UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June 30, 2017~~March 31, 2018

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

For the transition period from to

96 South George Street, Suite 520

York, Pennsylvania 17401

(Address of principal executive offices)

(717) 225-4711

(Registrant's telephone number, including area code)

Commission file

number

Exact name of registrant as

specified in its charter

IRS Employer

Identification No.

State or other jurisdiction of

incorporation or organization

1-03560

P. H. Glatfelter Company

23-0628360

Pennsylvania

N/A

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

Common Stock outstanding on ~~July~~April 25, ~~2017~~2018 totaled ~~43,583,926~~43,698,464 shares.

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

REPORT ON FORM 10-Q

For the QUARTERLY PERIOD ENDED

~~June 30, 2017~~March 31, 2018

Table of Contents

Page

PART I - FINANCIAL INFORMATION	PART I - FINANCIAL INFORMATION			PART I - FINANCIAL INFORMATION

Item 1	Financial Statements			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 Income for the three months ended March 31, 2018 and 2017 (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 Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017 (unaudited)		3
	Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 (unaudited)		4	Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (unaudited)		5	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6	Notes to Condensed Consolidated Financial Statements (unaudited)		6
	1.	Organization	6	1.	Organization	6
	2.	Accounting Policies	6	2.	Accounting Policies	6
	3.	Earnings Per Share	7	3.	Revenue	7
	4.	Accumulated Other Comprehensive Income	8	4.	Gain on Disposition of Plant, Equipment and Timberlands	8
	5.	Income Taxes	10	5.	Earnings Per Share	8
	6.	Stock-based Compensation	10	6.	Accumulated Other Comprehensive Income	9
				7.	Income Taxes	10
				8.	Stock-based Compensation	11

	7.	Retirement Plans and Other Post- Retirement Benefits	11		9.	Retirement Plans and Other Post- Retirement Benefits	12
	8.	Inventories	12		10.	Inventories	12
	9.	Long-term Debt	12		11.	Capitalized Interest	12
	10.	Fair Value of Financial Instruments	13		12.	Long-term Debt	12
	11.	Financial Derivatives and Hedging Activities	13		13.	Fair Value of Financial Instruments	14
	12.	Commitments, Contingencies and Legal Proceedings	15		14.	Financial Derivatives and Hedging Activities	14
	13.	Segment Information	18		15.	Commitments, Contingencies and Legal Proceedings	16
	14.	Condensed Consolidating Financial Statements	19		16.	Segment Information	19
	15.	Subsequent Event	23		17.	Condensed Consolidating Financial Statements	20

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24	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 3	Quantitative and Qualitative Disclosures About Market Risks		31
Item 4	Controls and Procedures		34	Item 4	Controls and Procedures		31

PART II – OTHER INFORMATION	PART II – OTHER INFORMATION		35	PART II – OTHER INFORMATION			32

Item 6	Exhibits		35	Item 6	Exhibits		32

	SIGNATURES		35		SIGNATURES		32

PART I

Item 1 – Financial Statements

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Three months ended June 30						Six months ended June 30						Three months ended March 31
In thousands, except per share	2017			2016			2017			2016			2018			2017
Net sales	$	387,342		$	406,413		$	778,055		$	808,631		$	410,647		$	390,713
Energy and related sales, net		981			2,001			2,110			2,667			1,428			1,129
Total revenues		388,323			408,414			780,165			811,298			412,075			391,842
Costs of products sold		357,887			365,691			692,800			710,732			363,169			336,213
Gross profit		30,436			42,723			87,365			100,566			48,906			55,629
Selling, general and administrative expenses		31,999			37,191			67,085			69,049			37,063			34,877
(Gains) losses on dispositions of plant, equipment and timberlands, net		(58	)		2			(26	)		26			(1,554	)		32
Operating income (loss)		(1,505	)		5,530			20,306			31,491
Operating income														13,397			20,720
Non-operating income (expense)
Interest expense		(4,476	)		(3,953	)		(8,484	)		(8,069	)		(5,195	)		(4,008	)
Interest income		45			61			158			152			54			113
Other, net		(149	)		317			(428	)		(383	)		229			812
Total non-operating expense		(4,580	)		(3,575	)		(8,754	)		(8,300	)		(4,912	)		(3,083	)
(Loss) income before income taxes		(6,085	)		1,955			11,552			23,191
Income tax provision (benefit)		(371	)		(10	)		5,663			5,058
Net income (loss)	$	(5,714	)	$	1,965		$	5,889		$	18,133
(Loss) earnings per share
Income before income taxes														8,485			17,637
Income tax provision														2,769			6,034
Net income													$	5,716		$	11,603
Earnings per share
Basic	$	(0.13	)	$	0.05		$	0.14		$	0.42		$	0.13		$	0.27
Diluted		(0.13	)		0.04			0.13			0.41			0.13			0.26
Cash dividends declared per common share	$	0.13		$	0.125		$	0.26		$	0.25		$	0.13		$	0.13
Weighted average shares outstanding
Basic		43,604			43,558			43,593			43,539			43,700			43,583
Diluted		43,604			44,062			44,449			43,963			44,567			44,493

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

- 2 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three months ended
June 30

Six months ended
June 30

In thousands

2017

2016

2017

2016

Net income (loss)

$
(5,714
)

$
1,965

$
5,889

$
18,133

Foreign currency translation adjustments

27,504

(14,864
)

33,569

(1,445
)
Net change in:

Deferred (gains) losses on cash flow hedges, net of taxes

of $1,632, $(258), $1,920 and $(201), respectively

(3,651
)

944

(4,597
)

1,010

Unrecognized retirement obligations, net of taxes

of $(1,430), $(1,442), $(2,678) and $(2,809), respectively

2,479

2,381

4,553

4,638

Other comprehensive income (loss)

26,332

(11,539
)

33,525

4,203

Comprehensive income (loss)

$
20,618

$
(9,574
)

$
39,414

$
22,336

	Three months ended March 31
In thousands	2018			2017
Net income	$	5,716		$	11,603
Foreign currency translation adjustments		12,747			6,065
Net change in:
Deferred losses on cash flow hedges, net of taxes
of $583 and $288, respectively		(1,802	)		(946	)
Unrecognized retirement obligations, net of taxes
of $(977) and $(1,248), respectively		3,075			2,074
Other comprehensive income		14,020			7,193
Comprehensive income	$	19,736		$	18,796

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

- 3 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30			December 31			March 31			December 31
In thousands	2017			2016			2018			2017
Assets
Cash and cash equivalents	$	69,442		$	55,444		$	117,277		$	116,219
Accounts receivable, net		172,014			152,989			183,258			174,154
Inventories		261,721			249,669			262,947			252,064
Prepaid expenses and other current assets		37,032			36,157			45,218			42,534
Total current assets		540,209			494,259			608,700			584,971
Plant, equipment and timberlands, net		838,007			775,898			870,734			865,743
Goodwill		78,855			73,094			84,977			82,744
Intangible assets, net		58,439			56,259			59,168			58,859
Other assets		126,271			121,749			141,033			138,478
Total assets	$	1,641,781		$	1,521,259		$	1,764,612		$	1,730,795
Liabilities and Shareholders' Equity
Current portion of long-term debt	$	10,400		$	8,961		$	11,607		$	11,298
Accounts payable		178,793			164,345			187,661			190,478
Dividends payable		5,681			5,455			5,689			5,678
Environmental liabilities		29,500			25,000			26,000			28,500
Other current liabilities		115,390			119,250			107,739			111,222
Total current liabilities		339,764			323,011			338,696			347,176
Long-term debt		431,494			363,647			494,131			470,098
Deferred income taxes		60,715			54,995			85,025			83,571
Other long-term liabilities		124,776			125,780			122,768			121,022
Total liabilities		956,749			867,433			1,040,620			1,021,867
Commitments and contingencies		—			—			—			—
Shareholders’ equity
Common stock		544			544			544			544
Capital in excess of par value		60,570			57,917			62,359			62,594
Retained earnings		957,418			962,884			970,736			948,411
Accumulated other comprehensive loss		(171,081	)		(204,606	)		(148,953	)		(140,675	)
		847,451			816,739			884,686			870,874
Less cost of common stock in treasury		(162,419	)		(162,913	)		(160,694	)		(161,946	)
Total shareholders’ equity		685,032			653,826			723,992			708,928
Total liabilities and shareholders’ equity	$	1,641,781		$	1,521,259		$	1,764,612		$	1,730,795

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

- 4 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six months ended June 30						Three months ended March 31
In thousands	2017			2016			2018			2017
Operating activities
Net income	$	5,889		$	18,133		$	5,716		$	11,603
Adjustments to reconcile to net cash provided by operations:
Depreciation, depletion and amortization		34,967			33,411			19,431			17,282
Amortization of debt issue costs		578			574
Amortization of debt issue costs and original issue discount								290			289
Pension expense, net of unfunded benefits paid		2,512			1,964			1,298			928
Deferred income tax benefit		1,824			(2,672	)
Deferred income tax provision (benefit)								(2,244	)		1,704
(Gains) losses on dispositions of plant, equipment and timberlands, net		(26	)		26			(1,554	)		32
Share-based compensation		2,956			2,803			1,983			1,648
Change in operating assets and liabilities
Accounts receivable		(12,511	)		(8,471	)		(6,550	)		(11,462	)
Inventories		(4,750	)		(12,295	)		(7,795	)		(9,907	)
Prepaid and other current assets		(1,711	)		(163	)		(3,192	)		1,670
Accounts payable		7,044			(3,027	)		4,111			2,903
Accruals and other current liabilities		(6,399	)		5,252			(5,286	)		(8,874	)
Other		(1,609	)		1,105			1,451			(255	)
Net cash provided by operating activities		28,764			36,640			7,659			7,561


Investing activities
Expenditures for purchases of plant, equipment and timberlands		(71,047	)		(80,391	)		(26,568	)		(36,783	)
Proceeds from disposals of plant, equipment and timberlands, net		83			53			1,695			—
Other		—			(300	)		(28	)		—
Net cash used by investing activities		(70,964	)		(80,638	)		(24,901	)		(36,783	)


Financing activities
Net borrowings (repayments) under revolving credit facility		68,236			(11,403	)
Payments of borrowing costs		—			(136	)
Proceeds from term loans		—			19,428
Net borrowings under revolving credit facility								25,388			38,236
Repayment of term loans		(4,528	)		(3,803	)		(2,902	)		(2,190	)
Payments of dividends		(11,130	)		(10,679	)		(5,679	)		(5,455	)
Proceeds from government grants		—			4,443
Payments related to share-based compensation awards and other		(112	)		(976	)		(965	)		(112	)
Net cash provided (used) by financing activities		52,466			(3,126	)
Net cash provided by financing activities								15,842			30,479
Effect of exchange rate changes on cash		3,732			352			2,458			526
Net increase (decrease) in cash and cash equivalents		13,998			(46,772	)
Net increase in cash and cash equivalents								1,058			1,783
Cash and cash equivalents at the beginning of period		55,444			105,304			116,219			55,444
Cash and cash equivalents at the end of period	$	69,442		$	58,532		$	117,277		$	57,227

Supplemental cash flow information
Cash paid for:
Interest, net of amounts capitalized	$	7,810		$	7,509		$	1,496		$	293
Income taxes, net		4,193			8,486			2,956			2,194

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

- 5 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

P. H. GLATFELTER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.	ORGANIZATION

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

2.	ACCOUNTING POLICIES

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

We prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. In our opinion, the financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. When preparing these financial statements, we have assumed that you have read the audited consolidated financial statements included in our ~~2016~~2017 Annual Report on Form 10-K.

Reclassification As a result of adopting the provisions of Accounting Standards Update (“ASU”) No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Cost we reclassified certain amounts of periodic benefit expense for previously reported periods from Cost of products sold and Selling, general and administrative expense to Non Operating Expense. As a result of applying the ASU, Costs of products sold for the first quarter of 2017 was increased by $1.3 million and Selling, general and administrative expenses were reduced by $0.2 million and the offsetting net reclassification reduced Non-operating expense by $1.1 million.

Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of

contingencies as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Management believes the estimates and assumptions used in the preparation of these financial statements are reasonable, based upon currently available facts and known circumstances, but recognizes that actual results may differ from those estimates and assumptions.

Revenue Recognition We adopted ASU No. 2014-09, Revenue from Contracts with Customers in the first quarter of 2018. This ASU clarifies the principles for recognizing revenue and establishes expanded disclosure requirements; however, the adoption of ASU No. 2014-09 had no impact on the timing or amount of revenue recognized for any period presented. Refer to Note 3 for additional information about the disaggregation of our net sales.

Our revenue is earned primarily from the manufacture and sale of specialty papers and engineered materials (“product sales”). Revenue is earned pursuant to contracts, supply agreements and other arrangements with a wide variety of customers. Our performance obligation is to produce a specified product according to technical specifications and, in substantially all instances, to deliver the product. Revenue from product sales is earned at a point in time. We recognize revenue on product sales when we have satisfied our performance obligation and control of the product has passed to the customer thereby entitling us to payment. With respect to substantially all arrangements for product sales, this is deemed to occur when title transfers in accordance with specified shipping terms.

The prices are fixed at the time the sales arrangement is entered into and payment terms are customary for similar arrangements in our industry. Many of our agreements include customary provisions for volume rebates, discounts and similar incentives. In addition, we are obligated for products that fail to meet agreed upon specification. Provisions for such items are estimated and recorded as sales deductions in the period in which the related revenue is recognized.

Revenue from power sales and renewable energy credits is recorded under the caption “Energy and related sales, net” in the condensed consolidated statements of income and is recognized upon fulfillment of our performance obligation which is generally upon meeting capacity commitments or delivery of REC certificates. Revenue from energy sales is recognized when electricity is delivered to the customer. Prices for power sales and renewable energy credits are fixed at the time of sale and payment is generally due within normal terms and conditions customary for the industry.

- 6 -

GLATFELTER

03.31.18 Form 10-Q

Certain costs associated with the production of electricity, such as fuel, labor, depreciation and maintenance are netted against energy sales for presentation on the condensed consolidated statements of income.

Recently Issued Accounting Pronouncements In ~~March 2017,~~February 2018, the FASB issued ASU No. ~~2017-07,~~2018-02, ~~Improving the Presentation~~“Reclassification of ~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~Certain Tax Effects From Accumulated Other Comprehensive Income. (“ASU ~~2017-07”~~No. 2018-02”).” In December 2017, Tax Cuts and Jobs Act (“TCJA”) was passed into law and, among other provisions, reduced the statutory federal tax rate from 35% to 21%. The ~~update requires entities to present the service cost component of the net periodic benefit cost~~change in the ~~same~~tax rate impacted the carrying value of deferred tax assets and liabilities. ASU No. 2018-02 allows a reclassification from accumulated other comprehensive income ~~statement~~

~~line item as other employee compensation costs arising~~(“AOCI”) to retained earnings for stranded tax effects resulting from ~~services rendered during~~ the ~~period. All other components are~~TCJA. We elected to ~~be presented below~~adopt ASU No. 2018-02 in the ~~determination~~first quarter of ~~operating income. Entities will be required to disclose the line(s) used to present the other components~~2018, and we reclassified $22.3 million of net ~~periodic benefit cost, if the components are not presented separately in the income statement~~. ASU 2017-07 is effective for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted. We do not expect the adoption of ASU 2017-07 will have a material impact on our consolidated financial statements.

~~In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting~~ ~~designed to simplify certain aspects of accounting for share-based awards. The new ASU requires entities to recognize as a component of income tax expense all excess~~deferred tax benefits ~~or deficiencies arising~~ from the difference between compensation costs recognized and the intrinsic value at the time an option is exercised or, in the case of restricted stock and similar awards, the fair value upon vesting of an award. Previously such differences were recognized in additional paid in capital as part of an “APIC pool.” The ASU also requires entitiesAOCI to exclude excess tax benefits and tax deficiencies from the calculation of common share equivalents for purposes of calculating earnings per share. In addition, as permitted by the ASU, we have elected to account for the impact of forfeitures as they occur rather to estimate forfeitures for purposes of recognizing compensation expense. We adopted this standard effective January 1, 2017, on a prospective basis; however, the adoption of the new standard did not have a material impact on our reported results of operations or financial position.retained earnings.

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

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments that changes the impairment model for most financial instruments, including trade receivables from an incurred loss method to a new forward-looking approach, based on expected losses.

~~- 6 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

Under the new guidance, an allowance is recognized based on an estimate of expected credit losses. This standard is effective for us in the first quarter of 2020 and must be adopted using a modified retrospective transition approach. We are currently assessing the impact this standard may have on our results of operations and financial position.

In ~~May 2014,~~August 2017, the FASB issued ASU No. ~~2014-09,~~2017-12, ~~Revenue from Contracts~~"Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (“ASU No. 2017-12”), which simplifies the application of hedge accounting and more closely aligns hedge accounting with ~~Customers~~an entity’s risk management strategies. ASU No. 2017-12 also amends the manner in which ~~clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards. The new standard is required to~~hedge effectiveness may be adopted retrospectively for fiscal years beginning after December 15, 2017. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgmentsperformed and changes the presentation of hedge ineffectiveness in ~~judgments. The guidance allows~~the financial statements. ASU No. 2017-12 is effective for ~~both retrospective and modified retrospective methods of~~us beginning January 1, 2019, with early adoption permitted. ASU No. 2017-12 requires a cumulative-effect adjustment for certain items upon adoption. We ~~will apply the modified retrospective method of adoption. We continue to perform our assessment of~~are

currently evaluating the impact the adoption of ~~the~~ ASU No. 2017-12 will have on our policies, processes, systems and controls and are developing processes to obtain the information necessary for the new disclosures. This assessment requires, among others, a review of a substantial amount of the contracts we have with our customers.

Substantially all of our revenue is earned pursuant to contracts under which we have one performance obligation that is satisfied at a point-in-time. Based on our analysis completed to date, we do not expect this ASU will have a significant impact on the timing or amount of revenue recognition, our results of operations or ourconsolidated financial ~~position.~~statements.

REVENUE

The following tables set forth disaggregated information pertaining to our net sales:

	Three months ended March 31
In thousands	2018		2017
Composite Fibers
Food & beverage	$	70,397	$	62,602
Wallcovering		28,132		22,455
Technical specialties		20,958		17,707
Composite laminates		9,398		8,839
Metallized		12,713		13,500
		141,598		125,103

Advanced Airlaid Materials
Feminine hygiene		48,473		42,424
Specialty wipes		7,767		6,050
Adult incontinence		4,432		3,644
Home care		4,027		2,758
Other		4,910		4,962
		69,609		59,838

Specialty Papers
Carbonless & forms		71,870		77,072
Engineered products		49,951		48,162
Envelope & converting		37,905		42,857
Book publishing		38,558		37,173
Other		1,156		508
		199,440		205,772

TOTAL	$	410,647	$	390,713

- 7 -

GLATFELTER

03.31.18 Form 10-Q

	Three months ended March 31
In thousands	2018		2017
Composite Fibers
Europe, Middle East and Africa	$	94,782	$	83,547
Americas		24,048		23,059
Asia Pacific		22,768		18,497
		141,598		125,103

Advanced Airlaid Materials
Europe, Middle East and Africa		36,228		29,729
Americas		32,815		29,921
Asia Pacific		566		188
		69,609		59,838

Specialty Papers
Americas		197,829		204,774
Other		1,611		998
		199,440		205,772

TOTAL	$	410,647	$	390,713

4.	GAINS (LOSSES) ON DISPOSITION OF PLANT, EQUIPMENT AND TIMBERLANDS

During the three months ended March 31, 2018 and 2017 we completed the following sales of assets:

Dollars in thousands	Acres		Proceeds		Gain (loss)
2018
Timberlands		426	$	1,156	$	1,115
Other	n/a			539		439
Total			$	1,695	$	1,554
2017
Other	n/a		$	-	$	(32	)
Total			$	-	$	(32	)

5.	EARNINGS PER SHARE

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

Three months ended
June 30

In thousands, except per share
2017

2016

Net income (loss)
$
(5,714
)

$
1,965

Weighted average common shares

outstanding used in basic EPS

43,604

43,558

Common shares issuable upon

exercise of dilutive stock options

and PSAs / RSUs

—

504

Weighted average common shares

outstanding and common share

equivalents used in diluted EPS

43,604

44,062

Earnings (loss) per share

Basic
$
(0.13
)

$
0.05

Diluted

(0.13
)

0.04

	Six months ended June 30				Three months ended March 31
In thousands, except per share	2017		2016		2018		2017
Net income	$	5,889	$	18,133	$	5,716	$	11,603
Weighted average common shares
outstanding used in basic EPS		43,593		43,539		43,700		43,583
Common shares issuable upon
exercise of dilutive stock options
and PSAs / RSUs		856		424		867		910
Weighted average common shares
outstanding and common share
equivalents used in diluted EPS		44,449		43,963		44,567		44,493
Earnings per share
Basic	$	0.14	$	0.42	$	0.13	$	0.27
Diluted		0.13		0.41		0.13		0.26

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

	June 30				March 31
In thousands	2017		2016		2018		2017
Three months ended		1,327		1,368		587		592
Six months ended		591		1,451

- 78 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

4.6.	ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table sets forth details of the changes in accumulated other comprehensive income (losses) for the three months ended March 31, 2018 and ~~six months ended June 30, 2017 and 2016.~~2017.

In thousands	Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total			Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at April 1, 2017	$	(94,383	)	$	554		$	(108,466	)	$	4,882		$	(197,413	)
Balance at January 1, 2018																$	(41,839	)	$	(4,092	)	$	(98,295	)	$	3,551		$	(140,675	)
Amount reclassified for adoption of ASU No. 2018-02																							(23,297	)		999			(22,298	)
Balance as adjusted at January 1, 2018																	(41,839	)		(4,092	)		(121,592	)		4,550			(162,973	)
Other comprehensive income before reclassifications (net of tax)		27,504			(3,080	)		—			(106	)		24,318			12,747			(3,217	)		—			—			9,530
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(571	)		2,642			(57	)		2,014			—			1,415			3,164			(89	)		4,490
Net current period other comprehensive income (loss)		27,504			(3,651	)		2,642			(163	)		26,332			12,747			(1,802	)		3,164			(89	)		14,020
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	)
Balance at March 31, 2018																$	(29,092	)	$	(5,894	)	$	(118,428	)	$	4,461		$	(148,953	)

Balance at January 1, 2017																$	(100,448	)	$	1,500		$	(110,656	)	$	4,998		$	(204,606	)
Other comprehensive income before reclassifications (net of tax)		(14,864	)		837			—			—			(14,027	)		6,065			(255	)		—			—			5,810
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			107			2,613			(232	)		2,488			—			(691	)		2,190			(116	)		1,383
Net current period other comprehensive income (loss)		(14,864	)		944			2,613			(232	)		(11,539	)		6,065			(946	)		2,190			(116	)		7,193
Balance at June 30, 2016	$	(74,486	)	$	785		$	(115,786	)	$	3,204		$	(186,283	)
Balance at March 31, 2017																$	(94,383	)	$	554		$	(108,466	)	$	4,882		$	(197,413	)

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, 2017
$
(100,448
)

$
1,500

$
(110,656
)

$
4,998

$
(204,606
)
Other comprehensive income
   before reclassifications  (net of tax)

33,569

(3,335
)

—

(106
)

30,128

Amounts reclassified from accumulated
   other comprehensive income  (net of tax)

—

(1,262
)

4,832

(173
)

3,397

Net current period other comprehensive
   income (loss)

33,569

(4,597
)

4,832

(279
)

33,525

Balance at June 30, 2017
$
(66,879
)

$
(3,097
)

$
(105,824
)

$
4,719

$
(171,081
)
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
)

~~- 8 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

Reclassifications out of accumulated other comprehensive income and into the condensed consolidated statements of income were as follows:

	Three months ended June 30						Six months ended June 30							Three months ended March 31
In thousands	2017			2016			2017			2016				2018			2017
Description													Line Item in Statements of Income							Line Item in Statements of Income
Cash flow hedges (Note 11)
Gains (losses) on cash flow hedges	$	(785	)	$	215		$	(1,716	)	$	(83	)	Costs of products sold
Cash flow hedges (Note 13)
(Gains) losses on cash flow hedges														$	1,959		$	(931	)	Costs of products sold
Tax expense (benefit)		214			(108	)		454			4		Income tax provision (benefit)		(544	)		240		Income tax provision
Net of tax		(571	)		107			(1,262	)		(79	)			1,415			(691	)
Retirement plan obligations (Note 7)
Retirement plan obligations (Note 8)
Amortization of deferred benefit pension plans
Prior service costs		532			509			1,060			1,013		Costs of products sold		780			704		Other, net
		176			166			352			336		Selling, general and administrative
Actuarial losses		2,463			2,618			4,562			4,900		Costs of products sold		3,390			2,822		Other, net
		848			915			1,571			1,687		Selling, general and administrative
		4,019			4,208			7,545			7,936				4,170			3,526
Tax benefit		(1,377	)		(1,595	)		(2,713	)		(3,008	)	Income tax provision (benefit)		(1,006	)		(1,336	)	Income tax provision
Net of tax		2,642			2,613			4,832			4,928				3,164			2,190
Amortization of deferred benefit other plans
Prior service costs		(38	)		(38	)		(75	)		(75	)	Costs of products sold		(45	)		(45	)	Other, net
		(8	)		(8	)		(16	)		(16	)	Selling, general and administrative
Actuarial losses		(38	)		(269	)		(156	)		(311	)	Costs of products sold
		(8	)		(58	)		(33	)		(67	)	Selling, general and administrative
Actuarial gains															(73	)		(143	)	Other, net
		(92	)		(373	)		(280	)		(469	)			(118	)		(188	)
Tax expense		35			141			107			179		Income tax provision (benefit)		29			72		Income tax provision
Net of tax		(57	)		(232	)		(173	)		(290	)			(89	)		(116	)
Total reclassifications, net of tax	$	2,014		$	2,488		$	3,397		$	4,559			$	4,490		$	1,383

- 9 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

5.7.	~~INCO~~MEINCOME TAXES

Effects of the Tax Cuts and Jobs Act

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was signed into U.S. law. Among other things, the TCJA reduces the U.S. federal corporate tax rate from 35% to 21% beginning in 2018 and requires companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred. ASC Topic 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017.

Given the significance of the legislation, the U.S. Securities and Exchange Commission (the "SEC") staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed.

Our accounting for certain elements of the TCJA was incomplete as of December 31, 2017 and remains incomplete as of March 31, 2018. However, we were able to make reasonable estimates of the effects and therefore, recorded provisional estimates for these items.

During early 2018, the Internal Revenue Service issued additional guidance affecting the computation of our 2017 federal income tax liability. As a result of this and additional analysis, we revised our prior estimates and recorded $0.2 million of additional tax benefits. The ultimate impact of the TCJA may differ from current estimates, and such differences could be material, due to changes in interpretations or assumptions.

While the TCJA provides for a territorial tax system, beginning in 2018, it includes the global intangible low-taxed income (“GILTI”) provision. We elected to account for GILTI tax in the period in which it is incurred. The GILTI provisions require entities to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.

For the three months ended March 31, 2018, our effective tax rate increased by approximately 10% as a result of the GILTI provisions due to our utilization of U.S. federal tax loss carryforward, which restricts our ability to recognize the associated foreign tax credits and a deduction of up to 50% of the GILTI income. Since we are using U.S. federal tax loss

carryforwards, there is no impact to cash taxes related to the GILTI provisions.

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

As of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, we had ~~$16.9~~$27.8 million and ~~$14.2~~$26.9 million of gross unrecognized tax benefits. As of ~~June 30, 2017,~~March 31, 2018, if such benefits were to be recognized, approximately ~~$11.4~~$17.6 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate.

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

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

	Open Tax Years
Jurisdiction	Examinations not yet initiated	Examination in progress
United States
Federal	~~2013~~2014 - ~~2016~~2017	N/A
State	~~2012~~2013 - ~~2016~~2017	~~2013 -~~ 2014 – 2016
Canada⁽¹⁾	~~2010 - 2013; 2016~~2010-2013; 2017	2014 ~~- 2015~~– 2016
Germany⁽¹⁾	2016 - 2017	~~2012 -~~2011 – 2015
France	~~2014~~2015 - ~~2016~~2017	~~2011 -~~ 2012
United Kingdom	~~2015~~2016 - ~~2016~~2017	N/A
Philippines	2015, ~~- 2016~~2017	~~2013 - 2014~~2016

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

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of federal, state and foreign examinations, and the lapse of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may decrease within the next twelve months by a range of zero to ~~$0.9~~$4.9 million. Substantially all of this

range relates to tax positions taken in ~~the United Kingdom~~Germany and the U.S.

- 10 -

GLATFELTER

03.31.18 Form 10-Q

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

	Six months ended June 30				Three months ended March 31
In millions	2017		2016		2018		2017
Interest expense (income)	$	0.3	$	0.2	$	0.1	$	0.1
Penalties		—		—		—		—

June 30

December 31

2017

2016

Accrued interest payable
$
0.8

$
0.5

	March 31		December 31
	2018		2017
Accrued interest payable	$	0.9	$	0.8

6.8.STOCK-BASED COMPENSATION

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

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

Restricted Stock Units (“RSU”) and Performance Share Awards (“PSAs”) Awards of RSUs and PSAs are made under our LTIP. ~~On May 4, 2017, our shareholders approved a 1,840,000 share increase in the shares available to be awarded under the LTIP.~~ The RSUs vest on the passage of time, generally on a graded scale over a three, four, and five-year period, or in certain instances the RSUs were issued with five year cliff vesting. PSAs are issued to members of management and vesting is based on achievement of cumulative financial performance targets covering a two year period followed by an additional one-year service period. The performance measures include a minimum, target and maximum performance level providing the grantees an opportunity to receive more or less shares than targeted depending on actual financial performance. In addition, beginning in 2018, PSA awards include a modifier based on the three-year total shareholder return relative to a broad market index. For ~~both~~ RSUs ~~and PSAs,~~ the grant date fair value of the awards, ~~which is equal to~~or the closing price per common share on the date of the award, is used to determine the amount of expense to be recognized over the applicable service period. For PSAs, the grant date fair value is estimated using a lattice model. The significant inputs include the stock price, volatility, dividend yield, and risk free rate of return. Settlement of RSUs and PSAs will be made in shares of our common stock currently held in treasury.

~~- 10 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

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

Units	2017			2016			2018			2017
Balance at January 1,		679,038			674,523			929,386			679,038
Granted		364,748			295,654			312,555			290,880
Forfeited		(91,449	)		(143,209	)		(70,719	)		(90,801	)
Shares delivered		(24,052	)		(149,475	)		(69,372	)		—
Balance at June 30,		928,285			677,493
Balance at March 31,								1,101,850			879,117

The amount granted in 2018 and 2017 includes 181,653 and ~~2016 includes~~157,064, respectively, of PSAs ~~of 163,274 and 199,693, respectively,~~ exclusive of reinvested dividends.

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

	June 30				March 31
In thousands	2017		2016		2018		2017
Three months ended	$	1,049	$	935	$	1,804	$	1,039
Six months ended		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. No SOSARs were awarded during the first quarters of 2018 or 2017.

The following table sets forth information related to outstanding SOSARS for the ~~six~~three months ended ~~June 30;~~March 31;

2017

2016

SOSARS
Shares

Wtd Avg
Exercise
Price

Shares

Wtd Avg
Exercise
Price

Outstanding at January 1,

2,736,616

$
17.64

2,199,742

$
17.82

Granted

—

—

743,925

17.54

Exercised

(33,050
)

14.65

(53,190
)

9.91

Canceled / forfeited

(17,630
)

18.46

(108,945
)

21.81

Outstanding at June 30,

2,685,936

$
17.67

2,781,532

$
17.74

SOSAR Grants

Weighted average grant date
fair value per share
$
-

$
4.07

Aggregate grant date
fair value (in thousands)
$
-

$
3,013

Black-Scholes assumptions

Dividend yield

-

2.85
%

Risk free rate of return

-

1.34
%

Volatility

-

31.97
%

Expected life
-

6 yrs

	2018					2017
SOSARS	Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price
Outstanding at January 1,		2,561,846		$	17.87		2,736,616		$	17.64
Granted		—			—		—			—
Exercised		(138,423	)		12.98		(33,050	)		14.65
Canceled / forfeited		(20,994	)		18.76		(17,420	)		18.38
Outstanding at March 31,		2,402,429		$	18.14		2,686,146		$	17.67

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

	June 30				March 31
In thousands	2017		2016		2018		2017
Three months ended	$	259	$	669	$	179	$	609
Six months ended		868		1,401

- 11 -

GLATFELTER

03.31.18 Form 10-Q

7.9.	RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS

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

	Three months ended June 30						Three months ended March 31
In thousands	2017			2016			2018			2017
Pension Benefits
Service cost	$	2,649		$	2,510		$	2,859		$	2,721
Interest cost		5,989			6,153			5,589			5,907
Expected return on plan assets		(10,666	)		(11,275	)		(10,839	)		(10,831	)
Amortization of prior service cost		708			675			780			704
Amortization of unrecognized loss		3,311			3,533			3,390			2,822
Total net periodic benefit cost	$	1,991		$	1,596		$	1,779		$	1,323

Other Benefits
Service cost	$	284		$	250		$	307		$	295
Interest cost		513			456			451			485
Amortization of prior service credit		(46	)		(46	)		(45	)		(45	)
Amortization of actuarial gain		(46	)		(327	)		(73	)		(143	)
Total net periodic benefit cost	$	705		$	333		$	640		$	592

Six months ended
June 30

In thousands

2017

2016

Pension Benefits

Service cost

$
5,370

$
5,240

Interest cost

11,896

12,240

Expected return on plan assets

(21,497
)

(22,661
)
Amortization of prior service
   cost

1,412

1,349

Amortization of unrecognized
   loss

6,133

6,587

Total net periodic benefit cost

$
3,314

$
2,755

Other Benefits

Service cost

$
579

$
573

Interest cost

998

996

Amortization of prior
   service credit

(91
)

(91
)
Amortization of
   actuarial gain

(189
)

(378
)
Total net periodic
   benefit cost

$
1,297

$
1,100

In the first quarter of 2018, we adopted the provisions of ASU No. 2017-07 which requires entities to present the service cost component of net periodic benefit costs in operating profit along with other employee compensation costs. All other components of net periodic benefit costs are to be presented below the determination of operating income in “Other, net”.

~~- 11 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

8.10.

INVENTORIES

Inventories, net of reserves, were as follows:

	June 30		December 31		March 31		December 31
In thousands	2017		2016		2018		2017
Raw materials	$	71,723	$	66,359	$	63,024	$	60,806
In-process and finished		117,385		112,507		122,432		116,678
Supplies		72,613		70,803		77,491		74,580
Total	$	261,721	$	249,669	$	262,947	$	252,064

11.	CAPITALIZED INTEREST

The following table sets forth details of interest incurred, capitalized and expensed:

	Three months ended March 31
In thousands	2018		2017
Interest cost incurred	$	5,591	$	4,597
Interest capitalized		396		589
Interest expense	$	5,195	$	4,008

Capitalized interest primarily relates to spending for the Airlaid capacity expansion project in 2017 and 2018 and the Specialty Papers’ environmental compliance project in 2017.

9.12.

LONG-TERM DEBT

Long-term debt is summarized as follows:

	June 30			December 31			March 31			December 31
In thousands	2017			2016			2018			2017
Revolving credit facility, due Mar. 2020	$	130,000		$	61,595		$	196,588		$	171,200
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		8,151			8,282			7,481			7,710
2.05% Term Loan, due Mar. 2023		35,023			35,163			32,883			33,607
1.30% Term Loan, due Jun. 2023		9,781			9,788			9,241			9,423
1.55% Term Loan, due Sep. 2025		11,187			10,333			11,324			11,390
Total long-term debt		444,142			375,161			507,517			483,330
Less current portion		(10,400	)		(8,961	)		(11,607	)		(11,298	)
Unamortized deferred issuance costs		(2,248	)		(2,553	)		(1,779	)		(1,934	)
Long-term debt, net of current portion	$	431,494		$	363,647		$	494,131		$	470,098

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.

- 12 -

GLATFELTER

03.31.18 Form 10-Q

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 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, 2017,~~March 31, 2018, the leverage ratio, as calculated in accordance with the definition in our amended credit agreement, was ~~2.6x.~~2.8x. 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 any time on or after October 15, 2016 at the redemption prices specified in the applicable 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.

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 Facility at maturity or a default under the Revolving Credit Facility that accelerates the debt outstanding thereunder. As of ~~June 30, 2017,~~March 31, 2018, 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
Apr. 26, 2016								10,000		1.30	%	Jun. 2023
May 4, 2016		7,195		1.55	%	Sep. 2025		7,195		1.55	%	Sep. 2025
Apr. 26, 2016		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 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 $5.2 million as of ~~June 30, 2017~~March 31, 2018 and ~~$5.1 million as of~~ December 31, ~~2016.~~2017. The letters of credit, which reduce amounts available under our revolving credit facility, primarily provide financial assurances for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance program. We bear the credit risk on this amount to the extent that we do not comply with the provisions of certain agreements. No amounts are outstanding under the letters of credit.

- 13 -

GLATFELTER

03.31.18 Form 10-Q

~~10.~~13.

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, 2017				December 31, 2016				March 31, 2018				December 31, 2017
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Variable rate debt	$	130,000	$	130,000	$	61,595	$	61,595	$	196,588	$	196,588	$	171,200	$	171,200
Fixed-rate bonds		250,000		256,623		250,000		256,563		250,000		253,980		250,000		253,823
2.40% Term loan		8,151		8,349		8,282		8,877		7,481		7,637		7,710		7,889
2.05% Term loan		35,023		35,570		35,163		37,089		32,883		33,318		33,607		34,122
1.30% Term Loan		9,781		9,712		9,788		10,062		9,241		9,177		9,423		9,370
1.55% Term loan		11,187		11,103		10,333		10,082		11,324		11,229		11,390		11,320
Total	$	444,142	$	451,357	$	375,161	$	384,268	$	507,517	$	511,929	$	483,330	$	487,724

As of ~~June 30, 2017,~~March 31, 2018, and December 31, ~~2016,~~2017, we had $250.0 million of 5.375% fixed rate bonds. These bonds are publicly registered, but thinly traded. ~~Accordingly, the values set forth above for the bonds, as well as our other debt instruments, are based on observable inputs and other relevant market data (Level 2).~~ The fair value of financial derivatives is set forth below in Note ~~11.~~14.

~~11.~~14.

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 Hedges We 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, 2017,~~March 31, 2018, the maturity of currency forward contracts ranged from one month to 18 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 2017		December 31 2016		March 31 2018		December 31 2017
Derivative
Sell/Buy - sell notional
Philippine Peso / British Pound		22,856		—		—		19,047
Philippine Peso / Euro		11,072		—
Euro / British Pound		11,921		10,373		12,887		13,586
Euro / U.S. Dollar						—		1,048
U.S. Dollar / Euro		2,190		—		248		946
Sell/Buy - buy notional
Euro / Philippine Peso		879,929		699,279		902,076		890,096
British Pound / Philippine Peso		652,206		557,025		785,659		797,496
U.S. Dollar / Euro		9,025		15,379		1,390		4,253
Euro / U.S. Dollar		56,538		43,951		64,098		60,519
U.S. Dollar / Canadian Dollar		33,841		35,290		32,152		32,265
British Pound / Euro		403		—		—		335

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

03.31.18 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 2017		December 31 2016		March 31 2018		December 31 2017
Derivative
Sell/Buy - sell notional
U.S. Dollar / Euro						-		-
U.S. Dollar / British Pound		13,500		10,500		17,500		17,500
British Pound / Euro		2,500		2,500		1,000		1,000
Canadian / U.S. dollar						2,500		-

Sell/Buy - buy notional
Euro / U.S. Dollar		7,500		3,500		4,000		4,500
British Pound / Euro		12,000		18,500		9,000		13,000

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		March 31 2018		December 31 2017		March 31 2018		December 31 2017
	Prepaid Expenses and Other				Other				Prepaid Expenses and Other				Other
Balance sheet caption	Current Assets				Current Liabilities				Current Assets				Current Liabilities
Designated as hedging:
Forward foreign currency
exchange contracts	$	633	$	2,625	$	4,166	$	1,493	$	138	$	1,066	$	5,955	$	4,787
Not designated as hedging:
Forward foreign currency
exchange contracts	$	259	$	60	$	88	$	104	$	276	$	151	$	147	$	43

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 March 31
In thousands	2017		2016			2017		2016			2018			2017
Designated as hedging:
Forward foreign currency exchange contracts:
Effective portion – cost of products sold	$	785	$	(215	)	$	1,716	$	83		$	(1,959	)	$	931
Ineffective portion – other – net		36		73			86		(330	)		(322	)		50
Not designated as hedging:
Forward foreign currency
exchange contracts:
Other – net	$	370	$	475		$	391	$	1,064		$	297		$	21

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	2017			2016			2018			2017
Balance at January 1,	$	1,882		$	(178	)	$	(5,640	)	$	1,882
Deferred (losses) gains
on cash flow hedges		(4,801	)		1,294			(4,344	)		(303	)
Reclassified to earnings		(1,716	)		(83	)		1,959			(931	)
Balance at June 30,	$	(4,635	)	$	1,033
Balance at March 31,							$	(8,025	)	$	648

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

- 15 -

GLATFELTER

03.31.18 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.~~15.

COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

Fox River - Neenah, Wisconsin

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

The Site has been subject to certain studies, demonstration projects and interim cleanups. The permanent cleanup, known as a “remedial action” under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 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 (“WTM I”), 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. We and WTM I have recently executed documents for the withdrawal of WTM I from the entity we jointly formed for the performance of the OU1 work and releasing all claims between us related to the Site, subject to approval of the court overseeing WTM I’s bankruptcy.

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 majority of that work to date has been funded or conducted by parties other than ~~us, although before~~us. Prior to the UAO, we contributed to a project in that ~~area and~~area. Since the issuance of the UAO we have conducted about $13.4 million of cleanup work under the UAO in 2015 and 2016. The cleanup is expected to continue through ~~2018.~~2019. However, as discussed below, under a ~~proposed~~ consent decree between the United States, Wisconsin, NCR and Appvion, we ~~would~~are not be responsible for any additional cleanup at the Site.

Litigation and Settlement. In 2008, in an allocation action, NCR and Appvion sued us and many other defendants in an effort to allocate among the liable parties the costs of cleaning up this Site and compensating the Governments for their costs and the natural resource trustees for NRDs. This case has been called the “Whiting litigation.” After several summary judgment rulings and a trial, the trial court entered judgment in the Whiting Litigation allocating to NCR 100% of the costs of (a) 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.

~~- 15 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

On appeal, the United States Court of Appeals for the Seventh 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.~~allocation to something less than 100% to NCR.

In 2010, in an enforcement action, the Governments sued us and other defendants for (a) an injunction to require implementation of the 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 liability to comply with the 2007 UAO. The Governments’ costs claims remained pending.

On January 17, 2017, the United States filed a consent decree with the federal district court among the United States, Wisconsin, NCR, and 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 from us or anyone else any amounts

- 16 -

GLATFELTER

03.31.18 Form 10-Q

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 NCR/Appvion consent ~~decree. If~~decree, which the ~~proposed consent decree is approved by the~~federal district court ~~and~~entered on August 23, 2017. Under the consent decree, if it were to 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 reason, a further remedy if necessary in the event the currently ordered remedy fails, over 30 or more years, to achieve its objectives. As the result of earlier settlements, Georgia Pacific is only jointly liable with us to the Governments for monitoring and maintenance costs incurred in the most downstream three miles of the river (“OU4b”) and the bay of Green Bay (“OU5”). ~~In connection with the filing of 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~~paid Georgia

Pacific $9.5 million in August 2017. ~~Once~~

The NCR/Appvion consent decree and our settlement with Georgia Pacific resulted in all claims among the ~~payment is made,~~responsible parties being barred, waived, or withdrawn. Accordingly, on October 10, 2017, the federal district court approved a stipulation dismissing all remaining claims in the Whiting litigation. Therefore, unless certain limited circumstances occur permitting reassertion of claims, we are not subject to claims for reallocation of costs or damages incurred by any of the other parties ~~will~~and we cannot seek contribution or reallocation from them.

On October 20, 2017, we appealed the district court’s approval of the NCR/Appvion consent decree. We contend that the court did not do what was required to properly conclude that the NCR/Appvion consent decree was substantially fair to us. We contend that the consent decree was unfair to us because the costs we have ~~their claims against each other dismissed as settled.~~already incurred and the costs that we would have to incur were the NCR/Appvion consent decree to remain in effect would exceed our fair share of costs for this site. If we prevail on appeal, the circumstances that caused us to prevail would lead us to anticipate that, while all costs would again be subject to reallocation, that reallocation would be in our favor.

Cost estimates. The proposed NCR/Appvion consent decree, as revised, states that all parties combined have spent more than ~~approximately~~ $1 billion ~~to date~~through March 2017 towards remedial actions and NRDs, of which we have contributed approximately ~~$65~~$75 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. IfWe believe NCR to have completed a full season of work in 2017 and to be commencing work for the 2018 season. So long as the NCR/Appvion consent decree ~~were entered,~~remains in effect, we ~~would~~are not exposed to reallocation of any of those amounts, and no ~~longer~~other party will be exposed to reallocation of any of ~~those amounts.~~ the amounts that we have incurred or may incur in the future.

~~Under~~So long as the ~~proposed~~ NCR/Appvion consent decree remains in effect, we (and not NCR) would remain responsible for the Governments’ unreimbursed past ~~costs, which although in dispute, are represented~~costs. Many parties have entered into settlements with the Governments over time, including us, that have called for payments of cash or in-kind provision of natural resource restoration projects. Certain amounts were allocated to ~~total approximately $34 million~~the United States and the State to reimburse their costs, and other amounts were allocated to the Natural Resource Damages Assessment and Restoration (“NRDAR”) Fund to pay for natural resource damages assessment, if any, and restoration projects. The Governments may not recover costs from us that anyone has reimbursed previously. As of the end of 2015, the United States claims to have incurred about $32.7 million in unreimbursed recoverable costs including prejudgment interest, an amount that we dispute. The State had no unreimbursed recoverable costs, and now claims to have had on hand approximately $4.6 million of unspent settlement money, a claim that we also dispute. Further, the NRDAR Fund had received what the Governments claim to have been approximately $105 million in settlement payments, of which more than $60 million remained unspent. On February 5, 2018, the district court decided that the Governments’ recovery of costs would be reduced by the funds held by the State at the end of 2015 and by any amount by which the Governments had applied settlement payments to natural resource damages in excess of the actual amount of natural resource damages. We contend that the natural resource restoration projects already constructed fully compensate the public for any natural resource damages, and therefore that the entire unspent balance in the NRDAR Fund remains as an off-set, an amount likely to exceed all of the Governments’ past and future costs of response. The Governments have sought reconsideration of that decision. No date has yet been set for trial of the issue. If at trial the actual amount of NRDs were determined to be more than the Governments have collected in settlements, we might be exposed to that shortfall.

So long as the NCR/Appvion consent decree remains in effect, we would also remain subject to our remaining obligations under the OU1 consent decree, which now consist of long term monitoring and maintenance that we expect earlier contributions to the OU1 escrow account to fund these costs. Furthermore, we, along with Georgia Pacific, but not NCR, would be responsible for long term monitoring and maintenance required pursuant to the Lower Fox River 100% Remedial Design Report dated December 2009 – Long Term Monitoring Plan (the “Plan”). The Plan requires long term monitoring of each of ~~OU1~~OU2 through OU5 over a period of at

- 17 -

GLATFELTER

03.31.18 Form 10-Q

least 30 years. The monitoring activities consist of, among others, testing fish tissue, sampling water quality and sediment, and inspections of the engineered caps. Each operable unit is required to be monitored; however, because of our settlement with Georgia Pacific, our obligations are in OU1-OU4a. ~~Although~~In the first quarter of 2018, we ~~are unable to determine~~entered into a fixed-price, 30 year agreement with ~~certainty the timing of cash expenditures~~a third party for the ~~above matters, they are reasonably likely~~performance of all of our monitoring and maintenance obligations in OU1 through the upper four miles of OU4 (“OU4a”) with limited exceptions, such as, for extraordinary amounts of cap maintenance or replacement. Our obligation under this agreement is included in our total reserve for the Site. The portion of this agreement that pertains to ~~extend over a period~~OU1 will be paid out of ~~at least 30 years.~~the previously funded OU1 escrow account.

Reserves for the Site. Our reserve for all remaining claims against us relating to PCB contamination is set forth below:

	Six months ended June 30						Three months ended March 31
In thousands		2017			2016			2018			2017
Balance at January 1,	$	52,788		$	17,105		$	43,144		$	52,788
Payments		(128	)		(1,189	)		(2,536	)		(85	)
Accruals		-			-			-			-
Balance at June 30,	$	52,660		$	15,916
Balance at March 31,							$	40,608		$	52,703

The payments set forth above primarily represent cash paid ~~towards completion of remediation activities in connection with~~under the ~~2016~~recently-entered long-term monitoring and ~~2015 Work Plans and ongoing monitoring activities.~~maintenance agreement. Of our total reserve for the Fox River, ~~$29.5~~$26.0 million is recorded in the accompanying ~~June 30, 2017~~March 31, 2018 condensed consolidated balance sheet under the caption ~~“Environmental~~

“Environmental liabilities” and the remaining ~~$23.2~~$14.6 million is recorded under the caption “Other long term liabilities.”

Range of Reasonably Possible Outcomes. Based on our analysis of all available information, including but not limited to decisions of the courts, official documents such as records

~~- 16 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

of decision, discussions with legal counsel, cost estimates for future monitoring and maintenance and other post-remediation costs to be performed at the Site, ~~and substantially dependent on whether the 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 by amounts ranging from insignificant to 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. However, in the event the NCR/Appvion consent decree is not entered, the ultimate resolution of this matter would likely resort to extensive litigation involving various issues, including allocation of remedial action and related costs. In such a scenario, although we 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 $150 million.

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

- 1718 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

~~13.~~16.

~~SEG~~SEGMENT ~~MENT~~ INFORMATION

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

Three months ended June 30					Advanced Airlaid										Other and
Three months ended March 31																															Advanced Airlaid								Other and
Dollars in millions	Composite Fibers				Materials				Specialty Papers						Unallocated						Total						Composite Fibers				Materials				Specialty Papers				Unallocated						Total
	2017		2016		2017		2016		2017			2016			2017			2016			2017			2016			2018		2017		2018		2017		2018		2017		2018			2017			2018			2017
Net sales	$	133.1	$	136.4	$	62.8	$	60.8	$	191.4		$	209.3		$	—		$	—		$	387.3		$	406.4		$	141.6	$	125.1	$	69.6	$	59.8	$	199.4	$	205.8	$	—		$	—		$	410.6		$	390.7
Energy and related sales, net		—	—			—	—			1.0			2.0			—			—			1.0			2.0			—	—			—	—			1.4		1.1		—			—			1.4			1.1
Total revenue		133.1		136.4		62.8	60.8			192.4			211.3			—			—			388.3			408.4			141.6		125.1		69.6	59.8			200.8		206.9		—			—			412.1			391.8
Cost of products sold		107.6		109.0		53.0		51.8		195.9			202.9			1.4			2.0			357.9			365.7			114.7		99.6		59.7		50.5		186.5		179.9		2.3			6.2			363.2			336.2
Gross profit (loss)		25.5		27.4		9.8		9.0		(3.5	)		8.4			(1.4	)		(2.0	)		30.4			42.7			26.9		25.5		9.9		9.3		14.3		27.0		(2.3	)		(6.2	)		48.9			55.6
SG&A		10.8		12.1		2.3		2.2		10.3			14.2			8.6			8.7			32.0			37.2			11.6		11.1		2.7		2.2		11.9		13.5		10.9			8.1			37.1			34.9
(Gains) losses on dispositions of plant, equipment and timberlands, net		—		—		—		—		—			—			(0.1	)		—			(0.1	)		—			—		—		—		—		—		—		(1.6	)		—			(1.6	)		—
Total operating income (loss)		14.7		15.3		7.5		6.8		(13.8	)		(5.8	)		(9.9	)		(10.7	)		(1.5	)		5.5			15.3		14.4		7.2		7.1		2.4		13.5		(11.6	)		(14.3	)		13.4			20.7
Non-operating expense		—		—		—		—		—			—			(4.6	)		(3.6	)		(4.6	)		(3.6	)		—		—		—		—		—		—		(4.9	)		(3.1	)		(4.9	)		(3.1	)
Income (loss) before income taxes	$	14.7	$	15.3	$	7.5	$	6.8	$	(13.8	)	$	(5.8	)	$	(14.5	)	$	(14.3	)	$	(6.1	)	$	2.0		$	15.3	$	14.4	$	7.2	$	7.1	$	2.4	$	13.5	$	(16.5	)	$	(17.4	)	$	8.5		$	17.6
Supplementary Data
Net tons sold (thousands)		41.9		40.7		25.5		24.4		184.1			194.7			—			—			251.5			259.7			40.0		38.8		26.3		24.8		188.4		197.2		—			—			254.8			260.8
Depreciation, depletion and amortization	$	7.0	$	7.2	$	2.3	$	2.4	$	7.7		$	6.5		$	0.7		$	0.7		$	17.7		$	16.8		$	7.4	$	6.8	$	2.8	$	2.3	$	8.1	$	7.2	$	1.1		$	1.0		$	19.4		$	17.3
Capital expenditures		2.1		2.3		12.9		6.1		15.8			28.7			3.5			—			34.3			37.1			5.1		4.7		13.2		10.6		6.5		18.3		1.8			3.2			26.6			36.8

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

Management evaluates results of operations of the business units before ~~pension expense,~~retirement expenses, 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.

- 1819 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

~~14.~~17.

CONDENSED ~~CONSOLIDATING~~CONSOLIDATING FINANCIAL STATEMENTS

Our 5.375% Notes issued by P. H. Glatfelter Company (the “Parent”) are fully and unconditionally guaranteed, on a joint and several basis, by certain of our 100%-owned domestic subsidiaries, PHG Tea Leaves, Inc., Mollanvick, Inc., Glatfelter Composite Fibers N. A., Inc. (“CFNA”), Glatfelter 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; 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 ended March 31, 2018 and ~~six months ended June 30,~~ 2017, ~~and 2016,~~ our condensed consolidating balance sheets as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, and our condensed consolidating cash flows for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016.~~2017.

Condensed Consolidating Statement of Income for the three months ended ~~June 30, 2017~~March 31, 2018

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	191,370		$	23,052		$	194,708		$	(21,788	)	$	387,342		$	199,439		$	20,013		$	216,135		$	(24,940	)	$	410,647
Energy and related sales, net		981			—			—			—			981			1,428			—			—			—			1,428
Total revenues		192,351			23,052			194,708			(21,788	)		388,323			200,867			20,013			216,135			(24,940	)		412,075
Costs of products sold		195,444			22,047			162,184			(21,788	)		357,887			191,165			18,265			178,679			(24,940	)		363,169
Gross profit		(3,093	)		1,005			32,524			—			30,436			9,702			1,748			37,456			—			48,906
Selling, general and administrative
expenses		16,875			236			14,888			—			31,999			20,437			2,005			14,621			—			37,063
(Gain) loss on dispositions of plant
Gain on dispositions of plant
equipment and timberlands, net		16			(74	)		—			—			(58	)		(438	)		(1,115	)		(1	)		—			(1,554	)
Operating income (loss)		(19,984	)		843			17,636			—			(1,505	)		(10,297	)		858			22,836			—			13,397
Other non-operating
income (expense)
Interest expense		(5,182	)		(206	)		(437	)		1,349			(4,476	)		(5,682	)		(455	)		(428	)		1,370			(5,195	)
Interest income		142			1,237			15			(1,349	)		45			146			1,244			34			(1,370	)		54
Equity in earnings of subsidiaries		18,801			19,249			—			(38,050	)		—			21,233			22,255			—			(43,488	)		—
Other, net		534			(2,319	)		1,636			—			(149	)		(2,413	)		(3,263	)		5,905			—			229
Total other non-operating
income (expense)		14,295			17,961			1,214			(38,050	)		(4,580	)		13,284			19,781			5,511			(43,488	)		(4,912	)
Income (loss) before income taxes		(5,689	)		18,804			18,850			(38,050	)		(6,085	)
Income before income taxes																	2,987			20,639			28,347			(43,488	)		8,485
Income tax provision (benefit)		25			3			(399	)		—			(371	)		(2,729	)		(594	)		6,092			—			2,769
Net income (loss)		(5,714	)		18,801			19,249			(38,050	)		(5,714	)
Net income																	5,716			21,233			22,255			(43,488	)		5,716
Other comprehensive income		26,332			23,964			23,371			(47,335	)		26,332			14,020			11,036			12,035			(23,071	)		14,020
Comprehensive income	$	20,618		$	42,765		$	42,620		$	(85,385	)	$	20,618		$	19,736		$	32,269		$	34,290		$	(66,559	)	$	19,736

- 1920 -

GLATFELTER

~~06.30.17~~03.31.18 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~~ three months ended ~~June 30, 2016.~~

March 31, 2017

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated			Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	209,269		$	17,561		$	196,675		$	(17,092	)	$	406,413		$	205,771		$	19,533		$	185,887		$	(20,478	)	$	390,713
Energy and related sales, net		2,001			—			—			—			2,001			1,129			—			—			—			1,129
Total revenues		211,270			17,561			196,675			(17,092	)		408,414			206,900			19,533			185,887			(20,478	)		391,842
Costs of products sold		204,495			16,711			161,577			(17,092	)		365,691			185,246			18,586			152,859			(20,478	)		336,213
Gross profit		6,775			850			35,098			—			42,723			21,654			947			33,028			—			55,629
Selling, general and administrative
expenses		22,622			(36	)		14,605			—			37,191			20,162			74			14,641			—			34,877
Loss on dispositions of plant
equipment and timberlands, net		2			—			—			—			2			32			—			—			—			32
Operating income (loss)		(15,849	)		886			20,493			—			5,530
Operating income																	1,460			873			18,387			—			20,720
Other non-operating
income (expense)
Interest expense		(4,289	)		—			(814	)		1,150			(3,953	)		(4,661	)		(113	)		(504	)		1,270			(4,008	)
Interest income		169			1,001			41			(1,150	)		61			149			1,161			73			(1,270	)		113
Equity in earnings of subsidiaries		16,385			16,071			—			(32,456	)		—			13,617			13,852			—			(27,469	)		—
Other, net		(575	)		(1,421	)		2,313			—			317			1,584			(2,206	)		1,434			—			812
Total other non-operating
income (expense)		11,690			15,651			1,540			(32,456	)		(3,575	)		10,689			12,694			1,003			(27,469	)		(3,083	)
Income (loss) before income taxes		(4,159	)		16,537			22,033			(32,456	)		1,955
Income before income taxes																	12,149			13,567			19,390			(27,469	)		17,637
Income tax provision (benefit)		(6,124	)		152			5,962			—			(10	)		546			(50	)		5,538			—			6,034
Net income		1,965			16,385			16,071			(32,456	)		1,965			11,603			13,617			13,852			(27,469	)		11,603
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	)
Other comprehensive income																	7,193			5,102			5,014			(10,116	)		7,193
Comprehensive income																$	18,796		$	18,719		$	18,866		$	(37,585	)	$	18,796

~~- 20 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

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

Condensed Consolidating Balance Sheet as of ~~June 30, 2017~~March 31, 2018

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated		Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	8,587	$	3,080		$	57,775	$	—		$	69,442	$	1,022	$	1,266	$	114,989	$	-		$	117,277
Other current assets		219,123		278,908			277,622		(304,886	)		470,767		250,524		237,841		296,093		(293,035	)		491,423
Plant, equipment and timberlands, net		384,846		58,075			395,086		—			838,007		370,669		87,000		413,065		—			870,734
Investments in subsidiaries		851,050		601,864			—		(1,452,914	)		—		842,154		667,419		—		(1,509,573	)		—
Other assets		127,334		—			136,231		—			263,565		142,088		—		143,090		—			285,178
Total assets	$	1,590,940	$	941,927		$	866,714	$	(1,757,800	)	$	1,641,781	$	1,606,457	$	993,526	$	967,237	$	(1,802,608	)	$	1,764,612
Liabilities and Shareholders' Equity
Current liabilities	$	447,573	$	52,294		$	144,785	$	(304,888	)	$	339,764	$	398,152	$	67,660	$	165,919	$	(293,035	)	$	338,696
Long-term debt		338,991		39,000			53,503		—			431,494		371,036		65,000		58,095		—			494,131
Deferred income taxes		13,083		(729	)		48,361		—			60,715		12,049		18,209		54,767		—			85,025
Other long-term liabilities		106,263		312			18,201		—			124,776		101,228		503		21,037		—			122,768
Total liabilities		905,910		90,877			264,850		(304,888	)		956,749		882,465		151,372		299,818		(293,035	)		1,040,620
Shareholders’ equity		685,030		851,050			601,864		(1,452,912	)		685,032		723,992		842,154		667,419		(1,509,573	)		723,992
Total liabilities and shareholders’ equity	$	1,590,940	$	941,927		$	866,714	$	(1,757,800	)	$	1,641,781	$	1,606,457	$	993,526	$	967,237	$	(1,802,608	)	$	1,764,612

- 21 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

Condensed Consolidating Balance Sheet as of December 31, ~~2016~~2017

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated		Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	5,082	$	1,461		$	48,901	$	—		$	55,444	$	1,292	$	720	$	114,207	$	-		$	116,219
Other current assets		206,002		256,289			242,187		(265,663	)		438,815		249,293		217,822		279,626		(277,989	)		468,752
Plant, equipment and timberlands, net		360,521		31,455			383,922		—			775,898		375,231		80,992		409,520		—			865,743
Investments in subsidiaries		789,565		540,029			—		(1,329,594	)		—		829,895		653,128		—		(1,483,023	)		—
Other assets		123,010		—			128,092		—			251,102		139,552		—		140,529		—			280,081
Total assets	$	1,484,180	$	829,234		$	803,102	$	(1,595,257	)	$	1,521,259	$	1,595,263	$	952,662	$	943,882	$	(1,761,012	)	$	1,730,795
Liabilities and Shareholders' Equity
Current liabilities	$	426,628	$	26,085		$	135,961	$	(265,663	)	$	323,011	$	402,787	$	54,640	$	167,738	$	(277,989	)	$	347,176
Long-term debt		283,686		14,000			65,961		—			363,647		368,496		51,000		50,602		—			470,098
Deferred income taxes		10,221		(729	)		45,503		—			54,995		14,081		16,814		52,676		—			83,571
Other long-term liabilities		109,819		313			15,648		—			125,780		100,971		313		19,738		—			121,022
Total liabilities		830,354		39,669			263,073		(265,663	)		867,433		886,335		122,767		290,754		(277,989	)		1,021,867
Shareholders’ equity		653,826		789,565			540,029		(1,329,594	)		653,826		708,928		829,895		653,128		(1,483,023	)		708,928
Total liabilities and shareholders’ equity	$	1,484,180	$	829,234		$	803,102	$	(1,595,257	)	$	1,521,259	$	1,595,263	$	952,662	$	943,882	$	(1,761,012	)	$	1,730,795

Condensed Consolidating Statement of Cash Flows for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018

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	$	(12,072	)	$	(1,085	)	$	42,606		$	(685	)	$	28,764		$	(10,584	)	$	(980	)	$	19,223		$	-		$	7,659
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(40,739	)		(21,421	)		(8,887	)		—			(71,047	)		(8,251	)		(11,320	)		(6,997	)		—			(26,568	)
Proceeds from disposals of plant, equipment and timberlands, net		8			75			—			—			83			539			1,156			—			—			1,695
Repayments from intercompany loans		—			12,000			—			(12,000	)		—
Advances of intercompany loans		—			(12,550	)		—			12,550			—			—			(2,310	)		—			2,310			—
Intercompany capital contributed		—			(400	)		—			400			—			—			20,000			(20,000	)		—			—
Other																	(28	)		—			—			—			(28	)
Total investing activities		(40,731	)		(22,296	)		(8,887	)		950			(70,964	)		(7,740	)		7,526			(26,997	)		2,310			(24,901	)
Financing activities
Net long-term borrowings		55,000			25,000			(16,292	)		—			63,708
Net (repayments) borrowings of long-term debt																	2,388			14,000			6,098			—			22,486
Payment of dividends to shareholders		(11,130	)		—			—			—			(11,130	)		(5,679	)		—			—			—			(5,679	)
Repayments of intercompany loans		—			—			(12,000	)		12,000			—
Borrowings of intercompany loans		12,550			—			—			(12,550	)		—			2,310			—			—			(2,310	)		—
Intercompany capital received		—			—			400			(400	)		—
Payment of intercompany dividend		—			—			(685	)		685			—			20,000			(20,000	)		—			—			—
Payments related to share-based compensation awards and other		(112	)		—			—			—			(112	)		(965	)		—			—			—			(965	)
Total financing activities		56,308			25,000			(28,577	)		(265	)		52,466			18,054			(6,000	)		6,098			(2,310	)		15,842
Effect of exchange rate on cash		—			—			3,732			—			3,732			—			—			2,458			—			2,458
Net increase in cash		3,505			1,619			8,874			—			13,998
Net increase (decrease) in cash																	(270	)		546			782			—			1,058
Cash at the beginning of period		5,082			1,461			48,901			—			55,444			1,292			720			114,207			—			116,219
Cash at the end of period	$	8,587		$	3,080		$	57,775		$	—		$	69,442		$	1,022		$	1,266		$	114,989		$	—		$	117,277

- 22 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

Condensed Consolidating Statement of Cash Flows for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017

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	$	17,067		$	2,821		$	16,752		$	—		$	36,640		$	(19,330	)	$	(307	)	$	27,839		$	(641	)	$	7,561
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(51,043	)		(18,861	)		(10,487	)		—			(80,391	)		(21,515	)		(9,551	)		(5,717	)		—			(36,783	)
Proceeds from disposals of plant, equipment and timberlands, net		41			—			12			—			53
Repayments from intercompany loans		—			7,500			—			(7,500	)		—			—			8,000			—			(8,000	)		—
Advances of intercompany loans		—			(7,880	)		—			7,880			—			—			(8,550	)		—			8,550			—
Intercompany capital (contributed) returned		(17,000	)		(500	)		—			17,500			—
Other		(300	)		—			—			—			(300	)
Intercompany capital contributed																	—			(400	)		—			400			—
Total investing activities		(68,302	)		(19,741	)		(10,475	)		17,880			(80,638	)		(21,515	)		(10,501	)		(5,717	)		950			(36,783	)
Financing activities
Net repayments of indebtedness		—			—			4,222			—			4,222
Payments of borrowing costs		(51	)		—			(85	)		—			(136	)
Net (repayments) borrowings of long-term debt																	38,000			12,000			(13,954	)		—			36,046
Payment of dividends to shareholders		(10,679	)		—			—			—			(10,679	)		(5,455	)		—			—			—			(5,455	)
Repayments of intercompany loans		—			—			(7,500	)		7,500			—			—			—			(8,000	)		8,000			—
Borrowings of intercompany loans		7,880			—			—			(7,880	)		—			8,550			—			—			(8,550	)		—
Intercompany capital (returned) received		—			17,000			500			(17,500	)		—
Proceeds from government grants		2,443			2,000			—			—			4,443
Intercompany capital received																	—			—			400			(400	)		—
Payment of intercompany dividend																	—			—			(641	)		641			—
Payments related to share-based compensation awards and other		(976	)		—			—			—			(976	)		(112	)		—			—			—			(112	)
Total financing activities		(1,383	)		19,000			(2,863	)		(17,880	)		(3,126	)		40,983			12,000			(22,195	)		(309	)		30,479
Effect of exchange rate on cash		—			—			352			—			352			—			—			526			—			526
Net increase (decrease) in cash		(52,618	)		2,080			3,766			—			(46,772	)
Net increase in cash																	138			1,192			453			—			1,783
Cash at the beginning of period		59,130			465			45,709			—			105,304			5,082			1,461			48,901			—			55,444
Cash at the end of period	$	6,512		$	2,545		$	49,475		$	—		$	58,532		$	5,220		$	2,653		$	49,354		$	—		$	57,227

~~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.

- 23 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

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

The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein and Glatfelter’s Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2016~~2017 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, Ukraine and ~~Ukraine;~~Philippines;

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

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

vii.	changes in energy-related ~~costs~~prices 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") 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 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.

Introduction We manufacture a wide array of specialty papers and 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;

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.

- 24 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

RESULTS OF OPERATIONS

~~Six~~Three months ended ~~June 30, 2017~~March 31, 2018 versus the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017

Overview For the first ~~six months~~quarter of ~~2017~~2018, net income totaled ~~$5.9~~$5.7 million, or $0.13 per diluted share compared with ~~$18.1~~$11.6 million, ~~and $0.41~~or $0.26 per diluted share in the first quarter of 2017. Adjusted earnings for the first quarter of 2018 were $8.6 million, or $0.19 per diluted share compared with $17.2 million, or $0.39 per diluted share, for the same period a year ~~earlier period.~~ago. Our Composite Fibers and Advanced Airlaid Materials businesses, which combined represented ~~49%~~51.5% of consolidated net sales and 90.4% of business unit operating income, reported higher operating income ~~and operating margin expansion~~ in the comparison driven by higher shipping volumes, increased selling prices, improved productivity and ~~improved productivity.~~favorable foreign currency translation. Specialty Papers’ results ~~declined significantly~~were lower in the comparison ~~reflecting challenging market conditions.~~primarily due to lower shipping volumes, higher input costs and one-time operational issues.

The following table sets forth summarized consolidated results of operations:

	Six months ended June 30				Three months ended March 31
In thousands, except per share	2017		2016		2018		2017
Net sales	$	778,055	$	808,631	$	410,647	$	390,713
Gross profit		87,365		100,566		48,906		55,629
Operating income		20,306		31,491		13,397		20,720
Net income		5,889		18,133		5,716		11,603
Earnings per diluted share		0.13	0.41			0.13	0.26

In addition to the results reported in accordance with GAAP, we evaluate our performance using adjusted 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 earnings consists of net income determined in accordance with GAAP adjusted to exclude the impact of the following:

Costs related to strategic initiatives. These adjustments primarily reflect one-time professional and legal fees incurred directly related to evaluating certain strategic initiatives.

Airlaid capacity expansion costs. These adjustments reflect non-capitalized, one-time costs incurred related to the start-up of a new airlaid production facility in Fort Smith, Arkansas and implementation of a new business system.

Cost optimization actions. This adjustment reflects charges incurred in connection with initiatives to optimize the cost structure of certain business units in response to changes in business conditions. The costs are primarily related to headcount reduction efforts, asset write-offs and certain contract termination costs.

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 and the Boiler Maximum Achievable Control Technology rule. This adjustment includes costs incurred during the transition period in which the newly installed equipment was brought on-line.

~~Airlaid capacity expansion~~Timberland sales and related costs.These adjustments exclude gains from the sales of timberlands as these items are not considered to be part of our core business, ongoing results of operations or cash flows. These adjustments are irregular in timing and amount and may significantly impact our operating performance.

U.S. Tax Reform. These adjustments reflect ~~non-capitalized, one-time costs incurred related~~amounts estimating the impact of the Tax Cuts and Jobs Act (“TCJA”) which was signed into law on December 22, 2017. The TCJA includes, among many provisions, a tax on the mandatory repatriation of earnings of the Company’s non-U.S. subsidiaries and a change in the corporate tax rate from 35 % to ~~the~~

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

~~Cost optimization actions.~~ This adjustment reflects charges incurred in connection with initiatives to optimize the cost structure of certain business units in response to changes in business conditions. The costs are primarily related to headcount reduction efforts, asset write-offs and certain contract termination costs.21%.

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 forth the reconciliation of net income to adjusted earnings for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016:~~2017:

	Six months ended June 30										Three months ended March 31
	2017					2016					2018					2017
In thousands, except per share	Amount			Diluted EPS		Amount			Diluted EPS		Amount			Diluted EPS		Amount			Diluted EPS
Net income	$	5,889		$	0.13	$	18,133		$	0.41	$	5,716		$	0.13	$	11,603		$	0.26
Adjustments (pre-tax)
Specialty Papers' environmental compliance		2,480					1,125
Costs related to strategic initiatives												2,109					-
Airlaid capacity expansion costs		4,453					257					3,033					1,958
Cost optimization actions		2,788					88					-					2,013
Specialty Papers' environmental compliance												-					2,264
Timberland sales and related costs		(74	)				-					(1,115	)				-
Total adjustments (pre-tax)		9,647					1,470					4,027					6,235
Income taxes (1)		(999	)				(543	)				(955	)				(682	)
U.S. Tax Reform												(180	)				-
Total after-tax adjustments		8,648			0.19		927			0.02		2,892			0.06		5,553			0.12
Adjusted earnings	$	14,537		$	0.33	$	19,060		$	0.43	$	8,608		$	0.19	$	17,156		$	0.39

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

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

- 25 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

Business Unit Performance

Six months ended June 30					Advanced Airlaid									Other and
Three months ended March 31																														Advanced Airlaid								Other and
Dollars in millions	Composite Fibers				Materials				Specialty Papers					Unallocated						Total						Composite Fibers				Materials				Specialty Papers				Unallocated						Total
	2017		2016		2017		2016		2017			2016		2017			2016			2017			2016			2018		2017		2018		2017		2018		2017		2018			2017			2018			2017
Net sales	$	258.2	$	259.9	$	122.7	$	121.5	$	397.1		$	427.2	$	—		$	—		$	778.1		$	808.6		$	141.6	$	125.1	$	69.6	$	59.8	$	199.4	$	205.8	$	—		$	—		$	410.6		$	390.7
Energy and related sales, net		—	—			—	—			2.1			2.7		—			—			2.1			2.7			—	—			—	—			1.4		1.1		—			—			1.4			1.1
Total revenue		258.2	259.9			122.7		121.5		399.2			429.9		—			—			780.2			811.3			141.6		125.1		69.6		59.8		200.8		206.9		—			—			412.1			391.8
Cost of products sold		207.2		210.3		103.5		104.1		376.0			394.0		6.1			2.3			692.8			710.7			114.7		99.6		59.7		50.5		186.5		179.9		2.3			6.2			363.2			336.2
Gross profit (loss)		51.0		49.6		19.2		17.4		23.2			35.9		(6.1	)		(2.3	)		87.4			100.6			26.9		25.5		9.9		9.3		14.3		27.0		(2.3	)		(6.2	)		48.9			55.6
SG&A		21.9		23.2		4.6		4.2		23.8			26.6		16.8			15.0			67.1			69.0			11.6		11.1		2.7		2.2		11.9		13.5		10.9			8.1			37.1			34.9
(Gains) losses on dispositions of plant,
equipment and timberlands, net		—		—		—		—		—			—		—			—			—			—			—		—		—		—		—		—		(1.6	)		—			(1.6	)		—
Total operating income (loss)		29.1		26.4		14.6		13.2		(0.6	)		9.3		(22.9	)		(17.3	)		20.3			31.5			15.3		14.4		7.2		7.1		2.4		13.5		(11.6	)		(14.3	)		13.4			20.7
Non-operating expense		—		—		—		—		—			—		(8.8	)		(8.3	)		(8.8	)		(8.3	)		—		—		—		—		—		—		(4.9	)		(3.1	)		(4.9	)		(3.1	)
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		$	15.3	$	14.4	$	7.2	$	7.1	$	2.4	$	13.5	$	(16.5	)	$	(17.4	)	$	8.5		$	17.6
Supplementary Data
Net tons sold (thousands)		80.7		77.6		50.3		48.9		381.4			400.5		—			—			512.4			527.0			40.0		38.8		26.3		24.8		188.4		197.2		—			—			254.8			260.8
Depreciation, depletion and amortization	$	13.8	$	14.3	$	4.6	$	4.7	$	14.9		$	13.2	$	1.7		$	1.2		$	35.0		$	33.4		$	7.4	$	6.8	$	2.8	$	2.3	$	8.1	$	7.2	$	1.1		$	1.0		$	19.4		$	17.3
Capital expenditures		6.8		8.6		23.5		20.7		34.0			50.8		6.7			0.3			71.0			80.4			5.1		4.7		13.2		10.6		6.5		18.3		1.8			3.2			26.6			36.8

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

- 26 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

Sales and Costs of Products Sold

	Six months ended June 30									Three months ended March 31
In thousands	2017			2016			Change			2018			2017			Change
Net sales	$	778,055		$	808,631		$	(30,576	)	$	410,647		$	390,713		$	19,934
Energy and related sales, net		2,110			2,667			(557	)		1,428			1,129			299
Total revenues		780,165			811,298			(31,133	)		412,075			391,842			20,233
Costs of products sold		692,800			710,732			(17,932	)		363,169			336,213			26,956
Gross profit	$	87,365		$	100,566		$	(13,201	)	$	48,906		$	55,629		$	(6,723	)
Gross profit as a percent of Net sales		11.2	%		12.4	%					11.9	%		14.2	%

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

	Six months ended June 30						Three months ended March 31
Percent of Total	2017			2016			2018			2017
Business Unit
Composite Fibers		33.2	%		32.1	%		34.5	%		32.0	%
Advanced Airlaid Material		15.8			15.0			17.0			15.3
Specialty Papers		51.0			52.9			48.5			52.7
Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled ~~$778.1~~$410.6 million and ~~$808.6~~$390.7 million in the first ~~six~~three months of 2018 and 2017, ~~and 2016,~~ respectively. ~~The $30.5 million decrease was primarily driven by $14.4 million lower selling prices and unfavorable~~Foreign currency translation favorably impacted the year-over-year comparison by $21.8 million. On a constant currency basis, Composite Fibers’ net sales were essentially flat and Advanced Airlaid Materials’ increased by 7.8%. Specialty Papers’ net sales declined 3.1% in the year-over-year comparison reflecting the shutdown of ~~$12.8 million. Shipping volumes decreased 2.8%.~~a machine in the third quarter of 2017.

Composite Fibers’ net sales ~~decreased $1.7~~increased $16.5 million, or ~~0.6%. Shipping~~13.2% primarily due to a 3.2% increase in shipping volumes, ~~increased 4.0%; however, unfavorable~~a $16.7 million favorable impact from currency translation and ~~lower~~$0.3 million from higher selling ~~prices adversely impacted the comparison by $10.8 million and $4.0 million, respectively.~~prices.

Composite Fibers’ first quarter of 2018 operating income ~~for the six months~~totaled $15.3 million, an increase of ~~2017 increased $2.7 million to $29.1~~$0.9 million compared to the year-ago ~~period primarily due to a $4.9~~period. The benefit of higher shipping and production volumes together with efficient material usage partially offset the $3.5 million ~~benefit~~unfavorable impact from ~~improved operations including the impact of our cost optimization program.~~higher raw material prices. The primary drivers are summarized in the following chart:

Advanced Airlaid Materials’ net sales increased ~~$1.2~~$9.8 million, ~~in the year-over-year comparison~~or 16.3% primarily due to

~~higher~~ a 5.9% increase in shipping volumes, ~~which increased 2.9% due to~~a $5.1 million favorable impact of currency translation and $0.7 million from higher ~~shipments~~selling prices.

Operating income for the first quarter of ~~wipes and personal hygiene products.~~

~~Advanced Airlaid Materials’ operating income~~2018 totaled ~~$14.6~~$7.2 million, ~~an increase of $1.4 million compared to~~or 1.8% higher than the ~~same~~comparable period a year ago. Higher selling prices were more than offset by higher input costs and other general cost inflation totaling $1.2 million. The primary drivers are summarized in the following chart:

Specialty Papers’ net sales decreased ~~$30.1~~$6.3 million, or ~~7.0%~~3.1%, ~~due to~~reflecting the shutdown of a ~~4.8% decrease~~machine in ~~shipping volumes and~~the third quarter of 2017, partially offset by a ~~$9.8 million impact from lower selling prices.~~more favorable mix of products sold.

~~Operating loss~~Specialty Papers’ operating income totaled ~~$0.6~~$2.4 million in the first ~~six months~~quarter of ~~2017,~~2018, a decrease of $11.2 million 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~~same period a year ago. Higher raw material and ~~Spring Grove, PA facilities which~~energy prices adversely impacted ~~second-quarter 2017 and 2016~~ results by ~~$22.9~~approximately $5.6 million. Higher freight costs and depreciation expense negatively impacted results by $1.1 million and ~~$26.3~~$0.9 million, respectively. In addition, transition costs associated with the machine shutdown, severe weather and water quality issues, partially offset by the benefits of workforce reductions efforts,

- 27 -

GLATFELTER

03.31.18 Form 10-Q

adversely impacted earnings by $3.4 million. The primary drivers ~~of the change~~ are summarized in the following chart:

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

~~- 27 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

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. The following table summarizes this activity for the first three months of 2018 and 2017:

	Three months ended March 31
In thousands	2018			2017			Change
Energy sales	$	1,459		$	1,006		$	453
Costs to produce		(966	)		(1,438	)		472
Net		493			(432	)		925
Renewable energy credits		935			1,561			(626	)
Total	$	1,428		$	1,129		$	299

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~~$11.6 million in the first ~~six~~three months of ~~2017~~2018 compared with ~~$17.3~~$14.3 million in the first ~~six~~three months of ~~2016.~~2017. The ~~increase~~decrease in Other and Unallocated expenses, excluding the impact of gains from timberland sales in 2018, primarily relates to ~~Specialty Papers environmental compliance, the Airlaid capacity expansion project and the cost optimization actions.~~lower legal fees.

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

	Six months ended June 30						Three months ended March 31
In thousands	2017		2016		Change		2018			2017			Change
Recorded as:
Costs of products sold	$	1,692	$	1,178	$	514	$	2,308		$	2,171		$	137
SG&A expense		1,622		1,577		45		551			550			1
Non operating expense								(1,080	)		(1,398	)		318
Total	$	3,314	$	2,755	$	559	$	1,779		$	1,323		$	456

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 ~~2017~~2018 is expected to be approximately ~~$6.6~~$7.2 million compared with ~~$5.5~~$6.6 million in ~~2016 (which excludes a $7.3 million settlement charge).~~2017.

Gains (losses) on Dispositions of Plant, Equipment and Timberlands During three months ended March 31, 2018 and 2017, we completed the following sales of assets:

Dollars in thousands	Acres		Proceeds		Gain (loss)
2018
Timberlands		426	$	1,156	$	1,115
Other	n/a			539		439
Total			$	1,695	$	1,554
2017
Other	n/a		$	-	$	(32	)
Total			$	-	$	(32	)

Income taxes For the first ~~six~~three months of ~~2017,~~2018, we recorded a provision for income taxes of ~~$5.7~~$2.8 million on pre-tax income of ~~$11.6 million. The comparable amounts in the six months~~$8.5 million compared with a $6.0 million provision on pre-tax income of ~~2016 were $5.1~~$17.6 million ~~and $23.2 million, respectively. The effective tax rate of 49.0%~~ in the first ~~six months~~quarter of 2017 compared with 21.8% in the same period of 2016 reflects the adverse impact of 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 and $18 million

~~for the full year~~ 2017. The effective tax rate in ~~future periods may~~the first quarter of 2018 includes the impact of the 2017 U.S. tax reform. This required us to record a provision for the Global Intangible Low Taxed Income, also known as GILTI, which increased the effective tax rate by approximately 10%. In addition, since we are using U.S. federal tax loss carryforwards there is no impact to cash taxes related to the GILTI provisions. The effective tax rate for 2018 is expected to be ~~affected by changes in U.S.-based pre-tax income and its impact on the valuation of deferred taxes.~~approximately 33%.

Foreign Currency We 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 €125 million to €130~~an estimated €145 million. For the first ~~six~~three months of ~~2017,~~2018, the average currency exchange rate ~~for euro to the U.S. dollar~~ was ~~1.093~~1.229 dollar/euro compared with ~~1.114 for~~1.064 in the same period of ~~2016.~~2017. 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.

- 28 -

GLATFELTER

03.31.18 Form 10-Q

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~~three months of ~~2017.~~2018.

In thousands	Six months ended June 30, 2017				Three months ended March 31, 2018
	Favorable (unfavorable)				Favorable (unfavorable)
Net sales		$	(12,799	)		$	21,819
Costs of products sold			11,706				(18,667	)
SG&A expenses			1,063				(1,508	)
Income taxes and other			367				7
Net income		$	337			$	1,651

The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in ~~2017~~2018 were the same as ~~2016.~~2017. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

~~- 28 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

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

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

~~The following table sets forth summarized results of operations:~~

Three months ended
June 30

In thousands, except per share
2017

2016

Net sales
$
387,342

$
406,413

Gross profit

30,436

42,723

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

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 on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated and the related impact of valuation allowances.~~

~~Business Unit Performance~~

Three 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
$
133.1

$
136.4

$
62.8

$
60.8

$
191.4

$
209.3

$
—

$
—

$
387.3

$
406.4

Energy and related sales, net

—

—

—

—

1.0

2.0

—

—

1.0

2.0

Total revenue

133.1

136.4

62.8

60.8

192.4

211.3

—

—

388.3

408.4

Cost of products sold

107.6

109.0

53.0

51.8

195.9

202.9

1.4

2.0

357.9

365.7

Gross profit (loss)

25.5

27.4

9.8

9.0

(3.5
)

8.4

(1.4
)

(2.0
)

30.4

42.7

SG&A

10.8

12.1

2.3

2.2

10.3

14.2

8.6

8.7

32.0

37.2

(Gains) losses on dispositions of plant,
   equipment and timberlands, net

—

—

—

—

—

—

(0.1
)

—

(0.1
)

—

Total operating income (loss)

14.7

15.3

7.5

6.8

(13.8
)

(5.8
)

(9.9
)

(10.7
)

(1.5
)

5.5

Non-operating expense

—

—

—

—

—

—

(4.6
)

(3.6
)

(4.6
)

(3.6
)
Income (loss) before
   income taxes
$
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)

41.9

40.7

25.5

24.4

184.1

194.7

—

—

251.5

259.7

Depreciation, depletion and
   amortization
$
7.0

$
7.2

$
2.3

$
2.4

$
7.7

$
6.5

$
0.7

$
0.7

$
17.7

$
16.8

Capital expenditures

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.~~

~~- 29 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

~~Sales and Costs of Products Sold~~

Three months ended
June 30

In thousands
2017

2016

Change

Net sales
$
387,342

$
406,413

$
(19,071
)

Energy and related sales,
net

981

2,001

(1,020
)

Total revenues

388,323

408,414

(20,091
)

Costs of products sold

357,887

365,691

(7,804
)

Gross profit
$
30,436

$
42,723

$
(12,287
)

Gross profit as a percent
of Net sales

7.9
%

10.5
%

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

Three months ended
June 30

Percent of Total
2017

2016

Business Unit

Composite Fibers

34.4
%

33.6
%

Advanced Airlaid Material

16.2

15.0

Specialty Papers

49.4

51.4

Total

100.0
%

100.0
%

~~Net sales~~ totaled $387.3 million and $406.4 million in the second quarters of 2017 and 2016, respectively. Shipping volumes declined 3.2% and selling prices and foreign currency translation unfavorably impacted the quarter-over-quarter comparison by $7.6 million and $6.0 million, respectively.

Composite Fibers’ net sales declined $3.2 million, or 2.4%, primarily due to $5.2 million of unfavorable currency translation and $2.1 million from lower selling prices partially offset by higher shipping volumes.

~~Composite Fibers’ second quarter of 2017 operating income decreased slightly to $14.7 million. The primary drivers are summarized in the following chart:~~

Advanced Airlaid Materials’ net sales increased $2.1 million in the quarter-over-quarter comparison. Shipping volumes increased 4.7% primarily due to continued growth of personal hygiene products and wipes.

~~Advanced Airlaid Materials’ operating income totaled $7.5 million 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 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. In addition to lower spending for the annual maintenance outages, this business benefited from improved operations, cost control actions, and lower incentive compensation aggregating $5.1 million.

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

Three months ended
June 30

In thousands
2017

2016

Change

Energy sales
$
787

$
836

$
(49
)

Costs to produce

(929
)

(934
)

5

Net

(142
)

(98
)

(44
)

Renewable energy credits

1,123

2,099

(976
)

Total
$
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.

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

Three months ended
June 30

In thousands
2017

2016

Change

Recorded as:

Costs of products sold
$
1,098

$
742

$
356

SG&A expense

893

854

39

Total
$
1,991

$
1,596

$
395

~~Income taxes~~ For the second quarter of 2017, we recorded $0.4 million of tax benefit on pretax loss of $6.1 million. The comparable amounts in the second quarter of 2016 were no taxes on a pretax income of $2.0 million. The change in the effective tax rate reflects the adverse impact of valuation allowances recorded in 2017 for deferred tax 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 2017.

In thousands
Three months ended
June 30, 2017

Favorable (unfavorable)

Net sales

$
(6,039
)

Costs of products sold

6,085

SG&A expenses

476

Income taxes and other

91

Net income

$
613

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

~~- 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						Three months ended March 31
In thousands	2017			2016			2018			2017
Cash and cash equivalents at
beginning of period	$	55,444		$	105,304		$	116,219		$	55,444
Cash provided (used) by
Operating activities		28,764			36,640			7,659			7,561
Investing activities		(70,964	)		(80,638	)		(24,901	)		(36,783	)
Financing activities		52,466			(3,126	)		15,842			30,479
Effect of exchange rate
changes on cash		3,732			352			2,458			526
Net cash provided (used)		13,998			(46,772	)
Net cash provided								1,058			1,783
Cash and cash equivalents at
end of period	$	69,442		$	58,532		$	117,277		$	57,227

At ~~June 30, 2017,~~March 31, 2018, we had ~~$69.4~~$117.3 million in cash and cash equivalents held by both domestic and foreign subsidiaries. Unremitted earnings of our foreign subsidiaries as of January 1, 2018 and forward are deemed to be indefinitely reinvested and therefore no U.S. tax liability is reflected in the accompanying condensed consolidated financial statements. ~~As of June 30, 2017, the majority~~Substantially all of our cash and cash equivalents is held by our ~~international~~foreign subsidiaries ~~and the repatriation~~but could be repatriated without incurring a significant amount of ~~such funds would result in~~ additional ~~tax liability.~~taxes. In addition to our cash and cash equivalents, ~~$104.4~~

$20.2 million is available under our revolving credit agreement, which matures in March 2020.

Cash provided by operating activities totaled ~~$28.8~~$7.7 million in the first ~~six~~three months of ~~2017~~2018 compared with ~~$36.6~~$7.6 million in the same period a year ~~ago. The decrease in cash from operations primarily reflects~~ago as improved working capital usage offset lower operating ~~income.~~profits.

Net cash used by investing activities decreased by ~~$9.7~~$11.9 million in the year-over-year comparison due to lower capital ~~expenditures.~~expenditures primarily driven by the completion of the Specialty Papers environmental compliance project in 2017. Capital expenditures are expected to total between ~~$130~~$67 million and ~~$140~~$72 million for ~~2017, including approximately $10 million for the Specialty Papers’ environmental compliance projects and $43 million to $48 million for the Airlaid capacity expansion.~~2018.

Net cash provided by financing activities totaled ~~$52.5~~$15.8 million in the first ~~six~~three months of ~~2017~~2018 compared with ~~a use of $3.1~~$30.5 million in the same period of ~~2016.~~2017. The ~~increase~~decrease in cash provided by financing activities primarily reflects ~~additional~~lower borrowings under our credit agreement.

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

	June 30			December 31			March 31			December 31
In thousands	2017			2016			2018			2017
Revolving credit facility, due Mar. 2020	$	130,000		$	61,595		$	196,588		$	171,200
5.375% Notes, due Oct. 2020		250,000			250,000			250,000			250,000
2.40% Term Loan, due Jun. 2022		8,151			8,282			7,481			7,710
2.05% Term Loan, due Mar. 2023		35,023			35,163			32,883			33,607
1.30% Term Loan, due Jun. 2023		9,781			9,788			9,241			9,423
1.55% Term Loan, due Sep. 2025		11,187			10,333			11,324			11,390
Total long-term debt		444,142			375,161			507,517			483,330
Less current portion		(10,400	)		(8,961	)		(11,607	)		(11,298	)
Unamortized deferred issuance costs		(2,248	)		(2,553	)		(1,779	)		(1,934	)
Long-term debt, net of current portion	$	431,494		$	363,647		$	494,131		$	470,098

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, 2017,~~March 31, 2018, the leverage ratio, as calculated in accordance with the definition in our amended credit agreement, was ~~2.6x,~~2.8x, 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, 2017,~~March 31, 2018, 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 9.11.

- 29 -

GLATFELTER

03.31.18 Form 10-Q

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~~three months of ~~2017,~~2018, we used ~~$11.1~~$5.7 million of cash for dividends on our common stock compared with ~~$10.7~~$5.5 million in the same period of ~~2016.~~2017. 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.

~~- 32 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

As more fully discussed in Item 1 - Financial Statements – Note 1215 – Commitments, Contingencies and Legal Proceedings (“Note ~~12”~~15”), we are involved in the Lower Fox River in Wisconsin (the “Fox River”), an EPA Superfund site for which we remain potentially liable for certain response costs and long-term monitoring and maintenance related matters. Based on the recent developments more fully discussed in Note ~~12,~~15, it is conceivable the resolution of this matter may require us to spend in excess of ~~$29.5~~$26 million in ~~the next twelve months.~~2018. Although we are unable to determine with any degree of certainty the amount we may be required to spend, ~~other than a $9.5 million payment to be made in August 2017, related to the settlement with Georgia Pacific,~~ the recent developments provide greater clarity to the extent of such amounts.

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 ~~12,~~15, 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 Arrangements As of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, 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.

Outlook Composite Fibers’ shipping volumes in the ~~third~~second quarter of ~~2017~~2018 are expected to be approximately 3%5% higher than the ~~second quarter.~~first quarter with an improved mix. Selling prices are expected to be in-line with the ~~second~~first quarter ~~while~~and 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.~~increase moderately.

Advanced Airlaid Materials’ shipping volumes in the ~~third~~second quarter of 2018 are expected to be approximately 2% 3%

higher than 2018 first quarter. For the ~~second quarter.~~full-year 2018, we anticipate shipping volumes to be 10% to 12% higher than 2017. Selling prices and raw material and energy prices are expected to increase slightly when compared ~~with~~to the ~~second quarter.~~first quarter of this year.

Specialty Papers’ shipping volumes in the ~~third~~second quarter are expected to be ~~approximately~~ 5% ~~higher than~~below the ~~second~~first quarter of ~~2017. Selling~~2018 reflecting the annual maintenance outages at both mills. Average selling prices are expected to ~~decline slightly~~increase $30/ton and we expect raw material and energy prices to increase slightly; however, energy consumption is expected to be seasonally lower in the second quarter. The adverse impact of operational challenges related to machine transition costs, weather and water quality issues totaling approximately $5 million in the first quarter are not anticipated to impact the second quarter. The Company also plans to complete the annual maintenance outages at its U.S. facilities in the second quarter of 2018, which are expected to ~~be up slightly. In addition, we expect to incur $2~~adversely impact operating income by approximately $26 million to $3$28 million ~~of less market related downtime~~compared with $22.9 million in the ~~third quarter than 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.2017.

Consolidated capital expenditures for the year are expected to ~~total~~be between ~~$130 million and $140 million for 2017 and approximate between $62~~$67 million and $72 ~~million in 2018.~~million.

The effective tax rate on adjusted earnings is expected to be approximately ~~35%~~33% in 2018 compared with 19% for ~~the second half of~~ 2017.

- 3330 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

	Year Ended December 31															June 30, 2017				Year Ended December 31															March 31, 2018
Dollars in thousands	2017			2018			2019			2020			2021			Carrying Value		Fair Value		2018			2019			2020			2021			2022			Carrying Value		Fair Value
Long-term debt
Average principal outstanding
At fixed interest rates – Bond	$	250,000		$	250,000		$	250,000		$	218,750		$	—		$	250,000	$	256,623	$	250,000		$	250,000		$	197,917		$	—		$	—		$	250,000	$	253,980
At fixed interest rates – Term Loans		61,805			54,091			43,342			32,592			21,841			64,142		64,734		56,576			46,420			34,813			23,206			12,258			60,929		61,361
At variable interest rates		130,000			130,000			130,000			27,083			—			130,000		130,000		196,588			196,588			40,956			—			—			196,588		196,588
																$	444,142	$	451,357																$	507,517	$	511,929
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	%		—			—
On fixed rate debt – Term Loans		1.89	%		1.89	%		1.88	%		1.86	%		1.82	%						1.89	%		1.87	%		1.85	%		1.82	%		1.77	%
On variable rate debt		2.72	%		2.72	%		2.72	%		2.72	%		2.72	%						3.30	%		3.30	%		3.30	%		—			—

The table above presents the average principal outstanding and related interest rates for the next five years for debt outstanding as of ~~June 30, 2017.~~March 31, 2018. 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, 2017,~~March 31, 2018, we had ~~$441.9~~$505.7 million of long-term debt, net of unamortized debt issuance costs, of which ~~29.4%~~38.9% 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, 2017,~~March 31, 2018, the interest rate paid was approximately ~~2.72%~~3.30%. A hypothetical 100 basis point increase or decrease in the interest rate on variable rate debt would increase or decrease annual interest expense by ~~$1.3~~$2.0 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 €125 million to €130~~an estimated €145 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 Procedures Our 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, 2017,~~March 31, 2018, 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, 2017,~~March 31, 2018, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

- 3431 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

PART II

ITEM 6. EXHIBITS

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



10.1	~~Schedule~~Form of ~~Change in Control Employment Agreement,~~Performance Share Award Certificate (form effective February 22, 2018), 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, filed herewith

31.2	Certification of John P. Jacunski, Executive Vice President and Chief Financial Officer, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 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, furnished herewith

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

~~August~~May 1, ~~2017~~2018

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

~~- 35 -~~

~~GLATFELTER~~

~~06.30.17 Form 10-Q~~

~~EXHIBIT INDEX~~



~~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, filed herewith~~

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

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

- 3632 -

GLATFELTER

~~06.30.17~~03.31.18 Form 10-Q

In thousands	Three months ended June 30, 2017
	Favorable (unfavorable)
Net sales		$	(6,039	)
Costs of products sold			6,085
SG&A expenses			476
Income taxes and other			91
Net income		$	613