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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________to______________________
Commission File No. 1-3560
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P. H. GLATFELTER COMPANY
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-0628360
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
96 South George Street, Suite 500, York, Pennsylvania 17401
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(Address of principal executive offices) (Zip Code)
(717) 225-4711
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No .
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Shares of Common Stock outstanding at July 31, 2001 were 42,626,980.
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P. H. GLATFELTER COMPANY
INDEX
Part I - Financial Information
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Financial Statements (Unaudited):
Condensed Consolidated Statements of Income (Loss) -
Three Months and Six Months Ended June 30, 2001 and 2000.......3
Condensed Consolidated Balance Sheets - June 30, 2001
and December 31, 2000..........................................4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2000........................5
Notes to Condensed Consolidated Financial Statements..................6
Independent Accountants' Report...............................................13
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................14
Quantitative and Qualitative Disclosures About Market Risk....................20
Part II - Other Information...................................................20
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Signature.....................................................................22
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Index of Exhibits.............................................................23
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share amounts)
(UNAUDITED)
Three Months Ended Six Months Ended
6/30/01 6/30/00 6/30/01 6/30/00
--------- --------- --------- ---------
Revenues:
Net sales $ 170,287 $ 184,397 $ 355,933 $ 372,055
Other income - net:
Energy sales - net 2,402 1,362 4,714 3,828
Interest on investments
and other - net 961 701 2,339 1,989
Gain from property
dispositions, etc. - net 595 459 1,095 767
--------- --------- --------- ---------
3,958 2,522 8,148 6,584
Total revenues 174,245 186,919 364,081 378,639
Costs and expenses:
Cost of products sold 138,060 144,553 283,981 298,704
Selling, general and
administrative expenses 15,082 16,610 30,582 29,713
Interest on debt 3,802 3,997 8,244 8,377
Unusual items 52,500 -- 52,500 3,336
--------- --------- --------- ---------
209,444 165,160 375,307 340,130
Income (loss) before income taxes (35,199) 21,759 (11,226) 38,509
Income tax provision (benefit):
Current (5,601) 4,835 673 9,325
Deferred (7,126) 2,886 (4,791) 4,502
--------- --------- --------- ---------
Total (12,727) 7,721 (4,118) 13,827
Net income (loss) $ (22,472) $ 14,038 $ (7,108) $ 24,682
========= ========= ========= =========
Basic and diluted earnings (loss) per share $ (0.53) $ 0.33 $ (0.17) $ 0.58
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
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P. H. GLATFELTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(UNAUDITED)
ASSETS
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6/30/01 12/31/00
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Current assets:
Cash and cash equivalents $ 96,933 $ 110,552
Accounts receivable - net 82,726 72,231
Inventories:
Raw materials 25,266 27,789
In-process and finished 43,527 43,819
Supplies 28,865 29,686
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Total inventories 97,658 101,294
Prepaid expenses and other current assets 2,700 2,547
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Total current assets 280,017 286,624
Plant, equipment and timberlands - net 493,612 552,768
Other assets 185,636 173,799
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Total assets $ 959,265 $ 1,013,191
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Current portion of long-term debt $ 1,294 $ 1,419
Short-term debt 2,943 5,158
Accounts payable 41,449 45,869
Dividends payable 7,455 7,430
Income taxes payable 1,140 7,328
Accrued compensation and other expenses
and deferred income taxes 52,147 51,980
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Total current liabilities 106,428 119,184
Long-term debt 284,440 300,245
Deferred income taxes 150,507 155,360
Other long-term liabilities 66,118 65,699
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Total liabilities 607,493 640,488
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Commitments and contingencies
Shareholders' equity:
Common stock 544 544
Capital in excess of par value 41,220 41,669
Retained earnings 489,027 511,019
Accumulated other comprehensive loss (4,412) (2,843)
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Total 526,379 550,389
Less cost of common stock in treasury (174,607) (177,686)
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Total shareholders' equity 351,772 372,703
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Total liabilities and
shareholders' equity $ 959,265 $ 1,013,191
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See accompanying notes to condensed consolidated financial statements.
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P. H. GLATFELTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
Six Months Ended
6/30/01 6/30/00
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Cash flows from operating activities:
Net income (loss) $ (7,108) $ 24,682
Items included in net income (loss) not using cash:
Depreciation, depletion and amortization 22,924 23,755
Loss (gain) on disposition of fixed assets (333) 452
Loss on impairment of fixed assets 49,100 --
Expense related to 401(k) plans 1,221 994
Change in assets and liabilities:
Accounts receivable (13,259) (11,501)
Inventories 1,296 8,820
Other assets and prepaid expenses (13,130) (14,909)
Accounts payable, accrued compensation and
other expenses, deferred income taxes
and other long-term liabilities 6,004 (664)
Income taxes payable (14,488) 1,658
Deferred income taxes - noncurrent (4,507) 6,029
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Net cash provided by operating activities 27,720 39,316
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Cash flows from investing activities:
Proceeds from disposal of fixed assets 570 107
Additions to plant, equipment and timberlands (23,398) (9,390)
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Net cash used in investing activities (22,828) (9,283)
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Cash flows from financing activities:
Net payment of debt (4,847) (4,203)
Dividends paid (14,847) (14,796)
Proceeds from stock option exercises 1,468 40
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Net cash used in financing activities (18,226) (18,959)
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Effect of exchange rate changes on cash (285) 35
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Net increase (decrease) in cash and cash equivalents (13,619) 11,109
Cash and cash equivalents:
At beginning of year 110,552 76,035
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At end of period $ 96,933 $ 87,144
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Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 8,264 $ 8,621
Income taxes 12,802 8,431
See accompanying notes to condensed consolidated financial statements.
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P. H. GLATFELTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share excludes the dilutive impact of common
stock equivalents and is computed by dividing net income (loss) by the
weighted-average number of shares of common stock outstanding for the
period. Diluted earnings (loss) per share includes the effect of
potential dilution from the issuance of common stock, pursuant to
common stock equivalents, using the treasury stock method. A
reconciliation of the Registrant's basic and diluted earnings (loss)
per share follows with the dollar and share amounts in thousands:
Three Months Ended Six Months Ended
June 30 June 30
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2001 2000 2001 2000
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Shares Shares Shares Shares
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Basic per-share factors 42,514 42,318 42,466 42,293
Effect of potentially dilutive employee incentive plans:
Restricted stock awards -- 145 31 101
Performance stock awards -- 43 6 43
Employee stock options -- -- 43 --
-------- -------- -------- --------
Diluted per-share factors 42,514 42,506 42,546 42,437
======== ======== ======== ========
Net income (loss) $(22,472) $ 14,038 $ (7,108) $ 24,682
Basic and diluted earnings
(loss) per share $ (0.53) $ 0.33 $ (0.17) $ 0.58
Fully diluted loss per share is not presented for the three months and
six months ended June 30, 2001 as the Registrant incurred a net loss,
which causes potentially dilutive shares to be antidilutive. An
aggregate of 447,000 and 254,000 potentially dilutive shares have been
excluded from the computation of diluted loss per share for the second
quarter of 2001 and the first six months of 2001, respectively.
Basic and diluted loss per share of $.53 and $.17 for the three months
and six months ended June 30, 2001, respectively, as presented on the
Condensed Consolidated Statements of Loss, reflects the negative impact
of an after-tax impairment charge and a settlement of an environmental
matter (unusual items) of $.79 per share (see Note 2).
Basic and diluted earnings per share of $.58 for the six months ended
June 30, 2000, as presented on the Condensed Consolidated Statement of
Income, reflects the negative impact of an after-tax restructuring
charge (unusual item) of $.05 per share (see Note 2).
2. UNUSUAL ITEMS
On May 16, 2001, the Registrant announced it had entered into an
agreement to sell its Ecusta mill and two of its operating subsidiaries
("Ecusta Division"). On that date, the assets of the Ecusta Division
were reclassified as assets held-for-disposal, and thus the carrying
amount of these assets was reduced to fair value. The resulting pre-tax
impairment charge relating to these assets was $50,000,000. The
Registrant also
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recognized a $2,500,000 pre-tax charge in the second quarter of 2001
due to the settlement of an environmental matter in connection with the
Spring Grove facility's wastewater discharge permit (see Note 7). The
Registrant's total charge to earnings due to unusual items in the
second quarter of 2001 was $52,500,000 ($33,595,000 after tax).
The Registrant announced in September 1999 that, effective January 1,
2000, prices would be increased for certain of its tobacco paper
products. As the Registrant expected, certain tobacco paper customers
sought other suppliers after this announcement. During the first
quarter of 2000, the Registrant finalized a restructuring plan
decreasing its tobacco paper manufacturing capacity. This plan involved
a workforce reduction that has since been completed, resulting in the
decrease of approximately 220 salaried and hourly jobs. The Registrant
incurred a charge of $3,336,000 ($2,120,000 after tax) in the first
quarter of 2000 primarily as a result of the voluntary portion,
specifically 42 salaried employees, of this restructuring. The amount
of actual termination benefits paid and charged against the liability
as of June 30, 2001 was $801,000. The Registrant's liability remains
unaffected by the sale of the Ecusta Division (see Note 8).
3. RECENT ACCOUNTING PRONOUNCEMENTS AND RECLASSIFICATIONS
On July 20, 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." The effective dates of these Statements are July 1, 2001 and
January 1, 2002, respectively. The Registrant is evaluating the effects
of adopting these Statements but does not believe such adoption will
materially impact the Registrant's consolidated financial position and
results of operations.
On January 1, 2001, the Registrant adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended and interpreted, establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. All
derivatives, whether designated in hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the
derivative is designated in a fair-value hedge, changes in the fair-
value of the derivative and the hedged item are recognized in earnings.
If the derivative is designated in a cash-flow hedge, changes in the
fair value of the derivative are recorded in other comprehensive income
("OCI") and are recognized in the income statement when the hedged item
affects earnings. SFAS No. 133 defines new requirements for designation
and documentation of hedging relationships, as well as ongoing
effectiveness assessments and measurements to use hedge accounting. The
ineffective portion of a hedging derivative's change in fair value is
immediately recognized in earnings. For a derivative that does not
qualify as a hedge, changes in fair value are recognized in earnings.
The adoption of SFAS No. 133 on January 1, 2001 resulted in an $845,000
increase in OCI as a cumulative transition adjustment for derivatives
designated in cash flow-type hedges prior to adopting SFAS No. 133. Due
to the Registrant's limited use of derivative instruments, the effect
on earnings of adopting SFAS No. 133 was immaterial.
During the fourth quarter of 2000, the Registrant adopted the
provisions of the Emerging Issues Task Force ("EITF") Issue No. 00-10,
"Accounting for Shipping and Handling Fees and Costs." In accordance
with the provisions of EITF 00-10, certain shipping and handling costs
that the Registrant had previously recorded as a deduction in
determining net sales have been reclassified as cost of products sold.
As a result of adopting EITF 00-10,
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the Registrant has reclassified such shipping and handling costs on its
Condensed Consolidated Statements of Income for the three months and
six months ended June 30, 2000 to reflect comparable reporting.
4. INTEREST RATE SWAP AGREEMENTS
In January 1999, the Registrant entered into two interest rate swap
agreements, each having a total notional principal amount of DM
50,000,000 (approximately $21,700,000 as of June 30, 2001). Under these
agreements, which were effective April 6, 1999 and July 6, 1999 and
which expire December 22, 2002, the Registrant receives a floating rate
of the three-month DM London Interbank Offered Rate ("LIBOR") plus
twenty basis points and pays a fixed rate of 3.41% and 3.43%,
respectively, for the term of the agreements.
The Registrant's interest rate swap agreements convert a portion of the
Registrant's borrowings from a floating-rate to a fixed-rate basis.
Although the Registrant can terminate its swap agreements at any time,
the Registrant intends to hold its swap agreements until maturity.
5. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) was $(24,836,000) and $13,429,000 for the
second quarter of 2001 and 2000, respectively, and $(8,677,000) and
$23,611,000 for the first six months of 2001 and 2000, respectively.
Comprehensive income (loss) includes the effects of changes in (1)
certain currency exchange rates relative to the U.S. dollar and (2) the
fair value of derivative instruments held by the Registrant (see Note
3).
6. DIRECTORS' COMPENSATION
On May 1, 2001, the Registrant granted to each non-employee member of
its Board of Directors options to purchase 1,500 shares of common stock
for a total of 12,000 options granted. Such options become exercisable
on May 1, 2002 at an exercise price of $14.44, which represents the
average quoted market price of the Registrant's common stock on the
date of grant. The options expire on April 30, 2011.
7. COMMITMENTS AND CONTINGENCIES
The Registrant is subject to loss contingencies resulting from
regulation by various federal, state, local and foreign governmental
authorities with respect to the environmental impact of air and water
emissions and noise from its mills, as well as the disposal of solid
waste generated by its operations. To comply with environmental laws
and regulations, the Registrant has incurred substantial capital and
operating expenditures in past years. The Registrant anticipates that
environmental regulation of its operations will continue to become more
burdensome and that capital and operating expenditures will continue,
and perhaps increase, in the future. In addition, the Registrant may
incur obligations to remove or mitigate any adverse effects on the
environment resulting from its operations, including the restoration of
natural resources, and liability for personal injury and damage to
property, including natural resources. Because environmental
regulations are not consistent worldwide, the Registrant's ability to
compete in the world marketplace may be adversely affected by capital
and operating expenditures required for environmental compliance.
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Subject to permit approval, the Registrant has undertaken an initiative
under the Voluntary Advanced Technical Incentive Program of the United
States Environmental Protection Agency ("EPA") to comply with the new
"Cluster Rule" regulations. This initiative, the Registrant's "New
Century Project," will require capital expenditures currently estimated
at approximately $30,000,000 to be incurred before April 2004. The
Registrant expects such expenditures to begin during the first quarter
of 2002.
On September 7, 2000, the Pennsylvania Department of Environmental
Protection ("DEP") issued to the Registrant a renewed wastewater
discharge permit for the Spring Grove mill with an effective date of
October 1, 2000. The renewed permit calls for reductions in the mill's
discharge of color that the Registrant believes cannot be achieved at
this time without a curtailment of operations. On September 7, 2000,
DEP also issued to the Registrant an administrative order calling for
achievement of the limitations in the permit on a schedule extending
until 2007. Both the permit and the order contemplate adoption of an
alternative limitation on color which would be less stringent. The
Registrant expects to be able to meet the alternative limitation
without a curtailment of operations under the schedule set forth in the
order. Under the schedule set forth in the permit, however, the
Registrant would not have been able to meet the alternative limitation
without a curtailment of operations. The Registrant has appealed the
permit and the order to the Pennsylvania Environmental Hearing Board.
After an evidentiary hearing, the Board granted a stay of the permit
limitation during the pendency of the appeal. The Board did not grant a
stay of the alternative limitation because it is not yet in effect, and
will not come into effect until a change in the Pennsylvania Water
Quality Standard for color is approved; in this case, "approval"
includes an approval by EPA. The Pennsylvania Public Interest Research
Group and several other parties (collectively "Penn PIRG") have
appealed the alternative limitation and have also intervened in the
Registrant's appeal of the permit. The Registrant has reached a
conditional settlement of these administrative matters subject to the
settlement of the Penn PIRG litigation described below. If that
litigation is settled on the terms currently agreed to, the Registrant
expects to receive a revised permit calling for achievement of the less
stringent alternative limitation for color by April 2004.
In June 1999, Penn PIRG brought a citizen suit under the Federal Clean
Water Act and Pennsylvania Clean Streams Law seeking a reduction in the
Spring Grove mill's discharge of color, civil penalties and
reimbursement for costs of litigation. On February 7, 2001, the United
States District Court granted partial summary judgment on liability to
plaintiffs as to certain claims and granted summary judgment to the
Registrant on others. The Registrant moved for reconsideration, and the
case was stayed pending settlement discussions. The parties have
reached a conditional settlement of this case. Under the terms of the
settlement, to which the Pennsylvania DEP will become a party, the
Registrant agrees to achieve the less stringent alternative limitation
for color by April 2004. In addition, the Registrant will create a
permanent endowment for certain environmental and recreational
improvement projects in the Codorus Creek watershed, and the Registrant
will pay Penn PIRG certain amounts that it claims it incurred in
litigation expenses related to this lawsuit. The total cost to the
Registrant under this settlement is $2,500,000 (see Note 2). A federal
consent decree that sets forth some of the terms of this integrated
settlement is in the process of execution by the parties. The consent
decree must be submitted to the United States Department of Justice for
review and then to the Court for review and entry. As the result of
those reviews, the terms of the settlement may change, or the consent
decree may not be entered by the Court.
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In 1999, EPA and DEP issued to the Registrant separate Notices of
Violation ("NOVs") alleging violations of the federal and state air
pollution control laws, primarily for purportedly failing to obtain
appropriate preconstruction air quality permits in conjunction with
certain modifications to the Registrant's Spring Grove mill. EPA
announced that the Registrant was one of seven pulp and paper mill
operators to have received contemporaneously an NOV alleging this kind
of violation. EPA and DEP alleged that the Registrant's modifications
produced (1) significant net emissions increases in certain air
pollutants which should have been covered by appropriate permits
imposing new emissions limitations, and (2) certain other violations.
For all but one of the modifications cited by EPA, the Registrant
applied for and obtained from DEP the preconstruction permits which the
Registrant concluded were required by applicable law. EPA reviewed
those applications before the permits were issued. DEP's NOV pertained
only to the modification for which the Registrant did not receive a
preconstruction permit. The Registrant conducted an evaluation at the
time of this modification, and determined that the preconstruction
permit cited by EPA and DEP was not required. The Registrant has been
informed that EPA and DEP will seek substantial emissions reductions,
as well as civil penalties, to which the Registrant believes it has
meritorious defenses. Nevertheless, the Registrant is unable to predict
the ultimate outcome of these matters or the costs involved.
The Registrant faces several related threatened claims arising out of
the presence of polychlorinated biphenyls ("PCBs") in sediments in the
Fox River below Lake Winnebago and in Green Bay, downstream of the
Registrant's Neenah mill. As described below, various sovereigns have
formally notified seven potentially responsible parties ("PRPs"), of
which the Registrant is one, that they are potentially responsible for
investigation, cleanup and natural resource damages arising from this
contamination under the federal Comprehensive Environmental Response,
Compensation and Liability Act and other laws.
The Wisconsin Department of Natural Resources ("DNR") notified the
Registrant and other PRPs informally in 1990 that it wished to pursue
cleanup of certain sediments in the Fox River under state law. DNR
subsequently asserted claims under federal law as well for cleanup and
for natural resource damages. Since 1998, DNR has been performing a
remedial investigation and feasibility study ("RI/FS") of the Fox River
and Green Bay under contract to the EPA. In February 1999, DNR issued a
draft RI/FS report estimating the costs of potential remedies for the
Fox River at between $0 and $721,000,000, but did not select a
preferred remedy. The Registrant does not believe that the no action
remedy will be selected. The largest components of the costs of certain
of the remedial alternatives are attributable to large-scale sediment
removal by dredging. There is no assurance that the cost estimates in
the draft RI/FS will not differ significantly from actual costs. Under
ordinary procedures, the final RI/FS report will be issued along with a
proposed remedial action plan ("PRAP"). EPA will consider comments on
the PRAP and then will select a remedy for the site. EPA and DNR had
stated publicly that the final RI/FS would be issued in 2000. The
expected date of issuance was subsequently delayed to the spring of
2001 and has now been further delayed until September 2001.
Based on current information and advice from its environmental
consultants, the Registrant continues to believe that an aggressive
effort, as included in certain remedial alternatives in the draft
RI/FS, to remove PCB-contaminated sediment, much of which is buried
under cleaner material or is otherwise unlikely to move and which is
abating naturally, would be environmentally detrimental and, therefore,
inappropriate.
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In January 1997, DNR, the Wisconsin Department of Justice ("WDOJ"), and
the seven PRPs entered into an agreement to conduct a cooperative
natural resource damages assessment ("NRDA"). The State of Wisconsin
has notified the Registrant that it intends to terminate the agreement
effective August 15, 2001. While that NRDA has not been completed,
based upon work conducted to date, DNR and WDOJ have proposed to enter
into a settlement with another PRP of its share of the natural resource
damages liability. The proposed settlement does not state explicitly
the total amount of natural resource damages, but it calls for such
other PRP to spend $7,000,000 on resource restoration projects.
The United States Fish and Wildlife Service ("FWS"), the National
Oceanic and Atmospheric Administration ("NOAA"), four Indian tribes and
the Michigan Attorney General claim to be trustees for natural
resources injured by the PCBs in the Fox River and Green Bay. In June
1994, FWS notified the Registrant and other PRPs that it considered
them potentially responsible for natural resource damages. The federal,
tribal and Michigan agencies claiming to be trustees have proceeded
with the preparation of an NRDA separate from the work performed by
DNR. While the final report of assessment will be delayed until after
selection of a remedy for the site, on October 25, 2000, the federal
trustees released a restoration and compensation determination plan
("RCDP") that estimates natural resource damages for the site at
between $176,000,000 and $333,000,000.
The Registrant is seeking settlement with the Wisconsin agencies and
with EPA for all of its liabilities for response actions and natural
resource damages associated with the site. The Registrant believes that
the federal, tribal and Michigan natural resource damages claims are
without merit, and that the federal NRDA is technically and
procedurally flawed. The Registrant further maintains that its share of
any liability as among the seven identified PRPs is much less than
one-seventh and that additional responsible parties exist other than
the seven identified by the governments.
The Registrant currently is unable to predict the ultimate costs to the
Registrant related to this matter, because the Registrant cannot
predict which remedy will be selected for the site or the ultimate
amount of natural resource damages nor can the Registrant predict its
share of these costs or damages.
The Registrant continues to believe it is likely that this matter will
result in litigation; however, the Registrant believes it will be able
to persuade a court that removal of a substantial amount of
PCB-contaminated sediments is not an appropriate remedy. There can be
no assurance, however, that the Registrant will be successful in
arguing that removal of PCB-contaminated sediments is inappropriate or
that it would prevail in any resulting litigation.
The amount and timing of future expenditures for environmental
compliance, cleanup, remediation and personal injury, natural resource
damage and property damage liability, including but not limited to
those related to the lower Fox River and the Bay of Green Bay, cannot
be ascertained with any certainty due to, among other things, the
unknown extent and nature of any contamination, the extent and timing
of any technological advances for pollution control, the remedial
actions which may be required and the number and financial resources of
any other PRPs. The Registrant continues to evaluate its exposure and
the level of its reserves, including, but not limited to, its share of
the costs and damages (if any) associated with the lower Fox River and
the Bay of Green Bay. The Registrant believes that it is insured
against certain losses related to the lower Fox River, depending on the
nature and amount thereof. Coverage, which is currently being
investigated under reservation of rights by various insurance
companies, is
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dependent upon the identity of the plaintiff, the procedural posture of
the claims asserted and how such claims are characterized. The
Registrant does not know when the insurers' investigation as to
coverage will be completed.
The Registrant's current assessment, after consultation with legal
counsel, is that ultimately it should be able to resolve these
environmental matters without a long-term, material adverse impact on
the Registrant. In the meantime, however, these matters could, at any
particular time or for any particular period, have a material adverse
effect on the Registrant's consolidated financial condition, liquidity
or results of operations or result in a default under the Registrant's
loan covenants. Moreover, there can be no assurance that the
Registrant's reserves will be adequate to provide for future
obligations related to these matters, that the Registrant's share of
costs and/or damages for these matters will not exceed its available
resources or that such obligations will not have a long-term, material
adverse effect on the Registrant's consolidated financial condition,
liquidity or results of operations.
8. SUBSEQUENT EVENT
On August 9, 2001, the Registrant completed the sale of its Ecusta
Division and certain of the Registrant's receivables for a reduced cash
price of approximately $24,000,000, plus the assumption of certain
liabilities related to Ecusta's business. The cash price is $15,000,000
lower than the amount announced on May 16, 2001 due to changes in
certain aspects of Ecusta's business. The cash price is subject to
adjustments for working capital and final settlement of the closing
balance sheet.
During the third quarter of 2001, a gain primarily related to the
settlement of pension obligations will be approximately offset by the
impact of the reduction of the cash price. Any post-closing adjustments
to the purchase price required under the acquisition agreement will be
recorded by year end.
As of August 6, 2001, in connection with the Ecusta transaction, the
Registrant amended its $200,000,000 multi-currency revolving credit
facility to reflect changes to certain financial covenants and other
matters.
9. DISCLOSURE STATEMENT
In the opinion of the Registrant, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which
comprise only normal recurring accruals) necessary for a fair
presentation of the financial information contained therein. These
unaudited condensed consolidated financial statements should be read in
conjunction with the more complete disclosures contained in the
Registrant's Annual Report on Form 10-K for the year ended December 31,
2000.
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INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
P. H. Glatfelter Company:
We have reviewed the accompanying condensed consolidated balance sheet of P. H.
Glatfelter Company and subsidiaries as of June 30, 2001, the related condensed
consolidated statements of income (loss) for the three months and six months
ended June 30, 2001 and 2000, and the related condensed consolidated statements
of cash flows for the six months ended June 30, 2001 and 2000. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of P.
H. Glatfelter Company and subsidiaries as of December 31, 2000, and the related
consolidated statements of income and comprehensive income, shareholders' equity
and cash flows for the year then ended (not presented herein); and in our report
dated February 2, 2001, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2000 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
As discussed in Note 3 to the condensed consolidated financial statements, the
Company changed its method of accounting for derivative financial instruments as
of January 1, 2001.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
July 18, 2001, except for Note 8 as to
which the date is August 9, 2001
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion and analysis contains forward-looking statements. See
"Cautionary Statement" set forth in Item 5.
RESULTS OF OPERATIONS
A summary of the period-to-period changes in the principal items included in the
Condensed Consolidated Statements of Income (Loss) is shown below.
Comparison of
----------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, 2001 and 2000 June 30, 2001 and 2000
--------------------------- ----------------------------
Increase (Decrease)
(dollars in thousands)
Net sales $(14,110) (7.7)% $(16,122) (4.3)%
Other income - net 1,436 56.9% 1,564 23.8%
Cost of products sold (6,493) (4.5)% (14,723) (4.9)%
Selling, general and
administrative expenses (1,528) (9.2)% 869 2.9%
Interest on debt (195) (4.9)% (133) (1.6)%
Income tax provision (20,448) (264.8)% (17,945) (129.8)%
Net income (36,510) (260.1)% (31,790) (128.8)%
Net Sales
- ---------
Net sales decreased $14,110,000, or 7.7%, for the second quarter of 2001
compared to the second quarter of 2000 due primarily to lower sales volume. Such
lower volume was due primarily to the Registrant's Spring Grove facility's
annual scheduled maintenance shutdown occurring in June in 2001, whereas the
2000 shutdown occurred in July. Production and sales volume are reduced during
such shutdowns. Lower sales volume was also caused by weaker demand for the
Registrant's products stemming from unfavorable general economic conditions.
Lower average net selling prices also contributed to a decrease in net sales.
Net sales for the first six months of 2001 decreased $16,122,000, or 4.3%,
compared to the like period of 2000. This decrease was due to lower volume also
resulting from the annual Spring Grove shutdown and unfavorable general economic
conditions.
The Registrant classifies its sales into two product groups: specialized
printing papers and engineered papers (which includes tobacco papers). Net sales
of specialized printing papers decreased 8.7% in the second quarter of 2001
compared to the second quarter of 2000 due to a 5.3% decrease in sales volume
and a 3.6% decrease in average net selling prices. Net sales of specialized
printing papers for the first six months of 2001 decreased 3.7% from the
corresponding period of 2000. This decrease was due to a 3.2% reduction in sales
volume, in addition to a 0.5% decrease in average net selling prices. The
Registrant expects demand for its specialized printing papers to strengthen in
the second half of 2001.
Net sales of engineered papers, excluding tobacco papers, decreased 7.1% and
1.0% in the second quarter and first six months of 2001, respectively, versus
the like periods of 2000 due almost entirely to decreased sales volume. Average
net selling prices decreased slightly for both the three months and six months
ended June 30, 2001 compared to the like periods of 2000. Although it is
difficult to characterize such engineered papers in terms of demand trends and
pricing due to the fragmentation and small size of markets within this group,
certain markets have experienced weakening demand and some reduction in selling
prices. On an overall basis, demand is steady and selling prices are fairly
stable.
Net sales of tobacco papers decreased 3.9% in the second quarter of 2001
compared to the second quarter of 2000 due to a 9.1% decrease in average net
selling prices, partly offset by a 5.6% increase in sales volume. Net sales of
tobacco
14
15
papers for the first six months of 2001 decreased 11.4% versus the corresponding
period of 2000. This decrease was due to a 6.2% decrease in average net selling
prices, resulting from a weaker mix of products sold, and a 5.5% decrease in
sales volume. As a result of the weakening of the tobacco papers market, the
Registrant announced its intent to sell its Ecusta Division (see Note 2 to the
Registrant's unaudited condensed consolidated financial statements). The
Registrant's Gernsbach, Germany mill will transition its tobacco papers
production to other products over the next few years.
Other Income - Net
- ------------------
Other income - net increased $1,436,000, or 56.9%, and $1,564,000, or 23.8%, for
the second quarter and first six months of 2001, respectively, compared to the
corresponding periods of 2000. Energy sales - net increased $1,040,000 and
$886,000 for the three months and six months ended June 30, 2001 versus the
comparable periods in 2000. Approximately one and one-half months of energy
sales were lost in the second quarter of 2000 due to equipment problems at the
Registrant's Spring Grove mill. Interest on investments and other - net
increased $260,000 and $350,000 in the second quarter of 2001 and the first half
of 2001, respectively, versus the same periods in 2000 as a result of higher
average cash balances.
Cost of Products Sold and Gross Margin
- --------------------------------------
Cost of products sold decreased $6,493,000, or 4.5%, for the second quarter of
2001 versus the second quarter of 2000 and decreased $14,723,000, or 4.9%, for
the first half of 2001 versus the first half of 2000 due primarily to decreased
sales resulting from the annual shutdown occurring in June rather than July.
Cost of products sold also decreased due to lower raw material costs,
specifically market pulp and wastepaper. Market pulp prices have dropped
steadily from January 2001 through August 2001. The Registrant expects that
market pulp prices will remain constant throughout the remainder of the year.
Partially offsetting the above decreases in costs were higher energy costs due
to rising natural gas, fuel oil and coal prices. Further, the annual shutdown
and subsequent start-up of equipment resulted in higher maintenance costs and
production inefficiencies. Wages and benefits also increased resulting from the
Registrant's contractual obligations to its hourly workforce.
The Registrant continued to realize the benefits of its cash savings project,
known as "DRIVE," through the second quarter of 2001. Such savings began in the
second quarter of 2000. The Registrant remains on pace to achieve its DRIVE
target, excluding the Ecusta Division, of $40,000,000 in sustainable annual cash
savings. As of June 30, 2001, the Registrant had implemented portions of the
DRIVE project that will realize approximately $36,000,000 per year in
sustainable cash savings.
Income resulting from the overfunded status of the Registrant's defined benefit
pension plans and other postretirement benefit plans decreased cost of products
sold by $5,808,000 and $6,607,000 for the second quarter of 2001 and the same
quarter of 2000, respectively. Pension income decreased cost of products sold by
$12,875,000 and $11,888,000 for the first half of 2001 and the like period of
2000, respectively. The improved level of pension income for the first six
months of 2001 was primarily the result of the long-term investment performance
of the plans' assets.
Cost of products sold per ton increased 0.3% for the second quarter of 2001
versus the same period of 2000, resulting in a decrease in gross margin per ton
of 15.1%. Conversely, for the first half of 2001 versus the same period of 2000,
cost of products sold per ton decreased 2.1% resulting in an increase in gross
margin per ton of 1.0%.
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16
As a result of the aforementioned items, gross margin as a percentage of net
sales decreased to 18.9% for the second quarter of 2001 from 21.6% for the like
quarter of 2000. For the first six months of 2001 gross margin as a percentage
of sales increased to 20.2% from 19.7% for the first six months of 2000.
Selling, General and Administrative ("SG&A") Expenses
- -----------------------------------------------------
SG&A expenses for the second quarter of 2001 were $1,528,000, or 9.2%, lower
than the second quarter of 2000. Consulting fees were incurred in the second
quarter of 2000, primarily related to the Registrant's DRIVE project; no
consulting fees regarding the DRIVE project were incurred in the second quarter
of 2001. For the first half of 2001, SG&A expenses increased $869,000, or 2.9%,
from SG&A expenses for the like period of 2000 primarily due to increased legal
and professional fees and incentive compensation costs. Such compensation costs
increased as the market price for the Registrant's stock increased substantially
in 2001, thereby increasing the costs of its stock-based incentive plans.
Pension income reduced SG&A expenses by $1,300,000 and $1,359,000 for the second
quarter of 2001 and the same quarter of 2000, respectively, and by $2,881,000
and $2,433,000 for the first six months of 2001 and 2000, respectively.
Interest on Debt - Net
- ----------------------
Interest on debt - net decreased $195,000, or 4.9%, for the three months ended
June 30, 2001 and decreased $133,000, or 1.6%, for the first half of 2001 versus
the comparable periods of 2000 primarily because the Registrant held lower
average debt balances due principally to net payment of debt. In addition,
interest on debt - net decreased as interest denominated in Deutsche marks was
translated to a stronger U.S. dollar for the periods indicated.
UNUSUAL ITEMS
- -------------
On May 16, 2001, the Registrant announced it had entered into an agreement to
sell its Ecusta mill and two of its operating subsidiaries ("Ecusta Division").
On that date, the assets of the Ecusta Division were reclassified as assets
held-for-disposal, and thus the carrying amount of these assets was reduced to
fair value. The resulting pre-tax impairment charge relating to these assets was
$50,000,000. The Registrant also recognized a $2,500,000 pre-tax charge in the
second quarter of 2001 due to the settlement of an environmental matter in
connection with the Spring Grove facility's wastewater discharge permit (see
Note 7 to the Registrant's unaudited condensed consolidated financial
statements). The Registrant's total charge to earnings due to unusual items in
the second quarter of 2001 was $52,500,000 ($33,595,000 after tax).
The Registrant announced in September 1999 that, effective January 1, 2000,
prices would be increased for certain of its tobacco paper products. As the
Registrant expected, certain tobacco paper customers sought other suppliers
after this announcement. During the first quarter of 2000, the Registrant
finalized a restructuring plan decreasing its tobacco paper manufacturing
capacity. This plan involved a workforce reduction that has since been
completed, resulting in the decrease of approximately 220 salaried and hourly
jobs. The Registrant incurred a charge of $3,336,000 ($2,120,000 after tax) in
the first quarter of 2000 primarily as a result of the voluntary portion,
specifically 42 salaried employees, of this restructuring. The amount of actual
termination benefits paid and charged against the liability as of June 30, 2001
was $801,000. The Registrant's liability remains unaffected by the sale of the
Ecusta Division (see Note 8 to the Registrant's unaudited condensed consolidated
financial statements).
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17
SUBSEQUENT EVENT
- ----------------
On August 9, 2001, the Registrant completed the sale of its Ecusta Division and
certain of the Registrant's receivables for a reduced cash price of
approximately $24,000,000, plus the assumption of certain liabilities related to
Ecusta's business. The cash price is $15,000,000 lower than the amount announced
on May 16, 2001 due to changes in certain aspects of Ecusta's business. The
cash price is subject to adjustments for working capital and final settlement of
the closing balance sheet.
The Registrant believes that the consummation of this transaction will not have
a significant impact on third quarter 2001 results. During the third quarter, a
gain primarily related to the settlement of pension obligations will be
approximately offset by the impact of the reduction of the cash price. Any
post-closing adjustments to the purchase price required under the acquisition
agreement will be recorded by year end. The transaction will also be modestly
dilutive to earnings exclusive of any one-time net charges.
As of August 6, 2001, in connection with the Ecusta transaction, the Registrant
amended its $200,000,000 multi-currency revolving credit facility ("Revolving
Credit Facility") to reflect changes to certain financial covenants and other
matters.
IMPACT PROJECT
- --------------
In July 2000, the Registrant initiated its IMPACT project, which is focused on
identifying and implementing changes to the Registrant's organization and its
business processes. The initial phase, the preliminary design work, has been
completed. The second phase of the IMPACT project, which includes the
installation of an enterprise resource planning system, is underway and is
expected to extend over the next few years. Total spending on the IMPACT project
is expected to be approximately $49,000,000, of which approximately $45,000,000
is capital related. During 2000, the Registrant capitalized approximately
$5,200,000 on the IMPACT project. During the six months ended June 30, 2001, the
Registrant capitalized $7,200,000 related to this project.
FINANCIAL CONDITION
- -------------------
Liquidity
- ---------
Cash and cash equivalents decreased $13,619,000 during the first six months of
2001 principally due to cash used in investing activities and financing
activities of $22,828,000 and $18,226,000, respectively. Cash used in investing
activities was primarily for additions to plant, equipment and timberlands, and
cash used in financing activities was principally for dividend payments and net
payment of debt. Cash used in investing and financing activities was partially
offset by cash provided by operations of $27,720,000.
To finance the acquisition of S&H Papier-Holding GmbH, on December 22, 1997, the
Registrant entered into the Revolving Credit Facility with a syndicate of major
lending institutions. The Revolving Credit Facility enables the Registrant to
borrow up to the equivalent of $200,000,000 in certain currencies in the form of
revolving credit loans with a final maturity date of December 22, 2002, and with
interest periods determined, at the Registrant's option, on a daily or one- to
six-month basis. Interest on the revolving credit loans is at variable rates
based, at the Registrant's option, on the Eurocurrency Rate or the Base Rate
(lender's prime rate), plus applicable margins. Margins are based on the higher
of the Registrant's debt ratings as published by Standard & Poor's and Moody's.
As of June 30, 2001, the Registrant's outstanding borrowings were DM 303,100,000
(approximately $131,500,000) under the Revolving Credit Facility.
17
18
In January 1999, the Registrant entered into two interest rate swap agreements,
each having a total notional principal amount of DM 50,000,000 (approximately
$21,700,000 as of June 30, 2001). Under these agreements, which were effective
April 6, 1999 and July 6, 1999 and which expire December 22, 2002, the
Registrant receives a floating rate of the three-month DM LIBOR plus twenty
basis points and pays a fixed rate of 3.41% and 3.43%, respectively, for the
term of the agreements.
On July 22, 1997, the Registrant issued $150,000,000 principal amount of 6-7/8%
Notes due July 15, 2007. Interest on the Notes is payable semiannually on
January 15 and July 15. The Notes are redeemable, in whole or in part, at the
option of the Registrant at any time at a calculated redemption price plus
accrued and unpaid interest to the date of redemption, and constitute unsecured
and unsubordinated indebtedness of the Registrant. The net proceeds from the
sale of the Notes were used primarily to repay certain short-term unsecured debt
and related interest.
The Registrant expects to meet all its near- and long-term cash needs from a
combination of internally generated funds, cash, cash equivalents and its
existing Revolving Credit Facility or other bank lines of credit and, if
prudent, other long-term debt. As of August 6, 2001, in connection with the
Ecusta transaction, the Registrant amended its Revolving Credit Facility to
reflect changes to certain financial covenants and other matters.
Interest Rate Risk
- ------------------
The Registrant uses its Revolving Credit Facility and proceeds from the issuance
of its 6-7/8% Notes to finance a significant portion of its operations. The
Revolving Credit Facility provides for variable rates of interest and exposes
the Registrant to interest rate risk resulting from changes in the DM LIBOR. The
Registrant uses interest rate swap agreements to hedge, partially, interest rate
exposure associated with the Revolving Credit Facility. All of the Registrant's
derivative financial instrument transactions are entered into for non-trading
purposes.
To the extent that the Registrant's financial instruments expose the Registrant
to interest rate risk and market risk, they are presented in the table below.
The table presents principal cash flows and related interest rates by year of
maturity for the Registrant's Revolving Credit Facility and 6-7/8% Notes as of
June 30, 2001. For interest rate swap agreements, the table presents notional
amounts and the related reference interest rates by year of maturity. Fair
values included herein have been determined based upon (1) rates currently
available to the Registrant for debt with similar terms and remaining
maturities, and (2) estimates obtained from dealers to settle interest rate swap
agreements.
Year of Maturity Fair
------------------------------------------------------
(dollar amounts in thousands) Value at
Debt: 2001 2002 2003 2004 2005 Thereafter Total 6/30/01
---- ---- ---- ---- ---- ---------- -------- ---------
Fixed rate -- $ 1,294 $ 1,620 $ 28 $ 642 $ 386 $150,305 $154,275 $156,705
Average interest rate 6.86% 6.87% 6.87% 6.87% 6.87% 6.88%
Variable rate -- $ -- $131,459 $ -- $ -- $ -- $ -- $131,459 $131,459
Average interest rate 4.64% 4.62% -- -- -- --
Interest rate swap agreements:
Variable to fixed swaps -- $ -- $ 43,367 $ -- $ -- $ -- $ -- $ 45,076 $ 679
Average pay rate 3.42% 3.42% -- -- -- --
Average receive rate 5.00% 5.00% -- -- -- --
As required by SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," the Registrant was required to record the interest rate swaps from
the above table on the balance sheet at fair value beginning January 1, 2001.
SFAS No. 133, as amended and interpreted, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. Because these swaps are
designated in a cash-flow hedge, changes in the fair value of the derivative are
recorded in other comprehensive income ("OCI") and are recognized in the income
statement when the hedged item
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19
affects earnings. The adoption of SFAS No. 133 on January 1, 2001 resulted in an
$845,000 increase in OCI as a cumulative transition adjustment for derivatives
designated in cash flow-type hedges prior to adopting SFAS No. 133. Due to the
Registrant's limited use of derivative instruments, the effect on earnings of
adopting SFAS No. 133 was immaterial.
Capital Expenditures
- --------------------
The Registrant expended $23,398,000, including $7,200,000 for the IMPACT
project, on capital projects for the first six months of 2001 compared to
$9,390,000 for the first six months of 2000. Capital spending during 2001 is
expected to be approximately $70,000,000, of which approximately $25,000,000
relates to the Registrant's IMPACT project.
Business Strategies
- -------------------
For more than a year, the Registrant has been developing strategies to position
its business for the future. Execution of these strategies is intended to result
in a reorganization of the Registrant's business to capitalize on its strengths
in customer relationships, technology and people and its leadership positions in
certain markets. Internally, the Registrant is working to improve the efficiency
of its operations. Externally, the Registrant is looking to strengthen its
business through strategic alliances and joint ventures, as well as potential
acquisition opportunities or dispositions of under-performing or non-strategic
assets.
ENVIRONMENTAL MATTERS
- ---------------------
The Registrant is subject to loss contingencies resulting from regulation by
various federal, state, local and foreign governmental authorities with respect
to the environmental impact of air and water emissions and noise from its mills,
as well as the disposal of solid waste generated by its operations. To comply
with environmental laws and regulations, the Registrant has incurred substantial
capital and operating expenditures in past years. During 2000, 1999 and 1998,
the Registrant incurred approximately $16,700,000, $15,800,000 and $17,700,000,
respectively, in operating costs related to complying with environmental laws
and regulations. The Registrant anticipates that environmental regulation of its
operations will continue to become more burdensome and that capital and
operating expenditures will continue, and perhaps increase, in the future. In
addition, the Registrant may incur obligations to remove or mitigate any adverse
effects on the environment resulting from its operations, including the
restoration of natural resources, and liability for personal injury and damage
to property, including natural resources. In particular, the Registrant remains
open to negotiations with EPA and DEP regarding the NOVs under the federal and
state air pollution control laws. The Registrant continues to negotiate with the
State of Wisconsin and the United States regarding natural resources damages and
response costs related to the discharge of PCBs and other hazardous substances
in the lower Fox River, on which the Registrant's Neenah mill is located. The
Registrant also has achieved a conditional settlement with DEP and Penn PIRG
regarding the wastewater discharge permit for its Spring Grove mill that
required a one-time, pre-tax charge of $2,500,000 during the second quarter of
2001, but that settlement is still under review.
The costs associated with environmental matters are presently unknown but could
be substantial and perhaps exceed the Registrant's available resources. The
Registrant's current assessment, after consultation with legal counsel, is that
ultimately it should be able to resolve these environmental matters without a
long-term, material adverse impact on the Registrant. In the meantime, however,
these matters could, at any particular time or for any particular period, have a
material adverse effect on the Registrant's consolidated financial condition,
liquidity or results of operations. Moreover, there can be no assurance that the
19
20
Registrant's reserves will be adequate to provide for future obligations related
to these matters or that such obligations will not have a long-term, material
adverse effect on the Registrant's consolidated financial condition, liquidity
or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the discussion under the headings "Liquidity" and "Interest Rate Risk" in
Item 2, as well as Note 4 to the Registrant's unaudited condensed consolidated
financial statements.
PART II - OTHER INFORMATION
- ---------------------------
Item 5. Other Information
Cautionary Statement
Any statements set forth herein or otherwise made in writing or orally by the
Registrant with regard to its goals for revenues, cost reductions and return on
capital, expectations as to industry conditions and the Registrant's financial
results and cash flow, demand for or pricing of its products, development of new
products, environmental matters and other aspects of its business may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Registrant makes such statements
based on assumptions that it believes to be reasonable, there can be no
assurance that actual results will not differ materially from the Registrant's
expectations. Accordingly, the Registrant identifies the following important
factors, among others, which could cause its results to differ from any results
which might be projected, forecasted or estimated by the Registrant in any such
forward-looking statements: (i) variations in demand for or pricing of its
products; (ii) the Registrant's ability to identify, finance and consummate
future alliances or acquisitions; (iii) the Registrant's ability to develop new,
high value-added engineered products; (iv) the Registrant's ability to identify
and implement its planned cost reductions pursuant to its DRIVE project and
changes to its business processes contemplated by its IMPACT project; (v)
changes in the cost or availability of raw materials used by the Registrant, in
particular market pulp, pulp substitutes and wastepaper; (vi) changes in
energy-related costs; (vii) changes in industry paper production capacity,
including the construction of new mills, the closing of mills and incremental
changes due to capital expenditures or productivity increases; (viii) the gain
or loss of significant customers and/or on-going viability of such customers;
(ix) cost and other effects of environmental compliance, cleanup, damages,
remediation or restoration, or personal injury or property damage related
thereto, such as costs associated with the NOVs issued by EPA and DEP, the costs
of natural resource restoration or damages related to the presence of PCBs in
the lower Fox River on which the Registrant's Neenah mill is located and the
effect of complying with the wastewater discharge limitations of the Spring
Grove mill permit which the Registrant is currently appealing and a settlement
with respect to which is still under review; (x) enactment of adverse state,
federal or foreign legislation or changes in government policy or regulation;
(xi) adverse results in litigation; (xii) fluctuations in currency exchange
rates; and (xiii) disruptions in production and/or increased costs due to labor
disputes.
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Item 6. Exhibits
(a) Exhibits
Number Description of Documents
------ ------------------------
10 First Amendment to Credit Agreement,
dated as of August 6, 2001
15 Letter in Lieu of Consent Regarding Review
Report of Unaudited Interim Financial
Information
(b) REPORTS ON FORM 8-K
Item 5
Current Report on Form 8-K dated and
filed May 16, 2001.
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SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
P. H. GLATFELTER COMPANY
Date: August 14, 2001
---------------------------------
C. Matthew Smith
Chief Financial Officer
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INDEX OF EXHIBITS
-----------------
Number Description of Documents
------ ------------------------
10 First Amendment to Credit Agreement,
dated as of August 6, 2001
15 Letter in Lieu of Consent Regarding
Review Report of Unaudited Interim
Financial Information
23