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 x☒ 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 x☒ 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 or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Common Stock outstanding on July ~~29, 2016~~25, 2017 totaled ~~43,547,739~~43,583,926 shares.

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

The following table sets forth details of the changes in accumulated other comprehensive income (losses) for the three months and six months ended June 30, ~~2016~~2017 and ~~2015.~~2016.

Reclassifications out of accumulated other comprehensive income were as follows:

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


Units	2016			2015			2017			2016
Balance at January 1,		674,523			888,942			679,038			674,523
Granted		295,654			152,531			364,748			295,654
Forfeited		(143,209	)		(77,652	)		(91,449	)		(143,209	)
Shares delivered		(149,475	)		(283,627	)		(24,052	)		(149,475	)

Balance at June 30,		677,493			680,194			928,285			677,493

The amount granted in ~~2016~~2017 and ~~2015~~2016 includes PSAs of ~~199,693~~163,274 and ~~100,801,~~199,693, respectively, exclusive of reinvested dividends.

~~- 10 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

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


	June 30				June 30
In thousands	2016		2015		2017		2016
Three months ended	$	935	$	453	$	1,049	$	935
Six months ended		1,402		820		2,088		1,402

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.~~SOSARS for the six months ended June 30;


	2016					2015					2017					2016
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,		2,199,742		$	17.82		1,864,707		$	16.20		2,736,616		$	17.64		2,199,742		$	17.82
Granted		743,925			17.54		406,142			24.94		—			—		743,925		17.54
Exercised		(53,190	)		9.91		(58,343	)		13.52		(33,050	)		14.65		(53,190	)		9.91
Canceled / forfeited		(108,945	)		21.81		(3,349	)		26.53		(17,630	)		18.46		(108,945	)		21.81

Outstanding at June 30,		2,781,532		$	17.74		2,209,157		$	17.87		2,685,936		$	17.67		2,781,532		$	17.74

SOSAR Grants

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

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


	June 30				June 30
In thousands	2016		2015		2017		2016
Three months ended	$	669	$	680	$	259	$	669
Six months ended		1,401		1,268		868		1,401

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~~post-retirement medical benefit plans.

	Three months ended June 30
In thousands	2017			2016
Pension Benefits
Service cost	$	2,649		$	2,510
Interest cost		5,989			6,153
Expected return on plan assets		(10,666	)		(11,275	)
Amortization of prior service cost		708			675
Amortization of unrecognized loss		3,311			3,533
Total net periodic benefit cost	$	1,991		$	1,596

Other Benefits
Service cost	$	284		$	250
Interest cost		513			456
Amortization of prior service credit		(46	)		(46	)
Amortization of actuarial gain		(46	)		(327	)
Total net periodic benefit cost	$	705		$	333


	Three months ended June 30						Six months ended June 30
In thousands	2016			2015			2017			2016
Pension Benefits
Service cost	$	2,510		$	2,561		$	5,370		$	5,240
Interest cost		6,153			5,788			11,896			12,240
Expected return on plan assets		(11,275	)		(11,454	)		(21,497	)		(22,661	)
Amortization of prior service cost		675			761			1,412			1,349
Amortization of unrecognized loss		3,533			3,947			6,133			6,587

Net periodic benefit cost	$	1,596		$	1,603
Total net periodic benefit cost							$	3,314		$	2,755

Other Benefits
Service cost	$	250		$	303		$	579		$	573
Interest cost		456			436			998			996
Amortization of prior service cost		(46	)		(70	)
Amortization of unrecognized (gain)/loss		(327	)		15

Net periodic benefit cost	$	333		$	684


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

Net periodic benefit cost	$	2,755		$	4,411

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

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

Amortization of prior service credit								(91	)		(91	)
Amortization of actuarial gain								(189	)		(378	)
Total net periodic benefit cost							$	1,297		$	1,100

- 11 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

INVENTORIES

Inventories, net of reserves, were as follows:


	June 30		December 31		June 30		December 31
In thousands	2016		2015		2017		2016
Raw materials	$	62,881	$	60,098	$	71,723	$	66,359
In-process and finished		122,322		115,874		117,385		112,507
Supplies		72,420		71,242		72,613		70,803

Total	$	257,623	$	247,214	$	261,721	$	249,669

LONG-TERM DEBT

Long-term debt is summarized as follows:


	June 30			December 31			June 30			December 31
In thousands	2016			2015			2017			2016
Revolving credit facility, due Mar. 2020	$	48,851		$	58,792		$	130,000		$	61,595
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		9,516			10,109			8,151			8,282
2.05% Term Loan, due Mar. 2023		40,000			42,130			35,023			35,163
1.30% Term Loan, due Jun. 2023		11,102			—			9,781			9,788
1.55% Term Loan, due Sep. 2025		10,884			2,839			11,187			10,333

Total long-term debt		370,353			363,870			444,142			375,161
Less current portion		(9,098	)		(7,366	)		(10,400	)		(8,961	)
Unamortized deferred issuance costs		(2,889	)		(3,208	)		(2,248	)		(2,553	)

Long-term debt, net of current portion	$	358,366		$	353,296		$	431,494		$	363,647

~~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. On February 1, 2017, the Revolving Credit Facility was further amended to, among other things, change the definition of earnings before interest, taxes, depreciation and amortization (“EBITDA”) for purposes of calculating covenant compliance.

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”)~~EBITDA ratio (the “leverage ratio”); and ii) a consolidated EBITDA to interest expense ratio. The most restrictive of our covenants is a maximum leverage ratio of 3.5x. As of June 30, ~~2016,~~2017, the leverage ratio, as calculated in accordance with the definition in our amended credit agreement, was ~~1.9x.~~2.6x. 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~~

~~6.30.16 Form 10-Q~~

The 5.375% Notes contain various covenants customary to indebtedness of this nature including limitations on i) the amount of indebtedness that may be incurred; ii) certain restricted payments including common stock dividends; iii) distributions from certain subsidiaries; iv) sales of assets; v) transactions amongst subsidiaries; and vi) incurrence of liens on assets. In addition, the 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the Revolving Credit ~~Agreement~~Facility at maturity or a default under the Revolving Credit ~~Agreement~~Facility that accelerates the debt outstanding thereunder. As of June 30, ~~2016,~~2017, we met all of the requirements of our debt covenants.

- 12 -

GLATFELTER

06.30.17 Form 10-Q

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


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

Each of the borrowings require quarterly repayments of principal and interest and 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, are calculated by reference to our Revolving Credit ~~Agreement.~~Facility.

P. H. Glatfelter Company guarantees all debt obligations of its subsidiaries. All such obligations are recorded in these condensed consolidated financial statements.

Letters of credit issued to us by certain financial institutions totaled ~~$5.1 million and $5.3~~$5.2 million as of June 30, ~~2016~~2017 and $5.1 million as of December 31, ~~2015, respectively.~~2016. 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.

10.

~~10.~~

~~ASSET RETIREMENT OBLIGATION~~

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

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

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


Balance at June 30,
   $ 401    $ 982

~~The amount set forth above as of June 30, 2016, is recorded in other current liabilities in the accompanying condensed consolidated balance sheet.~~

~~11.~~

FAIR VALUE OF FINANCIAL INSTRUMENTS

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


	June 30, 2016				December 31, 2015				June 30, 2017				December 31, 2016
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Variable rate debt	$	48,851	$	48,851	$	58,792	$	58,792	$	130,000	$	130,000	$	61,595	$	61,595
Fixed-rate bonds		250,000		255,625		250,000		250,938		250,000		256,623		250,000		256,563
2.40% Term loan		9,516		9,406		10,109		10,535		8,151		8,349		8,282		8,877
2.05% Term loan		40,000		38,724		42,130		42,886		35,023		35,570		35,163		37,089
1.30% Term Loan		11,102		10,403		—		—		9,781		9,712		9,788		10,062
1.55% Term loan		10,884		9,554		2,839		2,524		11,187		11,103		10,333		10,082

Total	$	370,353	$	372,563	$	363,870	$	365,675	$	444,142	$	451,357	$	375,161	$	384,268

As of June 30, ~~2016,~~2017, and December 31, ~~2015,~~2016, we had $250.0 million of 5.375% fixed rate bonds. These bonds

~~- 13 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

are publicly registered, but thinly traded. Accordingly, the values set forth above for the bonds, as well as our other debt instruments, are based on observable inputs and other relevant market data (Level 2). The fair value of financial derivatives is set forth below in Note ~~12.~~11.

11.

~~12.~~

FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES

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

Derivatives Designated as Hedging Instruments - 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. Currency forward contracts involve fixing the exchange for delivery of a specified amount of foreign currency on a specified date. As of June 30, ~~2016,~~2017, the maturity of currency forward contracts ranged from one month to 2518 months.

We designate certain currency forward contracts as cash flow hedges of forecasted raw material purchases, 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. With respect to hedges of forecasted raw material purchases or production costs, the

- 13 -

GLATFELTER

06.30.17 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	June 30 2016		December 31 2015		June 30 2017		December 31 2016
*Derivative*
Sell/Buy - sell notional
Philippine Peso / British Pound						22,856		—
Philippine Peso / Euro						11,072		—
Euro / British Pound		9,237		10,527		11,921		10,373
U.S. Dollar / Euro						2,190		—
Sell/Buy - buy notional
Euro / Philippine Peso		670,402		758,634		879,929		699,279
British Pound / Philippine Peso		486,437		542,063		652,206		557,025
U.S. Dollar / Euro						9,025		15,379
Euro / U.S. Dollar		48,574		51,433		56,538		43,951
U.S. Dollar / Canadian Dollar		33,839		34,649		33,841		35,290
U.S. Dollar / Euro		20,202		—
British Pound / Euro						403		—

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

~~- 14 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

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


In thousands	June 30 2016		December 31 2015		June 30 2017		December 31 2016
*Derivative*
Sell/Buy - sell notional
U.S. Dollar / British Pound		10,500		10,000		13,500		10,500
British Pound / Euro		2,500		3,500		2,500		2,500
Sell/Buy - buy notional
Euro / U.S. Dollar		3,500		12,500		7,500		3,500
British Pound / Euro		19,000		13,500		12,000		18,500

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

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

In thousands									June 30 2017		December 31 2016		June 30 2017		December 31 2016
									Prepaid Expenses and Other				Other
In thousands	June 30 2016		December 31 2015		June 30 2016		December 31 2015
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities				Current Assets				Current Liabilities
*Designated as hedging:*
Forward foreign currency exchange contracts	$	915	$	955	$	15	$	1,545
Forward foreign currency
exchange contracts									$	633	$	2,625	$	4,166	$	1,493
*Not designated as hedging:*
Forward foreign currency exchange contracts	$	124	$	68	$	—	$	49
Forward foreign currency
exchange contracts									$	259	$	60	$	88	$	104

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

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


	Three months ended June 30						Six months ended June 30					Three months ended June 30					Six months ended June 30
In thousands	2016			2015			2016			2015		2017		2016			2017		2016
*Designated as hedging:*
Forward foreign currency exchange contracts:
Effective portion – cost of products sold	$	(215	)	$	1,750		$	83		$	2,623	$	785	$	(215	)	$	1,716	$	83
Ineffective portion – other – net		73			(62	)		(330	)		288		36		73			86		(330	)
*Not designated as hedging*:
Forward foreign currency exchange contracts:
Not designated as hedging:
Forward foreign currency
exchange contracts:
Other – net	$	475		$	(313	)	$	1,064		$	407	$	370	$	475		$	391	$	1,064

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

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in

- 14 -

GLATFELTER

06.30.17 Form 10-Q

active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

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

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


In thousands	2016			2015			2017			2016
Balance at January 1,	$	(178	)	$	3,282		$	1,882		$	(178	)
Deferred gains on cash flow hedges		1,294			2,995
Deferred (losses) gains
on cash flow hedges								(4,801	)		1,294
Reclassified to earnings		(83	)		(2,623	)		(1,716	)		(83	)

Balance at June 30,	$	1,033		$	3,654		$	(4,635	)	$	1,033

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~~12 to ~~twenty-five~~18 months and the amount ultimately recognized will vary depending on actual market rates.

~~- 15 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

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

12.

~~13.~~

COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

Fox 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 originally notified several entities that they were potentially responsible parties (“PRPs”); however, 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 Consumer Products, L.P. (“Georgia Pacific”) and NCR Corporation (“NCR”). In addition to the government claims, Appvion, Inc. (“Appvion”) retains a claim against us and Georgia Pacific.

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

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, one of the PRPs, 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~~majority of that work to date has been funded ~~primarily~~or conducted by ~~NCR~~parties other than us, although before the UAO, we contributed to a project in that area and ~~its indemnitors, including Appvion, Inc. In 2015,~~ we ~~placed certain covering and capping in OU4b as a response to~~have conducted about $13.4 million of cleanup work under the ~~Government’s demands at a cost of $9.7 million. Georgia Pacific and NCR funded work~~UAO in 2015 ~~pursuant~~and 2016. The cleanup is expected to continue through 2018. However, as discussed below, under a proposed consent decree ~~that~~between the United States, ~~did~~Wisconsin, NCR and Appvion we would not ~~move to enter until April 12, 2016; the court has not yet ruled on that motion. Work is scheduled to continue in OU2-5 through 2018, with monitoring and maintenance to follow.~~

~~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~~be responsible for ~~OU2-5.~~

~~Cost estimates.~~~~Estimates of the Site remediation change over time as we, or others, gain~~any additional ~~data and experience~~cleanup at the Site.

Litigation and Settlement. 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~~2008, in ~~Green Bay that $1.1 billion provided~~ an ~~“upper end estimate of total past~~allocation action, NCR and ~~future response costs” including a $100 million “uncertainty premium for future response costs.” Based upon estimates made by the Governments~~Appvion sued us 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 $575 million for OU2-5 prior to the 2016 remediation season.

~~In 2016, the Governments again seek approximately $100 million of work to be completed~~many other defendants in ~~OU2-5. The exact work and a more precise estimate of its cost depend on certain unresolved technical issues. We have begun~~ an effort to ~~place the final layer on certain caps. We do not yet know to what extent we will undertake additional work in 2016; however, we expect to spend less than $10 million.~~

~~- 16 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

As the result of a partial settlement, Georgia-Pacific has no obligation to pay for work upstream of a line near 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~~the liable parties ~~responsible for~~the costs of cleaning up this Site ~~all of the costs incurred by~~and compensating the Governments ~~all of~~for their costs and the ~~costs incurred by the parties, and all of the NRDs owed to the Natural Resource Trustees. We have previously referred to this~~natural resource trustees for NRDs. This case ashas been called the “Whiting ~~Litigation.~~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) the OU2-5 cleanup, (b) NRDs, (c) past and future costs incurred by the Governments in OU2-5, and (d) past and future costs incurred by any of the other parties net of an appropriate equitable adjustment for insurance recoveries. ~~As to Glatfelter, NCR was judged liable to us for $4.28 million and any future costs or damages we may incur. NCR was held not responsible for costs incurred in OU1.~~

- 15 -

~~All parties appealed the Whiting Litigation judgment to~~GLATFELTER

06.30.17 Form 10-Q

On appeal, the United States Court of Appeals for the Seventh ~~Circuit. On September 25, 2014, that court~~Circuit affirmed the district court’s ruling, 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~~In 2010, in an enforcement action, the ~~district court should, after further consideration, reinstate the 100%, or some similar very high, allocation~~Governments sued us and other defendants for (a) an injunction 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~~require implementation of the ~~Site far downstream~~cleanup ordered by the 2007 UAO, (b) recovery of the Governments’ past and future costs of response, (c) recovery of NRDs, and (d) recovery of a declaration of liability for the Site. After appeals, the Governments did not obtain an injunction and they withdrew their claims for NRDs. The Governments obtained a declaration of our ~~former mill should, if applied~~liability to ~~NCR, make it liable for~~comply with the 2007 UAO. The Governments’ costs ~~incurred in OU1. The district court agreed with us in an order dated March 3, 2015.~~ claims remained pending.

On ~~March 31, 2015, NCR sought review of that order by the court of appeals which review was denied on May 1, 2015.~~

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

~~The district court has established a schedule for the Whiting Litigation under which it would hold a trial beginning in March~~January 17, 2017, ~~on remaining issues.~~

~~Enforcement Litigation.~~~~In October 2010,~~ the United States ~~and the State of Wisconsin brought an action (“Government Action”) in~~filed a consent decree with the federal district court ~~in Green Bay against us~~among the United States, Wisconsin, NCR, and ~~13 other defendants seeking (a)~~Appvion (the “NCR/Appvion consent decree”) under which NCR would agree to complete the remaining cleanup and both NCR and Appvion would agree not to seek to recover ~~all~~from us or anyone else any amounts they have spent or will spend, and we and others would be barred from seeking claims against NCR or Appvion. On March 29, 2017, the United States moved for entry of a somewhat revised version of the ~~United States’ and~~NCR/Appvion consent decree. If 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 requiredproposed consent decree is approved 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.~~if it were to ~~perform~~withstand any appeal, then we would only face exposure to: (i) government past oversight costs, (ii) government future oversight costs, (iii) long term monitoring and maintenance, and (iv) depending on the ~~work under~~reason, a further remedy if necessary in the ~~UAO.~~event the currently ordered remedy fails, over 30 or more years, to achieve its objectives. As the result of ~~partial~~earlier settlements, ~~U.S. Paper Mills Corp.~~Georgia Pacific is only jointly liable with us to the Governments for monitoring and ~~Georgia-Pacific Consumer Products L.P. agreed to joint and several liability for some~~maintenance costs incurred in the most downstream three miles of the ~~work. Appvion was held not liable for this Site under CERCLA.~~

~~All other potentially responsible parties, including the United States~~river (“OU4b”) and the ~~State~~bay of ~~Wisconsin, have settled~~Green Bay (“OU5”). In connection with the ~~Governments. As a result, the remaining defendants consist~~filing of ~~us, NCR, and Georgia-Pacific.~~

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

~~- 17 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

On remand, the district court issued an opinion on October 19, 2015, 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.

As described below, the United States has withdrawn its natural resources damages claim against us. The Governments’ 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 unreimbursed past costs of the Wisconsin Department of Natural Resources totaling $3.9 million (as incurred through June 30, 2015), and (2) costs incurred and/or to be incurred after September 30, 2015 and June 30, 2015, respectively. The remaining issues in the Government Action are set for trial to commence after the 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 entered into a proposed consent decree with the United States under which they agreed to fund certain work estimated to cost approximately $67 million in 2015, and they 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 did not move to enter that consent decree until April 12, 2016, and the court has not yet ruled on that motion. Through the issuance of the 2015 Work Plan the EPA assigned to us those remaining tasks. Under the proposed consent decree, NCR and Appvion filed a request to stay the trial scheduled to commence in April 2017. The court granted the stay.

In addition, we and Georgia Pacific had claims against each other to reallocate the costs that we have each incurred or will incur. We have settled those claims. Under this settlement, Georgia Pacific has agreed to implement the monitoring and maintenance in OU4b and OU5 and we would be responsible for monitoring and maintenance of all other upstream Operable Units. We have agreed to pay Georgia

Pacific $9.5 million in August 2017. Once the payment is made, the parties will have their claims against each other dismissed as settled.

Cost estimates. The proposed NCR/Appvion consent decree, as revised, states that all parties combined have spent more than approximately $1 billion to date towards remedial actions and NRDs, of which we have contributed approximately $65 million. In addition, work to complete the remaining site remedy under the UAO was anticipated to cost approximately $200 million at the beginning of the 2017 remediation season. If the consent decree were entered, we would no longer be exposed to reallocation of any of those amounts.

Under the proposed NCR/Appvion consent decree, we would remain ~~jointly~~responsible for the Governments’ unreimbursed past costs, which although in dispute, are represented to total approximately $34 million and ~~severally liable~~the Governments’ future costs. Furthermore, we, along with Georgia Pacific, would be responsible for ~~work in~~long term monitoring and maintenance required pursuant to the ~~2015 Work~~Lower Fox River 100% Remedial Design Report dated December 2009 – Long Term Monitoring Plan ~~not completed in 2015, except for~~(the “Plan”). The Plan requires long term monitoring of each of OU1 through OU5 over a ~~small amount~~period of ~~work upstream~~at least 30 years. The monitoring activities consist of, among others, testing fish tissue, sampling water quality and sediment, and inspections of the ~~area for which GP~~engineered caps. Each operable unit is responsible. We contracted for remediation work in OU4 at a total cost of $9.7 million, an amount of work less than the amount assigned to us in the 2015 Work Plan. We anticipate that the amount of work performed by us in 2015 satisfied our share of the obligation if NCR and GP perform the work assigned to them in the 2015 Work Plan. The United States disagrees. We cannot predict the outcome of these disagreements or any possible resulting litigation.

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

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

~~Because we may not be able to obtain an agreement with the other parties or a ruling in litigation defining our obligation to contribute to work in 2016 prior to the time that work would have~~required to be ~~implemented, it is conceivable that we may have to choose an amount~~monitored; however, because of ~~work that we believe satisfies any obligation we may have to complete work~~our settlement with Georgia Pacific, our obligations are in 2016, which selection we will have to defend after the fact. We expect to spend less than $10 million in connection with the 2016 Work Plan. In addition, it is conceivable we may be in the same position with respect to work in OU2-5 beyond the 2016 season.OU1-OU4a. Although we are unable to determine with ~~any degree of~~ certainty the ~~amount we may be required~~timing of cash expenditures for the above matters, they are reasonably likely 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.~~extend over a period of at least 30 years.

~~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 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~~for all ~~pending, threatened or asserted and unasserted~~remaining claims against us relating to PCB contamination is set forth below:

~~- 18 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~


	Six months ended
	June 30						Six months ended June 30
In thousands	2016			2015				2017			2016
Balance at January 1,	$	17,105		$	16,223		$	52,788		$	17,105
Payments		(1,189	)		(21	)		(128	)		(1,189	)
Accruals		—			—			-			-

Balance at June 30,	$	15,916		$	16,202		$	52,660		$	15,916

The payments set forth above represent cash paid towards completion of remediation activities in connection with the 2016 and 2015 Work Plans and 2016 Work Plans. Our reserve as of June 30, 2016, includes our estimate of costs to be incurred for remediation work, pending clarity from the 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.

ongoing monitoring activities. Of our total reserve for the Fox River, ~~$11.4~~$29.5 million is recorded in the accompanying June 30, ~~2016~~2017 condensed consolidated balance sheet under the caption “Environmental liabilities” and the ~~remainder~~remaining $23.2 million 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

of decision, ~~as well as~~ discussions with legal counsel, ~~and~~ cost estimates for ~~work~~future monitoring and maintenance and other post-remediation costs to be performed at the Site, and substantially dependent on whether the ~~resolution of the allocation issues discussed above,~~NCR/Appvion consent decree is entered, 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 ~~$190~~approximately $30 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~~ However, in the event the NCR/Appvion consent decree is not entered, the ultimate resolution of this matter would likely resort to ~~be incurred primarily over the next two to three years,~~extensive litigation involving various issues, including allocation of remedial action and related costs. In such a scenario, although we ~~are unable~~should ultimately bear a very small share, it is reasonably possible that our costs associated with the Fox River matter could exceed the aggregate amounts accrued by amounts ranging from insignificant 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.$150 million.

~~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

~~- 19 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

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

individually either to perform directly or to contribute significant amounts towards remedial action downstream of ~~Little Lake Butte des Morts~~OU1 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.

- 2017 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

13.

~~14.~~

~~SEGMENT~~SEGMENT INFORMATION

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


Three months ended June 30	Composite Fibers					Advanced Airlaid Materials					Specialty Papers						Other and Unallocated								Total													Advanced Airlaid												Other and
Dollars in millions					Composite Fibers						Specialty Papers						Other and Unallocated							Materials										Specialty Papers						Unallocated						Total
	Composite Fibers		2016			Advanced Airlaid Materials			2015			2016			2015			2016				2015								2016				2015			2016			2015		2017			2016			2017			2016			2017			2016			2017		2016	2017	2016
Net sales	$	136.4	$	140.4		$	60.8	$	57.5		$	209.3		$	212.9		$	—			$	—			Total	$	406.4			$	410.8		$	133.1		$	136.4		$	62.8		$	60.8		$	191.4		$	209.3		$	—		$	—		$	387.3		$	406.4
Energy and related sales, net		—		—			—		—			2.0			0.7			—				—				2.0				0.7			—		—				—		—				1.0			2.0			—			—			1.0			2.0

Total revenue		136.4		140.4			60.8		57.5			211.3			213.6			—				—				408.4				411.5			133.1			136.4			62.8		60.8				192.4			211.3			—			—			388.3			408.4
Cost of products sold		109.0		112.4			51.8		52.3			202.9			211.9			2.0				2.1				365.7				378.7			107.6			109.0			53.0			51.8			195.9			202.9			1.4			2.0			357.9			365.7

Gross profit (loss)		27.4		28.0			9.0		5.2			8.4			1.7			(2.0	)			(2.1	)			42.7				32.8			25.5			27.4			9.8			9.0			(3.5	)		8.4			(1.4	)		(2.0	)		30.4			42.7
SG&A		12.1		11.3			2.2		2.1			14.2			11.7			8.7				4.0				37.2				29.1			10.8			12.1			2.3			2.2			10.3			14.2			8.6			8.7			32.0			37.2
Gains on dispositions of plant, equipment and timberlands, net		—		—			—		—			—			—			—				(0.1	)			—				(0.1	)

(Gains) losses on dispositions of plant, equipment and timberlands, net																																	—			—			—			—			—			—			(0.1	)		—			(0.1	)		—
Total operating income (loss)		15.3		16.7			6.8		3.1			(5.8	)		(10.0	)		(10.7	)			(6.0	)			5.5				3.8			14.7			15.3			7.5			6.8			(13.8	)		(5.8	)		(9.9	)		(10.7	)		(1.5	)		5.5
Non-operating expense		—		—			—		—			—			—			(3.6	)			(4.1	)			(3.6	)			(4.1	)		—			—			—			—			—			—			(4.6	)		(3.6	)		(4.6	)		(3.6	)

Income (loss) before income taxes	$	15.3	$	16.7		$	6.8	$	3.1		$	(5.8	)	$	(10.0	)	$	(14.3	)		$	(10.1	)		$	2.0			$	(0.3	)	$	14.7		$	15.3		$	7.5		$	6.8		$	(13.8	)	$	(5.8	)	$	(14.5	)	$	(14.3	)	$	(6.1	)	$	2.0

Supplementary Data
Net tons sold(thousands)		40.7		39.4			24.4		22.6			194.7			191.3			—				—				259.7				253.3			41.9			40.7			25.5			24.4			184.1			194.7			—			—			251.5			259.7
Depreciation, depletion and amortization	$	7.2	$	6.7		$	2.4	$	2.1		$	6.5		$	6.3		$	0.7			$	0.5			$	16.8			$	15.6		$	7.0		$	7.2		$	2.3		$	2.4		$	7.7		$	6.5		$	0.7		$	0.7		$	17.7		$	16.8
Capital expenditures		2.3		5.6			6.1		1.5			28.7			15.6			—				0.1				37.1				22.8			2.1			2.3			12.9			6.1			15.8			28.7			3.5			—			34.3			37.1

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

Total revenue		259.9		275.7			121.5		119.8			429.9			435.6			—				—				811.3				831.1
Cost of products sold		210.3		221.5			104.1		107.3			394.0			412.3			2.3				5.0				710.7				746.1

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

Total operating income (loss)		26.4		31.3			13.2		8.5			9.3			(0.6	)		(17.3	)			(11.7	)			31.5				27.3
Non-operating expense		—		—			—		—			—			—			(8.3	)			(8.7	)			(8.3	)			(8.7	)

Income (loss) before income taxes	$	26.4	$	31.3		$	13.2	$	8.5		$	9.3		$	(0.6	)	$	(25.6	)		$	(20.4	)		$	23.2			$	18.6

Supplementary Data
Net tons sold(thousands)		77.6		77.3			48.9		46.7			400.5			390.0			—				—				527.0				514.0
Depreciation, depletion and amortization	$	14.3	$	13.4		$	4.7	$	4.3		$	13.2		$	12.9		$	1.2			$	1.0			$	33.4			$	31.6
Capital expenditures		8.6		11.5			20.7		2.8			50.8			28.8			0.3				1.5				80.4				44.6

Six months ended June 30

Advanced Airlaid

Other and

Dollars in millions
Composite Fibers

Materials

Specialty Papers

Unallocated

Total

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

Net sales
$
258.2

$
259.9

$
122.7

$
121.5

$
397.1

$
427.2

$
—

$
—

$
778.1

$
808.6

Energy and related sales, net

—

—

—

—

2.1

2.7

—

—

2.1

2.7

Total revenue

258.2

259.9

122.7

121.5

399.2

429.9

—

—

780.2

811.3

Cost of products sold

207.2

210.3

103.5

104.1

376.0

394.0

6.1

2.3

692.8

710.7

Gross profit (loss)

51.0

49.6

19.2

17.4

23.2

35.9

(6.1
)

(2.3
)

87.4

100.6

SG&A

21.9

23.2

4.6

4.2

23.8

26.6

16.8

15.0

67.1

69.0

(Gains) losses on dispositions of plant,

equipment and timberlands, net

—

—

—

—

—

—

—

—

—

—

Total operating income (loss)

29.1

26.4

14.6

13.2

(0.6
)

9.3

(22.9
)

(17.3
)

20.3

31.5

Non-operating expense

—

—

—

—

—

—

(8.8
)

(8.3
)

(8.8
)

(8.3
)
Income (loss) before
income taxes
$
29.1

$
26.4

$
14.6

$
13.2

$
(0.6
)

$
9.3

$
(31.7
)

$
(25.6
)

$
11.6

$
23.2

Supplementary Data

Net tons sold (thousands)

80.7

77.6

50.3

48.9

381.4

400.5

—

—

512.4

527.0

Depreciation, depletion and
amortization
$
13.8

$
14.3

$
4.6

$
4.7

$
14.9

$
13.2

$
1.7

$
1.2

$
35.0

$
33.4

Capital expenditures

6.8

8.6

23.5

20.7

34.0

50.8

6.7

0.3

71.0

80.4

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

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

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

- 2118 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

14.

~~15.~~

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Our 5.375% Notes issued by P. H. Glatfelter Company (the “Parent”) are fully and unconditionally guaranteed, on a joint and several basis, by certain of our 100%-owned domestic subsidiaries, PHG Tea Leaves, Inc., Mollanvick, Inc., Glatfelter Composite Fibers N. A., Inc. (“CFNA”), Glatfelter Advance Materials N.A., Inc. (“GAMNA”), and Glatfelter Holdings, LLC. The guarantees are subject to certain customary release provisions including i) the designation of such subsidiary as an unrestricted or excluded subsidiary; (ii) in connection with any sale or disposition of the capital stock of the subsidiary guarantor; ~~and~~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 our condensed consolidating statements of income, including comprehensive income, for the three months and six months ended June 30, 2017 and 2016, our condensed consolidating balance sheets as of June 30, 2017 and December 31, 2016, and our condensed consolidating cash flows for the six months ended June 30, ~~2016~~2017 and 2015 and our condensed consolidating balance sheets as of June 30, 2016 and December 31, 2015. The condensed consolidating financial statements set forth below include the addition of CFNA and GAMNA as guarantors during 2015.2016.

Condensed Consolidating Statement of Income for the ~~Three~~three months ended June 30, ~~2016~~2017

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


Total revenues
   211,270    17,561    196,675    (17,092 ) 408,414
Costs of products sold
   204,495    16,711    161,577    (17,092 ) 365,691


Gross profit
   6,775    850    35,098    —      42,723
Selling, general and administrative expenses
   22,622    (36 ) 14,605    —      37,191
Loss on dispositions of plant, equipment and timberlands, net
   2    —      —      —      2


Operating income (loss)
   (15,849 ) 886    20,493    —      5,530
Other non-operating income (expense)

Interest expense
   (4,289 ) —      (814 ) 1,150    (3,953 )
Interest income
   169    1,001    41    (1,150 ) 61
Equity in earnings of subsidiaries
   16,385    16,071    —      (32,456 ) —
Other, net
   (575 ) (1,421 ) 2,313    —      317


Total other non-operating income (expense)
   11,690    15,651    1,540    (32,456 ) (3,575 )


Income (loss) before income taxes
   (4,159 ) 16,537    22,033    (32,456 ) 1,955
Income tax provision (benefit)
   (6,124 ) 152    5,962    —      (10 )


Net income
   1,965    16,385    16,071    (32,456 ) 1,965
Other comprehensive income (loss)
   (11,539 ) (13,937 ) (13,490 ) 27,427    (11,539 )


Comprehensive income (loss)
   $ (9,574 ) $ 2,448    $ 2,581    $ (5,029 ) $ (9,574 )

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	191,370		$	23,052		$	194,708		$	(21,788	)	$	387,342
Energy and related sales, net		981			—			—			—			981
Total revenues		192,351			23,052			194,708			(21,788	)		388,323
Costs of products sold		195,444			22,047			162,184			(21,788	)		357,887
Gross profit		(3,093	)		1,005			32,524			—			30,436
Selling, general and administrative
expenses		16,875			236			14,888			—			31,999
(Gain) loss on dispositions of plant
equipment and timberlands, net		16			(74	)		—			—			(58	)
Operating income (loss)		(19,984	)		843			17,636			—			(1,505	)
Other non-operating
income (expense)
Interest expense		(5,182	)		(206	)		(437	)		1,349			(4,476	)
Interest income		142			1,237			15			(1,349	)		45
Equity in earnings of subsidiaries		18,801			19,249			—			(38,050	)		—
Other, net		534			(2,319	)		1,636			—			(149	)
Total other non-operating
income (expense)		14,295			17,961			1,214			(38,050	)		(4,580	)
Income (loss) before income taxes		(5,689	)		18,804			18,850			(38,050	)		(6,085	)
Income tax provision (benefit)		25			3			(399	)		—			(371	)
Net income (loss)		(5,714	)		18,801			19,249			(38,050	)		(5,714	)
Other comprehensive income		26,332			23,964			23,371			(47,335	)		26,332
Comprehensive income	$	20,618		$	42,765		$	42,620		$	(85,385	)	$	20,618

- 2219 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

Condensed Consolidating Statement of Income for the six months ended June 30, 2017.

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	397,141		$	42,585		$	380,595		$	(42,266	)	$	778,055
Energy and related sales, net		2,110			—			—			—			2,110
Total revenues		399,251			42,585			380,595			(42,266	)		780,165
Costs of products sold		379,390			40,633			315,043			(42,266	)		692,800
Gross profit		19,861			1,952			65,552			—			87,365
Selling, general and administrative
expenses		37,246			310			29,529			—			67,085
(Gain) loss on dispositions of plant
equipment and timberlands, net		48			(74	)		—			—			(26	)
Operating income (loss)		(17,433	)		1,716			36,023			—			20,306
Other non-operating
income (expense)
Interest expense		(9,843	)		(319	)		(941	)		2,619			(8,484	)
Interest income		291			2,398			88			(2,619	)		158
Equity in earnings of subsidiaries		32,418			33,101			—			(65,519	)		—
Other, net		1,027			(4,525	)		3,070			—			(428	)
Total other non-operating
income (expense)		23,893			30,655			2,217			(65,519	)		(8,754	)
Income before income taxes		6,460			32,371			38,240			(65,519	)		11,552
Income tax provision (benefit)		571			(47	)		5,139			—			5,663
Net income		5,889			32,418			33,101			(65,519	)		5,889
Other comprehensive income		33,525			29,066			28,385			(57,451	)		33,525
Comprehensive income	$	39,414		$	61,484		$	61,486		$	(122,970	)	$	39,414

Condensed Consolidating Statement of Income for the ~~Six~~three months ended June 30, ~~2016~~2016.

In thousands
   Parent
Company Guarantors Non
Guarantors Adjustments/
Eliminations Consolidated
Net sales
   $ 427,157    $ 36,207    $ 381,141    $ (35,874 ) $ 808,631
Energy and related sales, net
   2,667    —      —      —      2,667


Total revenues
   429,824    36,207    381,141    (35,874 ) 811,298
Costs of products sold
   396,454    34,761    315,391    (35,874 ) 710,732


Gross profit
   33,370    1,446    65,750    —      100,566
Selling, general and administrative expenses
   41,067    (221 ) 28,203    —      69,049
Loss on dispositions of plant, equipment and timberlands, net
   4    —      22    —      26


Operating income (loss)
   (7,701 ) 1,667    37,525    —      31,491
Other non-operating income (expense)

Interest expense
   (8,704 ) —      (1,601 ) 2,236    (8,069 )
Interest income
   350    1,993    45    (2,236 ) 152
Equity in earnings of subsidiaries
   29,257    27,825    —      (57,082 ) —
Other, net
   (1,117 ) (1,401 ) 2,135    —      (383 )


Total other non-operating income (expense)
   19,786    28,417    579    (57,082 ) (8,300 )


Income before income taxes
   12,085    30,084    38,104    (57,082 ) 23,191
Income tax provision (benefit)
   (6,048 ) 827    10,279    —      5,058


Net income
   18,133    29,257    27,825    (57,082 ) 18,133
Other comprehensive income (loss)
   4,203    (384 ) (373 ) 757    4,203


Comprehensive income
   $ 22,336    $ 28,873    $ 27,452    $ (56,325 ) $ 22,336

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	209,269		$	17,561		$	196,675		$	(17,092	)	$	406,413
Energy and related sales, net		2,001			—			—			—			2,001
Total revenues		211,270			17,561			196,675			(17,092	)		408,414
Costs of products sold		204,495			16,711			161,577			(17,092	)		365,691
Gross profit		6,775			850			35,098			—			42,723
Selling, general and administrative
expenses		22,622			(36	)		14,605			—			37,191
Loss on dispositions of plant
equipment and timberlands, net		2			—			—			—			2
Operating income (loss)		(15,849	)		886			20,493			—			5,530
Other non-operating
income (expense)
Interest expense		(4,289	)		—			(814	)		1,150			(3,953	)
Interest income		169			1,001			41			(1,150	)		61
Equity in earnings of subsidiaries		16,385			16,071			—			(32,456	)		—
Other, net		(575	)		(1,421	)		2,313			—			317
Total other non-operating
income (expense)		11,690			15,651			1,540			(32,456	)		(3,575	)
Income (loss) before income taxes		(4,159	)		16,537			22,033			(32,456	)		1,955
Income tax provision (benefit)		(6,124	)		152			5,962			—			(10	)
Net income		1,965			16,385			16,071			(32,456	)		1,965
Other comprehensive loss		(11,539	)		(13,937	)		(13,490	)		27,427			(11,539	)
Comprehensive income (loss)	$	(9,574	)	$	2,448		$	2,581		$	(5,029	)	$	(9,574	)

- 2320 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

Condensed Consolidating Statement of Income for the ~~Three~~six months ended June 30, ~~2015~~2016.

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	427,157		$	36,207		$	381,141		$	(35,874	)	$	808,631
Energy and related sales, net		2,667			—			—			—			2,667
Total revenues		429,824			36,207			381,141			(35,874	)		811,298
Costs of products sold		396,454			34,761			315,391			(35,874	)		710,732
Gross profit		33,370			1,446			65,750			—			100,566
Selling, general and administrative
expenses		41,067			(221	)		28,203			—			69,049
Loss on dispositions of plant
equipment and timberlands, net		4			—			22			—			26
Operating income (loss)		(7,701	)		1,667			37,525			—			31,491
Other non-operating
income (expense)
Interest expense		(8,704	)		—			(1,601	)		2,236			(8,069	)
Interest income		350			1,993			45			(2,236	)		152
Equity in earnings of subsidiaries		29,257			27,825			—			(57,082	)		—
Other, net		(1,117	)		(1,401	)		2,135			—			(383	)
Total other non-operating
income (expense)		19,786			28,417			579			(57,082	)		(8,300	)
Income before income taxes		12,085			30,084			38,104			(57,082	)		23,191
Income tax provision (benefit)		(6,048	)		827			10,279			—			5,058
Net income		18,133			29,257			27,825			(57,082	)		18,133
Other comprehensive income (loss)		4,203			(384	)		(373	)		757			4,203
Comprehensive income	$	22,336		$	28,873		$	27,452		$	(56,325	)	$	22,336

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


Total revenues
   213,635    22,667    194,779    (19,563 ) 411,518
Costs of products sold
   212,472    21,921    163,855    (19,563 ) 378,685


Gross profit
   1,163    746    30,924    —      32,833
Selling, general and administrative expenses
   15,661    458    13,018    —      29,137
Loss on dispositions of plant, equipment and timberlands, net
   (51 ) —      (60 ) —      (111 )


Operating income (loss)
   (14,447 ) 288    17,966    —      3,807
Other non-operating income (expense)

Interest expense
   (4,608 ) —      (6,370 ) 6,626    (4,352 )
Interest income
   169    6,498    36    (6,625 ) 77
Equity in earnings of subsidiaries
   17,478    11,305    —      (28,783 ) —
Other, net
   (746 ) (29 ) 990    —      215


Total other non-operating income (expense)
   12,293    17,774    (5,344 ) (28,782 ) (4,060 )


Income (loss) before income taxes
   (2,154 ) 18,062    12,622    (28,782 ) (253 )
Income tax provision (benefit)
   (5,002 ) 584    1,317    —      (3,101 )


Net income
   2,848    17,478    11,305    (28,782 ) 2,848
Other comprehensive income (loss)
   17,087    13,680    (9,958 ) (3,722 ) 17,087


Comprehensive income
   $ 19,935    $ 31,158    $ 1,347    $ (32,504 ) $ 19,935

~~- 24 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

~~Condensed Consolidating Statement of Income for the Six months ended June 30, 2015~~

In thousands
   Parent
Company Guarantors Non
Guarantors Adjustments/
Eliminations Consolidated
Net sales
   $ 432,796    $ 42,817    $ 392,877    $ (40,218 ) $ 828,272
Energy and related sales, net
   2,783    —      —      —      2,783


Total revenues
   435,579    42,817    392,877    (40,218 ) 831,055
Costs of products sold
   416,154    41,255    328,923    (40,218 ) 746,114


Gross profit
   19,425    1,562    63,954    —      84,941
Selling, general and administrative expenses
   32,843    955    26,611    —      60,409
Gains on dispositions of plant, equipment and timberlands, net
   (1,522 ) (1,183 ) (60 ) —      (2,765 )


Operating income (loss)
   (11,896 ) 1,790    37,403    —      27,297
Other non-operating income (expense)

Interest expense
   (9,425 ) —      (12,764 ) 13,329    (8,860 )
Interest income
   331    13,097    41    (13,327 ) 142
Equity in earnings of subsidiaries
   34,562    21,499    —      (56,061 ) —
Other, net
   (1,460 ) (159 ) 1,649    (2 ) 28


Total other non-operating income (expense)
   24,008    34,437    (11,074 ) (56,061 ) (8,690 )


Income before income taxes
   12,112    36,227    26,329    (56,061 ) 18,607
Income tax provision (benefit)
   (4,661 ) 1,665    4,830    —      1,834


Net income
   16,773    34,562    21,499    (56,061 ) 16,773
Other comprehensive income (loss)
   (18,198 ) (24,870 ) 28,890    (4,020 ) (18,198 )


Comprehensive income (loss)
   $ (1,425 ) $ 9,692    $ 50,389    $ (60,081 ) $ (1,425 )

~~- 25 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

Condensed Consolidating Balance Sheet as of June 30, ~~2016~~2017

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	8,587	$	3,080		$	57,775	$	—		$	69,442
Other current assets		219,123		278,908			277,622		(304,886	)		470,767
Plant, equipment and timberlands, net		384,846		58,075			395,086		—			838,007
Investments in subsidiaries		851,050		601,864			—		(1,452,914	)		—
Other assets		127,334		—			136,231		—			263,565
Total assets	$	1,590,940	$	941,927		$	866,714	$	(1,757,800	)	$	1,641,781
Liabilities and Shareholders' Equity
Current liabilities	$	447,573	$	52,294		$	144,785	$	(304,888	)	$	339,764
Long-term debt		338,991		39,000			53,503		—			431,494
Deferred income taxes		13,083		(729	)		48,361		—			60,715
Other long-term liabilities		106,263		312			18,201		—			124,776
Total liabilities		905,910		90,877			264,850		(304,888	)		956,749
Shareholders’ equity		685,030		851,050			601,864		(1,452,912	)		685,032
Total liabilities and shareholders’ equity	$	1,590,940	$	941,927		$	866,714	$	(1,757,800	)	$	1,641,781

In thousands
   Parent
Company    Guarantors Non
Guarantors    Adjustments/
Eliminations Consolidated
Assets
Cash and cash equivalents
   $ 6,512       $ 2,545    $ 49,475       $ —      $ 58,532
Other current assets
   207,168       255,574    266,025       (262,714 ) 466,053
Plant, equipment and timberlands, net
   329,041       18,507    400,488       —      748,036
Investments in subsidiaries
   783,479       535,117    —         (1,318,596 ) —
Other assets
   112,876       —      139,687       —      252,563






Total assets
   $ 1,439,076       $ 811,743    $ 855,675       $ (1,581,310 ) $ 1,525,184






Liabilities and Shareholders’ Equity
Current liabilities
   $ 401,540       $ 28,180    $ 144,387       $ (262,714 ) $ 311,393
Long-term debt
   247,381       —      110,985       —      358,366
Deferred income taxes
   26,905       (229 ) 48,479       —      75,155
Other long-term liabilities
   87,027       313    16,707       —      104,047






Total liabilities
   762,853       28,264    320,558       (262,714 ) 848,961
Shareholders’ equity
   676,223       783,479    535,117       (1,318,596 ) 676,223






Total liabilities and shareholders’ equity
   $ 1,439,076       $ 811,743    $ 855,675       $ (1,581,310 ) $ 1,525,184

- 21 -

GLATFELTER

06.30.17 Form 10-Q

Condensed Consolidating Balance Sheet as of December 31, ~~2015~~2016

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	5,082	$	1,461		$	48,901	$	—		$	55,444
Other current assets		206,002		256,289			242,187		(265,663	)		438,815
Plant, equipment and timberlands, net		360,521		31,455			383,922		—			775,898
Investments in subsidiaries		789,565		540,029			—		(1,329,594	)		—
Other assets		123,010		—			128,092		—			251,102
Total assets	$	1,484,180	$	829,234		$	803,102	$	(1,595,257	)	$	1,521,259
Liabilities and Shareholders' Equity
Current liabilities	$	426,628	$	26,085		$	135,961	$	(265,663	)	$	323,011
Long-term debt		283,686		14,000			65,961		—			363,647
Deferred income taxes		10,221		(729	)		45,503		—			54,995
Other long-term liabilities		109,819		313			15,648		—			125,780
Total liabilities		830,354		39,669			263,073		(265,663	)		867,433
Shareholders’ equity		653,826		789,565			540,029		(1,329,594	)		653,826
Total liabilities and shareholders’ equity	$	1,484,180	$	829,234		$	803,102	$	(1,595,257	)	$	1,521,259

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

~~- 26 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

Condensed Consolidating Statement of Cash Flows for the ~~Six~~six months ended June 30, ~~2016~~2017

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

Operating activities
   $ 17,067    $ 2,821    $ 16,752    $ —      $ 36,640
Investing activities

Expenditures for purchases of plant, equipment and timberlands
   (51,043 ) (18,861 ) (10,487 ) —      (80,391 )
Proceeds from disposals of plant, equipment and timberlands, net
   41    —      12    —      53
Repayments from intercompany loans
   —      7,500    —      (7,500 ) —
Advances of intercompany loans
   —      (7,880 ) —      7,880    —
Intercompany capital contributed
   (17,000 ) (500 ) —      17,500    —
Other
   (300 ) —      —      —      (300 )


Total investing activities
   (68,302 ) (19,741 ) (10,475 ) 17,880    (80,638 )
Financing activities

Net long-term borrowings
   —      —      4,222    —      4,222
Payments of borrowing costs
   (51 ) —      (85 ) —      (136 )
Payment of dividends to shareholders
   (10,679 ) —      —      —      (10,679 )
Repayments of intercompany loans
   —      —      (7,500 ) 7,500    —
Borrowings of intercompany loans
   7,880    —      —      (7,880 ) —
Intercompany capital (returned) received
   —      17,000    500    (17,500 ) —
Proceeds from government grants
   2,443    2,000    —      —      4,443
Payments related to share-based compensation awards and other
   (976 ) —      —      —      (976 )


Total financing activities
   (1,383 ) 19,000    (2,863 ) (17,880 ) (3,126 )
Effect of exchange rate on cash
   —      —      352    —      352


Net increase (decrease) in cash
   (52,618 ) 2,080    3,766    —      (46,772 )
Cash at the beginning of period
   59,130    465    45,709    —      105,304


Cash at the end of period
   $ 6,512    $ 2,545    $ 49,475    $ —      $ 58,532

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(12,072	)	$	(1,085	)	$	42,606		$	(685	)	$	28,764
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(40,739	)		(21,421	)		(8,887	)		—			(71,047	)
Proceeds from disposals of plant, equipment and timberlands, net		8			75			—			—			83
Repayments from intercompany loans		—			12,000			—			(12,000	)		—
Advances of intercompany loans		—			(12,550	)		—			12,550			—
Intercompany capital contributed		—			(400	)		—			400			—
Total investing activities		(40,731	)		(22,296	)		(8,887	)		950			(70,964	)
Financing activities
Net long-term borrowings		55,000			25,000			(16,292	)		—			63,708
Payment of dividends to shareholders		(11,130	)		—			—			—			(11,130	)
Repayments of intercompany loans		—			—			(12,000	)		12,000			—
Borrowings of intercompany loans		12,550			—			—			(12,550	)		—
Intercompany capital received		—			—			400			(400	)		—
Payment of intercompany dividend		—			—			(685	)		685			—
Payments related to share-based compensation awards and other		(112	)		—			—			—			(112	)
Total financing activities		56,308			25,000			(28,577	)		(265	)		52,466
Effect of exchange rate on cash		—			—			3,732			—			3,732
Net increase in cash		3,505			1,619			8,874			—			13,998
Cash at the beginning of period		5,082			1,461			48,901			—			55,444
Cash at the end of period	$	8,587		$	3,080		$	57,775		$	—		$	69,442

- 2722 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

Condensed Consolidating Statement of Cash Flows for the ~~Six~~six months ended June 30, ~~2015~~2016


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(4,343	)	$	(695	)	$	30,551		$	—		$	25,513		$	17,067		$	2,821		$	16,752		$	—		$	36,640
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(30,241	)		—			(14,334	)		—			(44,575	)		(51,043	)		(18,861	)		(10,487	)		—			(80,391	)
Proceeds from disposals of plant, equipment and timberlands, net		1,581			1,213			257			—			3,051			41			—			12			—			53
Repayments from intercompany loans		—			48,855			—			(48,855	)		—			—			7,500			—			(7,500	)		—
Advances of intercompany loans		—			(38,690	)		—			38,690			—			—			(7,880	)		—			7,880			—
Intercompany capital (contributed) returned		10,500			(300	)		—			(10,200	)		—			(17,000	)		(500	)		—			17,500			—
Other		(1,600	)		—			—			—			(1,600	)		(300	)		—			—			—			(300	)

Total investing activities		(19,760	)		11,078			(14,077	)		(20,365	)		(43,124	)		(68,302	)		(19,741	)		(10,475	)		17,880			(80,638	)
Financing activities
Net repayments of indebtedness		—			—			(1,492	)		—			(1,492	)		—			—			4,222			—			4,222
Payments of borrowing costs		(1,329	)		—			—			—			(1,329	)		(51	)		—			(85	)		—			(136	)
Payment of dividends to shareholders		(9,992	)		—			—			—			(9,992	)		(10,679	)		—			—			—			(10,679	)
Repayments of intercompany loans		(9,158	)		—			(39,697	)		48,855			—			—			—			(7,500	)		7,500			—
Borrowings of intercompany loans		38,690			—			—			(38,690	)		—			7,880			—			—			(7,880	)		—
Intercompany capital (returned) received		—			(10,500	)		300			10,200			—			—			17,000			500			(17,500	)		—
Proceeds from government grants																	2,443			2,000			—			—			4,443
Payments related to share-based compensation awards and other		(2,000	)		—			—			—			(2,000	)		(976	)		—			—			—			(976	)

Total financing activities		16,211			(10,500	)		(40,889	)		20,365			(14,813	)		(1,383	)		19,000			(2,863	)		(17,880	)		(3,126	)
Effect of exchange rate on cash		—			—			(1,651	)		—			(1,651	)		—			—			352			—			352

Net decrease in cash		(7,892	)		(117	)		(26,066	)		—			(34,075	)
Net increase (decrease) in cash																	(52,618	)		2,080			3,766			—			(46,772	)
Cash at the beginning of period		42,208			509			57,120			—			99,837			59,130			465			45,709			—			105,304

Cash at the end of period	$	34,316		$	392		$	31,054		$	—		$	65,762		$	6,512		$	2,545		$	49,475		$	—		$	58,532

15.SUBSEQUENT EVENT

On July 27, 2017, we announced several cost reduction measures in our Specialty Papers business unit including the shutdown of a paper machine at the Chillicothe, OH facility, the elimination of approximately 50 affected hourly positions, and a reduction of an additional 70 salaried positions across the business unit. The machine shutdown will remove approximately 80,000 tons, or 10%, of capacity from the business unit. Production is expected to be absorbed by the remaining seven paper machines in the business unit. The

machine shutdown and headcount reductions are expected to result in an annual net profitability improvement of approximately $9 million and the avoidance of costly market-driven downtime. In connection with these cost reduction initiatives, we will recognize an aggregate pre-tax charge to earnings of approximately $8 million to $9 million including an estimated $5 million to $6 million in non-cash charges. The full amount of the charge is expected to be recognized in the third quarter of 2017.

- 2823 -

GLATFELTER

~~6.30.16~~06.30.17 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 ~~2015~~2016 Annual Report on Form 10-K.

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

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

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

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

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

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

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

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

viii.

the impact of unplanned production interruption;

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

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

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

xii.

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

xiii.

adverse results in litigation in the Fox River matter;

xiv.	the impact of war and terrorism;

xv.	the impact of unfavorable outcomes of audits by various state, federal or international tax ~~authorities;~~authorities or changes in pre-tax income and its impact on the valuation of deferred taxes;

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.

IntroductionWe 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 wallcovering base materials, metallized products, composite laminate papers, and many technically special papers including substrates for electrical applications;

•

~~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.

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

- 2924 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

RESULTS OF OPERATIONS

Six months ended June 30, ~~2016~~2017 versus the six months ended June 30, ~~2015~~2016

OverviewFor the first six months of ~~2016~~2017 net income ~~was $18.1~~totaled $5.9 million, or ~~$0.41~~$0.13 per diluted share compared with ~~$16.8~~$18.1 million ~~or $0.38~~and $0.41 per diluted share in the first six months of 2015. Adjusted earnings, a non-GAAP measure, were $19.1 million, or $0.43 per diluted share for the first six months of 2016 compared with $15.2 million, or $0.35 per diluted share, for the same period a year ~~ago.~~earlier period. Our Composite Fibers and Advanced Airlaid Materials ~~and Specialty Papers~~ businesses, which combined represented 49% of consolidated net sales, reported ~~significantly~~ higher operating income and operating margin expansion in the comparison driven by higher ~~demand,~~shipping volumes and improved ~~operations within Advanced Airlaid Materials, and, with respect to~~productivity. Specialty ~~Papers, less costly annual maintenance outages and lower input costs. The improved performance of these two businesses was partially offset by lower operating income~~Papers’ results declined significantly in the ~~Composite Fibers business, which was impacted by lower average selling prices.~~ comparison reflecting challenging market conditions.

The following table sets forth summarized consolidated results of operations:


	Six months ended June 30				Six months ended June 30
In thousands, except per share	2016		2015		2017		2016
Net sales	$	808,631	$	828,272	$	778,055	$	808,631
Gross profit		100,566		84,941		87,365		100,566
Operating income		31,491		27,297		20,306		31,491
Net income		18,133		16,773		5,889		18,133
Earnings per diluted share		0.41		0.38		0.13	0.41

In addition to the results reported in accordance with GAAP, we evaluate our performance using adjusted ~~net income~~earnings 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~~earnings 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, one-time 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).~~rule. This adjustment includes costs incurred during the transition period in which the newly installed equipment was brought on-line.

Airlaid capacity expansion costs.These adjustments reflect non-capitalized, one-time costs incurred ~~directly~~ related to the

start-up of a new airlaid production facility ~~for Advanced Airlaid Materials.~~in Ft. Smith, Arkansas.

~~Timberland sales and related costs.~~ ~~These adjustments exclude gains from~~Cost optimization actions. This adjustment reflects charges incurred in connection with initiatives to optimize the ~~sales~~cost structure of ~~timberlands as these items~~certain business units in response to changes in business conditions. The costs 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 and future performance of the Company and therefore are excluded for comparability purposes.

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

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

Adjusted earnings and adjusted earnings per diluted share are considered measures not calculated in accordance with GAAP, and therefore are non-GAAP measures. 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 ~~for~~forth the reconciliation of net income to adjusted earnings for the six months ended June 30, ~~2016~~2017 and ~~2015:~~2016:

												Six months ended June 30
	2016					2015						2017					2016
In thousands, except per share	Amount			Diluted EPS		Amount			Diluted EPS			Amount			Diluted EPS		Amount			Diluted EPS
Net income	$	18,133		$	0.41	$	16,773		$	0.38		$	5,889		$	0.13	$	18,133		$	0.41
Adjustments(pre-tax)
Specialty Papers’ environmental compliance		1,125					—
Specialty Papers' environmental compliance													2,480					1,125
Airlaid capacity expansion costs		257					—						4,453					257
Cost optimization actions													2,788					88
Timberland sales and related costs		—					(2,705	)					(74	)				-
Workforce efficiency charges		88					1,953
Acquisition and integration related costs		—					160

Total adjustments(pre-tax)		1,470					(592	)					9,647					1,470
Income taxes⁽¹⁾⁽²⁾		(543	)				(963	)

Income taxes (1)													(999	)				(543	)
Total after-tax adjustments		927			0.02		(1,555	)		(0.04	)		8,648			0.19		927			0.02

Adjusted earnings	$	19,060		$	0.43	$	15,218		$	0.35		$	14,537		$	0.33	$	19,060		$	0.43

(1)	Tax effect ~~for~~on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment ~~originated.~~originated and the related impact of valuation allowances.

~~(2)~~

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

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

- 3025 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

Business Unit Performance

Six months ended June 30					Advanced Airlaid									Other and
Dollars in millions	Composite Fibers				Materials				Specialty Papers					Unallocated						Total
	2017		2016		2017		2016		2017			2016		2017			2016			2017			2016
Net sales	$	258.2	$	259.9	$	122.7	$	121.5	$	397.1		$	427.2	$	—		$	—		$	778.1		$	808.6
Energy and related sales, net		—	—			—	—			2.1			2.7		—			—			2.1			2.7
Total revenue		258.2	259.9			122.7		121.5		399.2			429.9		—			—			780.2			811.3
Cost of products sold		207.2		210.3		103.5		104.1		376.0			394.0		6.1			2.3			692.8			710.7
Gross profit (loss)		51.0		49.6		19.2		17.4		23.2			35.9		(6.1	)		(2.3	)		87.4			100.6
SG&A		21.9		23.2		4.6		4.2		23.8			26.6		16.8			15.0			67.1			69.0
(Gains) losses on dispositions of plant,
equipment and timberlands, net		—		—		—		—		—			—		—			—			—			—
Total operating income (loss)		29.1		26.4		14.6		13.2		(0.6	)		9.3		(22.9	)		(17.3	)		20.3			31.5
Non-operating expense		—		—		—		—		—			—		(8.8	)		(8.3	)		(8.8	)		(8.3	)
Income (loss) before income taxes	$	29.1	$	26.4	$	14.6	$	13.2	$	(0.6	)	$	9.3	$	(31.7	)	$	(25.6	)	$	11.6		$	23.2
Supplementary Data
Net tons sold (thousands)		80.7		77.6		50.3		48.9		381.4			400.5		—			—			512.4			527.0
Depreciation, depletion and amortization	$	13.8	$	14.3	$	4.6	$	4.7	$	14.9		$	13.2	$	1.7		$	1.2		$	35.0		$	33.4
Capital expenditures		6.8		8.6		23.5		20.7		34.0			50.8		6.7			0.3			71.0			80.4

Six months ended June 30 Composite Fibers Advanced
Airlaid Materials Specialty Papers Other and Unallocated Total
Dollars in millions

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Net sales
$ 259.9    $ 275.7    $ 121.5    $ 119.8    $ 427.2    $ 432.8    $ —      $ —      $ 808.6    $ 828.3
Energy and related sales, net
—      —      —      —      2.7    2.8    —      —      2.7    2.8

Total revenue
259.9    275.7    121.5    119.8    429.9    435.6    —      —      811.3    831.1
Cost of products sold
210.3    221.5    104.1    107.3    394.0    412.3    2.3    5.0    710.7    746.1

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

Total operating income (loss)
26.4    31.3    13.2    8.5    9.3    (0.6 ) (17.3 ) (11.7 ) 31.5    27.3
Non-operating expense
—      —      —      —      —      —      (8.3 ) (8.7 ) (8.3 ) (8.7 )

Income (loss) before income taxes
$ 26.4    $ 31.3    $ 13.2    $ 8.5    $ 9.3    $ (0.6 ) $ (25.6 ) $ (20.4 ) $ 23.2    $ 18.6

Supplementary Data

Net tons sold(thousands)
77.6    77.3    48.9    46.7    400.5    390.0    —      —      527.0    514.0
Depreciation, depletion and amortization
$ 14.3    $ 13.4    $ 4.7    $ 4.3    $ 13.2    $ 12.9    $ 1.2    $ 1.0    $ 33.4    $ 31.6
Capital expenditures
8.6    11.5    20.7    2.8    50.8    28.8    0.3    1.5    80.4    44.6

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

- 3126 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

Sales and Costs of Products Sold


	Six months ended June 30									Six months ended June 30
In thousands	2016			2015			Change			2017			2016			Change
Net sales	$	808,631		$	828,272		$	(19,641	)	$	778,055		$	808,631		$	(30,576	)
Energy and related sales, net		2,667			2,783			(116	)		2,110			2,667			(557	)

Total revenues		811,298			831,055			(19,757	)		780,165			811,298			(31,133	)
Costs of products sold		710,732			746,114			(35,382	)		692,800			710,732			(17,932	)

Gross profit	$	100,566		$	84,941		$	15,625		$	87,365		$	100,566		$	(13,201	)

Gross profit as a percent of Net sales		12.4	%		10.3	%					11.2	%		12.4	%

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


	Six months ended June 30						Six months ended June 30
Percent of Total	2016			2015			2017			2016
Business Unit
Composite Fibers		32.1	%		33.3	%		33.2	%		32.1	%
Advanced Airlaid Material		15.0			14.5			15.8			15.0
Specialty Papers		52.9			52.2			51.0			52.9

Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled ~~$808.6~~$778.1 million and ~~$828.3~~$808.6 million in the first ~~half~~six months of ~~2016~~2017 and ~~2015,~~2016, respectively. The ~~$19.7~~$30.5 million ~~decline~~decrease was primarily driven by ~~$18.1~~$14.4 million of lower selling prices and ~~$4.5 million~~unfavorable currency translation of ~~currency translation.~~$12.8 million. Shipping volumes ~~increased 2.5%~~decreased 2.8%.

Composite Fibers’ net sales ~~declined $15.8~~decreased $1.7 million, or ~~5.7%, primarily due to $4.7 million of~~0.6%. Shipping volumes increased 4.0%; however, unfavorable currency translation and lower selling prices adversely impacted the comparison by $10.8 million and ~~$4.5~~$4.0 million, ~~of unfavorable currency translation.~~respectively.

Composite Fibers’ operating income for the ~~first half~~six months of ~~2016 decreased $4.9~~2017 increased $2.7 million to ~~$26.4~~$29.1 million compared to the year-ago ~~period.~~period primarily due to a $4.9 million benefit from improved operations including the impact of our cost optimization program. The primary drivers are summarized in the following chart:

Advanced Airlaid Materials’ net sales increased ~~$1.7~~$1.2 million in the year-over-year comparison ~~as $5.6 million of lower selling prices from the contractual pass through of lower raw material costs more than offset~~ primarily due to

higher shipping ~~volumes. Shipping~~ volumes which increased ~~4.7% primarily~~2.9% due to higher shipments of wipes and personal hygiene products.

Advanced Airlaid Materials’ operating income totaled ~~$13.2~~$14.6 million, an increase of ~~$4.7~~$1.4 million ~~or 55.3%~~ compared to the same period a year ago. The primary drivers are summarized in the following chart:

Specialty Papers’ net sales decreased ~~$5.6~~$30.1 million, or ~~1.3%~~7.0%, due to a ~~$7.9~~4.8% decrease in shipping volumes and a $9.8 million impact from lower selling ~~prices partially offset by a 2.7% increase in shipping volumes. The business unit again outperformed the broader uncoated free sheet market which increased 0.1%.~~prices.

Operating ~~income~~loss totaled ~~$9.3~~$0.6 million ~~an increase of $9.9 million compared to~~in the first six months of ~~2015.~~2017, compared with operating income of $9.3 million for the first six months of 2016. Operating results for both quarters reflect the cost of annual maintenance outages at the Chillicothe, OH and Spring Grove, PA facilities which adversely impacted second-quarter 2017 and 2016 results by $22.9 million and $26.3 million, respectively. The primary drivers of the change are summarized in the following chart:

~~The $5.7 million improvement in “Operations & Other” in the chart above includes the $7.1 million lower cost of the annual maintenance outages.~~

~~- 32 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

We sell excess power generated by the Spring Grove, PA facility. The following table summarizes this activity for the first six months of ~~2016~~2017 and ~~2015:~~2016:

- 27 -

GLATFELTER

06.30.17 Form 10-Q

   Six months ended
June 30
In thousands
   2016 2015 Change
Energy sales
   $ 1,818    $ 3,328    $ (1,510 )
Costs to produce
   (2,042 ) (2,256 ) 214


Net
   (224 ) 1,072    (1,296 )
Renewable energy credits
   2,891    1,711    1,180


Total
   $ 2,667    $ 2,783    $ (116 )

	Six months ended June 30
In thousands	2017			2016			Change
Energy sales	$	1,793		$	1,818		$	(25	)
Costs to produce		(2,367	)		(2,042	)		(325	)
Net		(574	)		(224	)		(350	)
Renewable energy credits		2,684			2,891			(207	)
Total	$	2,110		$	2,667		$	(557	)

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

Other and Unallocated The amount of net operating expenses not allocated to a business unit and reported as “Other and Unallocated” in our table of Business Unit Performance totaled $22.9 million in the first six months of 2017 compared with $17.3 million in the first six months of ~~2016 compared with $11.7 million~~2016. The increase in Other and Unallocated expenses primarily relates to Specialty Papers environmental compliance, the ~~first six months of 2015. Excluding $2.8 million of gains in 2015 from sales of timberlands in~~Airlaid capacity expansion project and the ~~comparison, unallocated net operating expenses increased $2.8 million primarily due to higher incentive compensation and professional services partially offset by lower pension expense.~~cost optimization actions.

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


	Six months ended June 30							Six months ended June 30
In thousands	2016		2015		Change			2017		2016		Change
Recorded as:
Recorded as:
Costs of products sold	$	1,178	$	3,495	$	(2,317	)	$	1,692	$	1,178	$	514
SG&A expense		1,577		916		661			1,622		1,577		45

Total	$	2,755	$	4,411	$	(1,656	)	$	3,314	$	2,755	$	559

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 ~~2016~~2017 is expected to be approximately ~~$5.5~~$6.6 million compared with ~~$9.1~~$5.5 million in ~~2015. The decrease reflects the impact of higher discount rates partially offset by~~2016 (which excludes a ~~lower assumed long term rate of return on plan assets.~~$7.3 million settlement charge).

Income taxes For the first six months of ~~2016,~~2017, we recorded a provision for income taxes of ~~$5.1~~$5.7 million on ~~pretax~~pre-tax income of ~~$23.2~~$11.6 million. The comparable amounts in the ~~period~~six months of ~~2015~~2016 were ~~$1.8~~$5.1 million and ~~$18.6~~$23.2 million, respectively. The effective tax rate of 49.0% in ~~2015 includes~~ the first six months of 2017 compared with 21.8% in the same period of 2016 reflects the adverse impact of ~~a $2.6~~an increase in unrecognized tax benefits and in our valuation allowances for U.S. deferred tax assets. We currently expect to record valuation allowances of between $16 million ~~release~~and $18 million

for the full year 2017. The effective tax rate in future periods may be affected by changes in U.S.-based pre-tax income and its impact on the valuation of ~~income tax reserves in connection with the completion of certain federal and state tax examinations.~~deferred taxes.

Foreign CurrencyWe own and operate facilities in Canada, Germany, France, the United Kingdom and the Philippines. The functional currency of our Canadian operations is the U.S. dollar. However, in Germany and France it is the Euro, in the UK, it is the British Pound Sterling, and in the Philippines the functional currency is the Peso. On an annual basis, our euro denominated revenue exceeds euro expenses by approximately ~~€120~~€125 million to €130 million. For the first six months ~~ended June 30, 2016,~~of 2017, the average currency exchange rate ~~increased slightly~~for euro to ~~1.12~~the U.S. ~~dollars to 1.00 euro~~dollar was 1.093 compared with ~~1.11 to 1.00~~1.114 for the ~~first six months~~same period of ~~2015.~~2016. With respect to the British Pound Sterling, Canadian dollar, and Philippine Peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the euro. As a result, we are exposed to changes in currency exchange rates and such changes could be significant. The translation of the results from international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

The table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the first six months of ~~2016.~~2017.


In thousands	Six months ended June 30, 2016			Six months ended June 30, 2017
	Favorable (unfavorable)			Favorable (unfavorable)
Net sales	$	(4,518	)		$	(12,799	)
Costs of products sold		3,211				11,706
SG&A expenses		375				1,063
Income taxes and other		37				367

Net income	$	(895	)		$	337

The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in ~~2016~~2017 were the same as ~~2015.~~2016. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

- 3328 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

Three months ended June 30, ~~2016~~2017 versus the three months ended June 30, ~~2015~~2016

OverviewFor the ~~second-quarter~~second quarter of ~~2016,~~2017, net loss totaled $5.7 million, or $0.13 per diluted share compared with net income ~~totaled~~of $2.0 million, or $0.04 per ~~diluted share compared with $2.8 million, or $0.06 per diluted~~ share in the second quarter of ~~2015. Adjusted~~2016. On an adjusted earnings basis the loss for the second quarter of ~~2016 were~~2017 was $2.6 million, or $0.06 per share compared with adjusted earnings of $2.8 million, or $0.06 ~~per diluted share compared with $1.8 million, or $0.04~~ per diluted share, for the same period a year ago.

The following table sets forth summarized results of operations:


	Three months ended June 30				Three months ended June 30
In thousands, except per share	2016		2015		2017			2016
Net sales	$	406,413	$	410,803	$	387,342		$	406,413
Gross profit		42,723		32,833		30,436			42,723
Operating income		5,530		3,807
Net income		1,965		2,848
Earnings per diluted share		0.04		0.06
Operating income (loss)						(1,505	)		5,530
Net income (loss)						(5,714	)		1,965
Earnings (loss) per share						(0.13	)		0.04

The following table sets ~~for~~forth the reconciliation of net income to adjusted earnings for the three months ended June 30, ~~2016~~2017 and ~~2015:~~2016:

2016 2015
In thousands, except per share
Amount Diluted
EPS Amount Diluted
EPS
Net income
$ 1,965    $ 0.04    $ 2,848    $ 0.06
Adjustments(pre-tax)

Specialty Papers’ environmental compliance
1,088    —
Airlaid capacity expansion costs
201    —
Timberland sales and related costs
—      (51 )
Workforce efficiency charges
—      614

Total adjustments(pre-tax)
1,289    563
Income taxes⁽¹⁾⁽²⁾
(487 ) (1,567 )

Total after-tax adjustments
802    0.02    (1,004 ) (0.02 )

Adjusted earnings
$ 2,767    $ 0.06    $ 1,844    $ 0.04

	Three months ended June 30
	2017						2016
In thousands, except per share	Amount			EPS			Amount			Diluted EPS

Net income (loss)	$	(5,714	)	$	(0.13	)	$	1,965		$	0.04
Adjustments (pre-tax)
Specialty Papers' environmental compliance and other		216						1,088
Airlaid capacity expansion costs		2,495						201
Cost optimization		775						-
Timberland sales and related costs		(74	)					-
Total adjustments (pre-tax)		3,412						1,289
Income taxes (1)		(317	)					(487	)
Total after-tax adjustments		3,095			0.07			802			0.02
Adjusted earnings (loss)	$	(2,619	)	$	(0.06	)	$	2,767		$	0.06

(1)	Tax effect ~~for~~on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment ~~originated.~~originated and the related impact of valuation allowances.

~~(2)~~

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

Business Unit Performance


Three months ended June 30	Composite Fibers					Advanced Airlaid Materials				Specialty Papers						Other and Unallocated							Total												Advanced Airlaid												Other and
Dollars in millions					Composite Fibers					Specialty Papers						Other and Unallocated						Materials									Specialty Papers						Unallocated						Total
	Composite Fibers		2016			Advanced Airlaid Materials			2015		2016			2015			2016			2015							2016				2015			2016			2015		2017			2016			2017			2016			2017			2016			2017		2016	2017	2016
Net sales	$	136.4	$	140.4		$	60.8	$	57.5	$	209.3		$	212.9		$	—		$	—			Total	$	406.4		$	410.8		$	133.1		$	136.4		$	62.8		$	60.8		$	191.4		$	209.3		$	—		$	—		$	387.3		$	406.4
Energy and related sales, net		—		—			—		—		2.0			0.7			—			—				2.0			0.7			—		—				—		—				1.0			2.0			—			—			1.0			2.0

Total revenue		136.4		140.4			60.8		57.5		211.3			213.6			—			—				408.4			411.5			133.1			136.4			62.8		60.8				192.4			211.3			—			—			388.3			408.4
Cost of products sold		109.0		112.4			51.8		52.3		202.9			211.9			2.0			2.1				365.7			378.7			107.6			109.0			53.0			51.8			195.9			202.9			1.4			2.0			357.9			365.7

Gross profit (loss)		27.4		28.0			9.0		5.2		8.4			1.7			(2.0	)		(2.1	)			42.7			32.8			25.5			27.4			9.8			9.0			(3.5	)		8.4			(1.4	)		(2.0	)		30.4			42.7
SG&A		12.1		11.3			2.2		2.1		14.2			11.7			8.7			4.0				37.2			29.1			10.8			12.1			2.3			2.2			10.3			14.2			8.6			8.7			32.0			37.2
Gains on dispositions of plant, equipment and timberlands, net		—		—			—		—		—			—			—			(0.1	)			—			(0.1	)

(Gains) losses on dispositions of plant, equipment and timberlands, net																														—			—			—			—			—			—			(0.1	)		—			(0.1	)		—
Total operating income (loss)		15.3		16.7			6.8		3.1		(5.8	)		(10.0	)		(10.7	)		(6.0	)			5.5			3.8			14.7			15.3			7.5			6.8			(13.8	)		(5.8	)		(9.9	)		(10.7	)		(1.5	)		5.5
Non-operating expense		—		—			—		—		—			—			(3.6	)		(4.1	)			(3.6	)		(4.1	)		—			—			—			—			—			—			(4.6	)		(3.6	)		(4.6	)		(3.6	)

Income (loss) before income taxes	$	15.3	$	16.7		$	6.8	$	3.1	$	(5.8	)	$	(10.0	)	$	(14.3	)	$	(10.1	)		$	2.0		$	(0.3	)	$	14.7		$	15.3		$	7.5		$	6.8		$	(13.8	)	$	(5.8	)	$	(14.5	)	$	(14.3	)	$	(6.1	)	$	2.0

Supplementary Data
Net tons sold(thousands)		40.7		39.4			24.4		22.6		194.7			191.3			—			—				259.7			253.3			41.9			40.7			25.5			24.4			184.1			194.7			—			—			251.5			259.7
Depreciation, depletion and amortization	$	7.2	$	6.7		$	2.4	$	2.1	$	6.5		$	6.3		$	0.7		$	0.5			$	16.8		$	15.6		$	7.0		$	7.2		$	2.3		$	2.4		$	7.7		$	6.5		$	0.7		$	0.7		$	17.7		$	16.8
Capital expenditures		2.3		5.6			6.1		1.5		28.7			15.6			—			0.1				37.1			22.8			2.1			2.3			12.9			6.1			15.8			28.7			3.5			—			34.3			37.1

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

- 3429 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

Sales and Costs of Products Sold


	Three months ended June 30									Three months ended June 30
In thousands	2016			2015			Change			2017			2016			Change
Net sales	$	406,413		$	410,803		$	(4,390	)	$	387,342		$	406,413		$	(19,071	)
Energy and related sales, net		2,001			715			1,286			981			2,001			(1,020	)

Total revenues		408,414			411,518			(3,104	)		388,323			408,414			(20,091	)
Costs of products sold		365,691			378,685			(12,994	)		357,887			365,691			(7,804	)

Gross profit	$	42,723		$	32,833		$	9,890		$	30,436		$	42,723		$	(12,287	)

Gross profit as a percent of Net sales		10.5	%		8.0	%					7.9	%		10.5	%

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


	Three months ended June 30						Three months ended June 30
Percent of Total	2016			2015			2017			2016
Business Unit
Composite Fibers		33.6	%		34.2	%		34.4	%		33.6	%
Advanced Airlaid Material		15.0			14.0			16.2			15.0
Specialty Papers		51.4			51.8			49.4			51.4

Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled ~~$406.4~~$387.3 million and ~~$410.8~~$406.4 million in the second quarters of 2017 and 2016, respectively. Shipping volumes declined 3.2% and ~~2015, respectively, with the decline primarily reflecting lower average~~ selling ~~prices. Currency~~prices and foreign currency translation ~~adjustments favorably~~unfavorably impacted the ~~year-over-year~~quarter-over-quarter comparison by ~~$0.7~~$7.6 million and $6.0 million, respectively.

Composite Fibers’ net sales declined ~~$4.0~~$3.2 million, or ~~2.9%~~2.4%, primarily due to ~~$1.6~~$5.2 million of unfavorable currency translation and $2.1 million from lower selling ~~prices. Shipping volumes were~~prices partially offset by higher ~~in the comparison primarily due to improved demand for wallcover.~~shipping volumes.

Composite Fibers’ ~~second-quarter 2016~~second quarter of 2017 operating income decreased ~~$1.4 million~~slightly to ~~$15.3 million compared to the year-ago period.~~$14.7 million. The primary drivers are summarized in the following chart:

Advanced Airlaid Materials’ net sales increased ~~$3.3~~$2.1 million in the ~~year-over-year comparison as shipping~~quarter-over-quarter comparison. Shipping volumes increased ~~7.8%~~4.7% primarily due to ~~higher shipments~~

continued growth of personal hygiene ~~products. Lower selling prices impacted the comparison by $1.8 million.~~products and wipes.

Advanced Airlaid Materials’ operating income totaled ~~$6.8~~$7.5 million ~~more than double the same quarter a year ago. The primary drivers are summarized in the following chart:~~

~~Specialty Papers’ net sales decreased $3.7 million, or 1.7%, due to a $3.7 million impact from lower selling prices.~~

~~Specialty Papers’ operating loss narrowed by $4.2 million in the year-over-year comparison and totaled $5.8~~compared with $6.8 million in the second quarter of 2016. The primary drivers are summarized in the following chart:

Specialty Papers’ net sales decreased $17.9 million, or 8.6%, due to a 5.4 % decline in shipping volumes and a $5.3 million impact from lower selling prices.

- 30 -

GLATFELTER

06.30.17 Form 10-Q

Specialty Papers’ operating loss totaled $13.8 million in the second quarter of 2017, compared with $5.8 million in the same period a year ago. The primary drivers are summarized in the following chart:

Specialty Papers’ markets continued to be impacted by a supply-demand imbalance resulting in lower selling prices and shipping volumes adversely impacting operating results by $7.9 million coupled with market-related downtime of $5.6 million. In addition, lower energy and related sales and higher raw material and energy costs adversely impacted the year-over-year comparison by $2.9 million. Operating results for both quarters reflect the cost of annual maintenance outages at the ~~Company’s~~ Chillicothe, OH and Spring Grove, PA ~~facilities. The outages~~facilities which adversely impacted second-quarter 2017 and 2016 results by $22.9 million and $26.3 million, ~~which was $7.1 million less than the cost of the outages in 2015. The $0.9 million improvement in “Operations & Other” in the chart above includes the~~respectively. In addition to lower ~~cost of~~spending for the annual maintenance outages, ~~which was offset by~~this business benefited from improved operations, cost control actions, and lower ~~pulp production and an increase in~~ incentive compensation ~~and other costs.~~aggregating $5.1 million.

~~- 35 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

We sell excess power generated by the Spring Grove, PA facility. The following table summarizes this activity for the second quarters of ~~2016~~2017 and ~~2015:~~2016:


	Three months ended June 30									Three months ended June 30
In thousands	2016			2015			Change			2017			2016			Change
Energy sales	$	836		$	1,163		$	(327	)	$	787		$	836		$	(49	)
Costs to produce		(934	)		(1,211	)		277			(929	)		(934	)		5

Net		(98	)		(48	)		(50	)		(142	)		(98	)		(44	)
Renewable energy credits		2,099			763			1,336			1,123			2,099			(976	)

Total	$	2,001		$	715		$	1,286		$	981		$	2,001		$	(1,020	)

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 excluding gains from sales of timberlands, totaled $10.0 million in the second quarter of 2017 compared with $10.7 million in the second quarter of ~~2016 compared with $6.0 million in the second quarter of 2015. The increase was primarily due to higher incentive compensation and professional service fees.~~2016.

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


	Three months ended June 30							Three months ended June 30
In thousands	2016		2015		Change			2017		2016		Change
Recorded as:
Costs of products sold	$	742	$	1,468	$	(726	)	$	1,098	$	742	$	356
SG&A expense		854		135		719			893		854		39

Total	$	1,596	$	1,603	$	(7	)	$	1,991	$	1,596	$	395

Income taxes For the second quarter of ~~2016,~~2017, we recorded ~~zero~~$0.4 million of tax benefit on a pretax ~~income~~loss of ~~$2.0 million due to the jurisdiction in which taxable earnings and discrete items were generated.~~$6.1 million. The comparable amounts in the second quarter of ~~2015~~2016 were ~~an income tax benefit of $3.1 million~~no taxes on a pretax ~~loss~~income of ~~$0.3~~$2.0 million. The change in the effective tax ~~benefit was primarily due to~~rate reflects the ~~release income~~adverse impact of valuation allowances recorded in 2017 for deferred tax ~~reserves in connection with the completion of certain federal and state tax examinations.~~assets.

Foreign Currency 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 second quarter of ~~2016.~~2017.


In thousands	Three months ended June 30, 2016			Three months ended June 30, 2017
	Favorable (unfavorable)			Favorable (unfavorable)
Net sales	$	709			$	(6,039	)
Costs of products sold		(1,354	)			6,085
SG&A expenses		(22	)			476
Income taxes and other		(9	)			91

Net income	$	(676	)		$	613

- 31 -

GLATFELTER

06.30.17 Form 10-Q

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:


	Six months ended June 30						Six months ended June 30
In thousands	2016			2015			2017			2016
Cash and cash equivalents at beginning of period	$	105,304		$	99,837
Cash and cash equivalents at
beginning of period							$	55,444		$	105,304
Cash provided (used) by
Operating activities		36,640			25,513			28,764			36,640
Investing activities		(80,638	)		(43,124	)		(70,964	)		(80,638	)
Financing activities		(3,126	)		(14,813	)		52,466			(3,126	)
Effect of exchange rate changes on cash		352			(1,651	)

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

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

Effect of exchange rate
changes on cash								3,732			352
Net cash provided (used)								13,998			(46,772	)
Cash and cash equivalents at
end of period							$	69,442		$	58,532

At June 30, ~~2016,~~2017, we had ~~$58.5~~$69.4 million in cash and cash equivalents held by both domestic and foreign subsidiaries. Unremitted earnings of our foreign subsidiaries are deemed to be indefinitely ~~reinvested; however, as~~reinvested and therefore no U.S. tax liability is reflected in the accompanying condensed consolidated financial statements. As of June 30, ~~2016,~~2017, the majority of our cash ~~and cash equivalents~~

~~- 36 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

is ~~either~~ held by ~~domestic entities or is available for use domestically.~~our international subsidiaries and the repatriation of such funds would result in additional tax liability. In addition to our cash and cash equivalents, ~~$258.4~~$104.4 million is available under our revolving credit agreement, which matures in March 2020.

Cash provided by operating activities totaled ~~$36.6~~$28.8 million in the first six months of ~~2016~~2017 compared with ~~$25.5~~$36.6 million in the same period a year ago. The ~~increase~~decrease in cash from operations primarily reflects ~~a decrease in cash used for working capital.~~lower operating income.

Net cash used by investing activities ~~increased~~decreased by ~~$37.5~~$9.7 million in the year-over-year comparison ~~primarily~~ due to lower capital ~~expenditures for Specialty Papers’ environmental compliance and Advanced Airlaid Materials’ capacity expansion projects which totaled $55.6 million in 2016.~~expenditures. Capital expenditures are expected to total between ~~$150~~$130 million and ~~$170~~$140 million for ~~2016,~~2017, including approximately ~~$45~~$10 million ~~to $50 million~~ for the Specialty Papers’ environmental compliance projects and ~~approximately $40~~$43 million to ~~$45~~$48 million for the Airlaid capacity expansion.

Net cash ~~used~~provided by financing activities totaled ~~$3.1~~$52.5 million in the first six months of ~~2016~~2017 compared with ~~$14.8~~a use of $3.1 million in the same period of ~~2015.~~2016. The ~~net decline~~increase in ~~use of~~ cash ~~for~~provided by financing activities primarily reflects ~~lower revolver~~additional borrowings ~~offset by additional term loan borrowings and receipt of $4.4 million of government grants primarily related to~~under our ~~Airlaid capacity expansion and Specialty Papers’ compliance projects.~~credit agreement.

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


	June 30			December 31			June 30			December 31
In thousands	2016			2015			2017			2016
Revolving credit facility, due Mar. 2020	$	48,851		$	58,792		$	130,000		$	61,595
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		9,516			10,109			8,151			8,282
2.05% Term Loan, due Mar. 2023		40,000			42,130			35,023			35,163
1.30% Term Loan, due Jun. 2023		11,102			—			9,781			9,788
1.55% Term Loan, due Sep. 2025		10,884			2,839			11,187			10,333

Total long-term debt		370,353			363,870			444,142			375,161
Less current portion		(9,098	)		(7,366	)		(10,400	)		(8,961	)
Unamortized deferred issuance costs		(2,889	)		(3,208	)		(2,248	)		(2,553	)

Long-term debt, net of current portion	$	358,366		$	353,296		$	431,494		$	363,647

Our revolving credit facility contains a number of customary compliance covenants, the most restrictive of which is a maximum leverage ratio of 3.5x. As of June 30, ~~2016,~~2017, the leverage ratio, as calculated in accordance with the definition in our amended credit agreement, was ~~1.9x,~~2.6x, within the limits set forth in our

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

The 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding under the credit agreement at maturity, or a default under the credit agreement that accelerates the debt outstanding thereunder. As of June 30, ~~2016,~~2017, we met all of the requirements of our debt covenants. The significant terms of the debt instruments are more fully discussed in Item 1 - Financial Statements – Note 9.

Financing activities includes cash used for common stock dividends which increased in the comparison reflecting a 4% increase in our quarterly cash dividend. In the first six months of ~~2016,~~2017, we used ~~$10.7~~$11.1 million of cash for dividends on our common stock compared with ~~$10.0~~$10.7 million in the same period of ~~2015.~~2016. 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.

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

- 32 -

GLATFELTER

06.30.17 Form 10-Q

As more fully discussed in Item 1 - Financial Statements – Note 1312 – Commitments, Contingencies and Legal Proceedings (“Note ~~13”~~12”), we are involved in the Lower Fox River in Wisconsin (the “Fox River”), an EPA Superfund site for which we remain potentially liable for ~~contributions to~~certain response costs and long-term monitoring and maintenance related matters. Based on the ~~clean-up activity. During 2015, we used $9.7 million and expect to spend less than $10.0 million~~recent developments more fully discussed in ~~2016 for remediation activities. It~~Note 12, it is conceivable wethe resolution of this matter may ~~need~~require us to ~~fund amounts~~spend in excess of ~~this to fund a~~

~~- 37 -~~

~~GLATFELTER~~

~~6.30.16 Form 10-Q~~

~~portion of~~$29.5 million in the ~~on-going costs in 2016 or beyond.~~next twelve months. Although we are unable to determine with any degree of certainty the amount we may be required to ~~fund for interim remediation work, such amounts could~~spend, other than a $9.5 million payment to be ~~significant. The ultimate allocation~~made in August 2017, related to the settlement with Georgia Pacific, the recent developments provide greater clarity to the extent of such ~~costs is the subject of extensive ongoing litigation amongst three potentially responsible parties. See Note 13 for a summary of significant environmental matters.~~amounts.

~~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 and long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility and other long-term debt. However, as discussed in Note ~~13,~~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.

Off-Balance-Sheet ArrangementsAs of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, 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, are reflected in the condensed consolidated balance sheets included herein in Item 1 – Financial Statements.

OutlookComposite Fibers’ shipping volumes in the third quarter of 2017 are expected to be approximately 3% higher than the second quarter. Selling prices are expected to be in-line with the second quarter while raw material and energy prices are expected to be slightly higher. In addition, we expect this business unit to incur approximately $1 million of less market related downtime in the third quarter than the second quarter.

Advanced Airlaid Materials’ shipping volumes in the third quarter are expected to be ~~slightly~~approximately 2% higher than the second quarter. Selling prices and raw material and energy prices are expected to ~~be in-line~~increase slightly compared with the second quarter.

~~Advanced Airlaid Materials’~~

Specialty Papers’ shipping volumes in the third quarter are expected to ~~increase~~be approximately 5% higher than the second quarter of 2017. Selling prices are expected to decline slightly ~~in the third quarter. Customer selling prices~~ and raw material and energy prices are expected to be ~~in-line with the second quarter.~~

~~For Specialty Papers,~~up slightly. In addition, we expect ~~shipping volumes in the third quarter~~ to increase by approximately 5% compared with the second quarter. Selling prices are expected to be slightly higher while increases in raw material and energy prices are expected to slightly outpace selling price increases. We also expect maintenance spending to decrease by approximately $23 million reflecting normal patterns of maintenance expense.

~~Corporate costs are expected to be approximately $1~~incur $2 million to $2$3 million of less market related downtime in the third quarter than in the second quarter. Specialty Papers will also benefit

about $1 million from the cost reduction actions recently announced.

In connection with our cost reduction actions within Specialty Papers, we expect to record one-time charges of approximately $8 million to $9 million primarily during the third quarter, of which approximately $5 million to $6 million will be non-cash. In addition, costs associated with the Specialty Papers environmental compliance projects and Advanced Airlaid Materials capacity expansion are expected to be $1 million and $4 million, respectively.

Consolidated capital expenditures are expected to total between $130 million and $140 million for 2017 and approximate between $62 million and $72 million in 2018.

The effective tax rate on adjusted earnings is expected to be approximately 35% for the second half of 2017.

- 3833 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

ITEM 3. QUANTITATIVE AND ~~QUALITATIVE~~QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISKS~~RISKS


	Year Ended December 31															June 30, 2016				Year Ended December 31															June 30, 2017
Dollars in thousands	2017			2018			2019			2020			2021			Carrying Value		Fair Value		2017			2018			2019			2020			2021			Carrying Value		Fair Value
Long-term debt
Average principal outstanding
At fixed interest rates – Bond	$	250,000		$	250,000		$	250,000		$	250,000		$	250,000		$	250,000	$	255,625	$	250,000		$	250,000		$	250,000		$	218,750		$	—		$	250,000	$	256,623
At fixed interest rates – Term Loans		62,403			52,625			42,166			31,708			21,249			71,502		68,087		61,805			54,091			43,342			32,592			21,841			64,142		64,734
At variable interest rates		48,851			48,851			48,851			48,851			48,851			48,851		48,851		130,000			130,000			130,000			27,083			—			130,000		130,000
																																			$	444,142	$	451,357
																$	370,353	$	372,563

Weighted-average interest rate
On fixed rate debt – Bond		5.375	%		5.375	%		5.375	%		5.375	%		5.375	%						5.375	%		5.375	%		5.375	%		5.375	%		5.375	%
On fixed rate debt – Term Loans		2.17	%		2.17	%		2.17	%		2.17	%		2.17	%						1.89	%		1.89	%		1.88	%		1.86	%		1.82	%
On variable rate debt		1.25	%		1.25	%		1.25	%		1.25	%		1.25	%						2.72	%		2.72	%		2.72	%		2.72	%		2.72	%

The table above presents the average principal outstanding and related interest rates for the next five years for debt outstanding as of June 30, ~~2016.~~2017. Fair values included herein have been determined based upon rates currently available to us for debt with similar terms and remaining maturities.

Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At June 30, ~~2016,~~2017, we had ~~$370.4~~$441.9 million of long-term debt, net of unamortized debt issuance costs, of which ~~13.2%~~29.4% was at variable interest rates. Variable-rate debt outstanding represents borrowings under our revolving credit agreement that accrues interest based on LIBOR plus a margin. At June 30, ~~2016,~~2017, the interest rate paid was approximately ~~1.25%~~2.72%. A hypothetical 100 basis point increase or decrease in the interest rate on variable rate debt would increase or decrease annual interest expense by ~~$0.5~~$1.3 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. On an annual basis, our euro denominated revenue exceeds euro expenses by approximately ~~€120~~€125 million to €130 million. With respect to the British Pound Sterling, Canadian dollar, and Philippine Peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the euro. As a result, particularly with respect to the euro, we are exposed to changes in currency exchange rates and such changes could be significant.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and ProceduresOur chief executive officer and our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, ~~2016,~~2017, have concluded that, as of the evaluation date, our disclosure controls and procedures are effective.

Changes in Internal Controls During the second quarter of 2017, we completed the conversion of the payroll processing system for our U.S.-based operations provided by an outsourced service provider. There were no other changes in our internal control over financial reporting during the three months ended June 30, ~~2016,~~2017, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

- 3934 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

PART II

ITEM 6. EXHIBITS

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



~~31.1~~ 10.1	Schedule of Change in Control Employment Agreement, filed herewith **

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.~~2002, 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.~~2002, 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, 18 U.S.C. Section ~~1350.~~1350, furnished herewith

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.~~1350, furnished 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


**	Management compensatory contract

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)~~
August 1, 2017
~~August 2, 2016~~
	By
		By	/s/ David C. Elder
			David C. Elder
			Vice President, Finance

- 4035 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q

EXHIBIT INDEX


~~Exhibit~~ ~~Number~~		~~Description~~
10.1	Schedule of Change in Control Employment Agreement, filed herewith **
~~31.1~~
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.~~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.~~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.~~18 U.S.C. Section 1350, furnished herewith

32.2		Certification of John P. Jacunski, Executive Vice President and Chief Financial Officer, ~~and 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.~~furnished 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


**	Management compensatory contract

- 4136 -

GLATFELTER

~~6.30.16~~06.30.17 Form 10-Q


Large accelerated filer	☒	x		Accelerated filer		¨ ☐

Non-accelerated filer	☐	¨ ~~(Do~~ (Do not check if a smaller reporting company).		~~Small~~ Smaller reporting company	☐
	¨	Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.					☐


		~~Page~~
~~PART I - FINANCIAL INFORMATION~~

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


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

~~Item 2~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		29
~~Item 3~~	~~Quantitative and Qualitative Disclosures About Market Risks~~		39
~~Item 4~~	~~Controls and Procedures~~		39

~~PART II – OTHER INFORMATION~~

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

	~~SIGNATURES~~		40

PART I - FINANCIAL INFORMATION

Item 1	Financial Statements
	Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2017 and 2016 (unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2017 and 2016 (unaudited)		3
	Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (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


	Six months ended June 30				Six months ended June 30
In thousands, except per share	2016		2015		2017		2016
Net income	$	18,133	$	16,773	$	5,889	$	18,133

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

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

Weighted average common shares
outstanding used in basic EPS						43,593		43,539
Common shares issuable upon
exercise of dilutive stock options
and PSAs / RSUs						856		424
Weighted average common shares
outstanding and common share
equivalents used in diluted EPS						44,449		43,963
Earnings per share
Basic	$	0.42	$	0.39	$	0.14	$	0.42
Diluted		0.41		0.38		0.13		0.41

	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	18
	14.	Condensed Consolidating Financial Statements	19
	15.	Subsequent Event	23

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3	Quantitative and Qualitative Disclosures About Market Risks		34
Item 4	Controls and Procedures		34

PART II – OTHER INFORMATION			35

Item 6	Exhibits		35

	SIGNATURES		35

In thousands	Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at April 1, 2017	$	(94,383	)	$	554		$	(108,466	)	$	4,882		$	(197,413	)
Other comprehensive income before reclassifications (net of tax)		27,504			(3,080	)		—			(106	)		24,318
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(571	)		2,642			(57	)		2,014
Net current period other comprehensive income (loss)		27,504			(3,651	)		2,642			(163	)		26,332
Balance at June 30, 2017	$	(66,879	)	$	(3,097	)	$	(105,824	)	$	4,719		$	(171,081	)
Balance at April 1, 2016	$	(59,622	)	$	(159	)	$	(118,399	)	$	3,436		$	(174,744	)
Other comprehensive income before reclassifications (net of tax)		(14,864	)		837			—			—			(14,027	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			107			2,613			(232	)		2,488
Net current period other comprehensive income (loss)		(14,864	)		944			2,613			(232	)		(11,539	)
Balance at June 30, 2016	$	(74,486	)	$	785		$	(115,786	)	$	3,204		$	(186,283	)


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

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

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

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

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

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


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

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

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

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

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

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


		Open Tax Years
Jurisdiction		Examinations not yet initiated			Examination in progress
United States
Federal			2013 - ~~2015~~2016		N/A	~~N/A~~
State	2012 - 2016		~~2011 - 2015~~			~~2011~~ 2013 - 2014
Canada⁽¹⁾			2010 - ~~2015~~2013; 2016		2014 - 2015	~~N/A~~
Germany⁽¹⁾	2016			2012 - 2015			~~2007 - 2011~~
France	2014 - 2016		~~2013 - 2015~~			2011 - 2012
United Kingdom	2015 - 2016		~~2014 - 2015~~	N/A		~~N/A~~
Philippines	2015 - 2016		~~2015~~	2013 - 2014		~~2013, 2014~~


	Six months ended June 30				Six months ended June 30
In millions	2016		2015		2017		2016
Interest expense	$	0.2	$	—
Interest expense (income)					$	0.3	$	0.2
Penalties		—		—		—		—

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


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

Total revenue		259.9		275.7		121.5		119.8		429.9		435.6			—			—			811.3			831.1
Cost of products sold		210.3		221.5		104.1		107.3		394.0		412.3			2.3			5.0			710.7			746.1

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

Total operating income (loss)		26.4		31.3		13.2		8.5		9.3		(0.6	)		(17.3	)		(11.7	)		31.5			27.3
Non-operating expense		—		—		—		—		—		—			(8.3	)		(8.7	)		(8.3	)		(8.7	)

Income (loss) before income taxes	$	26.4	$	31.3	$	13.2	$	8.5	$	9.3	$	(0.6	)	$	(25.6	)	$	(20.4	)	$	23.2		$	18.6

Supplementary Data
Net tons sold(thousands)		77.6		77.3		48.9		46.7		400.5		390.0			—			—			527.0			514.0
Depreciation, depletion and amortization	$	14.3	$	13.4	$	4.7	$	4.3	$	13.2	$	12.9		$	1.2		$	1.0		$	33.4		$	31.6
Capital expenditures		8.6		11.5		20.7		2.8		50.8		28.8			0.3			1.5			80.4			44.6