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

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

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

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

Common Stock outstanding on October ~~30, 2015~~25, 2016 totaled ~~43,406,546~~43,549,639 shares.

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

1.	ORGANIZATION

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

2.	ACCOUNTING POLICIES

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

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

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

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

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

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

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

common revenue standard for GAAP and International Financial Reporting Standards. The ~~FASB deferred the effective date to provide adequate time to effectively implement the new revenue standard. The~~ new standard is ~~now~~ required to be adopted retrospectively for fiscal years beginning after December 15, ~~2017.~~2017 and early adoption is permitted only for reporting periods beginning after December 31, 2016. We are in the process of evaluating the impact this standard may have, if any, on our reported results of operations or financial position.

3.	~~ACQUISITION~~

~~On October 1, 2014, we completed~~In June 2016, the ~~acquisition~~FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of ~~all~~Credit Losses on Financial Instruments that changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses. Under the new guidance, an allowance is recognized based on an estimate of expected credit losses. This standard is effective for us in the ~~outstanding equity~~first quarter of ~~Spezialpapierfabrik Oberschmitten GmbH (SPO) from FINSPO Beteiligungs-GmbH for $8.2 million. SPO has annual sales~~2020 and must be adopted using a modified retrospective transition approach. We are currently assessing the impact this standard may have on our results of ~~approximately $33 million. SPO, located near Frankfurt, Germany, primarily produces highly technical papers for a wide range of capacitors used in consumer~~operations and industrial products; insulation papers for cables and transformers; and materials for industrial power inverters, electromagnetic current filters and electric rail traction. SPO also produces glassine products, which are used in cosmetics packaging, food packaging, and pharmaceutical dosage bags. SPO is operated as part of the Composite Fibers business unit, and complements other technical specialties.financial position.

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

~~During the first nine months of 2015 and 2014, we completed sales of assets as summarized in the following table:~~

Dollars in thousands
   Acres    Proceeds    Gain
2015

Timberlands
   1,398       $ 2,794       $ 2,704
Other
   n/a       387       184




Total
      $ 3,181       $ 2,888




2014

Timberlands
   2,030       $ 4,041       $ 3,876
Other
   n/a       10       5




Total
      $ 4,051       $ 3,881

- 6 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

On October 9, 2015, we completed the sale of 9,803 acres of timberlands for $17.0 million in cash. We expect to realize an after-tax gain on the transaction of approximately $9.1 million in the fourth quarter of 2015.

EARNINGS PER SHARE

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


	Three months ended September 30				Three months ended September 30
In thousands, except per share	2015		2014		2016		2015
Net income	$	13,504	$	30,372	$	19,601	$	13,504

Weighted average common shares outstanding used in basic EPS		43,457		43,049
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs		408		792

Weighted average common shares outstanding and common share equivalents used in diluted EPS		43,865		43,841

Weighted average common shares
outstanding used in basic EPS						43,576		43,457
Common shares issuable upon
exercise of dilutive stock options
and PSAs / RSUs						557		408
Weighted average common shares
outstanding and common share
equivalents used in diluted EPS						44,133		43,865
Earnings per share
Basic	$	0.31	$	0.71	$	0.45	$	0.31
Diluted		0.31		0.69		0.44		0.31


	Nine months ended September 30				Nine months ended September 30
In thousands, except per share	2015		2014		2016		2015		��
Net income	$	30,277	$	49,689	$	37,734	$	30,277

Weighted average common shares outstanding used in basic EPS		43,363		43,233
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs		586		878

Weighted average common shares outstanding and common share equivalents used in diluted EPS		43,949		44,111

Weighted average common shares
outstanding used in basic EPS						43,552		43,363
Common shares issuable upon
exercise of dilutive stock options
and PSAs / RSUs						507		586
Weighted average common shares
outstanding and common share
equivalents used in diluted EPS						44,059		43,949
Earnings per share
Basic	$	0.70	$	1.15	$	0.87	$	0.70
Diluted		0.69		1.13		0.86		0.69

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


	September 30				September 30
In thousands	2015		2014		2016		2015
Three months ended		696		282		681		696
Nine months ended		696		282		683		696

- 7 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

ACCUMULATED OTHER COMPREHENSIVE INCOME

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

in thousands
   Currency
translation
adjustments Unrealized gain
(loss) on cash
flow hedges Change in
pensions Change in other
postretirement
defined benefit
plans Total
Balance at July 1, 2015
   $ (58,857 ) $ 2,621    $ (114,076 ) $ (2,756 ) $ (173,068 )
Other comprehensive income before reclassifications (net of tax)
   (3,262 ) (1,381 ) —      —      (4,643 )
Amounts reclassified from accumulated other comprehensive income (net of tax)
   —      (1,442 ) 3,090    (7 ) 1,641


Net current period other comprehensive income (loss)
   (3,262 ) (2,823 ) 3,090    (7 ) (3,002 )


Balance at September 30, 2015
   $ (62,119 ) $ (202 ) $ (110,986 ) $ (2,763 ) $ (176,070 )


Balance at July 1, 2014
   $ 15,336    $ 60    $ (84,822 ) $ 60    $ (69,366 )
Other comprehensive income before reclassifications (net of tax)
   (33,450 ) 1,379    —      —      (32,071 )
Amounts reclassified from accumulated other comprehensive income (net of tax)
   —      96    2,363    35    2,494


Net current period other comprehensive income (loss)
   (33,450 ) 1,475    2,363    35    (29,577 )


Balance at September 30, 2014
   $ (18,114 ) $ 1,535    $ (82,459 ) $ 95    $ (98,943 )

In thousands	Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at July 1, 2016	$	(74,486	)	$	785		$	(115,786	)	$	3,204		$	(186,283	)
Other comprehensive income before reclassifications (net of tax)		(1,530	)		(1,195	)		---			---			(2,725	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			337			2,464			(145	)		2,656
Net current period other comprehensive income (loss)		(1,530	)		(858	)		2,464			(145	)		(69	)
Balance at September 30, 2016	$	(76,016	)	$	(73	)	$	(113,322	)	$	3,059		$	(186,352	)
Balance at July 1, 2015	$	(58,857	)	$	2,621		$	(114,076	)	$	(2,756	)	$	(173,068	)
Other comprehensive income before reclassifications (net of tax)		(3,262	)		(1,381	)		---			---			(4,643	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(1,442	)		3,090			(7	)		1,641
Net current period other comprehensive income (loss)		(3,262	)		(2,823	)		3,090			(7	)		(3,002	)
Balance at September 30, 2015	$	(62,119	)	$	(202	)	$	(110,986	)	$	(2,763	)	$	(176,070	)

in thousands
   Currency
translation
adjustments Unrealized gain
(loss) on cash
flow hedges Change in
pensions Change in other
postretirement
defined benefit
plans Total
Balance at January 1, 2015
   $ (34,224 ) $ 2,356    $ (120,260 ) $ (2,742 ) $ (154,870 )
Other comprehensive income before reclassifications (net of tax)
   (27,895 ) 793    —      —      (27,102 )
Amounts reclassified from accumulated other comprehensive income (net of tax)
   —      (3,351 ) 9,274    (21 ) 5,902


Net current period other comprehensive income (loss)
   (27,895 ) $ (2,558 ) 9,274    (21 ) (21,200 )


Balance at September 30, 2015
   $ (62,119 ) $ (202 ) $ (110,986 ) $ (2,763 ) $ (176,070 )


Balance at January 1, 2014
   $ 15,141    $ (941 ) $ (89,547 ) $ (10 ) $ (75,357 )
Other comprehensive income before reclassifications (net of tax)
   (33,255 ) 1,594    —      —      (31,661 )
Amounts reclassified from accumulated other comprehensive income (net of tax)
   —      882    7,088    105    8,075


Net current period other comprehensive income (loss)
   (33,255 ) 2,476    7,088    105    (23,586 )


Balance at September 30, 2014
   $ (18,114 ) $ 1,535    $ (82,459 ) $ 95    $ (98,943 )

In thousands	Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at January 1, 2016	$	(73,041	)	$	(225	)	$	(120,714	)	$	3,494		$	(190,486	)
Other comprehensive income before reclassifications (net of tax)		(2,975	)		(106	)		---			---			(3,081	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			258			7,392			(435	)		7,215
Net current period other comprehensive income (loss)		(2,975	)		152			7,392			(435	)		4,134
Balance at September 30, 2016	$	(76,016	)	$	(73	)	$	(113,322	)	$	3,059		$	(186,352	)
Balance at January 1, 2015	$	(34,224	)	$	2,356		$	(120,260	)	$	(2,742	)	$	(154,870	)
Other comprehensive income before reclassifications (net of tax)		(27,895	)		793			---			---			(27,102	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(3,351	)		9,274			(21	)		5,902
Net current period other comprehensive income (loss)		(27,895	)		(2,558	)		9,274			(21	)		(21,200	)
Balance at September 30, 2015	$	(62,119	)	$	(202	)	$	(110,986	)	$	(2,763	)	$	(176,070	)

- 8 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

Reclassifications out of accumulated other comprehensive income were as follows:


	Three months ended September 30						Nine months ended September 30							Three months ended September 30						Nine months ended September 30
In thousands	2015			2014			2015			2014				2016			2015			2016			2015
Description													Line Item in Statements of Income													Line Item in Statements of Income
Cash flow hedges (Note 15)

Cash flow hedges (Note 11)
(Gains) losses on cash flow hedges	$	(1,972	)	$	137		$	(4,595	)	$	1,227		Costs of products sold	$	347		$	(1,972	)	$	264		$	(4,595	)	Costs of products sold
Tax (benefit) expense		530			(41	)		1,244			(345	)	Income tax provision

Tax expense (benefit)															(10	)		530			(6	)		1,244		Income tax provision
Net of tax		(1,442	)		96			(3,351	)		882				337			(1,442	)		258			(3,351	)
Retirement plan obligations (Note 9)
Retirement plan obligations (Note 7)
Amortization of deferred benefit pension plan items
Prior service costs		571			621			1,713			1,864		Costs of products sold		506			571			1,519			1,713		Costs of products sold
		189			206			568			618		Selling, general and administrative		168			189			504			568		Selling, general and administrative
Actuarial losses		3,144			2,215			9,432			6,644		Costs of products sold		2,450			3,144			7,350			9,432		Costs of products sold
		1,082			762			3,247			2,287		Selling, general and administrative		843			1,082			2,530			3,247		Selling, general and administrative
															3,967			4,986			11,903			14,960
		4,986			3,804			14,960			11,413
Tax benefit		(1,896	)		(1,441	)		(5,686	)		(4,325	)	Income tax provision		(1,503	)		(1,896	)		(4,511	)		(5,686	)	Income tax provision

Net of tax		3,090			2,363			9,274			7,088				2,464			3,090			7,392			9,274
Amortization of deferred benefit other plan items
Prior service costs		(58	)		(59	)		(173	)		(178	)	Costs of products sold		(37	)		(58	)		(112	)		(173	)	Costs of products sold
		(12	)		(13	)		(37	)		(38	)	Selling, general and administrative		(8	)		(12	)		(24	)		(37	)	Selling, general and administrative
Actuarial losses		48			106			142			319		Costs of products sold		(156	)		48			(467	)		142		Costs of products sold
		10			23			31			68		Selling, general and administrative		(33	)		10			(100	)		31		Selling, general and administrative
															(234	)		(12	)		(703	)		(37	)
		(12	)		57			(37	)		171
Tax benefit		5			(22	)		16			(66	)	Income tax provision

Tax expense															89			5			268			16		Income tax provision
Net of tax		(7	)		35			(21	)		105				(145	)		(7	)		(435	)		(21	)

Total reclassifications, net of tax	$	1,641		$	2,494		$	5,902		$	8,075			$	2,656		$	1,641		$	7,215		$	5,902

- 9 -

GLATFELTER

9.30.16 Form 10-Q

~~INCOME~~INCOME TAXES

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

As of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, we had ~~$12.0~~$15.2 million and ~~$14.9~~$12.2 million of gross unrecognized tax benefits. As of September 30, ~~2015,~~2016, if such benefits were to be recognized, approximately ~~$12.0~~$12.2 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate. Gross unrecognized tax benefits reflected a net decrease of $2.9 million during the nine months ended September 30, 2015, primarily due to the completion of federal and state examinations during the second quarter.

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

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


		Open Tax Years
Jurisdiction		Examinations not yet initiated		Examination in progress

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

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

~~- 9 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of federal, state and foreign examinations, and the lapse of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may decrease within the next twelve months by a range of zero to ~~$1.7~~$1.8 million. Substantially all of this range relates to tax positions taken in ~~the U.S. and~~ Germany.

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


	Nine months ended September 30				Nine months ended September 30
In millions	2015		2014		2016		2015
Interest expense	$	—	$	0.1	$	0.2	$	—
Penalties		—		—		—		—

	September 30 2015		December 31 2014
Accrued interest payable	$	0.6	$	0.6

8.	~~STOCK-BASED COMPENSATION~~

	September 30		December 31
	2016		2015
Accrued interest payable	$	0.8	$	0.6

6.STOCK-BASED COMPENSATION

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

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

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

- 10 -

GLATFELTER

9.30.16 Form 10-Q

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


Units	2015			2014			2016			2015
Balance at January 1,		888,942			1,001,814			674,523			888,942
Granted		160,514			173,206			298,832			160,514
Forfeited		(87,567	)		(45,355	)		(146,327	)		(87,567	)
Shares delivered		(286,857	)		(239,394	)		(149,975	)		(286,857	)

Balance at September 30,		675,032			890,271			677,053			675,032

The amount granted in ~~2015~~2016 and ~~2014~~2015 includes PSAs of ~~105,017~~199,693 and ~~95,691~~105,017, respectively, exclusive of reinvested dividends.

~~- 10 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

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


	September 30				September 30
In thousands	2015		2014		2016		2015

Three months ended	$	395	$	854	$	765	$	395

Nine months ended		1,214		1,874		2,167		1,214

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

The following table sets forth information related to outstanding SOSARS.


	2015					2014					2016					2015
SOSARS	Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price
Outstanding at January 1,		1,864,707		$	16.20		1,977,133		$	13.91		2,199,742		$	17.82		1,864,707		$	16.20
Granted		423,590			24.62		281,881			29.22		743,925			17.54		423,590		24.62
Exercised		(70,347	)		14.12		(26,245	)		15.67		(61,190	)		10.70		(70,347	)		14.12
Canceled / forfeited		(17,559	)		25.24		(29,842	)		19.36		(143,932	)		17.87		(17,559	)		25.24

Outstanding at September 30,		2,200,391		$	17.82		2,202,927		$	15.77		2,738,545		$	17.64		2,200,391		$	17.82

SOSAR Grants
Weighted average grant date fair value per share	$	7.46				$	9.81
Aggregate grant date fair value(in thousands)	$	3,134				$	2,764
Weighted average grant date
fair value per share											$	4.07				$	7.46
Aggregate grant date
fair value (in thousands)											$	3,013				$	3,134
Black-Scholes assumptions
Dividend yield		1.94	%				1.48	%				2.85	%				1.94	%
Risk free rate of return		1.64	%				1.74	%				1.34	%				1.64	%
Volatility		36.38	%				37.59	%				31.97	%				36.38	%
Expected life		6 yrs					6 yrs				6 yrs					6 yrs

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


	September 30				September 30
In thousands	2015		2014		2016		2015

Three months ended	$	671	$	577	$	650	$	671

Nine months ended		1,940		1,585		2,051		1,940

RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

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


	Three months ended September 30						Three months ended September 30
In thousands	2015			2014			2016			2015
Pension Benefits
Service cost	$	2,850		$	2,602		$	2,614		$	2,850
Interest cost		5,868			6,216			6,120			5,868
Expected return on plan assets		(11,498	)		(10,969	)		(11,331	)		(11,498	)
Amortization of prior service cost		760			827			674			760
Amortization of unrecognized loss		4,226			2,977			3,293			4,226

Net periodic benefit cost	$	2,206		$	1,653		$	1,370		$	2,206

Other Benefits
Service cost	$	358		$	614		$	287		$	358
Interest cost		499			597			498			499
Amortization of prior service cost		(70	)		(72	)		(45	)		(70	)
Amortization of unrecognized loss		58			129

Amortization of unrecognized (gain)/loss								(189	)		58
Net periodic benefit cost	$	845		$	1,268		$	551		$	845


	Nine months ended September 30						Nine months ended September 30
In thousands	2015			2014			2016			2015
Pension Benefits
Service cost	$	8,546		$	7,810		$	7,855		$	8,546
Interest cost		17,606			18,696			18,360			17,606
Expected return on plan assets		(34,495	)		(32,907	)		(33,992	)		(34,495	)
Amortization of prior service cost		2,281			2,482			2,023			2,281
Amortization of unrecognized loss		12,679			8,931			9,880			12,679

Net periodic benefit cost	$	6,617		$	5,012		$	4,126		$	6,617

Other Benefits
Service cost	$	1,074		$	1,844		$	860		$	1,074
Interest cost		1,498			1,793			1,494			1,498
Amortization of prior service cost		(210	)		(216	)		(136	)		(210	)
Amortization of unrecognized loss		173			387

Amortization of unrecognized (gain)/loss								(567	)		173
Net periodic benefit cost	$	2,535		$	3,808		$	1,651		$	2,535

- 11 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

~~10.~~

~~ASSET IMPAIRMENT CHARGE~~

During the third quarters of 2015 and 2014, in connection with our annual test of potential impairment of indefinite lived intangible assets, we recorded $1.2 million and $3.3 million, respectively, of non-cash asset impairment charges related to a trade name intangible asset acquired in connection with our Composite Fibers business unit’s 2013 Dresden acquisition. The charges were due to changes in the estimated fair value of the trade name, primarily driven by lower forecasted revenues associated with the business, an increase in discount rates related to Dresden’s business in Russia and Ukraine and this region’s political and economic instability. The charges are recorded in the accompanying condensed consolidated statements of income under the caption “Selling, general and administrative expenses.” The fair value of the asset was estimated using a discounted cash flow model, Level 3 fair value classification.

INVENTORIES

~~11.~~

~~INVENTORIES~~

Inventories, net of reserves, were as follows:


	September 30		December 31		September 30		December 31
In thousands	2015		2014		2016		2015
Raw materials	$	59,985	$	61,266	$	64,579	$	60,098
In-process and finished		117,980		117,580		124,459		115,874
Supplies		70,121		69,859		73,853		71,242

Total	$	248,086	$	248,705	$	262,891	$	247,214

~~12.~~

LONG-TERM DEBT

Long-term debt is summarized as follows:


	September 30			December 31			September 30			December 31
In thousands	2015			2014			2016			2015
Revolving credit facility, due Mar. 2020	$	83,464		$	—		$	59,830		$	58,792
Revolving credit facility, due Nov. 2016		—			90,555
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		10,803			12,155			9,566			10,109
2.05% Term Loan, due Mar. 2023		44,848			51,902			40,210			42,130

1.30% Term Loan, due Jun. 2023								11,161			-
1.55% Term Loan, due Sep. 2025								10,941			2,839
Total long-term debt		389,115			404,612			381,708			363,870
Less current portion		(7,580	)		(5,734	)		(11,432	)		(7,366	)

Unamortized deferred issuance costs								(2,727	)		(3,208	)
Long-term debt, net of current portion	$	381,535		$	398,878		$	367,549		$	353,296

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

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

For all US dollar denominated borrowings under the Revolving Credit Facility, the borrowing rate is, at our option, either, (a) the bank’s base rate which is equal to the greater of i) the prime rate; ii) the federal funds rate plus 50 basis points; or iii) the daily Euro-rate plus 100 basis points plus an applicable spread over either i), ii) or iii) ranging from 12.5 basis points to 100 basis points based on the Company’s leverage ratio and its corporate credit ratings determined by Standard & Poor’s Rating Services and Moody’s Investor Service, Inc. (the “Corporate Credit Rating”); or (b) the daily

Euro-rate plus an applicable margin ranging from 112.5 basis points to 200 basis points based on the Company’s leverage ratio and the Corporate Credit Rating. For non-US dollar denominated borrowings, interest is based on (b) above.

The Revolving Credit Facility contains a number of customary covenants for financings of this type that, among other things, restrict our ability to dispose of or create liens on assets, incur additional indebtedness, repay other indebtedness, limits certain intercompany financing arrangements, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios including: i) maximum net debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio (the “leverage ratio”); and ii) a consolidated EBITDA to interest expense ratio. The most restrictive of our covenants is a maximum leverage ratio of 3.5x. As of September 30, ~~2015,~~2016, the leverage ratio, as calculated in accordance with the definition in our credit agreement, was ~~2.2x which is within the limits set forth in our credit agreement.~~2.1x. A breach of these requirements would give rise to certain remedies under the Revolving Credit Facility, among which are the termination of the agreement and accelerated repayment of the outstanding borrowings plus accrued and unpaid interest under the credit facility.

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

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

~~- 12 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

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

- 12 -

GLATFELTER

9.30.16 Form 10-Q

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

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

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

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

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

Aggregated unamortized deferred debt issuance costs incurred in connection with all of our outstanding debt totaled $5.6 million at September 30, 2015 and are reported under the caption “Other assets” in the accompanying condensed consolidated balance sheets. The deferred costs are being amortized on a straight line basis over the life of the underlying instruments.

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

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

~~13.~~

~~ASSET RETIREMENT OBLIGATION~~

During 2008, we recorded $11.5 million, net present value, of asset retirement obligations related to the legal requirement to close several lagoons at the Spring Grove, PA facility. Historically, lagoons were used to dispose of residual waste material. Closure of the lagoons is expected to be completed in 2016 and will be accomplished by filling the lagoons, installing a non-permeable liner which will be covered with soil to construct the required cap over the lagoons. The retirement obligation was accrued with a corresponding increase in the carrying value of the property, equipment and timberlands caption on the consolidated balance sheet. The amount capitalized is being amortized as a charge to operations on the straight-line basis in relation to the expected closure period. Following is a summary of activity recorded during the first nine months of 2015 and 2014:

In thousands
   2015 2014
Balance at January 1,
   $ 4,114    $ 5,032
Accretion
   59    115
Payments
   (2,384 ) (767 )
Downward revision
   (1,000 ) —
Gain
   (359 ) (128 )


Balance at September 30,
   $ 430    $ 4,252

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

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

   September 30    December 31
In thousands
   2015    2014
Other current liabilities
   $ 430       $ 2,855
Other long-term liabilities
   —         1,259




Total
   $ 430       $ 4,114

~~- 13 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

~~14.~~

10.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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


	September 30, 2015				December 31, 2014				September 30, 2016				December 31, 2015
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Variable rate debt	$	83,464	$	83,464	$	90,555	$	90,555	$	59,830	$	59,830	$	58,792	$	58,792
Fixed-rate bonds		250,000		253,908		250,000		255,470		250,000		252,658		250,000		250,938
2.40% Term loan		10,803		10,729		12,155		12,626		9,566		9,324		10,109		10,535
2.05% Term loan		44,848		43,611		51,902		53,106		40,210		38,735		42,130		42,886

1.30% Term Loan										11,161		10,470		-		-
1.55% Term loan										10,941		10,180		2,839		2,524
Total	$	389,115	$	391,712	$	404,612	$	411,757	$	381,708	$	381,197	$	363,870	$	365,675

As of September 30, ~~2015,~~2016, and December 31, ~~2014,~~2015, we had $250.0 million of 5.375% fixed rate bonds. These bonds are publicly registered, but thinly traded. Accordingly, the values set forth above for the bonds, as well as our other debt instruments, are based on observable inputs and other relevant market data (Level 2). The fair value of financial derivatives is set forth below in Note ~~15.~~11.

~~15.~~

11.

FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES

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

Derivatives Designated as Hedging ~~Instruments—~~Instruments - Cash Flow HedgesWe use currency forward contracts as cash flow hedges to manage our exposure to fluctuations in the currency exchange rates on certain forecasted production costs or capital expenditures expected to be ~~incurred over a twelve month to eighteen month period of time.~~incurred. Currency forward contracts involve fixing the exchange ~~rate~~ for delivery of a specified amount of foreign currency on a specified date. As of September 30, 2016, the maturity of currency forward contracts ranged from one month to 22 months.

We designate certain currency forward contracts as cash flow hedges of forecasted raw material purchases, or certain production costs or capital expenditures with exposure to changes in foreign currency exchange rates. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of foreign exchange risk is deferred as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance ~~sheets and~~sheets. With respect to hedges of forecasted raw material purchases or production costs, the

- 13 -

GLATFELTER

9.30.16 Form 10-Q

amount deferred is subsequently reclassified into costs of products sold in the period that inventory produced using the hedged transaction affects earnings. For hedged capital expenditures, deferred gains or losses are reclassified and included in the historical cost of the capital asset and subsequently affect earnings as depreciation is recognized. The ineffective portion of the change in fair value of the derivative is recognized directly to earnings and reflected in the accompanying condensed consolidated statements of income as non-operating income (expense) under the caption “Other, net.”

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


In thousands	September 30 2015		December 31 2014		September 30 2016		December 31 2015
*Derivative*
Sell/Buy - sell notional
Euro / British Pound		9,189		4,592		7,703		10,527
Sell/Buy - buy notional
Euro / Philippine Peso		661,453		523,313		733,358		758,634
British Pound / Philippine Peso		471,607		260,535		408,967		542,063
Euro / U.S. Dollar		47,751		32,527		42,672		51,433
U.S. Dollar / Canadian Dollar		19,205		10,036		34,143		34,649
U.S. Dollar / Euro						26,774		—

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

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

~~- 14 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

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


In thousands	September 30 2015		December 31 2014		September 30 2016		December 31 2015
*Derivative*
Sell/Buy - sell notional
U.S. Dollar / Euro		—		4,000
U.S. Dollar / British Pound		7,000		9,000		10,500		10,000
Euro / British Pound		—		2,000
British Pound / Euro		2,000		—		2,500		3,500
Sell/Buy - buy notional
Euro / U.S. Dollar		7,000		—		-		12,500
British Pound / Euro		15,500		3,000		18,500		13,500

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

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

In thousands									September 30 2016		December 31 2015		September 30 2016		December 31 2015
									Prepaid Expenses and Other				Other
In thousands	September 30 2015		December 31 2014		September 30 2015		December 31 2014
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities				Current Assets				Current Liabilities
*Designated as hedging:*
Forward foreign currency exchange contracts	$	693	$	3,106	$	1,676	$	394
Forward foreign currency
exchange contracts									$	330	$	955	$	958	$	1,545
*Not designated as hedging:*
Forward foreign currency exchange contracts	$	91.0	$	70	$	0	$	161
Forward foreign currency
exchange contracts									$	172	$	68	$	136	$	49

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

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

	Three months ended September 30						Nine months ended September 30
In thousands	2016			2015			2016			2015
Designated as hedging:
Forward foreign currency exchange contracts:
Effective portion – cost of products sold	$	(347	)	$	1,972		$	(264	)	$	4,595
Ineffective portion – other – net		(69	)		(184	)		(399	)		104
Not designated as hedging:
Forward foreign currency
exchange contracts:
Other – net	$	332		$	621		$	1,396		$	1,028

   Three months ended
September 30 Nine months ended
September 30
In thousands
   2015 2014 2015    2014
Designated as hedging:

Forward foreign currency exchange contracts:

Effective portion – cost of products sold
   $ 1,972    $ (137 ) $ 4,595       $ (1,227 )
Ineffective portion – other – net
   (184 ) 81    104       181
Not designated as hedging:

Forward foreign currency exchange contracts:

Other – net
   $ 621    $ 595    $ 1,028       $ 1,792

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

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

- 14 -

GLATFELTER

9.30.16 Form 10-Q

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

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


In thousands	2015			2014			2016			2015
Balance at January 1,	$	3,282		$	(1,296	)	$	(178	)	$	3,282
Deferred gains on cash flow hedges		1,100			2,223
Deferred (losses) gains
on cash flow hedges								(200	)		1,100
Reclassified to earnings		(4,595	)		1,227			264			(4,595	)

Balance at September 30,	$	(213	)	$	2,154		$	(114	)	$	(213	)

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

Credit risk related to derivative activity arises in the event the counterparty fails to meet its obligations to us.

~~- 15 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

This exposure is generally limited to the amounts, if any, by which the counterparty’s obligations exceed our obligation to them. Our policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings.

~~16.~~

12.

COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

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

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

The United States notified the following parties (“PRPs”) of their potential responsibility to implement response actions, to pay response costs, and to compensate for NRDs at this site: us, Appvion, Inc. (formerly known as Appleton Papers Inc.), CBC Coating, Inc. (formerly known as Riverside Paper

Corporation), Georgia-Pacific Consumer Products, L.P. (“Georgia-Pacific”, formerly known as Fort James Operating Company), Menasha Corporation, NCR Corporation (“NCR”), U.S. Paper Mills Corp., and WTM I Company. As described below, many other parties have been joined in litigation. After giving effect to settlements reached with the Governments, the remaining PRPs exposed to continuing obligations to implement the remainder of the cleanup consist of us, Georgia-Pacific and NCR.

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

The United States Environmental Protection Agency (“EPA”) has divided the Site into five “operable units”, including the most upstream portion of the Site on which our facility was located (“OU1”) and four downstream reaches of the river and bay (“OU2-5”).

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

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

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

Cost estimates.Estimates of the Site remediation change over time as we, or others, gain additional data and experience at the Site. In addition, disagreement exists over the likely costs for some of this work. On October 14, 2014, the Governments represented to the United States District Court in Green Bay that $1.1 billion provided an “upper end estimate of total past and future response costs” including a $100 million “uncertainty premium for future response costs.”

- 15 -

GLATFELTER

9.30.16 Form 10-Q

Based upon estimates made by the Governments and independent estimates commissioned by various potentially responsible parties, we have no reason to disagree with the Governments’ assertion. Much of that amount has already been incurred, including approximately $100 million for OU1 and what we believe to be approximately ~~$500~~$575 million for OU2-5 prior to the ~~2015~~2016 remediation season.

In ~~previous years,~~2016, the Governments ~~indicated their expectation was~~again seek approximately $100 million of work to ~~have~~be completed in OU2-5. The exact work ~~in OU2-5 completed~~and a more precise estimate of its cost depend on certain unresolved technical issues. During 2016, we placed the final layer on certain caps at a ~~rate estimated to~~ cost at least $70 million annually in 2015 and 2016, and at lower rates thereafter. However, the Governments have revised their estimate per year and the cost for the 2015 dredging season was increased to beof approximately ~~$100~~$4 million.

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

~~- 16 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

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

Allocation Litigation. In January 2008, NCR and Appvion brought an action in the federal district court in Green Bay to allocate among all parties responsible for this Site all of the costs incurred by the Governments, all of the costs incurred by the parties, and all of the NRDs owed to the Natural Resource Trustees. We have previously referred to this case as the “Whiting Litigation.” After several summary judgment rulings and a trial, the trial court entered judgment in the Whiting Litigation allocating to NCR 100% of the costs of (a) theOU2-5 cleanup, (b) NRDs, (c) past and future costs incurred by the Governments in OU2-5, and (d) past and future costs incurred by any of the other parties net of an appropriate equitable adjustment for insurance recoveries. As to Glatfelter, NCR was judged liable to us for $4.28 million and any future costs or damages we may incur. NCR was held not responsible for costs incurred in OU1.

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

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

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

On March 31, 2015, NCR sought review of that order by the court of appeals which review was denied on May 1, 2015. ~~However, on May 15, 2015, the district court issued an opinion in the Government Action, described below, containing a sentence suggesting that NCR would not be liable for~~

~~OU1. Also as described below, on October 19, 2015, the district court reconsidered its May 15 opinion and ruled against NCR generally, although with no specific reference to OU1.~~

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

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

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

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

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

~~- 17 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

NCR had failed to prove that liability for OU2-5 could be apportioned, directing the lower court to consider issues it had not considered initially.

- 16 -

GLATFELTER

9.30.16 Form 10-Q

On remand, the district court issued an opinion on May 15, 2015, (“May 15 Decision”) in which it held that the existing trial record allowed it to apportion NCR’s liability for OU4 at 28% of the total OU4 costs. The district court did not apportion liability for OU2 or OU3. The court’s opinion contains a sentence stating that NCR would not be liable for OU1 because the facilities formerly owned by NCR discharged downstream. We moved for reconsideration of the May 15 Decision, as did the United States, Georgia-Pacific, and certain other parties. On October 19, 2015, ~~the district court reconsidered its May 15 Decision and held~~holding that NCR had not shown a reasonable basis for apportionment of its liability for the site. On January 25, 2016, the court denied NCR’s request to certify that decision for immediate appeal.

~~We do not know~~As described below, the United States has withdrawn its natural resources damages claim against us. The Governments’ ~~intentions concerning further litigation~~remaining claims principally consist of claims for (1) unreimbursed past costs of the United States totaling $35.1 million (as incurred through September 30, 2015), and (2) costs incurred and/or to be incurred by the United States after September 30, 2015 and by the State of Wisconsin after June 30, 2015 in excess of about $4.7 million, respectively. The remaining issues in the Government Action ~~nor do we know~~are set for trial to commence after the ~~schedule for any further proceedings. We cannot now predict when it will be resolved.~~conclusion of the 2017 trial in the Whiting Litigation.

Interim Funding of Ongoing Work. As described above, the court of appeals vacated the allocation judgment in the Whiting Litigation on September 25, 2014, but neither court has since replaced that allocation with any other. The 2007 UAO requires the PRPs to submit annual remediation work plans. For 2015, the EPA approved the 2015 Work Plan for $100 million of remediation activities. NCR, GP, and we were not able to reach agreement on a division of the costs of that work on an interim basis, subject to reallocation in the Whiting Litigation. NCR and GP ~~have~~ entered into a proposed consent decree with the United States under which they ~~will~~agreed to fund certain work estimated to cost approximately $67 million in 2015, and they ~~will~~would not be responsible for completing the remainder of the work in 2015, estimated to cost approximately $33 million. However, NCR and GP did not complete all of the work assigned to them under the consent decree. The United States ~~has~~did not ~~moved~~move to enter that consent ~~decree.~~decree until April 12, 2016, and the court did not enter that decree until May 10, 2016. Through the issuance of the 2015 Work Plan the EPA assigned to us those remaining tasks. Under the proposed consent decree, all parties would remain jointly and severally liable for work in the 2015 Work Plan not completed in 2015, except for a small amount of work upstream of the area for which GP is responsible. We contracted for remediation work in OU4 ~~estimated to~~at a total ~~approximately $10~~cost of $9.7 million, an amount of work less than the amount assigned to us in the 2015 Work Plan.

We anticipate that ~~$10 million~~the amount of work performed by us in 2015 ~~would satisfy~~satisfied our share of the obligation if NCR and GP ~~perform~~had performed the work assigned to them in the 2015 Work Plan. The United States disagrees. We cannot predict the outcome of these disagreements or any possible resulting litigation.

~~With respect~~The 2016 Work Plan similarly calls for completion of work that is estimated to cost in the range of $100 million. However, unlike the 2015 Work Plan, ~~we disagree with the United States over i) whether~~it does not allocate the work ~~purportedly assigned~~among NCR, GP, and us. The parties have again not come to

~~us could be completed in the specified timeframe; ii) whether the EPA has the legal authority to assign remedial tasks as it purports to have done under the terms~~ agreement on an interim allocation among them of ~~the UAO; iii) whether we have available to us avenues~~responsibility for relief from the purported obligation to perform the assigned work in 2015; iv) whether we have any other responses of which we may avail our self; v) whether an arbitrary per capita allocation of one-third can be imposed on us in light of the multiple rulings by the courts since 2009 that appear inconsistent with a per capita allocation; and vi) whether the 2015 Work Plan affects the Company’s ultimate liability for this Site.

In September 2015, the U.S. Department of Justice notified us that we, along with Georgia - Pacific, should be prepared to participate in the remediation activities during 2016. In addition, we understand NCR has submitted a draft 2016 Work Plan. Although we do not have an estimate of the costs of completing the work called for by the 2016

Work Plan. NCR ~~proposes be~~and GP have begun certain work. We have completed ~~in 2016, we expect~~ the ~~cost could approximate $100 million. The draft does not assign work to particular parties.~~placement of certain capping material.

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

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

However, on October 14, 2014, the Governments represented to the district court that if certain settlements providing $45.9 million toward compensation of NRDs were approved, the total NRD recovery would amount to $105 million. The Governments stated they would consider those recoveries adequate and they would withdraw their claims against us and NCR for additional compensation of NRDs. On October 19, 2015, the district court granted the Governments leave to withdraw their

~~- 18 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

NRD claims against us without prejudice to re-filing them at some later time. Some of the settling parties, including all of the settling parties contributing the $45.9 million, have waived their rights to seek contribution from us of the settlement amounts. We previously paid a portion of the earlier settlements that the Governments value at $59 million and that we contend may be somewhat more.

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

							Nine months ended September 30
In thousands	2015			2014				2016			2015
Balance at January 1,	$	16,223		$	16,276		$	17,105		$	16,223
Payments		(5,617	)		(39	)		(4,193	)		(5,617	)
Accruals		10,000			—			—			10,000

Balance at September 30,	$	20,606		$	16,237		$	12,912		$	20,606

- 17 -

GLATFELTER

9.30.16 Form 10-Q

The payments set forth above represent cash paid towards completion of remediation activities in connection with the 2015 and 2016 Work ~~Plan,~~Plans. Our reserve as of ~~which approximately $4.5 million will be paid during the fourth quarter of 2015. In addition, in the third quarter of 2015 we increased our reserve by $10.0 million to reflect~~September 30, 2016, includes our estimate of costs to be incurred ~~related to~~for remediation work, pending clarity from the ~~2016 Work Plan. The charge is recorded in the accompanying condensed consolidated financial statements under the caption “Selling, general and administrative expenses.”~~Whiting litigation. If we are unsuccessful in the allocation litigation or in the enforcement litigation described above, we may be required to record additional charges and such charges could be significant.

Of our total reserve for the Fox River, ~~$16.0~~$8.4 million is recorded in the accompanying September 30, ~~2015~~2016 condensed consolidated balance sheet under the caption “Environmental liabilities” and the remainder is recorded under the caption “Other long term liabilities.”

As described above, the appellate court vacated and remanded for reconsideration the district court’s ruling in the Whiting Litigation that NCR would bear 100% of costs for the downstream portion of the Site. We continue to believe we will not be allocated a significant share of liability in any final equitable allocation of the response costs for OU2-5 or for NRDs. The accompanying condensed consolidated financial

statements do not include reserves for any future defense costs, which could be significant, related to our involvement at the Site.

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

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

The district court in the Government Action has found that the Neenah mill discharged an unknown amount of PCBs.

Based upon the rulings in the Whiting Litigation and the Government Action, neither of which endorsed an equitable allocation in proportion to the mass of PCBs discharged, we continue to believe an allocation in proportion to mass of PCBs discharged would not constitute an equitable allocation of the potential liability for the contamination at the Fox River. We contend other factors, such as a party’s role in causing costs, the location of discharge, and the location of contamination must be considered in order for the allocation to be equitable.

~~- 19 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

Range of Reasonably Possible Outcomes. Based on our analysis of all available information, including but not limited to decisions of the courts, official documents such as records of decision, as well as discussions with legal counsel and cost estimates for work to be performed at the Site, and substantially dependent on the resolution of the allocation issues discussed above, we believe it is reasonably possible that our costs associated with the Fox River matter could exceed the aggregate amounts accrued for the Fox River matter by amounts ranging from insignificant to ~~$175~~$190 million. We believe the likelihood of an outcome in the upper end of the monetary range is less than other possible outcomes within the range and the possibility of an outcome in excess of the upper end of the monetary range is remote.

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

Summary.~~Summary.~~ Our current assessment is we will be able to manage this environmental matter without a long-term, material adverse impact on the Company. This matter could, however, at any particular time or for any particular year or years, have a material adverse effect on our consolidated financial position, liquidity and/or results of operations or could result in a default under our debt covenants. Moreover, there can be no assurance our reserves will be adequate to provide for future obligations related to this matter, or our share of costs and/or damages will not exceed our available resources, or those obligations will not have a long-term, material adverse effect on our consolidated financial position, liquidity or results of operations. Should a court grant the United States or the State of Wisconsin relief requiring us individually either to perform directly or to contribute significant amounts towards remedial action downstream of Little Lake Butte des Morts those developments could have a material adverse effect on our consolidated financial position, liquidity and results of operations and might result in a default under our loan covenants.

- 2018 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

~~17.~~

13.

SEGMENT INFORMATION

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


Three months ended September 30 Dollars in millions	Composite Fibers				Advanced Airlaid Materials				Specialty Papers				Other and Unallocated						Total
Three months ended September 30																													Advanced Airlaid								Other and
Dollars in millions																									Composite Fibers				Materials				Specialty Papers				Unallocated						Total
	2015		2014		2015		2014		2015		2014		2015			2014			2015			2014			2016		2015		2016		2015		2016		2015		2016			2015			2016			2015
Net sales	$	133.9	$	154.5	$	63.2	$	74.4	$	222.8	$	236.2	$	—		$	—		$	420.0		$	465.1		$	131.7	$	133.9	$	61.9	$	63.2	$	211.8	$	222.8	$	—		$	—		$	405.3		$	420.0
Energy and related sales, net		—		—		—		—		1.2		0.9		—			—			1.2			0.9			—	—			—	—			1.3		1.2		—			—			1.3			1.2

Total revenue		133.9		154.5		63.2		74.4		224.0		237.1		—			—			421.1			466.0			131.7		133.9		61.9	63.2			213.1		224.0		—			—			406.6			421.1
Cost of products sold		108.4		123.7		54.6		64.7		196.1		195.2		2.1			1.8			361.2			385.4			105.8	108.4			53.5		54.6		180.1		196.1		6.1			2.1			345.5			361.2

Gross profit (loss)		25.5		30.8		8.6		9.7		27.9		41.9		(2.1	)		(1.8	)		59.9			80.5			25.9		25.5		8.4		8.6		33.0		27.9		(6.1	)		(2.1	)		61.2			59.9
SG&A		11.5		12.6		1.8		2.2		10.4		14.1		16.2			9.0			39.8			37.9			11.9		11.5		2.0		1.8		14.3		10.4		7.5			16.2			35.7			39.8
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		(0.1	)		(1.6	)		(0.1	)		(1.6	)

Gains on dispositions of plant, equipment
and timberlands, net																										—		—		—		—		—		—		—			(0.1	)		—			(0.1	)
Total operating income (loss)		14.0		18.1		6.8		7.5		17.5		27.8		(18.2	)		(9.2	)		20.2			44.2			14.0		14.1		6.4		6.8		18.7		17.5		(13.6	)		(18.2	)		25.4			20.2
Non-operating expense		—		—		—		—		—		—		(4.4	)		(4.8	)		(4.4	)		(4.8	)		—		—		—		—		—		—		(4.4	)		(4.4	)		(4.4	)		(4.4	)

Income (loss) before income taxes	$	14.0	$	18.1	$	6.8	$	7.5	$	17.5	$	27.8	$	(22.6	)	$	(14.0	)	$	15.8		$	39.4		$	14.0	$	14.1	$	6.4	$	6.8	$	18.7	$	17.5	$	(18.0	)	$	(22.6	)	$	21.0		$	15.8


Supplementary Data
Net tons sold(thousands)		38.9		40.1		24.8		26.3		203.6		208.4		—			—			267.2			274.7			39.1		38.9		25.2		24.8		197.3		203.6		—			—			261.5			267.2
Depreciation, depletion and amortization	$	6.7	$	7.4	$	2.2	$	2.3	$	6.4	$	6.5	$	0.5		$	0.5		$	15.8		$	16.7		$	6.9	$	6.7	$	2.4	$	2.2	$	6.4	$	6.4	$	0.6		$	0.5		$	16.3		$	15.8
Capital expenditures		5.8		5.4		1.8		1.3		22.1		9.7		—			0.5			29.7			16.9			5.1		5.8		4.3		1.8		26.7		22.1		0.5			—			36.6			29.7

Nine months ended September 30 Dollars in millions	Composite Fibers				Advanced Airlaid Materials				Specialty Papers				Other and Unallocated						Total
	2015		2014		2015		2014		2015		2014		2015			2014			2015			2014
Net sales	$	409.6	$	470.1	$	183.0	$	216.2	$	655.6	$	679.9	$	—		$	—		$	1,248.2		$	1,366.2
Energy and related sales, net		—		—		—		—		3.9		6.9		—			—			3.9			6.9

Total revenue		409.6		470.1		183.0		216.2		659.5		686.8		—			—			1,252.2			1,373.1
Cost of products sold		329.8		376.7		162.0		189.9		608.4		624.3		7.1			5.2			1,107.3			1,196.1

Gross profit (loss)		79.8		93.4		21.0		26.3		51.1		62.5		(7.1	)		(5.2	)		144.8			177.0
SG&A		34.4		38.8		5.8		6.8		34.2		39.5		25.7			18.7			100.2			103.8
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		(2.9	)		(3.9	)		(2.9	)		(3.9	)

Total operating income (loss)		45.4		54.6		15.2		19.5		16.9		23.0		(29.9	)		(20.0	)		47.5			77.1
Non-operating expense		—		—		—		—		—		—		(13.1	)		(14.0	)		(13.1	)		(14.0	)

Income (loss) before income taxes	$	45.4	$	54.6	$	15.2	$	19.5	$	16.9	$	23.0	$	(43.0	)	$	(34.0	)	$	34.4		$	63.1


Supplementary Data
Net tons sold(thousands)		116.2		119.5		71.4		76.0		593.6		601.3		—			—			781.2			796.8
Depreciation, depletion and amortization	$	20.1	$	22.7	$	6.5	$	6.9	$	19.3	$	22.6	$	1.5		$	1.3		$	47.4		$	53.5
Capital expenditures		17.3		16.7		4.6		4.1		51.0		24.5		1.4			1.7			74.3			47.0

Nine months ended September 30

Advanced Airlaid

Other and

Dollars in millions
Composite Fibers

Materials

Specialty Papers

Unallocated

Total

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

Net sales
$
391.6

$
409.6

$
183.4

$
183.0

$
638.9

$
655.6

$
—

$
—

$
1,213.9

$
1,248.2

Energy and related sales, net

—

—

—

—

4.0

3.9

—

—

4.0

3.9

Total revenue
391.6

409.6

183.4

183.0

642.9

659.5

—

—

1,217.9

1,252.2

Cost of products sold

316.0

329.8

157.5

162.0

574.1

608.4

8.6

7.1

1,056.2

1,107.3

Gross profit (loss)

75.6

79.8

25.9

21.0

68.8

51.1

(8.6
)

(7.1
)

161.7

144.8

SG&A

35.1

34.4

6.2

5.8

40.9

34.2

22.6

25.7

104.8

100.2

Gains on dispositions of plant, equipment

and timberlands, net

—

—

—

—

—

—

—

(2.9
)

—

(2.9
)
Total operating income (loss)

40.5

45.4

19.7

15.2

27.9

16.9

(31.2
)

(29.9
)

56.9

47.5

Non-operating expense

—

—

—

—

—

—

(12.7
)

(13.1
)

(12.7
)

(13.1
)
Income (loss) before income taxes
$
40.5

$
45.4

$
19.7

$
15.2

$
27.9

$
16.9

$
(43.9
)

$
(43.0
)

$
44.2

$
34.4

Supplementary Data

Net tons sold (thousands)

116.7

116.2

74.1

71.4

597.7

593.6

—

—

788.5

781.2

Depreciation, depletion and amortization
$
21.2

$
20.1

$
7.0

$
6.5

$
19.7

$
19.3

$
1.8

$
1.5

$
49.7

$
47.4

Capital expenditures

13.7

17.3

25.0

4.6

77.4

51.0

0.8

1.4

116.9

74.3

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

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

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

- 2119 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

~~18.~~

14.

CONDENSED ~~CONSOLIDATING~~CONSOLIDATING FINANCIAL STATEMENTS

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

The following presents ~~the~~our condensed consolidating statements of income, including comprehensive income for the three months and nine months ended September 30, 2016 and 2015, ~~and 2014, the~~our condensed consolidating balance sheets as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015 and ~~the~~our condensed consolidating cash flows for the nine months ended September 30, ~~2015~~2016 and 2014. These financial statements reflect the Parent, the guarantor subsidiaries (on a combined basis), the non-guarantor subsidiaries (on a combined basis) and elimination entries necessary to combine such entities on a consolidated basis. The condensed consolidating financial statements set forth below include the addition2015.

Condensed Consolidating Statement of CFNA and GAMNA as guarantors effective September 30, 2015 and all prior periods have been restated to retroactively effect this change. In addition, our presentation of the Guarantors’ statement of incomeIncome for the three months ~~and nine months~~ ended September 30, 2014 has been restated to correctly apply the equity method of accounting to reflect the Guarantors’ equity interests in certain Non Guarantors. Such changes are reflected under the caption “Equity in earnings of subsidiaries” in the accompanying condensed consolidating statements of income. The correction had no impact on any financial information of the Parent Company, the Non Guarantors or on the condensed consolidating balance sheet or the statement of cash flows.2016

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	211,761		$	18,086		$	192,214		$	(16,760	)	$	405,301
Energy and related sales, net		1,346			—			—			—			1,346
Total revenues		213,107			18,086			192,214			(16,760	)		406,647
Costs of products sold		186,297			16,732			159,208			(16,760	)		345,477
Gross profit		26,810			1,354			33,006			—			61,170
Selling, general and administrative
expenses		21,048			(25	)		14,724			—			35,747
(Gain) loss on dispositions of plant
equipment and timberlands, net		7			—			(2	)		—			5
Operating income		5,755			1,379			18,284			—			25,418
Other non-operating
income (expense)
Interest expense		(4,332	)		(1	)		(751	)		1,189			(3,895	)
Interest income		173			1,063			5			(1,189	)		52
Equity in earnings of subsidiaries		17,228			16,225			—			(33,453	)		—
Other, net		(670	)		(819	)		916			—			(573	)
Total other non-operating
income (expense)		12,399			16,468			170			(33,453	)		(4,416	)
Income before income taxes		18,154			17,847			18,454			(33,453	)		21,002
Income tax provision (benefit)		(1,447	)		619			2,229			—			1,401
Net income		19,601			17,228			16,225			(33,453	)		19,601
Other comprehensive loss		(69	)		(2,307	)		(2,462	)		4,769			(69	)
Comprehensive income	$	19,532		$	14,921		$	13,763		$	(28,684	)	$	19,532

- 20 -

GLATFELTER

9.30.16 Form 10-Q

Condensed Consolidating Statement of Income for the nine months ended September 30, 2016

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	638,918		$	54,293		$	573,355		$	(52,634	)	$	1,213,932
Energy and related sales, net		4,013			—			—			—			4,013
Total revenues		642,931			54,293			573,355			(52,634	)		1,217,945
Costs of products sold		582,751			51,493			474,599			(52,634	)		1,056,209
Gross profit		60,180			2,800			98,756			—			161,736
Selling, general and administrative
expenses		62,115			(246	)		42,927			—			104,796
Loss on dispositions of plant
equipment and timberlands, net		11			—			20			—			31
Operating income (loss)		(1,946	)		3,046			55,809			—			56,909
Other non-operating
income (expense)
Interest expense		(13,036	)		(1	)		(2,352	)		3,425			(11,964	)
Interest income		523			3,056			50			(3,425	)		204
Equity in earnings of subsidiaries		46,485			44,050			—			(90,535	)		—
Other, net		(1,787	)		(2,220	)		3,051			—			(956	)
Total other non-operating
income (expense)		32,185			44,885			749			(90,535	)		(12,716	)
Income before income taxes		30,239			47,931			56,558			(90,535	)		44,193
Income tax provision (benefit)		(7,495	)		1,446			12,508			—			6,459
Net income		37,734			46,485			44,050			(90,535	)		37,734
Other comprehensive income (loss)		4,134			(2,691	)		(2,835	)		5,526			4,134
Comprehensive income	$	41,868		$	43,794		$	41,215		$	(85,009	)	$	41,868

- 21 -

GLATFELTER

9.30.16 Form 10-Q

Condensed Consolidating Statement of Income for the three months ended September 30, 2015

In thousands
   Parent
Company Guarantors Non
Guarantors Adjustments/
Eliminations Consolidated
Net sales
   $ 222,803    $ 19,005    $ 197,589    $ (19,437 ) $ 419,960
Energy and related sales, net
   1,153    —      —      —      1,153


Total revenues
   223,956    19,005    197,589    (19,437 ) 421,113
Costs of products sold
   197,906    17,299    165,437    (19,437 ) 361,205


Gross profit
   26,050    1,706    32,152    —      59,908
Selling, general and administrative expenses
   24,764    (8 ) 15,036    —      39,792
Gains on dispositions of plant, equipment and timberlands, net
   (4 ) —      (119 ) —      (123 )


Operating income
   1,290    1,714    17,235    —      20,239
Other non-operating income (expense)

Interest expense
   (4,346 ) —      (23,201 ) 23,230    (4,317 )
Interest income
   181    23,129    11    (23,231 ) 90
Equity in earnings of subsidiaries
   14,173    (9,366 ) —      (4,808 ) —
Other, net
   (961 ) 23    718    —      (220 )


Total other non-operating income (expense)
   9,047    13,786    (22,472 ) (4,809 ) (4,447 )


Income (loss) before income taxes
   10,337    15,500    (5,237 ) (4,809 ) 15,792
Income tax provision (benefit)
   (3,167 ) 1,270    4,185    —      2,288


Net income (loss)
   13,504    14,230    (9,422 ) (4,809 ) 13,504
Other comprehensive income (loss)
   (3,002 ) (5,954 ) (7,752 ) 13,706    (3,002 )


Comprehensive income (loss)
   $ 10,502    $ 8,276    $ (17,174 ) $ 8,897    $ 10,502

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	222,803		$	19,005		$	197,589		$	(19,437	)	$	419,960
Energy and related sales, net		1,153			—			—			—			1,153
Total revenues		223,956			19,005			197,589			(19,437	)		421,113
Costs of products sold		197,906			17,299			165,437			(19,437	)		361,205
Gross profit		26,050			1,706			32,152			—			59,908
Selling, general and administrative
expenses		24,764			(8	)		15,036			—			39,792
Gain on dispositions of plant
equipment and timberlands, net		(4	)		—			(119	)		—			(123	)
Operating income		1,290			1,714			17,235			—			20,239
Other non-operating
income (expense)
Interest expense		(4,346	)		—			(23,201	)		23,230			(4,317	)
Interest income		181			23,129			11			(23,231	)		90
Equity in earnings of subsidiaries		14,173			(9,366	)		—			(4,808	)		—
Other, net		(961	)		23			718			—			(220	)
Total other non-operating
income (expense)		9,047			13,786			(22,472	)		(4,809	)		(4,447	)
Income (loss) before income taxes		10,337			15,500			(5,237	)		(4,809	)		15,792
Income tax provision (benefit)		(3,167	)		1,270			4,185			—			2,288
Net income (loss)		13,504			14,230			(9,422	)		(4,809	)		13,504
Other comprehensive loss		(3,002	)		(5,954	)		(7,752	)		13,706			(3,002	)
Comprehensive income (loss)	$	10,502		$	8,276		$	(17,174	)	$	8,897		$	10,502

- 22 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

Condensed Consolidating Statement of Income for the

~~three months ended September 30, 2014~~

In thousands
   Parent
Company Guarantors Non
Guarantors Adjustments/
Eliminations Consolidated
Net sales
   $ 236,182    $ 17,735    $ 228,699    $ (17,524 ) $ 465,092
Energy and related sales, net
   860    —      —      —      860


Total revenues
   237,042    17,735    228,699    (17,524 ) 465,952
Costs of products sold
   197,182    17,019    188,762    (17,524 ) 385,439


Gross profit
   39,860    716    39,937    —      80,513
Selling, general and administrative expenses
   19,352    589    17,946    —      37,886
Gains on dispositions of plant, equipment and timberlands, net
   (1,590 ) —      —      —      (1,590 )


Operating income
   22,098    127    21,991    —      44,217
Other non-operating income (expense)

Interest expense
   (4,790 ) —      (90,098 ) 90,217    (4,671 )
Interest income
   152    89,951    145    (90,218 ) 30
Equity in earnings of subsidiaries
   14,935    (74,502 ) —      59,566    —
Other, net
   (383 ) 9    202    5    (167 )


Total other non-operating income (expense)
   9,914    15,458    (89,751 ) 59,570    (4,808 )


Income (loss) before income taxes
   32,012    15,585    (67,760 ) 59,570    39,409
Income tax provision (benefit)
   1,640    1,091    6,306    —      9,037


Net income (loss)
   30,372    14,494    (74,066 ) 59,570    30,372
Other comprehensive income (loss)
   (29,577 ) (25,843 ) 16,924    8,919    (29,577 )


Comprehensive income (loss)
   $ 795    $ (11,349 ) $ (57,142 ) $ 68,489    $ 795

~~- 23 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

~~Condensed Consolidating Statement of Income for the~~

nine months ended September 30, 2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	655,599		$	61,822		$	590,466		$	(59,655	)	$	1,248,232		$	655,599		$	61,822		$	590,466		$	(59,655	)	$	1,248,232
Energy and related sales, net		3,936			—			—			—			3,936			3,936			—			—			—			3,936

Total revenues		659,535			61,822			590,466			(59,655	)		1,252,168			659,535			61,822			590,466			(59,655	)		1,252,168
Costs of products sold		614,060			58,554			494,360			(59,655	)		1,107,319			614,060			58,554			494,360			(59,655	)		1,107,319

Gross profit		45,475			3,268			96,106			—			144,849			45,475			3,268			96,106			—			144,849
Selling, general and administrative expenses		57,607			947			41,647			—			100,201
Gains on dispositions of plant, equipment and timberlands, net		(1,526	)		(1,183	)		(179	)		—			(2,888	)

Selling, general and administrative
expenses																	57,607			947			41,647			—			100,201
Gains on dispositions of plant,
equipment and timberlands, net																	(1,526	)		(1,183	)		(179	)		—			(2,888	)
Operating income (loss)		(10,606	)		3,504			54,638			—			47,536			(10,606	)		3,504			54,638			—			47,536
Other non-operating income (expense)
Other non-operating
income (expense)
Interest expense		(13,771	)		—			(35,965	)		36,559			(13,177	)		(13,771	)		—			(35,965	)		36,559			(13,177	)
Interest income		513			36,226			52			(36,559	)		232			513			36,226			52			(36,559	)		232
Equity in earnings of subsidiaries		48,775			11,879			—			(60,654	)		—			48,775			11,879			—			(60,654	)		—
Other, net		(2,423	)		(136	)		2,367			—			(192	)		(2,423	)		(136	)		2,367			—			(192	)

Total other non-operating income (expense)		33,094			47,969			(33,546	)		(60,654	)		(13,137	)

Total other non-operating
income (expense)																	33,094			47,969			(33,546	)		(60,654	)		(13,137	)
Income before income taxes		22,488			51,473			21,092			(60,654	)		34,399			22,488			51,473			21,092			(60,654	)		34,399
Income tax provision (benefit)		(7,789	)		2,586			9,325			—			4,122			(7,789	)		2,586			9,325			—			4,122

Net income		30,277			48,887			11,767			(60,654	)		30,277			30,277			48,887			11,767			(60,654	)		30,277
Other comprehensive income (loss)		(21,200	)		(30,607	)		21,156			9,451			(21,200	)		(21,200	)		(30,607	)		21,156			9,451			(21,200	)

Comprehensive income	$	9,077		$	18,280		$	32,923		$	(51,203	)	$	9,077		$	9,077		$	18,280		$	32,923		$	(51,203	)	$	9,077

- 23 -

GLATFELTER

9.30.16 Form 10-Q

Condensed Consolidating Balance Sheet as of September 30, 2016

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	3,658	$	418		$	46,676	$	—		$	50,752
Other current assets		222,853		265,889			270,650		(280,576	)		478,816
Plant, equipment and timberlands, net		351,301		20,918			399,234		—			771,453
Investments in subsidiaries		798,376		548,865			—		(1,347,241	)		—
Other assets		115,900		—			137,318		—			253,218
Total assets	$	1,492,088	$	836,090		$	853,878	$	(1,627,817	)	$	1,554,239
Liabilities and Shareholders' Equity
Current liabilities	$	415,957	$	36,689		$	144,048	$	(280,576	)	$	316,118
Long-term debt		269,535		1,000			97,014		—			367,549
Deferred income taxes		26,048		(288	)		47,315		—			73,075
Other long-term liabilities		88,859		313			16,636		—			105,808
Total liabilities		800,399		37,714			305,013		(280,576	)		862,550
Shareholders’ equity		691,689		798,376			548,865		(1,347,241	)		691,689
Total liabilities and
shareholders’ equity	$	1,492,088	$	836,090		$	853,878	$	(1,627,817	)	$	1,554,239

Condensed Consolidating Balance Sheet as of December 31, 2015

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	59,130	$	465		$	45,709	$	—		$	105,304
Other current assets		199,690		238,515			239,367		(230,509	)		447,063
Plant, equipment and timberlands, net		286,334		1,114			411,416		—			698,864
Investments in subsidiaries		737,450		507,116			—		(1,244,566	)		—
Other assets		106,586		—			142,599		—			249,185
Total assets	$	1,389,190	$	747,210		$	839,091	$	(1,475,075	)	$	1,500,416
Liabilities and Shareholders' Equity
Current liabilities	$	363,037	$	9,725		$	162,081	$	(230,523	)	$	304,320
Long-term debt		247,075		—			106,221		—			353,296
Deferred income taxes		28,561		(79	)		47,976		—			76,458
Other long-term liabilities		87,270		—			15,825		—			103,095
Total liabilities		725,943		9,646			332,103		(230,523	)		837,169
Shareholders’ equity		663,247		737,564			506,988		(1,244,552	)		663,247
Total liabilities and
shareholders’ equity	$	1,389,190	$	747,210		$	839,091	$	(1,475,075	)	$	1,500,416

- 24 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

~~Condensed Consolidating Statement of Income for the~~

~~nine months ended September 30, 2014~~

In thousands
   Parent
Company Guarantors Non
Guarantors Adjustments/
Eliminations Consolidated
Net sales
   $ 679,877    $ 56,138    $ 685,350    $ (55,211 ) $ 1,366,154
Energy and related sales, net
   6,912    —      —      —      6,912


Total revenues
   686,789    56,138    685,350    (55,211 ) 1,373,066
Costs of products sold
   629,984    53,491    567,812    (55,211 ) 1,196,076


Gross profit
   56,805    2,647    117,538    —      176,990
Selling, general and administrative expenses
   53,699    1,431    48,622    —      103,751
Gains on dispositions of plant, equipment and timberlands, net
   (2,565 ) (1,316 ) —      —      (3,881 )


Operating income
   5,671    2,532    68,916    —      77,120
Other non-operating income (expense)

Interest expense
   (14,284 ) —      (95,643 ) 95,682    (14,245 )
Interest income
   468    95,165    193    (95,683 ) 143
Equity in earnings of subsidiaries
   56,784    (38,229 ) —      (18,555 ) —
Other, net
   (1,603 ) 30    1,673    5    105


Total other non-operating income (expense)
   41,365    56,966    (93,777 ) (18,551 ) (13,997 )


Income (loss) before income taxes
   47,036    59,498    (24,861 ) (18,551 ) 63,123
Income tax provision (benefit)
   (2,653 ) 2,719    13,368    —      13,434


Net income (loss)
   49,689    56,779    (38,229 ) (18,551 ) 49,689
Other comprehensive income (loss)
   (23,586 ) (26,392 ) 18,907    7,485    (23,586 )


Comprehensive income (loss)
   $ 26,103    $ 30,387    $ (19,322 ) $ (11,066 ) $ 26,103

~~- 25 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

~~Condensed Consolidating Balance Sheet as of~~

~~September 30, 2015~~

In thousands
   Parent
Company    Guarantors Non
Guarantors    Adjustments/
Eliminations Consolidated
Assets
Cash and cash equivalents
   $ 28,626       $ 297    $ 44,742       $ —      $ 73,665
Other current assets
   232,486       260,054    261,431       (268,192 ) 485,779
Plant, equipment and timberlands, net
   283,712       1,005    412,607       —      697,324
Investments in subsidiaries
   734,303       504,783    —         (1,239,086 ) —
Other assets
   132,732       —      148,732       (485 ) 280,979






Total assets
   $ 1,411,859       $ 766,139    $ 867,512       $ (1,507,763 ) $ 1,537,747






Liabilities and Shareholders’ Equity
Current liabilities
   $ 368,220       $ 31,720    $ 163,984       $ (271,574 ) $ 292,350
Long-term debt
   250,000       —      131,535       —      381,535
Deferred income taxes
   48,226       (505 ) 50,110       3,376    101,207
Other long-term liabilities
   99,297       33    17,209       —      116,539






Total liabilities
   765,743       31,248    362,838       (268,198 ) 891,631
Shareholders’ equity
   646,116       734,891    504,674       (1,239,565 ) 646,116






Total liabilities and shareholders’ equity
   $ 1,411,859       $ 766,139    $ 867,512       $ (1,507,763 ) $ 1,537,747

~~Condensed Consolidating Balance Sheet as of~~

~~December 31, 2014~~

In thousands
   Parent
Company    Guarantors Non
Guarantors Adjustments/
Eliminations Consolidated
Assets
Cash and cash equivalents
   $ 42,208       $ 509    $ 57,120    $ —      $ 99,837
Other current assets
   216,940       439,910    254,911    (436,976 ) 474,785
Plant, equipment and timberlands, net
   255,255       996    441,357    —      697,608
Investments in subsidiaries
   826,084       401,540    —      (1,227,624 ) —
Other assets
   121,125       —      186,128    (17,979 ) 289,274




Total assets
   $ 1,461,612       $ 842,955    $ 939,516    $ (1,682,579 ) $ 1,561,504




Liabilities and Shareholders’ Equity
Current liabilities
   403,662       13,143    307,184    (444,258 ) 279,731
Long-term debt
   250,000       —      721,457    (572,579 ) 398,878
Deferred income taxes
   46,483       (506 ) 70,328    (12,289 ) 104,016
Other long-term liabilities
   112,358       24    11,608    5,780    129,770
Total liabilities
   812,503       12,661    1,110,577    (1,023,346 ) 912,395
Shareholders’ equity
   649,109       830,294    (171,061 ) (659,233 ) 649,109




Total liabilities and shareholders’ equity
   $ 1,461,612       $ 842,955    $ 939,516    $ (1,682,579 ) $ 1,561,504

~~- 26 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2016

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	41,753		$	3,748		$	13,936		$	—		$	59,437
Investing activities
Expenditures for purchases of plant,
equipment and timberlands		(78,187	)		(21,066	)		(17,695	)		—			(116,948	)
Proceeds from disposals of plant,
equipment and timberlands, net		41			—			14			—			55
Repayments from intercompany loans		—			11,101			—			(11,101	)		—
Advances of intercompany loans		—			(12,330	)		—			12,330			—
Intercompany capital
contributed		(17,000	)		(500	)		—			17,500			—
Other		(400	)		—			—			—			(400	)
Total investing activities		(95,546	)		(22,795	)		(17,681	)		18,729			(117,293	)
Financing activities
Net long-term borrowings		—			—			14,983			—			14,983
Payments of borrowing costs		(136	)		—			—			—			(136	)
Payment of dividends
to shareholders		(16,134	)		—			—			—			(16,134	)
Repayments of intercompany loans		—			—			(11,101	)		11,101			—
Borrowings of intercompany loans		12,330			—			—			(12,330	)		—
Intercompany capital (returned) received		—			17,000			500			(17,500	)		—
Proceeds from government grants		3,251			2,000			—			—			5,251
Payments related to share-based comp-
ensation awards and other		(990	)		—			—			—			(990	)
Total financing activities		(1,679	)		19,000			4,382			(18,729	)		2,974
Effect of exchange rate on cash		—			—			330			—			330
Net increase (decrease) in cash		(55,472	)		(47	)		967			—			(54,552	)
Cash at the beginning of period		59,130			465			45,709			—			105,304
Cash at the end of period	$	3,658		$	418		$	46,676		$	—		$	50,752

- 25 -

GLATFELTER

9.30.16 Form 10-Q

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2015


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	9,927		$	152		$	60,444		$	—		$	70,523		$	9,927		$	152		$	60,444		$	—		$	70,523
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(52,331	)		(42	)		(21,907	)		—			(74,280	)
Proceeds from disposal plant, equipment and timberlands, net		1,584			1,213			384			—			3,181
Expenditures for purchases of plant,
equipment and timberlands																	(52,331	)		(42	)		(21,907	)		—			(74,280	)
Proceeds from disposals of plant,
equipment and timberlands, net																	1,584			1,213			384			—			3,181
Repayments from intercompany loans		1,465			53,855			—			(55,320	)		—			1,465			53,855			—			(55,320	)		—
Advances of intercompany loans		—			(44,590	)		—			44,590			—			—			(44,590	)		—			44,590			—
Intercompany capital (contributed) returned		10,500			(300	)		—			(10,200	)		—
Intercompany capital
(contributed) returned																	10,500			(300	)		—			(10,200	)		—
Acquisitions, net of cash acquired		—			—			(224	)		—			(224	)		—			—			(224	)		—			(224	)
Other		(1,600	)		—			—			—			(1,600	)		(1,600	)		—			—			—			(1,600	)

Total investing activities		(40,382	)		10,136			(21,747	)		(20,930	)		(72,923	)		(40,382	)		10,136			(21,747	)		(20,930	)		(72,923	)
Financing activities
Net repayments of indebtedness		—			—			(3,387	)		—			(3,387	)		—			—			(3,387	)		—			(3,387	)
Payments of borrowing costs		(1,329	)		—			—			—			(1,329	)		(1,329	)		—			—			—			(1,329	)
Payment of dividends to shareholders		(15,215	)		—			—			—			(15,215	)
Payment of dividends
to shareholders																	(15,215	)		—			—			—			(15,215	)
Repayments of intercompany loans		(9,158	)		—			(46,162	)		55,320			—			(9,158	)		—			(46,162	)		55,320			—
Borrowings of intercompany loans		44,590			—			—			(44,590	)		—			44,590			—			—			(44,590	)		—
Intercompany capital received (returned)		—			(10,500	)		300			10,200			—
Payments related to share-based compensation awards and other		(2,015	)		—			—			—			(2,015	)

Intercompany capital (returned) received																	—			(10,500	)		300			10,200			—
Payments related to share-based comp-
ensation awards and other																	(2,015	)		—			—			—			(2,015	)
Total financing activities		16,873			(10,500	)		(49,249	)		20,930			(21,946	)		16,873			(10,500	)		(49,249	)		20,930			(21,946	)
Effect of exchange rate on cash		—			—			(1,826	)		—			(1,826	)		—			—			(1,826	)		—			(1,826	)

Net decrease in cash		(13,582	)		(212	)		(12,378	)		—			(26,172	)		(13,582	)		(212	)		(12,378	)		—			(26,172	)
Cash at the beginning of period		42,208			509			57,120			—			99,837			42,208			509			57,120			—			99,837

Cash at the end of period	$	28,626		$	297		$	44,742		$	—		$	73,665		$	28,626		$	297		$	44,742		$	—		$	73,665

- 2726 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

~~Condensed Consolidating Statement of Cash Flows for the~~

~~nine months ended September 30, 2014~~

In thousands
   Parent
Company Guarantors Non
Guarantors Adjustments/
Eliminations Consolidated
Net cash provided (used) by

Operating activities
   $ 712    $ 3,371    $ 17,297    $ —      $ 21,380
Investing activities

Expenditures for purchases of plant, equipment and timberlands
   (26,368 ) —      (20,668 ) —      (47,036 )
Proceeds from disposal plant, equipment and timberlands, net
   2,687    1,355    9    —      4,051
Repayments from intercompany loans
   —      10,409    —      (10,409 ) —
Advances of intercompany loans
   —      (15,540 ) —      15,540    —
Other
   (600 ) —      —      —      (600 )


Total investing activities
   (24,281 ) (3,776 ) (20,659 ) 5,131    (43,585 )
Financing activities

Net proceeds from indebtedness
   —      —      (18,128 ) —      (18,128 )
Payment of dividends to shareholders
   (13,935 ) —      —      —      (13,935 )
Repurchases of common stock
   (12,180 ) —      —      —      (12,180 )
Borrowings of intercompany loans
   15,540    —      —      (15,540 ) —
Repayments of intercompany loans
   —      —      (10,409 ) 10,409    —
Payments related to share-based compensation awards and other
   (1,764 ) —      —      —      (1,764 )


Total financing activities
   (12,339 ) —      (28,537 ) (5,131 ) (46,007 )
Effect of exchange rate on cash
   —      —      (1,015 ) —      (1,015 )


Net decrease in cash
   (35,908 ) (405 ) (32,914 ) —      (69,227 )
Cash at the beginning of period
   56,216    495    66,171    —      122,882


Cash at the end of period
   $ 20,308    $ 90    $ 33,257    $ —      $ 53,655

~~- 28 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

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

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

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

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

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

~~iii.~~

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

~~iv.~~

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

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

~~vi.~~

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

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

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

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

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

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

~~vii.~~

viii.

the impact of unplanned production interruption;

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

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

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

~~viii.~~

xii.

~~the impact of unplanned production interruption;~~

~~ix.~~

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

xiii.

adverse results in litigation ofin the Fox River matter;

~~xi.~~

xiv.

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

~~xii.~~

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

~~xiii.~~

the impact of war and terrorism;

~~xiv.~~

xv.

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

~~xv.~~

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

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

xvii.

our ability to finance, consummate and integrate acquisitions.

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

Composite Fibers with revenue from the sale of single-serve tea and coffee filtration papers, nonwoven wall covering materials, metallized papers, composite laminates papers, and many technically special papers including substrates for electrical applications;

Advanced Airlaid Materials with revenue from the sale of airlaid nonwoven fabric-like materials used in feminine hygiene and adult incontinence products, wipes, and other airlaid applications; and

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

•

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

•

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

•

~~Specialty Papers~~ ~~with revenue from the sale of carbonless papers, non-carbonless forms, book publishing, envelope & converting papers, and fiber-based engineered products.~~

- 2927 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

RESULTS OF OPERATIONS

Nine months ended September 30, ~~2015~~2016 versus the nine months ended September 30, ~~2014~~2015

Overview~~OverviewFor~~ Net income for the first nine months of ~~2015, net income~~2016 was ~~$30.3~~$37.7 million, or ~~$0.69~~$0.86 per diluted share compared with ~~$49.7~~$30.3 million, or ~~$1.13~~$0.69 per diluted share in the first nine months of ~~2014. On an adjusted~~2015. Adjusted earnings, ~~basis,~~ a non-GAAP measure, ~~that excludes non-core business items discussed below, earnings~~was $43.0 million, or $0.98 per diluted share ~~were $0.82~~for the first nine months of 2016 compared with ~~$1.11~~$36.0 million, or $0.82 per diluted share, for the same period a year ago. Our Advanced Airlaid Materials and Specialty Papers businesses reported significantly higher operating income in ~~2014.~~the comparison. The ~~year-over-year comparison of results of operations reflects the adverse~~ impact of i)lower selling prices was more the ~~stronger U.S. dollar on our euro-denominated businesses; ii) weaker demand~~offset by lower input costs, improved operations and, ~~pricing for nonwoven wallcover products primarily due~~with respect to ~~economic conditions in Russia and Ukraine; iii) pricing pressures in our~~ Specialty Papers, ~~business; and iv) weaker demand for certain Advanced Airlaid Materials’ products.~~less costly annual maintenance outages. The improved performance of these two businesses was partially offset by lower operating income in the Composite Fibers business, which was impacted by lower selling prices. The following table sets forth summarized consolidated results of operations:


	Nine months ended September 30				Nine months ended September 30
In thousands, except per share	2015		2014		2016		2015
Net sales	$	1,248,232	$	1,366,154	$	1,213,932	$	1,248,232
Gross profit		144,849		176,990		161,736		144,849
Operating income		47,536		77,120		56,909		47,536
Net income		30,277		49,689		37,734		30,277
Earnings per diluted share		0.69		1.13		0.86	0.69

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

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

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

Fox River environmental matter. This adjustment reflects a charge incurred to increase our reserve for estimated costs to remediate environmental contamination at the Fox River site.

These costs are irregular in timing and as such may not be indicative of our past or future performance.

Asset impairment charges. This adjustment represents a non-cash charge required to adjust to its estimated fair value the carrying value of a trade name intangible asset. Charges of this nature are irregular in timing and as such may not be indicative of our past and future performance.

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

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

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

~~Fox River environmental matter~~. This adjustment reflects a charge incurred to increase our reserve for estimated costs to remediate environmental contamination at the Fox River site. These costs are irregular in timing and as such may not be indicative of our past or future performance.

~~Asset impairment charges~~~~. This adjustment represents a non-cash charge required to adjust to its estimated fair value the carrying value of a trade name intangible asset. Charges of this nature~~ are irregular in timing and as such may not be indicative of our past and future performance.

~~Alternative fuel mixture/Cellulosic biofuel credits~~~~. These adjustments reflect the release of reserves for uncertain tax position due to the lapse of statutes of limitation.~~

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

In thousands, except per share
   After-tax
amounts Diluted
EPS
2015
Net income
   $ 30,277    $ 0.69
Timberland sales and related costs
   (3,078 ) (0.07 )
Fox River environmental matter
   6,222    0.14
Workforce efficiency charges
   1,621    0.04
Asset impairment charge
   857    0.02
Acquisition and integration related costs
   126    —


Adjusted earnings (non-GAAP)
   $ 36,025    $ 0.82


2014
Net income
   $ 49,689    $ 1.13
Timberland sales and related costs
   (2,381 ) (0.05 )
Asset impairment charge
   2,356    0.05
Acquisition and integration related costs
   115    —
Alternative fuel mixture/Cellulosic biofuel credits
   (1,032 ) (0.02 )


Adjusted earnings (non-GAAP)
   $ 48,747    $ 1.11

- 3028 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

	2016					2015
In thousands, except per share	Amount			Diluted EPS		Amount			Diluted EPS
Net income	$	37,734		$	0.86	$	30,277		$	0.69
Adjustments (pre-tax)
Specialty Papers' environmental compliance		6,645					-
Airlaid capacity expansion costs		1,308					-
Fox River environmental matter		-					10,000
Asset impairment charge		-					1,201
Timberland sales and related costs		-					(2,705	)
Workforce efficiency charges		88					2,249
Acquisition and integration related costs		-					178
Total adjustments (pre-tax)		8,041					10,923
Income taxes (1) (2)		(2,736	)				(5,175	)
Total after-tax adjustments		5,305			0.12		5,748			0.13
Adjusted earnings	$	43,039		$	0.98	$	36,025		$	0.82

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

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

Business Unit Performance

Nine months ended September 30					Advanced Airlaid								Other and
Dollars in millions	Composite Fibers				Materials				Specialty Papers				Unallocated						Total
	2016		2015		2016		2015		2016		2015		2016			2015			2016			2015
Net sales	$	391.6	$	409.6	$	183.4	$	183.0	$	638.9	$	655.6	$	—		$	—		$	1,213.9		$	1,248.2
Energy and related sales, net		—	—			—	—			4.0		3.9		—			—			4.0			3.9
Total revenue	391.6		409.6			183.4		183.0		642.9		659.5		—			—			1,217.9			1,252.2
Cost of products sold		316.0		329.8		157.5		162.0		574.1		608.4		8.6			7.1			1,056.2			1,107.3
Gross profit (loss)		75.6		79.8		25.9		21.0		68.8		51.1		(8.6	)		(7.1	)		161.7			144.8
SG&A		35.1		34.4		6.2		5.8		40.9		34.2		22.6			25.7			104.8			100.2
Gains on dispositions of plant, equipment
and timberlands, net		—		—		—		—		—		—		—			(2.9	)		—			(2.9	)
Total operating income (loss)		40.5		45.4		19.7		15.2		27.9		16.9		(31.2	)		(29.9	)		56.9			47.5
Non-operating expense		—		—		—		—		—		—		(12.7	)		(13.1	)		(12.7	)		(13.1	)
Income (loss) before income taxes	$	40.5	$	45.4	$	19.7	$	15.2	$	27.9	$	16.9	$	(43.9	)	$	(43.0	)	$	44.2		$	34.4
Supplementary Data
Net tons sold (thousands)		116.7		116.2		74.1		71.4		597.7		593.6		—			—			788.5			781.2
Depreciation, depletion and amortization	$	21.2	$	20.1	$	7.0	$	6.5	$	19.7	$	19.3	$	1.8		$	1.5		$	49.7		$	47.4
Capital expenditures		13.7		17.3		25.0		4.6		77.4		51.0		0.8			1.4			116.9			74.3

Nine months ended September 30
Dollars in millions
   Composite Fibers    Advanced
Airlaid Materials    Specialty Papers    Other and
Unallocated Total
   2015    2014    2015    2014    2015    2014    2015 2014 2015 2014
Net sales
   $ 409.6       $ 470.1       $ 183.0       $ 216.2       $ 655.6       $ 679.9       $ —      $ —      $ 1,248.2    $ 1,366.2
Energy and related sales, net
   —         —         —         —         3.9       6.9       —      —      3.9    6.9














Total revenue
   409.6       470.1       183.0       216.2       659.5       686.8       —      —      1,252.2    1,373.1
Cost of products sold
   329.8       376.7       162.0       189.9       608.4       624.3       7.1    5.2    1,107.3    1,196.1














Gross profit (loss)
   79.8       93.4       21.0       26.3       51.1       62.5       (7.1 ) (5.2 ) 144.8    177.0
SG&A
   34.4       38.8       5.8       6.8       34.2       39.5       25.7    18.7    100.2    103.8
Gains on dispositions of plant, equipment and timberlands, net
   —         —         —         —         —         —         (2.9 ) (3.9 ) (2.9 ) (3.9 )














Total operating income (loss)
   45.4       54.6       15.2       19.5       16.9       23.0       (29.9 ) (20.0 ) 47.5    77.1
Non-operating expense
   —         —         —         —         —         —         (13.1 ) (14.0 ) (13.1 ) (14.0 )














Income (loss) before income taxes
   $ 45.4       $ 54.6       $ 15.2       $ 19.5       $ 16.9       $ 23.0       $ (43.0 ) $ (34.0 ) $ 34.4    $ 63.1














Supplementary Data

Net tons sold(thousands)
   116.2       119.5       71.4       76.0       593.6       601.3       —      —      781.2    796.8
Depreciation, depletion and amortization
   $ 20.1       $ 22.7       $ 6.5       $ 6.9       $ 19.3       $ 22.6       $ 1.5    $ 1.3    $ 47.4    $ 53.5
Capital expenditures
   17.3       16.7       4.6       4.1       51.0       24.5       1.4    1.7    74.3    47.0

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

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

- 3129 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

Sales and Costs of Products Sold


	Nine months ended September 30									Nine months ended September 30
In thousands	2015			2014			Change			2016			2015			Change
Net sales	$	1,248,232		$	1,366,154		$	(117,922	)	$	1,213,932		$	1,248,232		$	(34,300	)
Energy and related sales, net		3,936			6,912			(2,976	)		4,013			3,936			77

Total revenues		1,252,168			1,373,066			(120,898	)		1,217,945			1,252,168			(34,223	)
Costs of products sold		1,107,319			1,196,076			(88,757	)		1,056,209			1,107,319			(51,110	)

Gross profit	$	144,849		$	176,990		$	(32,141	)	$	161,736		$	144,849		$	16,887

Gross profit as a percent of Net sales		11.6	%		13.0	%					13.3	%		11.6	%

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


	Nine months ended September 30						Nine months ended September 30
Percent of Total	2015			2014			2016			2015
Business Unit
Composite Fibers		32.8	%		34.4	%		32.3	%		32.8	%
Advanced Airlaid Material		14.7			15.8			15.1			14.7
Specialty Papers		52.5			49.8			52.6			52.5

Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled $1,213.9 million and $1,248.2 million in the first nine months of 2016 and 2015, ~~compared with $1,366.2~~respectively. The $34.3 million ~~in the first nine months~~decrease was primarily driven by $24.4 million of ~~2014. Currency translation adjustments unfavorably impacted the year-over-year comparison by $82.7~~lower selling prices and $6.7 million ~~reflecting a significantly stronger U.S. dollar.~~of unfavorable currency translation. Shipping volumes increased 0.9%.

Composite Fibers’ net sales ~~declined $60.5~~decreased $18.0 million, or ~~12.9%~~4.4%, primarily due to ~~$62.1~~$6.3 million of lower selling prices and $6.8 million of unfavorable currency translation together with lower shipping volumes and $7.8 million from lower selling prices, partially offset by the inclusion of Spezialpapierfabrik (SPO), which was acquired in the fourth quarter of 2014. Shipping volumes declined 2.8% primarily due to a 21.4% decline in shipments of nonwoven wallcover, partially offset by higher shipments of technical specialties and food and beverage segments. The weakness in sales to the wallcover segment is directly related to economic conditions in Russia and Ukraine, a region that accounts for roughly 50% of sales of this business unit’s wallcover products.translation.

Composite Fibers’ operating income for the ~~first~~ nine months of ~~2015~~2016 decreased ~~$9.2~~$4.9 million to ~~$45.4 million.~~$40.5 million compared to the year-ago period. The ~~decline~~primary drivers are summarized in operating income was primarily related to lower selling prices and shipping volumes and $6.6 million of unfavorable currency translation. These factors were partially offset by a $4.7 million benefit from lower raw material and energy prices and $2.5 million from improved operations.the following chart:

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

Advanced Airlaid Materials’ net sales ~~decreased $33.2~~increased $0.4 million ~~largely~~in the year-over-year comparison as the impact from higher shipping volumes was substantially offset by $7.7 million of lower selling prices, from the contractual pass

through of lower raw material costs. Shipping volumes increased 3.8% primarily due to ~~$20.6 million~~higher shipments of ~~unfavorable foreign currency translation and a 6.1% decline in shipping volumes. These factors were partially offset by $1.5 million of higher selling prices.~~hygiene products.

Advanced Airlaid Materials’ operating income ~~for the first nine months~~totaled $19.7 million, an increase of ~~2015 declined $4.3~~$4.5 million, compared to the same period a ~~year-ago as~~year ago. The primary drivers are summarized in the ~~combined impact of softer market demand and related production downtime and $1.5 million from the adverse impact of foreign currency translation more than offset the benefit of higher selling prices.~~following chart:

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

Specialty Papers’ net sales ~~declined $24.3~~decreased $16.7 million, or ~~3.6%~~2.5% due to ~~lower shipping volumes and $6.4~~a $10.4 million impact from lower ~~selling.~~selling prices. Shipping volumes increased 0.7%. The business unit again outperformed the broader uncoated freesheet market which declined 0.8%.

~~This business unit’s operating~~Operating income totaled ~~$16.9~~$27.9 million, ~~for~~an increase of $11.0 million compared to the first nine months of ~~2015 compared to $23.0~~2015. The primary drivers are summarized in the following chart:

The improvement in “Operations & Other” in the chart above includes $7.1 million ~~a year ago. The decline in operating income was due to~~from the lower ~~selling prices and shipping volumes together with $4.3 million of operating~~ cost ~~penalties primarily related to the expanded scope~~ of the annual maintenance outages. ~~These unfavorable factors were partially offset by a $9.3 million benefit from lower raw material and energy costs.~~

- 30 -

Energy and related sales decreased $3.0 million in the comparison as severe weather conditions in 2014 resulted in higher selling prices for excess power and a boiler outage in the first quarter of 2015 reduced power sales.GLATFELTER

9.30.16 Form 10-Q

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


	Nine months ended September 30									Nine months ended September 30
In thousands	2015			2014			Change			2016			2015			Change
Energy sales	$	4,375		$	10,714		$	(6,339	)	$	2,919		$	4,375		$	(1,456	)
Costs to produce		(3,387	)		(5,288	)		1,901			(3,229	)		(3,387	)		158

Net		988			5,426			(4,438	)		(310	)		988			(1,298	)
Renewable energy credits		2,948			1,486			1,462			4,323			2,948			1,375

Total	$	3,936		$	6,912		$	(2,976	)	$	4,013		$	3,936		$	77

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

~~- 32 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

Other and Unallocated The amount of net operating expenses not allocated to a business unit and reported as “Other and Unallocated” in our table of Business Unit Performance, totaled $31.2 million in the first nine months of 2016 compared with $29.9 million in the first nine months of ~~2015 compared with $20.0~~2015. Excluding $2.9 million of gains in ~~the first nine months of 2014. Excluding the gains~~2015 from sales of timberlands in the comparison, unallocated net operating expenses ~~increased $8.9~~decreased $1.6 million primarily due to ~~the $10.0 million Fox River environmental matter charge and severance costs related to our workforce efficiency initiative partially offset by~~ lower ~~corporate spending.~~pension expense.

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


	Nine months ended September 30						Nine months ended September 30
In thousands	2015		2014		Change		2016		2015		Change
Recorded as:
Costs of products sold	$	5,247	$	4,957	$	290	$	1,761	$	5,247	$	(3,486	)
SG&A expense		1,370		55		1,315		2,365		1,370		995

Total	$	6,617	$	5,012	$	1,605	$	4,126	$	6,617	$	(2,491	)

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

Income taxes For the first nine months of ~~2015,~~2016, we recorded a provision for income taxes of ~~$4.1~~$6.5 million on pretax income of ~~$34.4~~$44.2 million. The comparable amounts in the same period of 2015 were $4.1 million and $34.4 million, respectively. Tax

expense in the first nine months of ~~2014 were income~~2016 includes a benefit of $2.4 million primarily due to investment tax ~~expense of $13.4 million on $63.1 million of pretax income. The amount of taxes recorded in 2014 included a $1.0 million benefit from the~~credits, release of ~~tax~~ reserves related to ~~alternative fuel mixture credits earned~~the completion of tax audits and changes in ~~2009, due to~~statutory tax rates. The effective tax rate in 2015 includes the ~~lapse~~benefit of a $2.6 million release of uncertain tax positions in connection with the ~~applicable statutes~~completion of ~~limitation.~~certain tax audits.

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

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

~~In thousands~~

~~Nine months ended~~
~~September 30, 2015~~

~~Favorable~~
~~(unfavorable)~~

~~Net sales~~

~~$(82,693~~

)

~~Costs of products sold~~

~~62,069~~

~~SG&A expenses~~

~~6,987~~

~~Income taxes and other~~

~~2,263~~

In thousands	Nine months ended September 30, 2016
	Favorable (unfavorable)
Net sales		$	(6,672	)
Costs of products sold			2,736
SG&A expenses			725
Income taxes and other			355
Net income		$	(2,856	)

~~Net income~~

~~$(11,375~~

)

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

- 3331 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

Three months ended September 30, ~~2015~~2016 versus the three months ended September 30, ~~2014~~2015

Overview~~Overview~~For the third quarter of ~~2015,~~2016, net income totaled ~~$13.5~~$19.6 million, or ~~$0.31~~$0.44 per diluted share compared with ~~$30.4~~$13.5 million, or ~~$0.69~~$0.31 per diluted share in the third quarter of ~~2014.~~2015. Adjusted earnings for the third quarter of 2016 were $24.0 million, or $0.54 per diluted share compared with $20.8 million, or $0.47 per diluted share, for the same period a year ago.

The following table sets forth summarized results of operations:


	Three months ended September 30				Three months ended September 30
In thousands, except per share	2015		2014		2016		2015
Net sales	$	419,960	$	465,092	$	405,301	$	419,960
Gross profit		59,908		80,513		61,170		59,908
Operating income		20,239		44,217		25,418		20,239
Net income		13,504		30,372		19,601		13,504
Earnings per diluted share		0.31		0.69		0.44		0.31

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

							2016					2015
In thousands, except per share	After-tax amounts			Diluted EPS			Amount			Diluted EPS		Amount			Diluted EPS
2015
Net income	$	13,504		$	0.31		$	19,601		$	0.44	$	13,504		$	0.31
Adjustments (pre-tax)
Specialty Papers' environmental compliance								5,520					-
Airlaid capacity expansion costs								1,051					-
Fox River environmental matter		6,222			0.14			-					10,000
Asset impairment charge		857			0.02			-					1,201
Workforce efficiency charges		211			—			-					296
Acquisition and integration related costs		13			—			-					18

Adjusted earnings (non-GAAP)	$	20,807		$	0.47

2014
Net income	$	30,372		$	0.69
Asset impairment charge		2,356			0.05
Acquisition and integration related costs		115			—
Timberland sales and related costs		(1,004	)		(0.02	)
Alternative fuel mixture/ Cellulosic biofuel credits		(1,032	)		(0.02	)

Adjusted earnings (non-GAAP)	$	30,807		$	0.70

Total adjustments (pre-tax)								6,571					11,515
Income taxes (1)								(2,193	)				(4,212	)
Total after-tax adjustments								4,378			0.10		7,303			0.17
Adjusted earnings							$	23,979			0.54	$	20,807		$	0.47

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

Business Unit Performance


Three months ended September 30 Dollars in millions	Composite Fibers				Advanced Airlaid Materials				Specialty Papers				Other and Unallocated						Total
Three months ended September 30																													Advanced Airlaid								Other and
Dollars in millions																									Composite Fibers				Materials				Specialty Papers				Unallocated						Total
	2015		2014		2015		2014		2015		2014		2015			2014			2015			2014			2016		2015		2016		2015		2016		2015		2016			2015			2016			2015
Net sales	$	133.9	$	154.5	$	63.2	$	74.4	$	222.8	$	236.2	$	—		$	—		$	420.0		$	465.1		$	131.7	$	133.9	$	61.9	$	63.2	$	211.8	$	222.8	$	—		$	—		$	405.3		$	420.0
Energy and related sales, net		—		—		—		—		1.2		0.9		—			—			1.2			0.9			—	—			—	—			1.3		1.2		—			—			1.3			1.2

Total revenue		133.9		154.5		63.2		74.4		224.0		237.1		—			—			421.1			466.0			131.7		133.9		61.9	63.2			213.1		224.0		—			—			406.6			421.1
Cost of products sold		108.4		123.7		54.6		64.7		196.1		195.2		2.1			1.8			361.2			385.4			105.8	108.4			53.5		54.6		180.1		196.1		6.1			2.1			345.5			361.2

Gross profit (loss)		25.5		30.8		8.6		9.7		27.9		41.9		(2.1	)		(1.8	)		59.9			80.5			25.9		25.5		8.4		8.6		33.0		27.9		(6.1	)		(2.1	)		61.2			59.9
SG&A		11.5		12.6		1.8		2.2		10.4		14.1		16.2			9.0			39.8			37.9			11.9		11.5		2.0		1.8		14.3		10.4		7.5			16.2			35.7			39.8
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		(0.1	)		(1.6	)		(0.1	)		(1.6	)

Gains on dispositions of plant, equipment
and timberlands, net																										—		—		—		—		—		—		—			(0.1	)		—			(0.1	)
Total operating income (loss)		14.0		18.1		6.8		7.5		17.5		27.8		(18.2	)		(9.2	)		20.2			44.2			14.0		14.1		6.4		6.8		18.7		17.5		(13.6	)		(18.2	)		25.4			20.2
Non-operating expense		—		—		—		—		—		—		(4.4	)		(4.8	)		(4.4	)		(4.8	)		—		—		—		—		—		—		(4.4	)		(4.4	)		(4.4	)		(4.4	)

Income (loss) before income taxes	$	14.0	$	18.1	$	6.8	$	7.5	$	17.5	$	27.8	$	(22.6	)	$	(14.0	)	$	15.8		$	39.4		$	14.0	$	14.1	$	6.4	$	6.8	$	18.7	$	17.5	$	(18.0	)	$	(22.6	)	$	21.0		$	15.8

Supplementary Data
Net tons sold(thousands)		38.9		40.1		24.8		26.3		203.6		208.4		—			—			267.2			274.7			39.1		38.9		25.2		24.8		197.3		203.6		—			—			261.5			267.2
Depreciation, depletion and amortization	$	6.7	$	7.4	$	2.2	$	2.3	$	6.4	$	6.5	$	0.5		$	0.5		$	15.8		$	16.7		$	6.9	$	6.7	$	2.4	$	2.2	$	6.4	$	6.4	$	0.6		$	0.5		$	16.3		$	15.8
Capital expenditures		5.8		5.4		1.8		1.3		22.1		9.7		—			0.5			29.7			16.9			5.1		5.8		4.3		1.8		26.7		22.1		0.5			—			36.6			29.7

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

- 3432 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

Sales and Costs of Products Sold


	Three months ended September 30									Three months ended September 30
In thousands	2015			2014			Change			2016			2015			Change
Net sales	$	419,960		$	465,092		$	(45,132	)	$	405,301		$	419,960		$	(14,659	)
Energy and related sales, net		1,153			860			293			1,346			1,153			193

Total revenues		421,113			465,952			(44,839	)		406,647			421,113			(14,466	)
Costs of products sold		361,205			385,439			(24,234	)		345,477			361,205			(15,728	)

Gross profit	$	59,908		$	80,513		$	(20,605	)	$	61,170		$	59,908		$	1,262

Gross profit as a percent of Net sales		14.3	%		17.3	%					15.1	%		14.3	%

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


	Three months ended September 30						Three months ended September 30
Percent of Total	2015			2014			2016			2015
Business Unit
Composite Fibers		31.9	%		33.2	%		32.5	%		31.9	%
Advanced Airlaid Material		15.0			16.0			15.3			15.0
Specialty Papers		53.1			50.8			52.2			53.1

Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled $405.3 million and $420.0 million in the third quarters of 2016 and 2015, respectively. Lower selling prices unfavorably impacted the year-over-year comparison by $6.3 million and shipping volumes declined 2.1%.

Composite Fibers’ net sales declined $2.3 million, or 1.7%, primarily due to $1.6 million from lower selling prices. Shipping volumes increased 0.5% in the comparison.

Composite Fibers’ third quarter of 2016 operating income decrease slightly to $14.0 million. The primary drivers are summarized in the following chart:

Advanced Airlaid Materials’ net sales decreased $1.3 million in the quarter-over-quarter comparison primarily due to $2.2 million of lower selling prices. Shipping volumes increased 1.8% primarily due to higher shipments of wipes products.

Advanced Airlaid Materials’ operating income totaled $6.4 million compared with $6.8 million in the third quarter of ~~2015 compared with $465.1~~2015. The primary drivers are summarized in the following chart:

Specialty Papers’ net sales decreased $11.0 million, or 5.0%, due to a 3.1 % decline in shipping volumes and a $2.5 million impact from lower selling prices.

Specialty Papers’ operating income totaled $18.7 million in the third quarter of ~~2014.~~2016, slightly higher compared with the same period a year ago. The ~~translation of non-U.S. dollar sales unfavorably impacted the year-over-year comparison by $25.2 million reflecting the weaker Euro.~~

Net sales for Composite Fibers declined $20.6 million, or 13.3%, primarily due to $18.8 million of unfavorable currency translation and $3.9 million from lower selling prices, partially offset by the inclusion of Spezialpapierfabrik Oberschmitten GmbH (SPO), which was acquiredprimary drivers are summarized in the ~~fourth quarter of 2014. Shipping volumes declined 3.0% due to a 23.2% decline in nonwoven wallcover.~~

Composite Fibers’ third-quarter 2015 operating income totaled $14.1 million, a $4.0 million decline compared to the year-ago period. The negative impact of lower selling prices and wallcover shipping volumes was partially offset by $2.2 million of improved operations and $1.2 million of lower raw material and energy costs. The change in foreign currency exchange rates negatively impacted results by $1.3 million.

~~On a year-over-year basis, Advanced Airlaid Materials’ net sales decreased $11.2 million largely due to $6.4 million of unfavorable currency translation and a 5.8% decline in shipping volumes.~~following chart:

Third-quarter 2015 operating income declined $0.7 million compared to the same quarter a year-ago primarily due to approximately $1.7 million related to lower shipping volumes and downtime to align production with demand, partially offset by $1.5 million of lower raw material and energy costs.

~~On a year-over-year basis, Specialty Papers’ net sales decreased $13.4 million, or 5.7%, due to lower average selling prices totaling $5.7 million and a decline in shipping volumes.~~

Specialty Papers’ third-quarter 2015 operating income totaled $17.5 million, a $10.2 million decrease in the year-over-year comparison primarily due to lower selling prices, $3.1 million of market downtime and $3.7 million from lower pulp production, partially offset by $2.9 million of lower raw material and energy costs.

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

   Three months ended
September 30
In thousands
   2015 2014 Change
Energy sales
   $ 1,047    $ 1,513    $ (466 )
Costs to produce
   (1,131 ) (1,268 ) 137


Net
   (84 ) 245    (329 )
Renewable energy credits
   1,237    615    622


Total
   $ 1,153    $ 860    $ 293

	Three months ended September 30
In thousands	2016			2015			Change
Energy sales	$	1,101		$	1,047		$	54
Costs to produce		(1,187	)		(1,131	)		(56	)
Net		(86	)		(84	)		(2	)
Renewable energy credits		1,432			1,237			195
Total	$	1,346		$	1,153		$	193

~~- 35 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

- 33 -

GLATFELTER

9.30.16 Form 10-Q

compared with $18.2 million in the third quarter of ~~2015 compared with $9.1 million in the third quarter of 2014. Excluding the impact of sales of timberlands in the comparison, unallocated net operating expenses increased $7.6 million~~2015. The decrease was primarily due to the $10.0 million ~~Fox River~~reserve for environmental ~~matter charge~~matters recorded in the third quarter of 2015, partially offset by ~~lower corporate spending.~~higher incentive compensation and professional service fees in 2016.

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


	Three months ended September 30						Three months ended September 30
In thousands	2015		2014		Change		2016		2015		Change
Recorded as:
Costs of products sold	$	1,752	$	1,650	$	102	$	582	$	1,752	$	(1,170	)
SG&A expense		454		3		451		788		454		334

Total	$	2,206	$	1,653	$	553	$	1,370	$	2,206	$	(836	)

Income taxes For the third quarter of ~~2015,~~2016, we recorded ~~a provision for income taxes~~$1.4 million of ~~$2.3 million~~tax expense on pretax income of ~~$15.8~~$21.0 million. The comparable amounts in the third quarter of ~~2014~~2015 were ~~income tax expense~~taxes of ~~$9.0~~$2.3 million on ~~$39.4 million~~a pretax income of ~~pretax income. In the~~$15.8 million. The third quarter ~~of 2014, we recorded a $1.0~~2016 tax rate benefited by $2.4 million ~~benefit from the~~primarily due to investment tax credits, release of ~~tax~~ reserves related to ~~alternative fuel mixture credits earned~~the completion of tax audits and changes in ~~2009, due to the lapse of the applicable statutes of limitation.~~statutory tax rates.

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

~~In thousands~~

~~Three months ended~~
~~September 30, 2015~~

~~Favorable~~
~~(unfavorable)~~

~~Net sales~~

~~$(25,198~~

)

~~Costs of products sold~~

~~19,146~~

~~SG&A expenses~~

~~2,052~~

~~Income taxes and other~~

~~491~~

In thousands	Three months ended September 30, 2016
	Favorable (unfavorable)
Net sales		$	(2,153	)
Costs of products sold			(475	)
SG&A expenses			350
Income taxes and other			318
Net income		$	(1,960	)

~~Net income~~

~~$ (3,509~~

)

LIQUIDITY AND CAPITAL RESOURCES

Our business is capital intensive and requires significant expenditures for new or enhanced equipment, to support our research and development efforts, for environmental compliance matters including, but not limited to, the Clean Air Act, and to support our business strategy. In addition, we have mandatory debt service requirements of both principal and

interest. The following table summarizes cash flow information for each of the periods presented:


	September 30						Nine months ended September 30
In thousands	2015			2014			2016			2015
Cash and cash equivalents at beginning of period	$	99,837		$	122,882
Cash and cash equivalents at
beginning of period							$	105,304		$	99,837
Cash provided (used) by
Operating activities		70,523			21,380			59,437			70,523
Investing activities		(72,923	)		(43,585	)		(117,293	)		(72,923	)
Financing activities		(21,946	)		(46,007	)		2,974			(21,946	)
Effect of exchange rate changes on cash		(1,826	)		(1,015	)

Effect of exchange rate
changes on cash								330			(1,826	)
Net cash used		(26,172	)		(69,227	)		(54,552	)		(26,172	)

Cash and cash equivalents at end of period	$	73,665		$	53,655

Cash and cash equivalents at
end of period							$	50,752		$	73,665

At September 30, ~~2015,~~2016, we had ~~$73.7~~$50.8 million in cash and cash equivalents held by both domestic and foreign subsidiaries. ~~Although unremitted~~Unremitted earnings of our foreign subsidiaries are deemed to be ~~permanently reinvested, substantially all~~indefinitely reinvested; however, as of September 30, 2016, the majority of our cash and cash equivalents is either held by domestic entities or is available for use domestically. In addition to our cash and cash equivalents, ~~$157.2~~$227.8 million is available under our revolving credit agreement, which matures in March 2020.

Cash provided by operating activities totaled ~~$70.5~~$59.4 million in the first nine months of ~~2015~~2016 compared with ~~$21.4~~$70.5 million in the same period a year ago. The ~~increase~~decrease in cash from operations primarily reflects ~~a decrease~~an increase in cash used for working capital ~~primarily related to lower inventory and improved payment terms with suppliers together with lower income tax payments~~ partially offset by ~~cash used for Fox River environmental remediation activities.~~improved operating income.

Net cash used by investing activities increased by ~~$29.3~~$44.4 million in the year-over-year comparison primarily due to capital expenditures ~~largely related to~~for Specialty Papers’ environmental compliance ~~projects.~~and Advanced Airlaid Materials’ capacity expansion projects which totaled $73.6 million in 2016 compared to $19.0 million in 2015. Capital expenditures ~~during the first nine months of 2015 and 2014, include $19.0 million and $2.9 million, respectively, related to environmental compliance projects. Capital expenditures in 2015~~ are expected to betotal between $155 million and $170 million for 2016, including approximately ~~$105~~$55 million to ~~$115 million including approximately $35~~$60 million for the Specialty Papers’ environmental compliance ~~projects.~~projects and $40 million to $45 million for the Airlaid capacity expansion.

~~- 36 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

Net cash ~~used~~provided by financing activities totaled ~~$21.9~~$3.0 million in the first nine months of ~~2015~~2016 compared with ~~$46.0~~a use of $21.9 million in the same period of ~~2014. In 2014, we used $30.7~~2015. The increase in cash provided by financing activities primarily reflects additional term loan borrowings and receipt of $5.3 million of ~~cash~~government grants primarily related to ~~reduce amounts outstanding on~~ our ~~revolving credit facility compared with no changes in the first nine months of 2015.~~Airlaid capacity expansion and Specialty Papers’ compliance projects.

- 34 -

~~At September 30, 2015, our net debt (defined as total debt less cash) totaled $315.5 million compared to $304.8 million at the end of 2014.~~ GLATFELTER

9.30.16 Form 10-Q

The following table sets forth our outstanding long-term indebtedness:


	September 30			December 31			September 30			December 31
In thousands	2015			2014			2016			2015
Revolving credit facility, due Mar. 2020	$	83,464		$	—		$	59,830		$	58,792
Revolving credit facility, due Nov. 2016		—			90,555
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		10,803			12,155			9,566			10,109
2.05% Term Loan, due Mar. 2023		44,848			51,902			40,210			42,130

1.30% Term Loan, due Jun. 2023								11,161			-
1.55% Term Loan, due Sep. 2025								10,941			2,839
Total long-term debt		389,115			404,612			381,708			363,870
Less current portion		(7,580	)		(5,734	)		(11,432	)		(7,366	)

Unamortized deferred issuance costs								(2,727	)		(3,208	)
Long-term debt, net of current portion	$	381,535		$	398,878		$	367,549		$	353,296

Our revolving credit facility contains a number of customary compliance covenants, the most restrictive of which is a maximum leverage ratio of 3.5x. As of September 30, ~~2015,~~2016, the leverage ratio, as calculated in accordance with the definition in our credit agreement, was ~~2.2x,~~2.1x, within the limits set forth in our credit agreement. Based on our expectations of future results of operations and capital needs, we do not believe the debt covenants will impact our operations or limit our ability to undertake financings that may be necessary to meet our capital needs.

The 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the credit agreement at maturity, or a default under the credit agreement that accelerates the debt outstanding thereunder. As of September 30, ~~2015,~~2016, we met all of the requirements of our debt covenants. The significant terms of the debt instruments are more fully discussed in Item 1—1 - Financial Statements – Note ~~12.~~9.

Our long-term debt includes two term loans with mandatory principal repayments that have used $3.4 million of cash in the first nine months of 2015. Principal repayments will total approximately $4.7 million and $6.8 million, in 2015 and 2016, respectively.

~~Cash used for financing~~Financing activities includes cash used for common stock dividends ~~and, with respect to~~which increased in the ~~first nine months of 2014, stock repurchases. In February 2015, our Board of Directors authorized~~comparison reflecting a 9%4% increase in our quarterly cash dividend. In the first nine months of ~~2015,~~2016, we used ~~$15.2~~$16.1 million of cash for dividends on our common stock compared with ~~$13.9~~$15.2 million in the same period of ~~2014. The~~2015. Our Board of Directors determines what, if any, dividends will be paid to our shareholders. Dividend payment decisions are based upon then-existing factors and conditions and, therefore, historical trends of dividend payments are not necessarily indicative of future payments.

On May 1, 2014, we announced that our Board of Directors approved a $25 million increase to our share repurchase program and extended the expiration date to May 1, 2016. Under the revised program, we may repurchase up to $50 million of our outstanding common stock of which $33.4 million remains available as of September 30, 2015. No repurchases were made in the first nine months of 2015 and repurchases totaled $12.2 million in the first nine months of 2014.

We are subject to various federal, state and local laws and regulations intended to protect the environment as well as human health and safety. At various times, we have incurred significant costs to comply with these regulations and we could incur additional costs as new regulations are developed or regulatory priorities change. We will incur material capital costs to comply with new air quality regulations including the

U.S. EPA Best Available Retrofit Technology rule (BART; otherwise known as the Regional Haze Rule) and the Boiler Maximum Achievable Control Technology rule (Boiler MACT). These rules will require process modifications and/or installation of air pollution controls on boilers at two of our facilities. We ~~have begun~~are converting or replacing ~~four~~five coal-fired boilers to natural gas and upgrading site infrastructure to accommodate the new boilers, including connecting to gas pipelines. ~~The~~Net of government grants, the total cost of these projects is estimated at ~~$85~~$95 million to ~~$90~~$100 million, of which ~~$25.1~~approximately $82.9 million has been ~~spent to date.~~incurred through the end of the third quarter of 2016. The balance of the ~~costs~~related spending will be ~~incurred~~ substantially ~~over the next eighteen months. The amount of capital spending ultimately incurred may differ, and the difference could be material. Enactment of new environmental laws or regulations or changes~~completed in ~~existing laws or regulations could significantly change our estimates.~~2016.

As more fully discussed in Item 1 - Financial Statements – Note 1612 – Commitments, Contingencies and Legal Proceedings ~~during the fourth quarter of 2015,~~(“Note 12”), we ~~expect to spend approximately $5 million to remediate a portion of~~are involved in the Lower Fox River in Wisconsin (the “Fox River”), an EPA Superfund ~~site.~~site for which we remain potentially liable for contributions to the clean-up activity. During 2015, we used $9.7 million and expect to spend less than $5.0 million in 2016 for remediation activities. It is conceivable we may need to fund amounts in excess of this to fund a portion of the on-going costs beyond ~~2015.~~2016. Although we are unable to determine with any degree of certainty the amount we may

~~- 37 -~~

~~GLATFELTER~~

~~9.30.15 Form 10-Q~~

be required to fund for interim remediation work, such amounts could be significant. The ultimate allocation of such costs is the subject of extensive ongoing litigation amongst three potentially responsible parties. See ~~Item 1 – Financial Statements –~~ Note 1612 for a summary of significant environmental matters.

During 2016, we expect our use of cash for capital expenditures, strategic investments and environmental compliance projects will exceed cash generated from operations. We expect to meet all of our ~~near-~~near and ~~longer-term~~long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility ~~or other bank lines of credit~~ and other long-term debt. However, as discussed in ~~Item 1 – Financial Statements –~~ Note ~~16,~~12, an unfavorable outcome of the Fox River matters could have a material adverse impact on our consolidated financial position, liquidity and/or results of operations.

- 35 -

GLATFELTER

9.30.16 Form 10-Q

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

Outlook~~Outlook~~Composite Fibers’ shipping volumes ~~and selling prices~~ in the fourth quarter of 2016 are expected ~~to approximate~~be approximately 5% lower than the third quarter driven by lower sales of ~~2015 levels. Raw~~metalized products. Selling prices and raw material and energy prices are expected to be ~~slightly higher than~~in-line with the third quarter. We anticipate the impact of machine downtime to reduce inventory levels will be largely offset by cost reduction initiatives.

~~Shipping volumes for~~

Advanced Airlaid ~~Materials in the fourth quarter of 2015~~Materials’ shipping volumes are expected to ~~be down~~decline slightly compared with the third quarter. ~~Average~~Customer selling prices and raw material and energy prices ~~in the fourth quarter~~ are expected to be in-line with the third quarter.

For Specialty Papers, ~~we expect~~ shipping volumes in the fourth quarter ~~of 2015~~are expected to be ~~in-line~~in line with the third quarter. ~~Overall,~~Lower selling prices and mix changes are expected to reduce operating profit by approximately $5 million. The impact of machine downtime to reduce inventory levels is expected to be offset by lower maintenance costs. Raw material and energy prices are expected to decline slightly in the fourth quarter compared to the third quarter due to continued pressure on commodity products and input costs are expected to be in-line with the third quarter of 2015. We do not expect any market downtime in Specialty Papers in the fourth quarter.increase moderately.

- 3836 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS~~

   Year Ended December 31    September 30, 2015
Dollars in thousands    2015 2016 2017 2018 2019    Carrying
Value    Fair Value
Long-term debt

Average principal outstanding

At fixed interest rates – Bond
   $ 250,000    $ 250,000    $ 250,000    $ 250,000    $ 250,000       $ 250,000       $ 253,908
At fixed interest rates – Term Loans
   57,547    52,261    44,681    37,101    29,521       55,651       54,340
At variable interest rates
   83,464    83,464    83,464    83,464    83,464       83,464       83,464




      $ 389,115       $ 391,712




Weighted-average interest rate

On fixed rate debt – Bond
   5.375 % 5.375 % 5.375 % 5.375 % 5.375 %
On fixed rate debt – Term Loans
   2.12 % 2.12 % 2.12 % 2.12 % 2.12 %
On variable rate debt
   1.50 % 1.50 % 1.50 % 1.50 % 1.50 %

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

	Year Ended December 31															September 30, 2016
Dollars in thousands	2017			2018			2019			2020			2021			Carrying Value		Fair Value
Long-term debt
Average principal outstanding
At fixed interest rates – Bond	$	250,000		$	250,000		$	250,000		$	250,000		$	250,000		$	250,000	$	252,658
At fixed interest rates – Term Loans		62,732			52,903			42,389			31,876			21,362			71,878		68,709
At variable interest rates		59,830			59,830			59,830			59,830			59,830			59,830		59,830
																$	381,708	$	381,197
Weighted-average interest rate
On fixed rate debt – Bond		5.375	%		5.375	%		5.375	%		5.375	%		5.375	%
On fixed rate debt – Term Loans		2.17	%		2.17	%		2.17	%		2.17	%		2.17	%
On variable rate debt		1.25	%		1.25	%		1.25	%		1.25	%		1.25	%

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

Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At September 30, ~~2015,~~2016, we had ~~$389.1~~$379.0 million of long-term debt, net of unamortized debt issuance costs, of which ~~21.5%~~15.8% was at variable interest rates. Variable-rate debt outstanding ~~consists of~~represents borrowings under our revolving credit agreement that accrues interest based on LIBOR plus a margin. At September 30, ~~2015,~~2016, the interest rate paid was approximately ~~1.50%~~1.25%. A hypothetical 100 basis point increase or decrease in the interest rate on variable rate debt would increase or decrease annual interest expense by ~~$0.8~~$0.6 million.

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

ITEM 4. CONTROLS AND PROCEDURES

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

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

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

- 3937 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

PART II

ITEM 6. EXHIBITS

~~ITEM 6.~~

~~EXHIBITS~~

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



~~4.1~~ 31.1		~~First Supplemental Indenture dated as of October 27, 2015 by and among P. H. Glatfelter Company, the Subsidiary Guarantors named therein and US Bank National Association, as Trustee.~~

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

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

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

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

101.INS		XBRL Instance Document, filed herewith

101.SCH		XBRL Taxonomy Extension Schema, filed herewith

101.CAL		XBRL Extension Calculation Linkbase, filed herewith

101.DEF		XBRL Extension Definition Linkbase, filed herewith

101.LAB		XBRL Extension Label Linkbase, filed herewith

101.PRE		XBRL Extension Presentation Linkbase, filed herewith

SIGNATURES

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


		P. H. GLATFELTER COMPANY (Registrant)
		~~(Registrant)~~
November 1, 2016
~~November 3, 2015~~
	By
		By	/s/ David C. Elder
			David C. Elder
			Vice President, Finance

- 4038 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q

EXHIBIT INDEX

Exhibit Number		Description
~~Exhibit~~ ~~Number~~		~~Description~~
31.1
~~4.1~~		~~First Supplemental Indenture dated as of October 27, 2015 by and among P. H. Glatfelter Company, the Subsidiary Guarantors named therein and US Bank National Association, as Trustee.~~

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

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

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

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

101.INS		XBRL Instance Document, filed herewith

101.SCH		XBRL Taxonomy Extension Schema, filed herewith

101.CAL		XBRL Extension Calculation Linkbase, filed herewith

101.DEF		XBRL Extension Definition Linkbase, filed herewith

101.LAB		XBRL Extension Label Linkbase, filed herewith

101.PRE		XBRL Extension Presentation Linkbase, filed herewith

- 4139 -

GLATFELTER

~~9.30.15~~9.30.16 Form 10-Q


~~Commission~~ ~~file number~~	Commission file number		Exact name of registrant as specified in its charter		IRS Employer Identification No.		State or other jurisdiction of incorporation or organization
	1-03560
~~1-03560~~		P. H. Glatfelter Company		23-0628360		Pennsylvania


		~~Page~~
~~PART I – FINANCIAL INFORMATION~~

~~Item 1~~Page	~~Financial Statements~~Page
	~~Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2015 and 2014 (unaudited)~~		2
	~~Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2015 and 2014 (unaudited)~~		3
	~~Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 (unaudited)~~		4
	~~Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 (unaudited)~~		5
	~~Notes to Condensed Consolidated Financial Statements (unaudited)~~		6

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

~~Item 3~~	~~Quantitative and Qualitative Disclosures About Market Risks~~		39

~~Item 4~~	~~Controls and Procedures~~		39

~~PART II – OTHER INFORMATION~~

~~Item 6~~	~~Exhibits~~		40

~~SIGNATURES~~			40

PART I - FINANCIAL INFORMATION

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

Large accelerated filer	☒		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐

	7.	Retirement Plans and Other Post- Retirement Benefits	11
	8.	Inventories	12
	9.	Long-term Debt	12
	10.	Fair Value of Financial Instruments	13
	11.	Financial Derivatives and Hedging Activities	13
	12.	Commitments, Contingencies and Legal Proceedings	15
	13.	Segment Information	19
	14.	Condensed Consolidating Financial Statements	20

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3	Quantitative and Qualitative Disclosures About Market Risks		37
Item 4	Controls and Procedures		37

PART II – OTHER INFORMATION			38

Item 6	Exhibits		38

	SIGNATURES		38


Dollars in thousands	Acres		Proceeds		Gain
2015
Timberlands		1,398	$	2,794	$	2,704
Other		n/a		387		184

Total			$	3,181	$	2,888


2014
Timberlands		2,030	$	4,041	$	3,876
Other		n/a		10		5

Total			$	4,051	$	3,881


in thousands	Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at July 1, 2015	$	(58,857	)	$	2,621		$	(114,076	)	$	(2,756	)	$	(173,068	)
Other comprehensive income before reclassifications (net of tax)		(3,262	)		(1,381	)		—			—			(4,643	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(1,442	)		3,090			(7	)		1,641

Net current period other comprehensive income (loss)		(3,262	)		(2,823	)		3,090			(7	)		(3,002	)

Balance at September 30, 2015	$	(62,119	)	$	(202	)	$	(110,986	)	$	(2,763	)	$	(176,070	)

Balance at July 1, 2014	$	15,336		$	60		$	(84,822	)	$	60		$	(69,366	)
Other comprehensive income before reclassifications (net of tax)		(33,450	)		1,379			—			—			(32,071	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			96			2,363			35			2,494

Net current period other comprehensive income (loss)		(33,450	)		1,475			2,363			35			(29,577	)

Balance at September 30, 2014	$	(18,114	)	$	1,535		$	(82,459	)	$	95		$	(98,943	)