G. H. Glatfelter and
G. H. Glatfelter II, which were deposited in the P. H. Glatfelter Family
Shareholders' Voting Trust dated July 1, 1993 (the voting trust). Shares
deposited in the voting trust may be withdrawn subject to certain
conditions. Co-trustees for the voting trust are William M. Eyster II,
Katherine G. Costello, Irene G. Fegley, Elizabeth Glatfelter, Susan M.G.
Wilson and PNC Bank. Co-trustees other than PNC Bank each represent a
family group. The shares deposited in the voting trust may be voted only in
accordance with a majority of votes cast by the co-trustees pursuant to a
weighted formula in which (i) each co-trustee (other than PNC Bank) is
entitled to cast such number of votes as is equal to the number of shares
deposited in the voting trust in which members of his or her family group
have an interest and (ii) PNC Bank is entitled to cast such number of votes
as is equal to the number of shares deposited in the voting trust in which
any fiduciary trust of which PNC Bank is a trustee and which is for the
benefit of one or more Glatfelter family members has an interest. The co-
trustees have no dispositive power with regard to the shares deposited in
the voting trust. The voting trust will continue until it is terminated by
the co-trustees or all of the shares deposited in the voting trust are
withdrawn. The address for each of the co-trustees is c/o PNC Bank,
National Association, 1600 Market Street, Philadelphia, Pa.
(5) Includes 3,000 shares subject to the currently exercisable portions of
options as well as 89,348 shares held as co-trustee with PNC Bank, 901,161
shares (of which 4,416 shares are also included in the number of shares
which he holds as co-trustee) which G. H. Glatfelter has the right to
withdraw from certain trusts of which PNC Bank is trustee and 2,793,810
shares which G. H. Glatfelter has the right, on certain conditions, to
purchase from certain trusts of which PNC Bank is trustee. Except for the
3,000 shares subject to currently exercisable options and 2,306,178 shares
which he has the right to purchase, all shares beneficially owned by G. H.
Glatfelter are deposited in the voting trust (see footnote (4)). Does not
include an additional 1,500 shares subject to options which will become
exercisable on May 1, 2001.
(6) Represents 2,445,900 shares beneficially owned, as of December 31, 2000, by
Dimensional Fund Advisors Inc. (Dimensional). Dimensional, an investment
advisor registered under Section 203 of the Investment Advisors Act of
1940, furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment manager
to certain other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are the "Funds." In its role as
investment adviser or manager, Dimensional possesses voting and/or
investment power over shares that are owned by the Funds. All 2,445,900
shares are owned by the Funds. Dimensional disclaims beneficial ownership
of such shares.
19
22
(7) Includes 3,000 shares subject to the currently exercisable portions of
options. Does not include an additional 1,500 shares subject to options
which will become exercisable on May 1, 2001.
(8) Includes 1,500 shares subject to the currently exercisable portions of
options, as well as 1,014 shares held through a self-directed IRA which is
beneficially owned by P. G. Foulkrod's husband, 1,122 shares held in a
retirement plan of which P. G. Foulkrod's husband is trustee, 989,263
shares held as co-trustee and 899,033 shares which P. G. Foulkrod has the
right to withdraw from a trust of which PNC Bank is trustee. Except for the
1,014 shares held through the IRA and the 1,122 shares held in the
retirement plan, all shares beneficially owned by P. G. Foulkrod are
deposited in the voting trust (see footnote (4)). Does not include an
additional 1,500 shares subject to options which will become exercisable on
May 1, 2001.
(9) Includes 125,740 shares subject to the currently exercisable portions of
options. Of the shares beneficially owned by G. H. Glatfelter II, 5,898 are
held as co-trustee with PNC Bank and are subject to the voting trust (see
footnote (4)).
(10) Includes 58,058 shares subject to the currently exercisable portions of
options.
(11) Includes 9,097 shares subject to the currently exercisable portions of
options.
(12) Includes 65,203 shares subject to currently exercisable portions of
options.
(13) Includes 106,477 shares subject to the currently exercisable portions of
options.
(14) Includes 48,090 shares subject to currently exercisable portions of
options.
(15) Includes 571,512 shares subject to currently exercisable portions of
options.
G. H. Glatfelter, the voting trust, The PNC Financial Services Group, Inc.,
PNC Bancorp, Inc. and PNC Bank, National Association may be deemed to be
"control persons" of the company for purposes of the proxy rules and regulations
of the Securities and Exchange Commission.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Certain officers of the company, namely George H. Glatfelter II, Leland R.
Hall, Robert L. Miller, C. Matthew Smith and Robert S. Wood, each failed to file
on a timely basis one Form 4 covering one transaction by each of them during the
company's most recent fiscal year. Each such individual filed one late Form 4 on
August 17, 2000 to report such transaction.
Robert S. Lawrence, a former officer of the company, failed to file on a
timely basis two Forms 4, each covering one transaction, during the company's
most recent fiscal year. Mr. Lawrence filed one late Form 4 on August 17, 2000
to report one of these transactions and reported the second transaction on a
Form 5 filed on February 9, 2001.
Patricia G. Foulkrod, a director of the company, failed to file on a timely
basis multiple reports required by Section 16(a) of the Securities and Exchange
Act of 1934 covering nine transactions during the company's two most recent
fiscal years. Ms. Foulkrod filed one late Form 4 on March 5, 2001 to report
these nine transactions.
Robert E. Chappell and Nicholas DeBenedictis, directors of the company,
each failed to file on a timely basis one Form 5 covering three transactions by
each of them during the company's most recent fiscal year. Each of Mr. Chappell
and Mr. DeBenedictis filed one late Form 5 on March 14, 2001 to report such
transactions.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors knows of no
business that will be presented for consideration at the annual meeting other
than the items referred to above. If any other matter is properly brought before
the meeting for action by shareholders, which under applicable proxy regulations
need not be included in this proxy statement or which the Board did not know
would be presented a reasonable time before this solicitation, the persons named
in the accompanying proxy will have discretionary authority to vote proxies with
respect to such matter in accordance with their best judgment.
/s/ M.R. MUELLER
M. R. MUELLER,
Secretary
March 19, 2001
21
24
APPENDIX A
P. H. GLATFELTER COMPANY
AUDIT COMMITTEE CHARTER
ROLE
The Audit Committee is responsible to the Board of Directors for oversight
of the quality and integrity of the accounting, auditing, and reporting
practices of the Company and oversight of compliance by the Company with
applicable laws and regulations and its code of conduct and shall perform such
other duties as may be directed by the Board. The Committee shall maintain free
and open communication (including executive sessions at least annually) with the
Company's independent auditors, internal auditors, and management. In
discharging this oversight role, the Committee is empowered to investigate any
matter brought to its attention, with full power to retain outside counsel or
other experts for this purpose.
MEMBERSHIP AND INDEPENDENCE
The membership of the Committee shall consist of at least three directors
who are generally knowledgeable in current financial, accounting and auditing
matters, including at least one member with accounting or related financial
management expertise. Each member shall be free of any relationship that, in the
opinion of the Board, would interfere with his or her individual exercise of
independent judgment, and shall meet the director independence requirements for
serving on audit committees as set forth in the corporate governance standards
of the New York Stock Exchange.
The Chairperson of the Audit Committee, who shall be appointed by the Board
of Directors, shall be responsible for leadership of the Committee, including
preparing agendas for and presiding over meetings, making Committee assignments
and reporting to the Board of Directors. The Chairperson will also maintain
regular liaison with the Chief Executive Officer, Chief Financial Officer and
the internal audit manager of the Company and the lead independent audit
partner.
RESPONSIBILITIES
FINANCIAL REPORTING
- Review the audited financial statements and management's discussion and
analysis of financial condition and results of operations ("MD&A") and
discuss them with management and the independent auditors. These
discussions shall include consideration of the quality of the Company's
accounting policies and principles as applied in its financial reporting,
including review of estimates, reserves and accruals, review of judgment
areas, review of audit adjustments, whether or not recorded, and such
other inquiries as may be appropriate. Based on the review, the Committee
shall make its recommendation to the Board as to the inclusion of the
Company's audited financial statements in the Company's annual report on
Form 10-K.
- Review with management and the independent auditors the quarterly
financial information and MD&A prior to the filing of the Company's
Quarterly Reports on Form 10-Q. This review may be performed by the
Committee or its Chairperson.
- Report Audit Committee activities to the full Board and issue annually a
report (including appropriate oversight conclusions) to be included in
the Company's proxy statement for its annual meeting of shareholders.
A-1
25
INDEPENDENT AUDITORS
- Recommend to the Board annually the independent auditors to be engaged to
audit the financial statements of the Company. In doing so, the Committee
will request from the auditors a written affirmation that they are
independent of the Company, discuss with the auditors any relationships
(including non-audit services) that may impact their independence, and
recommend to the Board any actions necessary to oversee the auditors'
independence.
- Oversee the independent auditors' relationship by discussing with the
auditors the nature, scope and rigor of the audit process, receiving and
reviewing audit reports, and providing the auditors full access to the
Committee (and the Board) to report on appropriate matters.
- Review the management letter from the independent auditors and the
adequacy of management's responses thereto.
CORPORATE GOVERNANCE
- Provide guidance and oversight to the internal audit activities of the
Company, including reviewing the organization, plans and results of such
activities, and providing the internal auditor full access to the
Committee (and the Board) to report on any and all appropriate matters.
- Discuss with management, the internal auditor and the external auditors
the quality and adequacy of the Company's accounting systems (including
their security), internal controls and financial personnel.
- Provide guidance and oversight to the compliance program of the Company.
- Discuss with the Compliance Officer and senior management the status of
pending litigation, taxation matters and other legal and compliance
matters as may be appropriate.
- Review this Charter with the Board of Directors annually.
A-2
26
[RECYCLE LOGO]
Printed on Ecusta Sparlite
Manufactured by the
P. H. Glatfelter Company
Basis 25x38 -- 37 lb. Recycled.
27
PROXY P. H. GLATFELTER COMPANY
YORK, PENNSYLVANIA
------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 25, 2001
The undersigned shareholder of P. H. Glatfelter Company hereby appoints
Robert E. Chappell, Nicholas DeBenedictis and Richard L. Smoot and each of them,
attorneys and proxies, with power of substitution in each of them, to vote and
act for and on behalf of the undersigned at the annual meeting of shareholders
of the Company to be held at the Company's Spring Grove Mill, 228 South Main
Street, Spring Grove, Pennsylvania, on Wednesday, April 25, 2001, and at all
adjournments thereof, according to the number of shares which the undersigned
would be entitled to vote if then personally present, as indicated hereon and in
their discretion upon such other business as may come before the meeting, all as
set forth in the notice of the meeting and in the proxy statement furnished
herewith, copies of which have been received by the undersigned; and hereby
ratifies and confirms all that said attorneys and proxies may do or cause to be
done by virtue hereof.
IT IS AGREED THAT UNLESS OTHERWISE MARKED ON THE OTHER SIDE SAID ATTORNEYS
AND PROXIES ARE APPOINTED WITH AUTHORITY TO VOTE FOR THE ELECTION OF DIRECTORS.
(PLEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE)
(Continued and to be signed on reverse side)
28
X Please mark your
votes as in this
example.
VOTE for all
nominees listed VOTE
at right, except as WITHHELD
indicated below for all nominees
1. Election of
Directors:
THE BOARD OF DIRECTORS RECOMMENDS VOTING `FOR' THE NOMINEES.
NOMINEES: Term Expiring in 2004:
Robert P. Newcomer
John M. Sanzo
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature Date Signature
---------------------- ---------- --------------------
IF HELD JOINTLY
Date
----------
NOTE: Signature should be the same as the name printed above. Executors,
administrators, trustees, guardians, attorneys, and officers of corporations
should add their title when signing.
2