UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

~~FORM 10-Q~~

☒

FORM 10-Q


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

For the quarterly period ended ~~September~~June 30, ~~2017~~

2022

☐
☐			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~~

4350 Congress Street, Suite ~~520~~

~~York, Pennsylvania 17401~~

600

Charlotte, North Carolina 28209

(Address of principal executive offices)

~~(717) 225-4711~~

(704) 885-2555

(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~~

Corporation

23-0628360

Pennsylvania

~~N/A~~

(

(N/A)

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

report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

GLT

New York Stock Exchange

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~~

☐

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 ~~October 25, 2017~~July 29, 2022 totaled ~~43,586,355~~44,774,912 shares.

~~P. H.~~

GLATFELTER ~~COMPANY~~CORPORATION AND SUBSIDIARIES

REPORT ON FORM 10-Q

For the ~~QUARTERLY PERIOD ENDED~~

~~September~~Quarterly Period Ended

June 30, ~~2017~~

2022

Table of Contents

~~Page~~


PART I - FINANCIAL INFORMATION			Page
Item 1	Financial Statements		2
	Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2022 and 2021 (unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2022 and 2021 (unaudited)		3
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)		5
	Statements of Shareholders’ Equity for the three months and six months ended June 30, 2022 and 2021 (unaudited)		6
	Notes to Condensed Consolidated Financial Statements (unaudited)		7
	1	Organization	7
	2	Accounting Policies	7
	3	Acquisition	7
	4	Revenue	10
	5	Gains on Disposition of Plant, Equipment and Timberlands	11
	6	Goodwill and Other Asset Impairment	11
	7	Discontinued Operations	12
	8	Earnings Per Share	12
	9	Accumulated Other Comprehensive Income	13
	10	Stock-based Compensation	15
	11	Retirement Plans and Other Post-Retirement Benefits	16
	12	Income Taxes	16
	13	Inventories	17
	14	Goodwill and Other Intangible Assets	17
	15	Leases	19
	16	Long-term Debt	20
	17	Fair Value of Financial Instruments	21
	18	Financial Derivatives and Hedging Activities	21
	19	Commitments, Contingencies and Legal Proceedings	24
	20	Segment Information	26
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3	Quantitative and Qualitative Disclosures About Market Risks		42
Item 4	Controls and Procedures		43
PART II – OTHER INFORMATION			44
Item 1A	Risk Factors		44
Item 6	Exhibits		45
	SIGNATURES		46

PART I - FINANCIAL INFORMATION

Item 1
Financial Statements

Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2017 and 2016 (unaudited)

2

Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2017 and 2016 (unaudited)

3

Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 (unaudited)

4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (unaudited)

5

Notes to Condensed Consolidated Financial Statements (unaudited)

6

1.
Organization

6

2.
Accounting Policies

6

3.
Earnings Per Share

7

4.
Accumulated Other Comprehensive Income

8

5.
Income Taxes

10

6.
Stock-based Compensation

10

7.
Retirement Plans and Other Post- Retirement Benefits

11

8.
Inventories

12

9.
Capitalized Interest

12

10.
Long-term Debt

12

11.
Fair Value of Financial Instruments

13

12.
Financial Derivatives and Hedging Activities

13

13.
Commitments, Contingencies and Legal Proceedings

15

14.
Segment Information

18

15.
Condensed Consolidating Financial Statements

19

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

24
Item 3
Quantitative and Qualitative Disclosures About Market Risks

34
Item 4
Controls and Procedures

34

PART II – OTHER INFORMATION

35

Item 6
Exhibits

35

SIGNATURES

35

PART I

~~PART I~~

Item 1 – Financial Statements

~~P. H.~~

GLATFELTER ~~COMPANY~~CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three months ended September 30						Nine months ended September 30							Three months ended June 30,				Six months ended June 30,
In thousands, except per share	2017			2016			2017			2016			In thousands, except per share	2022		2021		2022		2021

Net sales	$	413,325		$	405,301		$	1,191,380		$	1,213,932		Net sales	$	363,963	$	244,911	$	745,643	$	470,585
Energy and related sales, net		1,236			1,346			3,346			4,013
Total revenues		414,561			406,647			1,194,726			1,217,945
Costs of products sold		359,826			345,477			1,052,626			1,056,209		Costs of products sold	326,566		209,357		676,581		395,735
Gross profit		54,735			61,170			142,100			161,736		Gross profit	37,397		35,554		69,062		74,850
Selling, general and administrative expenses		33,399			35,747			100,484			104,796		Selling, general and administrative expenses	28,400		28,984		61,566		51,811
(Gains) losses on dispositions of plant, equipment and timberlands, net		(24	)		5			(50	)		31
Operating income		21,360			25,418			41,666			56,909
Goodwill and other asset impairment charges													Goodwill and other asset impairment charges	—		—		117,349		—
Loss (gains) on dispositions of plant, equipment and timberlands, net													Loss (gains) on dispositions of plant, equipment and timberlands, net	73		(1,553)		(2,888)		(2,403)
Operating income (loss)													Operating income (loss)	8,924		8,123		(106,965)		25,442
Non-operating income (expense)													Non-operating income (expense)
Interest expense		(4,547	)		(3,895	)		(13,031	)		(11,964	)	Interest expense	(7,672)		(1,772)		(15,534)		(3,303)
Interest income		51			52			209			204		Interest income	38		11		55		31

Other, net		(478	)		(573	)		(906	)		(956	)	Other, net	(455)		(849)		(1,795)		(1,073)
Total non-operating expense		(4,974	)		(4,416	)		(13,728	)		(12,716	)	Total non-operating expense	(8,089)		(2,610)		(17,274)		(4,345)
Income before income taxes		16,386			21,002			27,938			44,193
Income (loss) from continuing operations before income taxes													Income (loss) from continuing operations before income taxes	835		5,513		(124,239)		21,097
Income tax provision (benefit)													Income tax provision (benefit)	3,295		4,021		(13,489)		11,211
Income (loss) from continuing operations													Income (loss) from continuing operations	(2,460)		1,492		(110,750)		9,886

Discontinued operations:													Discontinued operations:
Income (loss) before income taxes													Income (loss) before income taxes	408		(82)		371		(82)
Income tax provision		4,281			1,401			9,944			6,459		Income tax provision	—		—		—		—
Net income	$	12,105		$	19,601		$	17,994		$	37,734
Earnings per share
Basic	$	0.28		$	0.45		$	0.41		$	0.87
Diluted		0.27			0.44			0.41			0.86
Cash dividends declared per common share	$	0.13		$	0.125		$	0.39		$	0.375
Loss from discontinued operations													Loss from discontinued operations	408		(82)		371		(82)
Net income (loss)													Net income (loss)	$	(2,052)	$	1,410	$	(110,379)	$	9,804

Basic earnings per share													Basic earnings per share
Income (loss) from continuing operations													Income (loss) from continuing operations	$	(0.05)	$	0.03	$	(2.47)	$	0.22
Income from discontinued operations													Income from discontinued operations	0.01		—		0.01		—
Basic earnings (loss) per share													Basic earnings (loss) per share	$	(0.04)	$	0.03	$	(2.46)	$	0.22

Diluted earnings per share													Diluted earnings per share
Income (loss) from continuing operations													Income (loss) from continuing operations	$	(0.05)	$	0.03	$	(2.47)	$	0.22
Income from discontinued operations													Income from discontinued operations	0.01		—		0.01		—
Diluted earnings (loss) per share													Diluted earnings (loss) per share	$	(0.04)	$	0.03	$	(2.46)	$	0.22

Weighted average shares outstanding													Weighted average shares outstanding
Basic		43,617			43,576			43,601			43,552		Basic	44,841		44,563		44,775		44,507
Diluted		44,182			44,133			44,410			44,059		Diluted	44,841		44,872		44,775		44,865

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

- 2 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~P. H.~~

GLATFELTER ~~COMPANY~~CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three months ended
September 30

Nine months ended
September 30

In thousands

2017

2016

2017

2016

Net income

$
12,105

$
19,601

$
17,994

$
37,734

Foreign currency translation adjustments

16,559

(1,530
)

50,128

(2,975
)
Net change in:

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

of $111, $289, $2,031 and $88, respectively

(1,514
)

(858
)

(6,111
)

152

Unrecognized retirement obligations, net of taxes

of $(1,340), $(1,405), $(4,018) and $(4,214), respectively

2,285

2,319

6,838

6,957

Other comprehensive income (loss)

17,330

(69
)

50,855

4,134

Comprehensive income

$
29,435

$
19,532

$
68,849

$
41,868


	Three months ended June 30,				Six months ended June 30,
In thousands	2022		2021		2022		2021
Net income (loss)	$	(2,052)	$	1,410	$	(110,379)	$	9,804

Foreign currency translation adjustments	(28,675)		3,846		(39,590)		(9,347)
Net change in:
Deferred gains (losses) on derivatives, net of taxes of $(2,029), $114, $(2,629) and $(1,187), respectively	8,534		(316)		8,177		2,945
Unrecognized retirement obligations, net of taxes of $(49), $(14), $(101) and $(87), respectively	152		150		304		242
Other comprehensive income (loss)	(19,989)		3,680		(31,109)		(6,160)
Comprehensive income (loss)	$	(22,041)	$	5,090	$	(141,488)	$	3,644

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

- 3 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~P. H.~~

GLATFELTER ~~COMPANY~~CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30			December 31
In thousands	2017			2016			In thousands	June 30, 2022		December 31, 2021
Assets							Assets
Cash and cash equivalents	$	84,287		$	55,444		Cash and cash equivalents	$	71,476	$	138,436
Accounts receivable, net		186,310			152,989		Accounts receivable, net	209,455		170,212
Inventories		256,764			249,669		Inventories	307,612		279,520
Prepaid expenses and other current assets		44,134			36,157		Prepaid expenses and other current assets	46,083		48,398
Total current assets		571,495			494,259		Total current assets	634,626		636,566

Plant, equipment and timberlands, net		856,017			775,898		Plant, equipment and timberlands, net	690,228		758,812
Goodwill		81,497			73,094		Goodwill	168,288		236,165
Intangible assets, net		59,199			56,259		Intangible assets, net	110,096		156,304
Other assets		128,586			121,749		Other assets	94,052		92,760
Total assets	$	1,696,794		$	1,521,259		Total assets	$	1,697,290	$	1,880,607

Liabilities and Shareholders' Equity							Liabilities and Shareholders' Equity
Current portion of long-term debt	$	11,122		$	8,961		Current portion of long-term debt	$	22,117	$	26,437
Short-term debt							Short-term debt	10,610		22,843
Accounts payable		168,848			164,345		Accounts payable	208,181		214,015
Dividends payable		5,675			5,455		Dividends payable	6,269		6,237
Environmental liabilities		20,000			25,000		Environmental liabilities	2,200		2,200
Other current liabilities		130,368			119,250		Other current liabilities	78,143		99,438
Total current liabilities		336,013			323,011		Total current liabilities	327,520		371,170

Long-term debt		459,025			363,647		Long-term debt	779,026		738,075
Deferred income taxes		65,597			54,995		Deferred income taxes	63,025		87,285
Other long-term liabilities		125,563			125,780		Other long-term liabilities	137,797		141,315
Total liabilities		986,198			867,433		Total liabilities	1,307,368		1,337,845

Commitments and contingencies		—			—		Commitments and contingencies	—		—

Shareholders’ equity							Shareholders’ equity
Common stock		544			544		Common stock	544		544
Capital in excess of par value		62,346			57,917		Capital in excess of par value	62,555		64,779
Retained earnings		963,853			962,884		Retained earnings	582,687		705,600
Accumulated other comprehensive loss		(153,751	)		(204,606	)	Accumulated other comprehensive loss	(111,413)		(80,304)
		872,992			816,739			534,373		690,619
Less cost of common stock in treasury		(162,396	)		(162,913	)	Less cost of common stock in treasury	(144,451)		(147,857)
Total shareholders’ equity		710,596			653,826		Total shareholders’ equity	389,922		542,762
Total liabilities and shareholders’ equity	$	1,696,794		$	1,521,259		Total liabilities and shareholders’ equity	$	1,697,290	$	1,880,607

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

- 4 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~P. H.~~

GLATFELTER ~~COMPANY~~CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Nine months ended
September 30

In thousands
2017

2016

Operating activities

Net income
$
17,994

$
37,734

Adjustments to reconcile to net cash provided by operations:

Depreciation, depletion and amortization

56,343

49,725

Amortization of debt issue costs

868

864

Pension expense, net of unfunded benefits paid

3,707

2,908

Deferred income tax provision (benefit)

4,282

(4,266
)
(Gains) losses on dispositions of plant, equipment and timberlands, net

(50
)

31

Share-based compensation

4,868

4,218

Change in operating assets and liabilities

Accounts receivable

(23,753
)

(12,927
)
Inventories

2,906

(17,897
)
Prepaid and other current assets

(7,185
)

(4,205
)
Accounts payable

(4,001
)

(9,662
)
Accruals and other current liabilities

(3,702
)

10,257

Other

519

2,657

Net cash provided by operating activities

52,796

59,437

Investing activities

Expenditures for purchases of plant, equipment and timberlands

(102,172
)

(116,948
)
Proceeds from disposals of plant, equipment and timberlands, net

217

55

Other

(100
)

(400
)
Net cash used by investing activities

(102,055
)

(117,293
)

Financing activities

Repayments of note offerings

—

(136
)
Net borrowings (repayments) under revolving credit facility

96,534

(642
)
Proceeds from term loans

—

19,428

Repayment of term loans

(6,947
)

(3,803
)
Payments of dividends

(16,805
)

(16,134
)
Proceeds from government grants

—

5,251

Payments related to share-based compensation awards and other

(128
)

(990
)
Net cash provided by financing activities

72,654

2,974

Effect of exchange rate changes on cash

5,448

330

Net increase (decrease) in cash and cash equivalents

28,843

(54,552
)
Cash and cash equivalents at the beginning of period

55,444

105,304

Cash and cash equivalents at the end of period
$
84,287

$
50,752

Supplemental cash flow information

Cash paid for:

Interest, net of amounts capitalized
$
8,719

$
7,376

Income taxes, net

7,567

11,609

Six months ended June 30,
In thousands 2022 2021
Operating activities
Net income (loss) $ (110,379) $ 9,804
Loss (income) from discontinued operations, net of taxes (371) 82
Adjustments to reconcile to net cash provided (used) by continuing operations:
Depreciation, depletion and amortization 34,936 28,466
Amortization of debt issue costs and original issue discount 963 309
Goodwill and other asset impairment charges 117,349 —
Inventory and accounts receivable charges 3,948 —
Deferred income tax expense (benefit) (22,186) 616
Gains on dispositions of plant, equipment and timberlands, net (2,888) (2,403)
Share-based compensation 2,419 2,537
Change in operating assets and liabilities:
Accounts receivable (52,936) (11,533)
Inventories (45,148) (21,870)
Prepaid and other current assets 3,472 3,377
Accounts payable 9,516 (4,542)
Accruals and other current liabilities (16,910) (5,841)
Other (1,320) 2,363
Net cash provided (used) by operating activities from continuing operations (79,535) 1,365
Investing activities
Expenditures for purchases of plant, equipment and timberlands (22,697) (11,211)
Proceeds from disposals of plant, equipment and timberlands, net 3,173 2,510
Acquisition, net of cash acquired 1,413 (172,331)
Other (25) (104)
Net cash used by investing activities from continuing operations (18,136) (181,136)
Financing activities
Proceeds from term loans — 11,725
Repayment of term loans (23,793) (12,159)
Net borrowings under revolving credit facility 72,176 178,077
Payments of borrowing costs (1,102) (35)
Payments of dividends (12,498) (11,991)
Payments related to share-based compensation awards and other (1,237) (479)
Net cash provided by financing activities from continuing operations 33,546 165,138
Effect of exchange rate changes on cash (3,587) (1,432)
Net decrease in cash, cash equivalents and restricted cash (67,712) (16,065)
Decrease in cash, cash equivalents and restricted cash from discontinued operations (231) (238)
Cash, cash equivalents and restricted cash at the beginning of period 148,814 111,665
Cash, cash equivalents and restricted cash at the end of period 80,871 95,362
Less: restricted cash in Prepaid expenses and other current assets (2,000) (2,000)
Less: restricted cash in Other assets (7,395) (9,197)
Cash and cash equivalents at the end of period $ 71,476 $ 84,165

Supplemental cash flow information
Cash paid for:
Interest $ 15,879 $ 2,920
Income taxes, net 14,699 7,098
The accompanying notes are an integral part of these condensed consolidated financial statements.

- 5 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~P. H.~~

GLATFELTER ~~COMPANY~~CORPORATION AND SUBSIDIARIES

STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)


In thousands	Common stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders’ Equity
Balance at April 1, 2022	$	544	$	61,873	$	591,012	$	(91,424)	$	(145,272)	$	416,733
Net loss					(2,052)						(2,052)
Other comprehensive loss							(19,989)				(19,989)
Comprehensive loss											(22,041)
Cash dividends declared ($0.14 per share)					(6,273)						(6,273)
Share-based compensation expense			1,510								1,510
Delivery of treasury shares:
RSUs and PSAs			(828)						821		(7)
Balance at June 30, 2022	$	544	$	62,555	$	582,687	$	(111,413)	$	(144,451)	$	389,922

Balance at April 1, 2021	$	544	$	62,576	$	725,756	$	(68,493)	$	(149,322)	$	571,061
Net income					1,410						1,410
Other comprehensive income							3,680				3,680
Comprehensive income											5,090
Cash dividends declared ($0.14 per share)					(6,232)						(6,232)
Share-based compensation expense			1,329								1,329
Delivery of treasury shares:
RSUs and PSAs			(1,109)						1,106		(3)

Balance at June 30, 2021	$	544	$	62,796	$	720,934	$	(64,813)	$	(148,216)	$	571,245

Balance at January 1, 2022	$	544	$	64,779	$	705,600	$	(80,304)	$	(147,857)	$	542,762
Net loss					(110,379)						(110,379)
Other comprehensive loss							(31,109)				(31,109)
Comprehensive loss											(141,488)
Cash dividends declared ($0.14 per share)					(12,534)						(12,534)
Share-based compensation expense			2,419								2,419
Delivery of treasury shares:
RSUs and PSAs			(4,643)						3,406		(1,237)
Balance at June 30, 2022	$	544	$	62,555	$	582,687	$	(111,413)	$	(144,451)	$	389,922

Balance at January 1, 2021	$	544	$	63,261	$	723,365	$	(58,653)	$	(150,585)	$	577,932
Net income					9,804						9,804
Other comprehensive loss							(6,160)				(6,160)
Comprehensive income											3,644
Cash dividends declared ($0.275 per share)					(12,235)						(12,235)
Share-based compensation expense			2,537								2,537
Delivery of treasury shares:
RSUs and PSAs			(3,002)						2,369		(633)

Balance at June 30, 2021	$	544	$	62,796	$	720,934	$	(64,813)	$	(148,216)	$	571,245

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

- 6 -

GLATFELTER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.	~~ORGANIZATION~~

~~P. H.~~

1.ORGANIZATION

Glatfelter ~~Company~~Corporation and subsidiaries ~~(“Glatfelter”~~("Glatfelter") is a ~~manufacturer~~leading global supplier of ~~specialty papers~~engineered materials with a strong focus on innovation and ~~fiber-based engineered materials.~~sustainability. Glatfelter's high quality, technology-driven, innovative, and customizable nonwovens solutions can be found in products that are Enhancing Everyday Life®. These include personal care and hygiene products, food and beverage filtration, critical cleaning products, medical and personal protection, packaging products, as well as home improvement and industrial applications. Headquartered in ~~York, PA, U.S.~~Charlotte, NC, the Company’s 2021 net sales were $1.1 billion with approximately 3,250 employees worldwide. Glatfelter’s operations ~~include facilities~~utilize a variety of manufacturing technologies including airlaid, wetlaid and spunlace with 16 manufacturing sites located in ~~Spring Grove, PA and Chillicothe and Fremont, OH. International operations include facilities in~~the United States, Canada, Germany, ~~France,~~ the United Kingdom, France, Spain, and the ~~Philippines, and~~Philippines. The Company has sales ~~and distribution~~ offices in ~~Russia~~all major geographies serving customers under the Glatfelter and ~~China.~~Sontara brands. Additional information about Glatfelter may be found at www.glatfelter.com. The terms “we,” “us,” “our,” “the Company,” or “Glatfelter,” refer to ~~P. H.~~ Glatfelter ~~Company~~Corporation 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~~

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~~2021 Annual Report on Form 10-K.

Discontinued Operations The results of operations and cash flows of our former Specialty Papers business have been classified as discontinued operations for all periods presented in the condensed consolidated statements of income.

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.

~~Recently Issued Accounting Pronouncements~~ ~~In March 2016,~~

Inventories Our inventories are stated at the ~~Financial Accounting Standards Board (“FASB”~~lower of cost or net realizable value. Raw materials, in-process and finished goods inventories are valued principally using the average-cost method.

3.ACQUISITION

On May 13, 2021, we completed the acquisition of all the outstanding equity interests in Georgia-Pacific Mt. Holly LLC, Georgia-Pacific's U.S. nonwovens business ("Mount Holly") ~~issued Accounting Standards Update (“ASU”) No. 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting~~ ~~designed to simplify certain aspects of accounting~~ for ~~share-~~

~~based awards. The new ASU requires entities to recognize as a component of income tax expense all excess tax benefits or deficiencies arising~~$170.9 million. Mount Holly’s results are reported prospectively 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 capitalacquisition date as part of ~~an “APIC pool.” The ASU also requires entities~~our Airlaid Materials segment.

On October 29, 2021, we completed the acquisition of PMM Holding (Luxembourg) AG, the owner of all of the equity interest in Jacob Holm, a global leading manufacturer of premium quality spunlace nonwoven fabrics for critical

- 7 -

cleaning, high-performance materials, personal care, hygiene and medical applications, for approximately $304.0 million for all outstanding shares and the extinguishment of Jacob Holm’s debt.

For the quarter ended June 30, 2022, we adjusted the preliminary purchase price allocation related to ~~exclude excess tax benefits~~the Jacob Holm acquisition by reducing preacquistion compensation incentive accruals by approximately $0.5 million, and ~~tax deficiencies from the calculation of common share equivalents for purposes of calculating earnings per share. In addition, as permitted~~reducing goodwill by the ~~ASU, we have elected~~same amount, based on incentive payouts made during the quarter.

The following table sets forth information related to ~~account~~the consideration exchanged 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.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards.~~ each acquisition.


In thousands	Mount Holly		Jacob Holm		Total
Total consideration	$	170,919	$	303,952	$	474,871
Less: Debt repaid	—		(148,000)		(148,000)
Cash consideration	$	170,919	$	155,952	$	326,871

The new standard is required to 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 judgments and changes in judgments. The guidance allows for both retrospective and modified retrospective methods of adoption. We will apply the modified retrospective method of adoption. We continue to perform our assessment of the impact of the ASU 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. We have completed our review of a substantial portion of our contracts and we do not expect this ASU will have a significant impact on the timing or amount of revenue recognition, our results of operations or our financial position.

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ ~~(“ASU 2017-07”). The update requires entities to present the service cost component of the net periodic benefit cost~~preliminary purchase price allocations set forth in the ~~same income statement line item~~following table are based on all information available to us at the present time and is subject to change. With respect to the Mount Holly acquisition, the purchase price allocation is complete. However, the Jacob Holm purchase price allocation is preliminary as ~~other employee compensation costs arising from services rendered during the period. All other components are to be presented below the determination of~~

~~- 6 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

operating income. Entities will be required to disclose the line(s) used to present the other components 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 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. Wewe are in the process of ~~assessing~~finalizing our analysis of certain matters, primarily related to the ~~impact this standard will have~~assessment of potential tax liabilities associated with the acquired entities. In the event new information becomes available, the measurement of the amount of goodwill reflected may be affected.


In thousands	Mount Holly		Jacob Holm		Total
Assets
Cash and cash equivalents	$	—	$	11,426	$	11,426
Accounts receivable	11,599		30,271		41,870
Inventory	7,031		45,340		52,371
Prepaid and other current assets	11		6,727		6,738
Plant, equipment and timberlands	100,498		158,612		259,110
Intangible assets	20,000		70,240		90,240
Goodwill	35,793		48,355		84,148
Other assets	8,041		26,929		34,970
Total assets	182,973		397,900		580,873
Liabilities
Short-term debt	0		14,081		14,081
Accounts payable	2,321		25,264		27,585
Other current liabilities	1,868		21,263		23,131
Other long-term liabilities	7,865		33,340		41,205
Total liabilities	12,054		93,948		106,002
Total preliminary purchase price	$	170,919	$	303,952	$	474,871

The preliminary purchase price allocations set forth in the table above are based on all information available to us at the present time and ~~expect~~is subject to ~~follow a modified retrospective method provided~~change. In the event new information becomes available, the measurement of the amount of goodwill reflected may be affected. For purposes of allocating the total purchase price, assets acquired and liabilities assumed are recorded at their estimated fair market values. The allocations set forth above are based on management’s estimate of the fair value using valuation techniques such as discounted cash flow models, appraisals and similar methodologies.

The following table sets forth information related to amounts of net sales and operating income (loss) of the acquired businesses included in our results of operations in the three and six months ended 2022:

- 8 -


	Three months ended June 30,		Six months ended June 30,
In thousands	2022		2022
Mount Holly
Net sales	$	26,300	$	53,604
Operating income	1,911		4,635
Jacob Holm
Net sales	96,917		193,304
Operating loss	(1,808)		(3,380)

The following table summarizes annual unaudited pro forma financial information as if the acquisition occurred as of January 1, 2021:


(unaudited)	Three months ended June 30,		Six months ended June 30,
In thousands, except per share	2021		2021
Pro forma
Net sales	$	347,895	$	690,448
Income (loss) from continuing operations	(10,546)		12,892

The pro forma financial information set forth above for the three and six months ended June 30, 2021 includes $3.7 million and $4.3 million, respectively, of one-time costs directly related to the Mount Holly transaction. Such costs are presented under the ~~standard.~~

~~In August 2017, the FASB issued ASU 2017-12, "Derivatives~~caption “Selling, general and ~~Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities~~" (“ASU 2017-12”), which simplifies the application of hedge accounting and more closely aligns hedge accounting with an entity’s risk management strategies. ASU 2017-12 also amends the manner in which hedge effectiveness may be performed and changes the presentation of hedge ineffectivenessadministrative expenses” in the financial statements. ASU 2017-12 is effective for us beginning January 1, 2019, with early adoption permitted. ASU 2017-12 requires a cumulative-effect adjustment for certain items upon adoption. We are currently evaluatingaccompanying condensed consolidated statements of income.

- 9 -

4.REVENUE

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


	Three months ended June 30,				Six months ended June 30,
In thousands	2022		2021		2022		2021
Revenue by product category
Composite Fibers
Food & beverage	$	74,465	$	73,535	$	149,688	$	150,488
Wallcovering	9,902		24,182		25,733		46,811
Technical specialties	18,603		24,708		41,739		48,203
Composite laminates	11,570		10,549		22,867		20,358
Metallized	8,798		8,624		19,140		16,987

	123,338		141,598		259,167		282,847
Airlaid Materials
Feminine hygiene	56,943		47,184		116,255		94,825
Specialty wipes	37,908		21,371		75,003		37,287
Tabletop	26,771		17,188		57,518		24,051
Food pads	3,475		2,440		6,951		4,797
Home care	5,513		6,339		11,798		10,262
Adult incontinence	6,260		5,083		12,989		9,761
Other	6,838		3,708		12,658		6,755
	143,708		103,313		293,172		187,738
Spunlace
Consumer wipes	39,549		—		85,706		—
Critical cleaning	27,783		—		52,061		—
Health care	15,434		—		29,039		—
Hygiene	6,233		—		12,146		—
High performance	4,018		—		8,130		—
Beauty care	3,900		—		6,222		—

	96,917		—		193,304		—
Total	$	363,963	$	244,911	$	745,643	$	470,585

Revenue by geography
Composite Fibers
Europe, Middle East and Africa	$	59,868	$	85,796	$	133,472	$	172,741
Americas	42,077		35,369		80,053		67,210
Asia Pacific	21,393		20,433		45,642		42,896
	123,338		141,598		259,167		282,847
Airlaid Materials
Europe, Middle East and Africa	63,355		49,552		126,491		94,624
Americas	77,608		52,031		158,521		89,516
Asia Pacific	2,745		1,730		8,160		3,598
	143,708		103,313		293,172		187,738
Spunlace
Europe, Middle East and Africa	30,245		—		60,070		—
Americas	54,985		—		110,469		—
Asia Pacific	11,687		—		22,765		—

	96,917		—		193,304		—
Total	$	363,963	$	244,911	$	745,643	$	470,585

- 10 -

5.GAINS ON DISPOSITION OF PLANT, EQUIPMENT AND TIMBERLANDS

The following table sets forth sales of timberlands and other assets completed during the ~~impact the adoption~~first six months of ~~ASU 2017-12 will have on our consolidated financial statements.~~

~~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. Under the new guidance, an allowance is recognized based on an estimate of expected credit losses. This standard is effective for us in2022 and 2021:


Dollars in thousands	Acres	Proceeds		Gain (loss)
2022
Timberlands	790	$	3,130	$	2,962
Other	n/a	43		(74)
Total		$	3,173	$	2,888

2021
Timberlands	936	$	2,510	$	2,403
Other	n/a	—		—
Total		$	2,510	$	2,403

6.GOODWILL AND OTHER ASSET IMPAIRMENT

During the first quarter of ~~2020~~2022, in connection with an assessment of potential impairment of long-lived and ~~must be adopted using~~indefinite lived intangible assets stemming from the compounding impacts resulting from the Russia/Ukraine military conflict and related sanctions, we recorded a ~~modified retrospective transition approach. We~~$117.3 million non-cash asset impairment charge related to Composite Fibers' Dresden facility and an impairment of Composite Fibers' goodwill. Dresden is a single-line facility that produces wallcover base paper, the majority of which is sold into the Russian and Ukrainian markets. As a direct result of the economic impacts from the conflict, and the disruptions in the underlying financial systems and prohibition of the export of sanctioned wallcover base paper to Russia, management expects a significant reduction in wallcover revenues and associated cash flows for the foreseeable future. In addition, the conflict is expected to significantly impact energy prices and also impact other Composite Fibers products that are ~~currently assessing~~also subject to export sanctions into Russia. Accordingly, a charge was recorded to reduce the ~~impact this standard may have on our results~~carrying value of ~~operations~~the Dresden fixed assets and ~~financial position.~~

intangible assets (technological know-how, customer relationships, and an indefinite-lived trade name), along with Composite Fibers’ goodwill to fair value. The following table summarizes the impairment charge recorded in the accompanying condensed consolidated statements of income under the caption “Goodwill and other asset impairment charges:”

3.	~~EARNINGS PER SHARE~~
In thousands		Six months ended June 30,
Machinery and equipment		$	27,619
Technological know-how		18,443
Customer relationships		11,695
Tradename		3,530
Goodwill		56,062
Total		$	117,349

The fair value of the underlying assets was estimated using discounted cash flow models, independent appraisals and similar methods, all of which are Level 3 fair value classification.

- 11 -

7.DISCONTINUED OPERATIONS

For both the three and six months ended June 30, 2022, we recognized income of $0.4 million which primarily represents the successful appeal of a sales and use tax audit partially offset by legal costs. For 2021, the $0.1 million loss is primarily related to legal costs.

The following table sets forth a summary of cash flows from discontinued operations which is included in the condensed consolidated statements of cash flows:


	Six months ended June 30,
In thousands	2022		2021
Net cash used by operating activities	$	(231)	$	(238)
Net cash used by investing activities	—		—
Net cash provided by financing activities	—		—
Change in cash and cash equivalents from discontinued operations	$	(231)	$	(238)

8.EARNINGS PER SHARE

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

from continuing operations:

Three months ended
September 30

In thousands, except per share
2017

2016

Net income
$
12,105

$
19,601

Weighted average common shares

outstanding used in basic EPS

43,617

43,576

Common shares issuable upon

exercise of dilutive stock options

and PSAs / RSUs

565

557

Weighted average common shares

outstanding and common share

equivalents used in diluted EPS

44,182

44,133

Earnings per share

Basic
$
0.28

$
0.45

Diluted

0.27

0.44

Nine months ended
September 30

In thousands, except per share
2017

2016

Net income
$
17,994

$
37,734

Weighted average common shares

outstanding used in basic EPS

43,601

43,552

Common shares issuable upon

exercise of dilutive stock options

and PSAs / RSUs

809

507

Weighted average common shares

outstanding and common share

equivalents used in diluted EPS

44,410

44,059

Earnings per share

Basic
$
0.41

$
0.87

Diluted

0.41

0.86


	Three months ended June 30,				Six months ended June 30,
In thousands, except per share	2022		2021		2022		2021
Income (loss) from continuing operations	$	(2,460)	$	1,492	$	(110,750)	$	9,886

Weighted average common shares outstanding used in basic EPS	44,841		44,563		44,775		44,507
Common shares issuable upon exercise of dilutive stock options and PSAs / RSUs	—		309		—		358
Weighted average common shares outstanding and common share equivalents used in diluted EPS	44,841		44,872		44,775		44,865

Earnings (loss) per share from continuing operations
Basic	$	(0.05)	$	0.03	$	(2.47)	$	0.22
Diluted	(0.05)		0.03		(2.47)		0.22

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

September 30

In thousands
2017

2016

Three months ended

967

681

Nine months ended

593

683


	Three months ended June 30,		Six months ended June 30,
In thousands	2022	2021	2022	2021
Potential common shares	934	1,082	934	1,082

- 12 -

~~- 7 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

4.	~~ACCUMULATED OTHER~~ ~~COMPREHENSIVE INCOME~~

9.ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table sets forth details of the changes in accumulated other comprehensive income (losses) for the three months and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016.~~

2021.

In thousands
Currency translation adjustments

Unrealized gain (loss) on cash flow hedges

Change in pensions

Change in other postretirement defined benefit plans

Total

Balance at July 1, 2017
$
(66,879
)

$
(3,097
)

$
(105,824
)

$
4,719

$
(171,081
)
Other comprehensive income
   before reclassifications  (net of tax)

16,559

(1,533
)

—

—

15,026

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

—

19

2,424

(139
)

2,304

Net current period other comprehensive
   income (loss)

16,559

(1,514
)

2,424

(139
)

17,330

Balance at September 30, 2017
$
(50,320
)

$
(4,611
)

$
(103,400
)

$
4,580

$
(153,751
)
Balance at July 1, 2016
$
(74,486
)

$
785

$
(115,786
)

$
3,204

$
(186,283
)
Other comprehensive income
   before reclassifications  (net of tax)

(1,530
)

(1,195
)

—

—

(2,725
)
Amounts reclassified from accumulated
   other comprehensive income  (net of tax)

—

337

2,464

(145
)

2,656

Net current period other comprehensive
   income (loss)

(1,530
)

(858
)

2,464

(145
)

(69
)
Balance at September 30, 2016
$
(76,016
)

$
(73
)

$
(113,322
)

$
3,059

$
(186,352
)

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)

50,128

(4,868
)

—

1

45,261

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

—

(1,243
)

7,256

(419
)

5,594

Net current period other comprehensive
   income (loss)

50,128

(6,111
)

7,256

(418
)

50,855

Balance at September 30, 2017
$
(50,320
)

$
(4,611
)

$
(103,400
)

$
4,580

$
(153,751
)
Balance at January 1, 2016
$
(73,041
)

$
(225
)

$
(120,714
)

$
3,494

$
(190,486
)
Other comprehensive income
   before reclassifications  (net of tax)

(2,975
)

(106
)

—

—

(3,081
)
Amounts reclassified from accumulated
   other comprehensive income  (net of tax)

—

258

7,392

(435
)

7,215

Net current period other comprehensive
   income (loss)

(2,975
)

152

7,392

(435
)

4,134

Balance at September 30, 2016
$
(76,016
)

$
(73
)

$
(113,322
)

$
3,059

$
(186,352
)


In thousands	Currency translation adjustments		Unrealized gain (loss) on derivatives		Change in pensions		Change in other postretirement defined benefit plans		Total

Balance at April 1, 2022	$	(80,672)	$	1,631	$	(11,356)	$	(1,027)	$	(91,424)
Other comprehensive income (loss) before reclassifications (net of tax)	(28,675)		9,760		—		—		(18,915)
Amounts reclassified from accumulated other comprehensive income (net of tax)	—		(1,226)		126		26		(1,074)
Net current period other comprehensive income (loss)	(28,675)		8,534		126		26		(19,989)
Balance at June 30, 2022	$	(109,347)	$	10,165	$	(11,230)	$	(1,001)	$	(111,413)

Balance at April 1, 2021	$	(55,718)	$	765	$	(12,706)	$	(834)	$	(68,493)
Other comprehensive income (loss) before reclassifications (net of tax)	3,846		(341)		—		—		3,505
Amounts reclassified from accumulated other comprehensive income (net of tax)	—		25		197		(47)		175
Net current period other comprehensive income (loss)	3,846		(316)		197		(47)		3,680
Balance at June 30, 2021	$	(51,872)	$	449	$	(12,509)	$	(881)	$	(64,813)

Balance at January 1, 2022	$	(69,757)	$	1,988	$	(11,482)	$	(1,053)	$	(80,304)
Other comprehensive income (loss) before reclassifications (net of tax)	(39,590)		10,143		—		—		(29,447)
Amounts reclassified from accumulated other comprehensive income (net of tax)	—		(1,966)		252		52		(1,662)
Net current period other comprehensive income (loss)	(39,590)		8,177		252		52		(31,109)
Balance at June 30, 2022	$	(109,347)	$	10,165	$	(11,230)	$	(1,001)	$	(111,413)

Balance at January 1, 2021	$	(42,525)	$	(2,496)	$	(12,844)	$	(788)	$	(58,653)
Other comprehensive income (loss) before reclassifications (net of tax)	(9,347)		2,933		—		—		(6,414)
Amounts reclassified from accumulated other comprehensive income (net of tax)	—		12		335		(93)		254
Net current period other comprehensive income (loss)	(9,347)		2,945		335		(93)		(6,160)
Balance at June 30, 2021	$	(51,872)	$	449	$	(12,509)	$	(881)	$	(64,813)

- 813 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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

Three months ended September 30

Nine months ended
September 30

In thousands

2017

2016

2017

2016

Description

Line Item in Statements of Income
Cash flow hedges (Note 12)

(Gains) losses on cash flow hedges

$
29

$
347

$
(1,687
)

$
264

Costs of products sold
Tax expense (benefit)

(10
)

(10
)

444

(6
)

Income tax provision
Net of tax

19

337

(1,243
)

258

Retirement plan obligations (Note 7)

Amortization of deferred benefit pension plans

Prior service costs

532

506

1,592

1,519

Costs of products sold

176

168

528

504

Selling, general and administrative
Actuarial losses

2,290

2,450

6,852

7,350

Costs of products sold

788

843

2,359

2,530

Selling, general and administrative

3,786

3,967

11,331

11,903

Tax benefit

(1,362
)

(1,503
)

(4,075
)

(4,511
)

Income tax provision
Net of tax

2,424

2,464

7,256

7,392

Amortization of deferred benefit other plans

Prior service costs

(37
)

(37
)

(112
)

(112
)

Costs of products sold

(8
)

(8
)

(24
)

(24
)

Selling, general and administrative
Actuarial losses

(77
)

(156
)

(233
)

(467
)

Costs of products sold

(17
)

(33
)

(50
)

(100
)

Selling, general and administrative

(139
)

(234
)

(419
)

(703
)

Tax expense

—

89

—

268

Income tax provision
Net of tax

(139
)

(145
)

(419
)

(435
)

Total reclassifications, net of tax

$
2,304

$
2,656

$
5,594

$
7,215


	Three months ended June 30,				Six months ended June 30,
In thousands	2022		2021		2022		2021
Description									Line Item in Statements of Income
Cash flow hedges (Note 18)
Loss (gains) on cash flow hedges	$	(1,697)	$	33	$	(2,769)	$	57	Costs of products sold
Tax expense (benefit)	480		(22)		792		(73)		Income tax provision
Net of tax	(1,217)		11		(1,977)		(16)

Loss (gains) on interest rate swaps	(9)		22		11		43		Interest expense
Tax benefit	—		(8)		—		(15)		Income tax provision
Net of tax	(9)		14		11		28
Total cash flow hedges	(1,226)		25		(1,966)		12

Retirement plan obligations (Note 11)
Amortization of deferred benefit pension plans
Prior service costs	11		12		22		24		Other, net
Actuarial losses	164		199		331		398		Other, net
	175		211		353		422
Tax benefit	(49)		(14)		(101)		(87)		Income tax provision
Net of tax	126		197		252		335
Amortization of deferred benefit other plans
Prior service costs (credits)	26		(59)		52		(117)		Other, net
Actuarial losses	—		12		—		24		Other, net
	26		(47)		52		(93)
Tax expense	—		—		—		—		Income tax provision
Net of tax	26		(47)		52		(93)
Total reclassifications, net of tax	$	(1,074)	$	175	$	(1,662)	$	254

- 914 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

5.~~INCO~~ME

10.STOCK-BASED COMPENSATION

On May 5, 2022, upon Board and shareholder approval, the Glatfelter Corporation 2022 Long-Term Incentive Plan became effective and is a successor plan to the P. H. Glatfelter Amended and Restated Long-Term Incentive Plan (collectively, the “LTIP”). The LTIP continues to provide 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. Furthermore, the LTIP increases the number shares previously available for issuance by 1,400,000 shares. As of June 30, 2022, there were 2,670,523 shares of common stock available for future issuance under the LTIP.

Pursuant to terms of the LTIP, we have issued to eligible participants restricted stock units (“RSUs”), performance share awards (“PSAs”) and stock-only stock appreciation rights.

In 2022, we issued awards to employees of RSUs and PSAs under our LTIP. In 2022, 40% of fair value of the awards granted were RSUs, which vest based on the passage of time, generally over a graded three-year period or, in certain instances, the RSUs were cliff vesting after one or three years. In addition, some awards vest over one year or less depending upon the retirement eligibility of the grantees in the LTIP. The remaining 60% of the fair value of the awards granted in 2022 were PSAs. The PSAs awarded in 2022 vest based on either the achievement of cumulative financial performance targets covering a two-year period or based on the three-year total shareholder return relative to a broad market index. The performance measures include a minimum, target and maximum performance level providing the grantees an opportunity to receive more or less shares than targeted depending on actual financial performance. For RSUs, the grant date fair value of the awards, 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.

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


Units	2022	2021
Balance at January 1,	1,111,382	1,071,652
Granted	718,668	352,763
Forfeited	(215,656)	(98,012)
Shares delivered	(305,739)	(196,637)
Balance at June 30,	1,308,655	1,129,766

The amount granted in 2022 and 2021 includes 341,429 and 162,480, respectively, of PSAs exclusive of reinvested dividends.

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


	June 30,
In thousands	2022		2021
Three months ended	$	1,509	$	1,329
Six months ended	$	2,418	$	2,537

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 1 share of common stock at the time of exercising the SOSAR and the exercise price. All SOSARs are vested and have a term of ten years. No SOSARs were awarded since 2016.

The following table sets forth information related to outstanding SOSARs:

- 15 -


	2022			2021
	Shares	Wtd Avg Exercise Price		Shares	Wtd Avg Exercise Price
Outstanding at January 1,	1,079,113	$	20.42	1,082,413	$	20.40
Granted	—	—		—	—
Exercised	—	—		—	—
Canceled / forfeited	(145,440)	15.61		—	—
Outstanding at June 30,	933,673	$	21.17	1,082,413	$	20.40

11.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 included in continuing operations.


	Three months ended June 30,				Six months ended June 30,
In thousands	2022		2021		2022		2021
Pension Benefits
Service cost	$	—	$	—	$	—	$	—
Interest cost	179		273		414		523
Amortization of prior service cost	11		12		22		24
Amortization of actuarial loss	164		199		331		398
Total net periodic benefit expense	$	354	$	484	$	767	$	945

Other Benefits
Service cost	$	—	$	7	$	—	$	14
Interest cost	32		32		65		64
Amortization of prior service cost (credit)	26		(59)		52		(117)
Amortization of actuarial loss	—		12		—		24
Total net periodic benefit expense (income)	$	58	$	(8)	$	117	$	(15)

12.INCOME TAXES

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

For the six months ended June 30, 2022, we had pretax loss from continuing operations of $124.2 million and income tax benefit of $13.5 million. The income tax benefit includes $19.2 million of deferred tax benefit associated with the asset impairment charge and related bad debt and inventory reserves (refer to Note 6). Absent these charges, the Company had pre-tax loss of $2.9 million and income tax expense of $5.7 million, which was unfavorably impacted by the jurisdictional mix of pretax results among the Company and its subsidiaries, primarily by the pretax losses in the U.S. which generated no tax benefit.

For the six months ended June 30, 2022, we recorded an increase in our federal valuation allowance of $4.5 million against our net deferred tax assets. In assessing the need for a valuation allowance, management considers all available positive and negative evidence in its analysis. Based on this analysis, we recorded a valuation allowance for the portion of deferred tax assets where the weight of the evidence indicated it is more likely than not that the deferred assets will not be realized.

As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, we had ~~$17.1~~$56.8 million and ~~$14.2~~$55.7 million, respectively, of gross unrecognized tax benefits. As of ~~September~~June 30, ~~2017,~~2022, if such benefits were to be recognized, approximately ~~$11.5~~$53.0 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~~	~~2014 - 2016~~	~~N/A~~
~~State~~	~~2012 - 2016~~	~~2013 -2014~~
~~Canada~~⁽¹⁾	~~2010-2013; 2016~~	~~2014 - 2015~~
~~Germany~~⁽¹⁾	~~2016~~	~~2012 - 2015~~
~~France~~	~~2014 - 2016~~	~~2011 - 2012~~
~~United Kingdom~~	~~2015 - 2016~~	~~N/A~~
~~Philippines~~	~~2015 -2016~~	~~N/A~~

~~(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

- 16 -

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 ~~$0.7~~$1.7 million. ~~Substantially all of this range relates to tax positions taken in the United Kingdom and the U.S.~~

We recognize interest and penalties related to uncertain taxpositions as income tax expense.

The following table summarizes information included in continuing operations related to interest ~~and penalties~~ on uncertain tax positions:

Nine months ended
September 30

In millions
2017

2016

Interest expense (income)
$
0.3

$
0.2

Penalties

—

—


	Six months ended June 30,
In millions	2022		2021
Interest expense	$	0.8	$	0.4

September 30

December 31

2017

2016

Accrued interest payable
$
0.8

$
0.5


	June 30, 2022		December 31, 2021
Accrued interest payable	$	4.7	$	3.9
Accrued penalties	3.0		3.0

6.	~~STOCK-BASED COMPENSATION~~

~~The P. H. Glatfelter Amended and Restated Long Term Incentive Plan (the “LTIP”) provides for the issuance~~

13.INVENTORIES

Inventories, net 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 RSUsreserves, 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. For both RSUs and PSAs, the grant date fair value of the awards, which is equal to the closing price per common share on the date of the award, is used to determine the amount of expense to be recognized over the applicable service period. Settlement of RSUs and PSAs will be made in shares of our common stock currently held in treasury.

as follows:

~~- 10 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~


In thousands	June 30, 2022		December 31, 2021
Raw materials	$	100,129	$	87,448
In-process and finished	153,224		139,058
Supplies	54,259		53,014
Total	$	307,612	$	279,520

14.GOODWILL AND OTHER INTANGIBLE ASSETS

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

Units
2017

2016

Balance at January 1,

679,038

674,523

Granted

370,458

298,832

Forfeited

(93,045
)

(146,327
)
Shares delivered

(26,352
)

(149,975
)
Balance at September 30,

930,099

677,053

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

The following table sets forth ~~aggregate RSU~~changes in the amounts of goodwill and ~~PSA compensation expense~~other intangible assets recorded by each of our segments during the periods indicated:

- 17 -


In thousands	December 31, 2021		Impairment		Purchase price allocation adjustment		Translation		June 30, 2022
Goodwill
Composite Fibers	$	78,438	$	(56,062)	$	—	$	(1,968)	$	20,408
Airlaid Materials	109,486		—		—		(6,105)		103,381
Spunlace	48,241		—		(500)		(3,242)		44,499
Total	$	236,165	$	(56,062)	$	(500)	$	(11,315)	$	168,288
Other Intangible Assets	December 31, 2021		Impairment		Amortization		Translation		June 30, 2022
Composite Fibers
Tradename - non-amortizing	$	3,601	$	(3,530)	$	—	$	(71)	$	—

Technology and related	38,614		(37,823)		—		(791)		—
Accumulated amortization	(19,224)		19,380		(424)		268		—
Net	19,390		(18,443)		(424)		(523)		—

Customer relationships and related	34,739		(34,046)		—		(693)		—
Accumulated amortization	(22,104)		22,351		(587)		340		—
Net	12,635		(11,695)		(587)		(353)		—

Airlaid Materials
Tradename	4,485		—		—		(1,133)		3,352
Accumulated amortization	(603)		—		(88)		63		(628)
Net	3,882		—		(88)		(1,070)		2,724

Technology and related	17,825		—		—		(756)		17,069
Accumulated amortization	(4,552)		—		(587)		387		(4,752)
Net	13,273		—		(587)		(369)		12,317

Customer relationships and related	44,585				—		(2,038)		42,547
Accumulated amortization	(10,512)		—		(1,864)		895		(11,481)
Net	34,073		—		(1,864)		(1,143)		31,066

Spunlace
Products and Tradenames	27,623				—		(1,638)		25,985
Accumulated amortization	(253)		—		(801)		343		(711)
Net	27,370		—		(801)		(1,295)		25,274

Technology and related	14,547				—		(862)		13,685
Accumulated amortization	(202)		—		(676)		335		(543)
Net	14,345		—		(676)		(527)		13,142

Customer relationships and related	28,003				—		(1,660)		26,343
Accumulated amortization	(268)		—		(846)		344		(770)
Net	27,735		—		(846)		(1,316)		25,573

Total intangibles	214,022		(75,399)		—		(9,642)		128,981
Total accumulated amortization	(57,718)		41,731		(5,873)		2,975		(18,885)
Net intangibles	$	156,304	$	(33,668)	$	(5,873)	$	(6,667)	$	110,096

- 18 -

15.LEASES

We enter into a variety of arrangements in which we are the lessee for the ~~periods indicated:~~

use of automobiles, forklifts and other production equipment, production facilities, warehouses, office space and land. We determine if an arrangement contains a lease at inception. All our lease arrangements are operating leases and are recorded in the condensed consolidated balance sheet under the caption “Other assets” and the lease obligation is under “Other current liabilities” and “Other long-term liabilities.” We do not have any finance leases.

September 30

In thousands
2017

2016

Three months ended
$
1,658

$
765

Nine months ended

3,746

2,167

~~Stock Only Stock Appreciation Rights~~Operating lease right of use (“~~SOSARs”~~ROU”) ~~Under terms~~ assets and operating lease liabilities are recognized based on the present value of the ~~SOSAR, a recipient receives~~future minimum lease payments over the ~~right to a payment in~~lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the ~~form of shares of common stock equal to the difference, if any, in the fair market value of one share of common stock~~lease commencement date, less lease incentives received. We use our incremental borrowing rate based on information available at the ~~time~~commencement date in determining the lease liabilities as our leases generally do not provide an implicit rate. For purposes of ~~exercising~~recording the ~~SOSAR and~~lease arrangement, the ~~exercise price. The SOSARs vest ratably over a three year period and have a~~ term of ~~ten years.~~

~~No SOSARs were granted in 2017.~~ lease may include options to extend or terminate when we are reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

The following table sets forth information related to ~~outstanding SOSARS for~~our leases as of the ~~nine months ended September 30, 2017 and 2016;~~

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

(61,190
)

10.70

Canceled / forfeited

(17,630
)

18.46

(143,932
)

17.87

Outstanding at September 30,

2,685,936

$
17.67

2,738,545

$
17.64

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

periods indicated.

Dollars in thousands June 30,
2022 December 31,
2021
Right of use asset $ 26,275 $ 27,186
Weighted average discount rate 2.97 % 3.31 %
Weighted average remaining maturity (years)
21.2 26.0

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


	September 30					Six months ended June 30,
In thousands	2017		2016		In thousands	2022		2021
Three months ended	$	254	$	650	Three months ended	$	1,499	$	1,452
Nine months ended		1,122		2,051
Six months ended					Six months ended	$	2,920	$	2,799

7.	~~RETIREMENT PLANS AND OTHER POST-RETIREMENT BENEFITS~~

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

Three months ended
September 30
In thousands

2017

2016

Pension Benefits

Service cost

$
2,695

$
2,614

Interest cost

5,929

6,120

Expected return on plan assets

(10,749
)

(11,331
)

Amortization of prior service
   cost

708

674

Amortization of unrecognized
   loss

3,078

3,293

Total net periodic benefit cost

$
1,661

$
1,370

Other Benefits

Service cost

$
289

$
287

Interest cost

499

498

Amortization of prior
   service credit

(45
)

(45
)

Amortization of
   actuarial gain

(94
)

(189
)

Total net periodic
   benefit cost

$
649

$
551

Nine months ended
September 30

In thousands

2017

2016

Pension Benefits

Service cost

$
8,065

$
7,855

Interest cost

17,825

18,360

Expected return on plan assets

(32,246
)

(33,992
)
Amortization of prior service
   cost

2,120

2,023

Amortization of unrecognized
   loss

9,211

9,880

Total net periodic benefit cost

$
4,975

$
4,126

Other Benefits

Service cost

$
868

$
860

Interest cost

1,497

1,494

Amortization of prior
   service credit

(136
)

(136
)
Amortization of
   actuarial gain

(283
)

(567
)
Total net periodic
   benefit cost

$
1,946

$
1,651

~~- 11 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

8.	~~INVENTORIES~~

~~Inventories, net of reserves, were as follows:~~

September 30

December 31

In thousands
2017

2016

Raw materials
$
64,088

$
66,359

In-process and finished

117,490

112,507

Supplies

75,186

70,803

Total
$
256,764

$
249,669

9.	~~CAPITALIZED INTEREST~~

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

Three months ended
September 30

Nine months ended
September 30

In thousands

2017

2016

2017

2016

Interest cost incurred

$
5,079

$
4,334

$
14,556

$
12,962

Interest capitalized

532

439

1,525

998

Interest expense

$
4,547

$
3,895

$
13,031

$
11,964

~~Capitalized interest primarily relates to spending for Specialty Papers’ environmental compliance and~~required remaining future minimum lease payments during the ~~Airlaid capacity expansion projects.~~

~~10.~~

~~LONG-TERM DEBT~~

years indicated:


In thousands
2022	$	2,988
2023	3,606
2024	2,742
2025	2,350
2026	2,270
Thereafter	22,416

- 19 -

16.LONG-TERM DEBT

Long-term debt is summarized as follows:

September 30

December 31

In thousands
2017

2016

Revolving credit facility, due Mar. 2020
$
158,298

$
61,595

5.375% Notes, due Oct. 2020

250,000

250,000

2.40% Term Loan, due Jun. 2022

8,012

8,282

2.05% Term Loan, due Mar. 2023

34,659

35,163

1.30% Term Loan, due Jun. 2023

9,698

9,788

1.55% Term Loan, due Sep. 2025

11,574

10,333

Total long-term debt

472,241

375,161

Less current portion

(11,122
)

(8,961
)
Unamortized deferred issuance costs

(2,094
)

(2,553
)
Long-term debt, net of current portion
$
459,025

$
363,647


In thousands	June 30, 2022		December 31, 2021
Revolving credit facility, due Sep 2026	$	81,161	$	10,000
4.750% Senior Notes, due Oct 2029	500,000		500,000
Term loan, due Feb 2024	194,237		218,026
2.40% Term Loan, due Jun 2022	—		809
2.05% Term Loan, due Mar 2023	4,158		7,556
1.30% Term Loan, due Jun 2023	1,484		2,427
1.55% Term Loan, due Sep 2025	4,137		5,204
1.10% Term Loan, due Mar 2024	6,610		9,267
0.57% Term Loan, due Jul 2023	20,774		22,652
Total long-term debt	812,561		775,941
Less current portion	(22,117)		(26,437)
Unamortized deferred issuance costs	(11,418)		(11,429)
Long-term debt, net of current portion	$	779,026	$	738,075

On ~~March 12, 2015,~~September 2, 2021, we ~~amended our revolving credit~~entered into a restatement agreement ~~with~~as part of a ~~consortium of banks (the “Revolving Credit Facility”) which increased the amount available for borrowing to~~Fourth Amended and Restated $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~~and a €220.0 million Term Loan (collectively, the “Credit Agreement”) which matures September 6, 2026 and February 8, 2024, respectively.

On May 9, 2022, we entered into an amendment to the Credit Agreement. The amendment: i) increases the permitted maximum ratio of consolidated total net debt to consolidated adjusted EBITDA (“leverage ratio”); ii) increases the maximum interest rate borrowing margin to be applied to the applicable index by 25 basis points; and iii) pledges as collateral substantially all domestic assets to secure obligations owed under the Credit Agreement. As amended, we are obligated to maintain a maximum ratio of consolidated total net debt to consolidated adjusted EBITDA of 6.75 to 1.0 until the quarter ended December 31, 2023, after which the maximum leverage ratio steps down to 4.0 to 1.0.

The Credit Agreement also contains covenants requiring a minimum interest coverage ratio and provisions limiting our ability to, among other things, ~~change the definition of earnings before interest, taxes, depreciation~~(i) incur debt 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;guaranty obligations, (ii) incur liens, (iii) make loans, advances, investments and acquisitions, (iv) merge or ~~iii) the daily Euro-rate plus 100 basis points plus an applicable spread over either i), ii)~~liquidate, (v) sell or iii) ranging from 12.5 basis points to 100 basis points based on the Company’s leverage ratio and its corporate credit ratings determined by Standard & Poor’s Rating Services and Moody’s Investor Service, Inc. (the “Corporate Credit Rating”); or (b) the daily Euro-rate plus an applicable margin ranging from 112.5 basis points to 200 basis points based on the Company’s leverage ratio and the Corporate Credit Rating. For non-US dollar denominated borrowings, interest is based on (b) above.

~~The Revolving Credit Facility contains a number of customary covenants for financings of this type that, among other things, restrict our ability to dispose of or create liens on~~transfer assets, (vi) 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 ~~September~~June 30, ~~2017,~~2022, the leverage ratio as calculated in accordance with the definition in our ~~amended credit agreement,~~Credit Agreement was ~~2.6x.~~ 5.3x. A breach of these requirements would give rise to certain remedies under the Revolving Credit ~~Facility,~~Agreement, among which are the termination of the agreement and ~~accelerated~~the 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., Credit Agreement.

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 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)

~~- 12 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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 September 30, 2017, we met all of the requirements of our debt covenants.

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
Borrowing date

Apr. 11, 2013
€
42,700

2.05
%

Mar. 2023
Sep. 4, 2014

10,000

2.40
%

Jun. 2022
Oct. 10, 2015

2,608

1.55
%

Sep. 2025
May 4, 2016

7,195

1.55
%

Sep. 2025
Apr. 26, 2016

10,000

1.30
%

Jun. 2023

Each of the 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~~Corporation 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~~$6.7 million as of ~~September~~June 30, ~~2017~~2022 and ~~$5.1 million as of~~ December 31, ~~2016.~~2021. The letters of credit, which reduce amounts available under our ~~revolving credit facility,~~Revolving Credit Facility, primarily provide financial assurances for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance ~~program.~~program and for performance of certain remediation activity related to the Fox River matter. 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.

~~11.~~

~~FAIR VALUE OF FINANCIAL INSTRUMENTS~~

- 20 -

17.FAIR VALUE OF FINANCIAL INSTRUMENTS

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

��

September 30, 2017

December 31, 2016

In thousands
Carrying
Value

Fair Value

Carrying
Value

Fair Value

Variable rate debt
$
158,298

$
158,298

$
61,595

$
61,595

Fixed-rate bonds

250,000

254,265

250,000

256,563

2.40% Term loan

8,012

8,207

8,282

8,877

2.05% Term loan

34,659

35,223

35,163

37,089

1.30% Term Loan

9,698

9,644

9,788

10,062

1.55% Term loan

11,574

11,509

10,333

10,082

Total
$
472,241

$
477,146

$
375,161

$
384,268

~~As of September 30, 2017, and December 31, 2016, we had $250.0 million of 5.375% fixed rate bonds. These bonds are publicly registered, but thinly traded. Accordingly, the~~


	June 30, 2022				December 31, 2021
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value
Variable rate debt	$	81,161	$	81,161	$	10,000	$	10,000
4.750% Senior Notes, due Oct. 2029	500,000		348,750		500,000		516,875
Term loan, due Feb. 2024	194,237		194,237		218,026		218,026
2.40% Term Loan	—		—		809		813
2.05% Term Loan	4,158		4,162		7,556		7,616
1.30% Term Loan	1,484		1,477		2,427		2,433
1.55% Term Loan	4,137		4,047		5,204		5,234
1.10% Term Loan	6,610		6,514		9,267		9,252
0.57% Term Loan	20,774		20,484		22,652		22,657
Total	$	812,561	$	660,832	$	775,941	$	792,906

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

~~12.~~

~~FINANCIAL DERIVATIVES AND HEDGING ACTIVITIES~~

18.

18.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~~(“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~~(“foreign currency ~~hedges."~~

hedges”); or iii) convert variable-interest-rate debt to fixed rates.

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.~~costs. Currency forward contracts involve fixing the exchange for delivery of a specified amount of foreign currency on a specified date. As of ~~September~~June 30, ~~2017,~~2022, 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~~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~~

~~09.30.17 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.”

- 21 -

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

In thousands
September 30 2017

December 31 2016

Derivative

Sell/Buy - sell notional

Philippine Peso / British Pound

19,047

—

Euro / British Pound

11,428

10,373

U.S. Dollar / Euro

1,471

—

Canadian Dollar / U.S. Dollar

20

—

Sell/Buy - buy notional

Euro / Philippine Peso

857,103

699,279

British Pound / Philippine Peso

644,076

557,025

U.S. Dollar / Euro

7,799

15,379

Euro / U.S. Dollar

54,135

43,951

U.S. Dollar / Canadian Dollar

32,760

35,290

British Pound / Euro

335

—


In thousands	June 30, 2022	December 31, 2021
Derivative
Sell/Buy - sell notional
Euro / British Pound	22,083	18,823

U.S. Dollar / British Pound	27,221	16,205
U.S. Dollar / Euro	3,402	658


Sell/Buy - buy notional
Euro / Philippine Peso	965,540	896,291
British Pound / Philippine Peso	1,303,213	1,121,183
Euro / U.S. Dollar	107,614	108,467
U.S. Dollar / Canadian Dollar	36,493	36,904

On June 15, 2022, we terminated a €180 million notional value floating-to-fixed interest rate swap agreement with certain financial institutions that was entered into in October 2019 and was to mature in December 2022. During the life of the swap, we paid a fixed interest rate of the applicable margin plus 0.0395% on €180 million of the underlying variable rate term loan. We received the greater of 0.00% or EURIBOR. At termination, we recognized a deferred gain of $0.4 million that will be amortized into interest expense through December 2022.

Derivatives Designated as Hedging Instruments – Net Investment HedgeThe €220 million Term Loan discussed in Note 16 – “Long-Term Debt” is designated as a net investment hedge of our Euro functional currency foreign subsidiaries. During the first six months of 2022 and 2021, we recognized a pre-tax gain of $15.7 million and $7.8 million, respectively, on the remeasurement of the term loan from changes in currency exchange rates. Such amounts are recorded as a component of Other Comprehensive Income (Loss).

On March 3, 2022, we entered into cross-currency swaps with an aggregate notional value of $150.0 million. Pursuant to the terms of the swaps, we agreed to receive 4.750% interest denominated in U.S. dollars and we agreed to pay 3.06% interest denominated in euros. Interest is paid semi-annually on May 15 and November 15 and the swaps mature on May 15, 2025. We designated the cross-currency swaps as a hedge of our net investment in certain euro functional currency subsidiaries.

Derivatives Not Designated as Hedging Instruments - Foreign Currency Hedges We also ~~enter~~entered 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.”

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

In thousands
September 30   2017

December 31   2016

Derivative

Sell/Buy -  sell notional

U.S. Dollar / British Pound

17,500

10,500

British Pound / Euro

1,000

2,500

Sell/Buy - buy notional

Euro / U.S. Dollar

4,500

3,500

British Pound / Euro

12,000

18,500

- 22 -

In thousands June 30, 2022 December 31, 2021
Derivative
Sell/Buy - sell notional
U.S. Dollar / British Pound 29,450 26,600
British Pound / Euro 2,800 3,400
U.S. Dollar / Swiss Franc 7,960 2,180
British Pound / Swiss Franc 2,290 1,025
Euro / Swiss Franc 6,520 2,750
Euro / U.S. Dollar 6,400 11,000
Sell/Buy - buy notional
Euro / U.S. Dollar 2,700 20,900
British Pound / Euro 15,300 5,300

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

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

In thousands
September 30   2017

December 31    2016

September 30   2017

December 31    2016

Prepaid Expenses
and Other

Other

Balance sheet caption
Current Assets

Current Liabilities

Designated as hedging:

Forward foreign currency

exchange contracts
$
1,416

$
2,625

$
5,672

$
1,493

Not designated as hedging:

Forward foreign currency

exchange contracts
$
679

$
60

$
780

$
104


In thousands	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Balance sheet caption	Prepaid Expenses and Other Current Assets				Other Current Liabilities
Designated as hedging:
Forward foreign currency exchange contracts	$	7,151	$	3,197	$	2,037	$	288
Interest rate swap	—		—		—		44

Not designated as hedging:
Forward foreign currency exchange contracts	$	822	701		$	1,124	$	116

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

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

Three months ended
September 30

Nine months ended
September 30

In thousands

2017

2016

2017

2016

Designated as hedging:

Forward foreign currency exchange contracts:

Effective portion – cost of products sold

$
(29
)

$
(347
)

$
1,687

$
(264
)
Ineffective portion – other – net

40

(69
)

126

(399
)
Not designated as hedging:

Forward foreign currency

exchange contracts:

Other – net

$
328

$
332

$
719

$
1,396

~~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~~

~~09.30.17 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.”

- 23 -


	Three months ended June 30,				Six months ended June 30,
In thousands	2022		2021		2022		2021
Designated as hedging:
Forward foreign currency exchange contracts:
Cost of products sold	$	(1,697)	$	(33)	$	(2,769)	$	(57)
Interest expense	(9)		22		11		43

Not designated as hedging:
Forward foreign currency exchange contracts:
Other – net	$	1,289	$	433	$	1,729	$	703

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

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

In thousands
2017

2016

Balance at January 1,
$
1,882

$
(178
)
Deferred (losses) gains

on cash flow hedges

(6,455
)

(200
)
Reclassified to earnings

(1,687
)

264

Balance at September 30,
$
(6,260
)

$
(114
)


In thousands	2022		2021
Balance at January 1,	$	2,889	$	(3,460)
Deferred gains on cash flow hedges	6,565		4,117
Reclassified to earnings	(2,758)		14
Balance at June 30,	$	6,696	$	671

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.

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.

~~13.~~

~~COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS~~

19.COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

Fox River - Neenah, Wisconsin

~~Background.~~

Background We have ~~significant uncertainties~~previously reported that we face liabilities 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~~Georgia-Pacific Consumer Products, L.P. (“~~Georgia Pacific”~~Georgia-Pacific”) and NCR ~~Corporation (“NCR”). In addition to the government claims, Appvion, Inc. (“Appvion”) retains a claim against us and Georgia Pacific.~~

Corporation. The United States Environmental Protection Agency (“EPA”) has divided the Site into ~~five~~5 “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”).

Over the past several years, we and ~~WTM I Company, one of the~~certain other PRPs ~~implemented the~~completed all remedial ~~action in OU1 under a~~actions pursuant to applicable consent ~~decree with the Governments; Menasha Corporation made a financial contribution to that work. That project began in 2004 and the work is complete, other than on-going monitoring and maintenance.~~

~~For OU2-5, work has proceeded primarily under~~decrees or 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 the UAO,Order. In January 2019, we contributed to a project in that area and 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. However, as discussed below, under a consent decree betweenreached an agreement with the United States, the State of Wisconsin, ~~NCR~~ and ~~Appvion~~Georgia-Pacific to resolve all remaining claims among those parties. Under the Glatfelter consent decree, we are ~~not~~primarily 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.

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

~~- 15 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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.

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 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, which the federal district court entered on August 23, 2017. Under the consent decree, if it were to withstand any appeal, 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 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 thelong-term monitoring and maintenance in ~~OU4b~~OU2-OU4a and ~~OU5 and~~for reimbursement of government oversight costs paid after October 2018. Finally, we ~~would be~~remain responsible for our obligation to continue long-term monitoring and maintenance ~~of all other upstream Operable Units. We paid Georgia Pacific $9.5 million in August 2017.~~

~~The NCR/Appvion~~under our OU1 consent decree.

Cost estimates Our remaining obligations under the OU1 consent decree consist of long-term monitoring and ~~our settlement with Georgia Pacific resulted in all claims among the 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,~~maintenance. Furthermore, we are ~~not subject to claims for reallocation of costs or damages incurred by any of the other parties 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.

~~Cost estimates.~~ The proposed NCR/Appvion consent decree, as revised, states that all parties combined have spent more than approximately $1 billion to date towards remedial actions and NRDs, of which we have contributed approximately $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. With the consent decree being entered, we are no longer exposed to reallocation of any of those amounts.

~~Under the NCR/Appvion consent decree, we would remain~~primarily responsible for the Governments’ unreimbursed past costs, which although in dispute, are represented to total approximately $34 million and the Governments’ future costs. Furthermore, we, along with Georgia Pacific, would be responsible for long termlong-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 through OU5in OU2-OU4a over a period of at 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~~In 2018, we entered into a fixed-price, 30-year agreement with a third party for the performance of all of our ~~settlement~~monitoring and maintenance obligations in OU1 through OU4a with ~~Georgia Pacific, our obligations are~~limited

- 24 -

exceptions, such as, for extraordinary amounts of cap maintenance or replacement. Our obligation under this agreement is included in ~~OU1-OU4a. Although we are unable to determine with certainty the timing of cash expenditures for the above matters, they are reasonably likely to extend over a period of at least 30 years.~~

~~- 16 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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

Nine months ended
September 30

In thousands

2017

2016

Balance at January 1,

$
52,788

$
17,105

Payments

(9,581
)

(4,193
)
Accruals

-

-

Balance at September 30,

$
43,207

$
12,912

The payments set forth above represent cash paid towards completion of remediation activities in connection with the 2016 and 2015 Work Plans, the Georgia-Pacific settlement and ongoing monitoring activities. Of our total reserve for the ~~Fox River, $20.0~~Site. We are obligated to make the regular payments under that fixed-price contract until the remaining amount due is less than the OU1 escrow account balance. We are permitted to pay for this contract using the remaining balance of the escrow account established by us and WTM I Company (“WTM I”) another PRP, under the OU1 consent decree during any period that the balance in the escrow account exceeds the amount due under our fixed-price contract. As of June 30, 2022, the balance in the escrow is less than amounts due under the fixed-price contract by approximately $1.3 million. Our obligation to pay this difference is secured by a letter of credit.

At June 30, 2022, the escrow account balance totaled $8.7 million which is included in the condensed consolidated balance sheet under the caption “Other assets.”

Under the consent decree, we are responsible for reimbursement of government oversight costs paid from October 2018 and later over approximately the next 30 years. We anticipate that oversight costs will decline as activities at the site have transitioned from remediation to long-term monitoring and maintenance.

Reserves for the Site Our reserve for past and future government oversight costs and long-term monitoring and maintenance totaled $14.8 million at June 30, 2022, of which $2.2 million is recorded in the accompanying ~~September~~June 30, ~~2017~~2022 condensed consolidated balance sheet under the caption “Environmental liabilities” and the remaining ~~$23.2~~$12.6 million is recorded under the caption “Other ~~long term~~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 of decision, discussions with legal counsel, cost estimates for

future monitoring and maintenance and other post-remediation costs to be performed at the Site, we do not 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.

~~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 results of operations and might result in a default under our loan covenants.

amount.

- 1725 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~14.~~

~~SEGMENT INFORMATION~~

20.SEGMENT INFORMATION

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

Three months ended September 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
$
142.3

$
131.7

$
67.8

$
61.9

$
203.2

$
211.8

$
—

$
—

$
413.3

$
405.3

Energy and related sales, net

—

—

—

—

1.2

1.3

—

—

1.2

1.3

Total revenue

142.3

131.7

67.8

61.9

204.4

213.1

—

—

414.6

406.6

Cost of products sold

115.0

105.8

57.2

53.5

179.7

180.1

7.9

6.1

359.8

345.5

Gross profit (loss)

27.3

25.9

10.6

8.4

24.7

33.0

(7.9
)

(6.1
)

54.7

61.2

SG&A

10.9

11.9

2.4

2.0

12.2

14.3

7.9

7.5

33.4

35.7

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

—

—

—

—

—

—

—

—

—

—

Total operating income (loss)

16.4

14.0

8.2

6.4

12.5

18.7

(15.8
)

(13.6
)

21.4

25.4

Non-operating expense

—

—

—

—

—

—

(5.0
)

(4.4
)

(5.0
)

(4.4
)
Income (loss) before
   income taxes
$
16.4

$
14.0

$
8.2

$
6.4

$
12.5

$
18.7

$
(20.8
)

$
(18.0
)

$
16.4

$
21.0

Supplementary Data

Net tons sold (thousands)

43.8

39.1

26.2

25.2

197.1

197.3

—

—

267.1

261.5

Depreciation, depletion and
   amortization
$
7.1

$
6.9

$
2.5

$
2.4

$
8.0

$
6.4

$
3.8

$
0.6

$
21.4

$
16.3

Capital expenditures

3.8

5.1

12.6

4.3

10.2

26.7

4.5

0.5

31.1

36.6

Nine months ended September 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
$
400.6

$
391.6

$
190.4

$
183.4

$
600.3

$
638.9

$
—

$
—

$
1,191.4

$
1,213.9

Energy and related sales, net

—

—

—

—

3.3

4.0

—

—

3.3

4.0

Total revenue

400.6

391.6

190.4

183.4

603.6

642.9

—

—

1,194.7

1,217.9

Cost of products sold

322.2

316.0

160.7

157.5

555.7

574.1

14.0

8.6

1,052.6

1,056.2

Gross profit (loss)

78.4

75.6

29.7

25.9

47.9

68.8

(14.0
)

(8.6
)

142.1

161.7

SG&A

32.9

35.1

6.9

6.2

36.0

40.9

24.7

22.6

100.5

104.8

(Gains) losses on dispositions of plant,

equipment and timberlands, net

—

—

—

—

—

—

—

—

—

—

Total operating income (loss)

45.5

40.5

22.8

19.7

11.9

27.9

(38.7
)

(31.2
)

41.7

56.9

Non-operating expense

—

—

—

—

—

—

(13.7
)

(12.7
)

(13.7
)

(12.7
)
Income (loss) before
income taxes
$
45.5

$
40.5

$
22.8

$
19.7

$
11.9

$
27.9

$
(52.4
)

$
(43.9
)

$
27.9

$
44.2

Supplementary Data

Net tons sold (thousands)

124.5

116.7

76.6

74.1

578.4

597.7

—

—

779.5

788.5

Depreciation, depletion and
amortization
$
20.9

$
21.2

$
7.1

$
7.0

$
22.9

$
19.7

$
5.4

$
1.8

$
56.3

$
49.7

Capital expenditures

10.6

13.7

36.1

25.0

44.2

77.4

11.3

0.8

102.2

116.9


	Three months ended June 30,				Six months ended June 30,
Dollars in thousands	2022		2021		2022		2021
Net Sales
Composite Fibers	$	123,338	$	141,598	$	259,167	$	282,847
Airlaid Material	143,708		103,313		293,172		187,738
Spunlace	96,917		—		193,304		—
Total	$	363,963	$	244,911	$	745,643	$	470,585

Operating income (loss)
Composite Fibers	$	5,779	$	11,063	$	5,444	$	27,128
Airlaid Material	11,944		8,431		24,165		15,628
Spunlace	(1,808)		—		(3,380)		—
Other and unallocated	(6,991)		(11,371)		(133,194)		(17,314)
Total	$	8,924	$	8,123	$	(106,965)	$	25,442

Depreciation and amortization
Composite Fibers	$	4,796	$	7,000	$	11,315	$	13,981
Airlaid Material	7,542		6,767		15,171		12,615
Spunlace	2,945		—		5,859		—
Other and unallocated	1,169		966		2,591		1,870
Total	$	16,452	$	14,733	$	34,936	$	28,466

Capital expenditures
Composite Fibers	$	4,131	$	2,882	$	10,258	$	5,655
Airlaid Material	2,064		1,297		5,532		3,036
Spunlace	1,801		—		3,886		—
Other and unallocated	2,353		1,653		3,021		2,520
Total	10,349		5,832		$	22,697	$	11,211

Tons shipped (metric)
Composite Fibers	24,246		34,471		52,457		68,611
Airlaid Material	40,681		34,315		83,733		63,179
Spunlace	19,358		—		40,094		—

Total	84,285		68,786		176,284		131,790

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

~~Business Units~~Segments Results of individual ~~business units~~operating segments 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~~segments 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.~~segments. 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~~segment 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.~~

table set forth above.

- 26 -

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~~operating segments 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.

- 27 -

~~- 18 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~15.~~

~~CONDENSED CONSOLIDATING FINANCIAL STATEMENTS~~

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

The following presents our condensed consolidating statements of income, including comprehensive income, for the three months and nine months ended September 30, 2017 and 2016, our condensed consolidating balance sheets as of September 30, 2017 and December 31, 2016, and our condensed consolidating cash flows for the nine months ended September 30, 2017 and 2016.

~~Condensed Consolidating Statement of Income for the three months ended September 30, 2017~~

In thousands
Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales
$
203,205

$
20,588

$
211,331

$
(21,799
)

$
413,325

Energy and related sales, net

1,236

—

—

—

1,236

Total revenues

204,441

20,588

211,331

(21,799
)

414,561

Costs of products sold

188,677

19,525

173,423

(21,799
)

359,826

Gross profit

15,764

1,063

37,908

—

54,735

Selling, general and administrative

expenses

18,730

536

14,133

—

33,399

(Gain) loss on dispositions of plant

equipment and timberlands, net

70

(114
)

20

—

(24
)
Operating income (loss)

(3,036
)

641

23,755

—

21,360

Other non-operating

income (expense)

Interest expense

(5,241
)

(300
)

(436
)

1,430

(4,547
)
Interest income

160

1,316

5

(1,430
)

51

Equity in earnings of subsidiaries

17,880

18,096

—

(35,976
)

—

Other, net

498

(1,920
)

944

—

(478
)
Total other non-operating

income (expense)

13,297

17,192

513

(35,976
)

(4,974
)
Income before income taxes

10,261

17,833

24,268

(35,976
)

16,386

Income tax provision (benefit)

(1,844
)

(47
)

6,172

—

4,281

Net income

12,105

17,880

18,096

(35,976
)

12,105

Other comprehensive income

17,330

14,812

14,959

(29,771
)

17,330

Comprehensive income
$
29,435

$
32,692

$
33,055

$
(65,747
)

$
29,435

~~- 19 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~Condensed Consolidating Statement of Income for the nine months ended September 30, 2017~~

In thousands
Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales
$
600,346

$
63,173

$
591,926

$
(64,065
)

$
1,191,380

Energy and related sales, net

3,346

—

—

—

3,346

Total revenues

603,692

63,173

591,926

(64,065
)

1,194,726

Costs of products sold

568,067

60,158

488,466

(64,065
)

1,052,626

Gross profit

35,625

3,015

103,460

—

142,100

Selling, general and administrative

expenses

55,976

846

43,662

—

100,484

(Gain) loss on dispositions of plant

equipment and timberlands, net

118

(188
)

20

—

(50
)

Operating income (loss)

(20,469
)

2,357

59,778

—

41,666

Other non-operating

income (expense)

Interest expense

(15,084
)

(619
)

(1,377
)

4,049

(13,031
)

Interest income

451

3,714

93

(4,049
)

209

Equity in earnings of subsidiaries

50,298

51,197

—

(101,495
)

—

Other, net

1,525

(6,445
)

4,014

—

(906
)

Total other non-operating

income (expense)

37,190

47,847

2,730

(101,495
)

(13,728
)

Income before income taxes

16,721

50,204

62,508

(101,495
)

27,938

Income tax provision (benefit)

(1,273
)

(94
)

11,311

—

9,944

Net income

17,994

50,298

51,197

(101,495
)

17,994

Other comprehensive income

50,855

43,878

43,344

(87,222
)

50,855

Comprehensive income
$
68,849

$
94,176

$
94,541

$
(188,717
)

$
68,849

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

In thousands
Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales
$
211,761

$
18,086

$
192,214

$
(16,760
)

$
405,301

Energy and related sales, net

1,346

—

—

—

1,346

Total revenues

213,107

18,086

192,214

(16,760
)

406,647

Costs of products sold

186,297

16,732

159,208

(16,760
)

345,477

Gross profit

26,810

1,354

33,006

—

61,170

Selling, general and administrative

expenses

21,048

(25
)

14,724

—

35,747

(Gain) loss on dispositions of plant

equipment and timberlands, net

7

—

(2
)

—

5

Operating income

5,755

1,379

18,284

—

25,418

Other non-operating

income (expense)

Interest expense

(4,332
)

(1
)

(751
)

1,189

(3,895
)
Interest income

173

1,063

5

(1,189
)

52

Equity in earnings of subsidiaries

17,228

16,225

—

(33,453
)

—

Other, net

(670
)

(819
)

916

—

(573
)
Total other non-operating

income (expense)

12,399

16,468

170

(33,453
)

(4,416
)
Income before income taxes

18,154

17,847

18,454

(33,453
)

21,002

Income tax provision (benefit)

(1,447
)

619

2,229

—

1,401

Net income

19,601

17,228

16,225

(33,453
)

19,601

Other comprehensive loss

(69
)

(2,307
)

(2,462
)

4,769

(69
)
Comprehensive income
$
19,532

$
14,921

$
13,763

$
(28,684
)

$
19,532

~~- 20 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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

In thousands
Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales
$
638,918

$
54,293

$
573,355

$
(52,634
)

$
1,213,932

Energy and related sales, net

4,013

—

—

—

4,013

Total revenues

642,931

54,293

573,355

(52,634
)

1,217,945

Costs of products sold

582,751

51,493

474,599

(52,634
)

1,056,209

Gross profit

60,180

2,800

98,756

—

161,736

Selling, general and administrative

expenses

62,115

(246
)

42,927

—

104,796

Loss on dispositions of plant

equipment and timberlands, net

11

—

20

—

31

Operating income (loss)

(1,946
)

3,046

55,809

—

56,909

Other non-operating

income (expense)

Interest expense

(13,036
)

(1
)

(2,352
)

3,425

(11,964
)

Interest income

523

3,056

50

(3,425
)

204

Equity in earnings of subsidiaries

46,485

44,050

—

(90,535
)

—

Other, net

(1,787
)

(2,220
)

3,051

—

(956
)

Total other non-operating

income (expense)

32,185

44,885

749

(90,535
)

(12,716
)

Income before income taxes

30,239

47,931

56,558

(90,535
)

44,193

Income tax provision (benefit)

(7,495
)

1,446

12,508

—

6,459

Net income

37,734

46,485

44,050

(90,535
)

37,734

Other comprehensive income (loss)

4,134

(2,691
)

(2,835
)

5,526

4,134

Comprehensive income
$
41,868

$
43,794

$
41,215

$
(85,009
)

$
41,868

~~Condensed Consolidating Balance Sheet as of September 30, 2017~~

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Assets

Cash and cash equivalents

$
374

$
682

$
83,231

$
—

$
84,287

Other current assets

226,678

287,440

289,956

(316,866
)

487,208

Plant, equipment and timberlands, net

383,014

70,093

402,910

—

856,017

Investments in subsidiaries

885,734

634,893

—

(1,520,627
)

—

Other assets

129,617

—

139,665

—

269,282

Total assets

$
1,625,417

$
993,108

$
915,762

$
(1,837,493
)

$
1,696,794

Liabilities and Shareholders' Equity

Current liabilities

$
436,791

$
58,602

$
157,486

$
(316,866
)

$
336,013

Long-term debt

357,441

49,000

52,584

—

459,025

Deferred income taxes

14,478

(541
)

51,660

—

65,597

Other long-term liabilities

106,111

313

19,139

—

125,563

Total liabilities

914,821

107,374

280,869

(316,866
)

986,198

Shareholders’ equity

710,596

885,734

634,893

(1,520,627
)

710,596

Total liabilities and shareholders’ equity

$
1,625,417

$
993,108

$
915,762

$
(1,837,493
)

$
1,696,794

~~- 21 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Assets

Cash and cash equivalents

$
5,082

$
1,461

$
48,901

$
—

$
55,444

Other current assets

206,002

256,289

242,187

(265,663
)

438,815

Plant, equipment and timberlands, net

360,521

31,455

383,922

—

775,898

Investments in subsidiaries

789,565

540,029

—

(1,329,594
)

—

Other assets

123,010

—

128,092

—

251,102

Total assets

$
1,484,180

$
829,234

$
803,102

$
(1,595,257
)

$
1,521,259

Liabilities and Shareholders' Equity

Current liabilities

$
426,628

$
26,085

$
135,961

$
(265,663
)

$
323,011

Long-term debt

283,686

14,000

65,961

—

363,647

Deferred income taxes

10,221

(729
)

45,503

—

54,995

Other long-term liabilities

109,819

313

15,648

—

125,780

Total liabilities

830,354

39,669

263,073

(265,663
)

867,433

Shareholders’ equity

653,826

789,565

540,029

(1,329,594
)

653,826

Total liabilities and shareholders’ equity

$
1,484,180

$
829,234

$
803,102

$
(1,595,257
)

$
1,521,259

~~Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2017~~

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net cash provided (used) by

Operating activities

$
(17,066
)

$
(3,241
)

$
73,103

$
—

$
52,796

Investing activities

Expenditures for purchases of plant, equipment and timberlands

(55,415
)

(32,847
)

(13,910
)

—

(102,172
)

Proceeds from disposals of plant, equipment and timberlands, net

8

209

—

—

217

Repayments from intercompany loans

—

12,000

—

(12,000
)

—

Advances of intercompany loans

—

(13,500
)

—

13,500

—

Intercompany capital contributed

(2,000
)

(400
)

—

2,400

—

Other

(100
)

—

—

—

(100
)

Total investing activities

(57,507
)

(34,538
)

(13,910
)

3,900

(102,055
)

Financing activities

Net long-term borrowings

73,298

35,000

(18,711
)

—

89,587

Payment of dividends to shareholders

(16,805
)

—

—

—

(16,805
)

Repayments of intercompany loans

—

—

(12,000
)

12,000

—

Borrowings of intercompany loans

13,500

—

—

(13,500
)

—

Intercompany capital received

—

2,000

400

(2,400
)

—

Payment of intercompany dividend

—

—

—

—

—

Payments related to share-based compensation awards and other

(128
)

—

—

—

(128
)

Total financing activities

69,865

37,000

(30,311
)

(3,900
)

72,654

Effect of exchange rate on cash

—

—

5,448

—

5,448

Net increase (decrease) in cash

(4,708
)

(779
)

34,330

—

28,843

Cash at the beginning of period

5,082

1,461

48,901

—

55,444

Cash at the end of period

$
374

$
682

$
83,231

$
—

$
84,287

~~- 22 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net cash provided (used) by

Operating activities

$
41,753

$
3,748

$
13,936

$
—

$
59,437

Investing activities

Expenditures for purchases of plant, equipment and timberlands

(78,187
)

(21,066
)

(17,695
)

—

(116,948
)

Proceeds from disposals of plant, equipment and timberlands, net

41

—

14

—

55

Repayments from intercompany loans

—

11,101

—

(11,101
)

—

Advances of intercompany loans

—

(12,330
)

—

12,330

—

Intercompany capital (contributed) returned

(17,000
)

(500
)

—

17,500

—

Other

(400
)

—

—

—

(400
)

Total investing activities

(95,546
)

(22,795
)

(17,681
)

18,729

(117,293
)

Financing activities

Net long-term borrowings

—

—

14,983

—

14,983

Payments of borrowing costs

(136
)

—

—

—

(136
)

Payment of dividends to shareholders

(16,134
)

—

—

—

(16,134
)

Repayments of intercompany loans

—

—

(11,101
)

11,101

—

Borrowings of intercompany loans

12,330

—

—

(12,330
)

—

Intercompany capital (returned) received

—

17,000

500

(17,500
)

—

Proceeds from government grants

3,251

2,000

—

—

5,251

Payments related to share-based compensation awards and other

(990
)

—

—

—

(990
)

Total financing activities

(1,679
)

19,000

4,382

(18,729
)

2,974

Effect of exchange rate on cash

—

—

330

—

330

Net increase (decrease) in cash

(55,472
)

(47
)

967

—

(54,552
)

Cash at the beginning of period

59,130

465

45,709

—

105,304

Cash at the end of period

$
3,658

$
418

$
46,676

$
—

$
50,752

~~- 23 -~~

~~GLATFELTER~~

~~09.30.17 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~~2021 Annual Report on Form ~~10-K.~~

10-K ("2021 Form 10-K").

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

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

~~ii.~~

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

~~iii.~~

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

~~iv.~~

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

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

~~vi.~~

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

~~vii.~~

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

~~viii.~~

~~the impact of unplanned production interruption;~~

~~ix.~~

disruptions in production and/or increased costs due to labor disputes including an inability to renew our collective bargaining arrangement for the Spring Grove, PA facility which expired in February 2017;

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.~~

~~our ability to successfully complete the implementation of new manufacturing and business systems to support Advanced Airlaid Materials;~~

~~xiv.~~

~~adverse results in litigation in the Fox River matter;~~

~~xv.~~

~~the impact of war and terrorism;~~

~~xvi.~~

~~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;~~

~~xvii.~~

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

~~xviii.~~

~~our ability to finance, consummate and integrate acquisitions.~~

i.risks related to the military conflict between Russia and Ukraine and its impact on our production, sales, supply chain, cost of energy, and availability of energy due to potential natural gas supply issues into Europe from the Nord Stream 1 pipeline;

ii.risks associated with the impact of the COVID-19 pandemic, including global and regional economic conditions, changes in demand for our products, interruptions in our global supply chain, ability to continue production by our facilities, credit conditions of our customers or suppliers, or potential legal actions that could arise due to our operations during the pandemic;

iii.disruptions of our global supply chain, including the availability of key raw materials and transportation for the delivery of critical inputs and of products to customers, and the increase in the costs of transporting materials and products;

iv.risks associated with our ability to increase selling prices quickly or sufficiently enough to recover rapid cost inflation in our raw materials, energy, freight and other costs;

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

vi.the impact of competition, changes in industry production capacity, including the construction of new facilities or new machines, the closing of facilities and incremental changes due to capital expenditures or productivity increases;

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

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

ix.changes in the price or availability of raw materials we use, particularly woodpulp, pulp substitutes, synthetic pulp, other specialty fibers and abaca fiber;

x.changes in energy-related prices and commodity raw materials with an energy component;

xi.the impact of unplanned production interruption at our facilities or at any of our key suppliers;

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

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

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 legislation, policy or regulation; and

xvii.our ability to finance, consummate and integrate acquisitions, including our acquisitions of Mount Holly and Jacob Holm.

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

operating segments:

•Composite Fiberswith ~~revenue from the sale~~sales of single-serve tea and coffee filtration papers, ~~nonwoven~~ wallcovering base materials, ~~metallized products,~~ composite laminate papers, ~~and many technically special papers~~technical specialties including substrates for electrical ~~applications;~~

applications, and metallized products;

~~Advanced~~ •Airlaid Materialswith ~~revenue from the sale~~sales of airlaid nonwoven fabric-like materials used in feminine hygiene ~~and~~products, adult incontinence products, tabletop, specialty wipes, home care products and other airlaid applications; and

- 28 -

•Spunlace with sales of premium quality spunlace nonwovens for critical cleaning, high-performance materials, personal care, hygiene and medical applications.

The former Specialty Papers ~~with revenue from~~business’ results of operations and financial condition are reported as discontinued operations. Following is a discussion and analysis primarily of the ~~sale~~financial results of ~~papers~~operations and financial condition of our continuing operations.

Acquisition As discussed in Item 1 - Financial Statements and Supplementary Data, Note 3 “Acquisitions,” we completed our acquisitions of Georgia-Pacific's U.S. nonwovens business (“Mount Holly”) on May 13, 2021 for ~~carbonless~~$170.9 million and ~~other forms, envelopes, book publishing, and engineered products such as papers~~the acquisition of all outstanding equity of PMM Holdings (Luxembourg) AG ("Jacob Holm") on October 29, 2021 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.~~

$304.0 million. Refer to Note 3 - ~~24 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

“Acquisitions"”for additional information about these transactions.

RESULTS OF OPERATIONS

~~Nine~~

Six months ended ~~September~~June 30, ~~2017~~2022 versus the ~~nine~~six months ended ~~September~~June 30, ~~2016~~

2021

OverviewFor the first ~~nine~~six months of ~~2017 net income totaled $18.0~~2022, we reported a loss from continuing operations of $110.8 million, or ~~$0.41~~$2.47 per ~~diluted~~ share compared with ~~$37.7~~income of $9.9 million and ~~$0.86~~$0.22 per diluted share in the year earlier period.

The following table sets forth summarized consolidated results of operations:


	Nine months ended September 30					Six months ended June 30,
In thousands, except per share	2017		2016		In thousands, except per share	2022		2021
Net sales	$	1,191,380	$	1,213,932	Net sales	$	745,643	$	470,585
Gross profit		142,100		161,736	Gross profit	69,062		74,850
Operating income		41,666		56,909
Net income		17,994		37,734
Earnings per diluted share		0.41	0.86
Operating income (loss)					Operating income (loss)	(106,965)		25,442
Continuing operations					Continuing operations
Income (loss)					Income (loss)	(110,750)		9,886
Earnings per share					Earnings per share	(2.47)		0.22
Net income (loss)					Net income (loss)	(110,379)		9,804
Earnings per share					Earnings per share	(2.46)		0.22

~~Reported~~

The reported results are in accordance with generally accepted accounting principles in the United States (“GAAP”) and reflect the impact of a number of significant items including a goodwill and other asset impairment charge related to our Dresden operations and Composite Fibers segment, strategic initiatives, corporate headquarters relocation and cost optimization, among others. On an adjusted earnings basis, a non-GAAP measure, we had a loss from continuing operations of $7.8 million, or $0.17 per share for the first ~~nine~~six months of ~~2017~~2022, compared with income of $16.5 million, or $0.37 per diluted share, a year ago.

Our operating results for the first six months of 2022 reflect: i) the impact of Russia/Ukraine military conflict which commenced on February 24, 2022 and ~~2016 include~~the compounding impacts, including sanctions on the sale of certain products into Russia, adversely impacted sales, prices paid for energy, production and collection of receivables and resulted in the recording of a ~~pre-tax basis $19.5~~$117.3 million ~~and $8.0~~asset impairment charge; ii) the completion of two significant acquisitions in 2021, which collectively added $246.9 million ~~respectively,~~ of net sales; iii) the adverse impact of significant inflationary pressures, particularly energy costs, ~~considered~~which outpaced our efforts to ~~be unusual or non-core business in nature. The decline in our results summarized in~~realize higher selling prices; and iv) interest expense increased reflecting the table above reflects the $11.5 million increase in such costs. Our Composite Fibers and Advanced Airlaid Materials businesses, which combined represented approximately 50% of consolidated net sales, reported higher operating income and operating margin expansion in the comparison driven by higher shipping volumes and improved productivity. Specialty Papers’ results declined significantly in the comparison reflecting challenging market conditions.

acquisition financing.

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:

Strategic initiatives. These adjustments primarily reflect professional and legal fees incurred directly related to evaluating and executing certain strategic initiatives including costs associated with acquisitions, related integrations, and charges incurred to step-up acquired inventory to fair-value.

- 29 -

Corporate headquarters relocation. These adjustments reflect costs incurred in connection with the strategic relocation of the Company’s corporate headquarters to Charlotte, NC. The costs are primarily related to employee relocation costs and exit costs at the former corporate headquarters.

Cost optimization actions.These adjustments ~~reflects~~reflect 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~~the Company, improve efficiencies or other objectives. Such actions may include asset rationalization, headcount ~~reduction efforts, asset write-offs and certain contract termination costs.~~

~~Specialty Papers environmental compliance.~~reductions or similar actions. These adjustments, ~~reflect non-capitalized, one-time costs incurred by~~which have occurred at various times in the ~~business unit~~past, are irregular in timing and relate to specific identified programs to reduce or optimize the cost structure of a particular operating segment or the corporate function.

Goodwill and other asset impairment charges. This adjustment represents a non-cash charge recorded to reduce the carrying amount of certain long-lived assets, intangible assets and goodwill of our Dresden facility and the Composite Fibers reporting segment. The impairment was directly related to the ~~compliance with~~adverse impact of the ~~U.S. EPA Best Available Retrofit Technology rule~~Russia/Ukraine military conflict on our projected revenue and ~~the Boiler Maximum Achievable Control Technology rule.~~EBITDA.

Russia/Ukraine conflict charges. This adjustment ~~includes costs incurred during~~represents a non-cash charge recorded to reduce the ~~transition period in which the newly installed equipment was brought on-line.~~

~~Airlaid capacity expansion costs.~~ ~~These adjustments reflect non-capitalized, one-time costs incurred~~carrying amount of accounts receivable and inventory directly related to the ~~start-up of a new airlaid production facility in Fort Smith, Arkansas.~~

Russia/Ukraine military conflict.

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 benefit our operating results.

Coronavirus Aid, Relief, and Economic Security (CARES) Act 2020. This adjustment reflects taxes recorded in connection with passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) related to provisions that modified the “net operating loss” provisions of previous law to allow certain losses to be carried back five years.

These adjustments are each unique and not considered to be on-going in nature. The transactions are irregular in timing and amount and may significantly impact our operating performance.

As such, these items may not be indicative of our past or future performance and therefore are excluded for comparability purposes.

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 ~~nine months ended September~~period indicated:


	Six months ended June 30,
	2022				2021
In thousands, except per share	Amount		EPS		Amount		EPS
Net income (loss)	$	(110,379)	$	(2.46)	$	9,804	$	0.22
Exclude: Loss (income) from discontinued operations, net of tax	(371)		(0.01)		82		—
Income (loss) from continuing operations	(110,750)		(2.47)		9,886		0.22
Adjustments (pre-tax):
Goodwill and other asset impairment charges (1)	117,349				—
Russia/Ukraine conflict charges (2)	3,948				—
Strategic initiatives (3)	2,488				8,434
Corporate headquarters relocation	223				361
Cost optimization actions (4)	941				—
Timberland sales and related costs	(2,962)				(2,403)
Total adjustments (pre-tax)	121,987				6,392
Income taxes (5)	(19,167)				31
CARES Act of 2020 tax provision (6)	175				183
Total after-tax adjustments	102,995		2.30		6,606		0.15
Adjusted earnings (loss) from continuing operations	$	(7,755)	$	(0.17)	$	16,492	$	0.37

(1)Reflects goodwill impairment charge of $56.1 million and other asset impairment charges of $61.3 million. Refer to Note 6, Goodwill and Other Asset Impairment, for details of this item.

(2)Reflects bad debt expense charges of $2.9 million and inventory reserves charges $1.0 million. Refer to Note 6, Goodwill and Other Asset Impairment, for details of this item.

(3)For 2022, primarily reflects professional services fees (including legal, audit, valuation specialists and consulting) of $1.7 million, employee separation and other costs of $0.8 million and other costs, all of which are directly related to acquisitions. For 2021, primarily reflects

- 30 ~~2017~~-

professional services fees related to acquisitions (including legal, audit and ~~2016:~~

Nine months ended September 30

2017

2016

In thousands, except per share
Amount

Diluted EPS

Amount

Diluted EPS

Net income
$
17,994

$
0.41

$
37,734

$
0.86

Adjustments (pre-tax)

Cost optimization actions

9,627

88

Specialty Papers' environmental compliance

3,076

6,645

Airlaid capacity expansion costs

7,034

1,308

Timberland sales and related costs

(188
)

-

Total adjustments (pre-tax)

19,549

8,041

Income taxes (1)

(1,122
)

(2,736
)

Total after-tax adjustments

18,427

0.41

5,305

0.12

Adjusted earnings
$
36,421

$
0.82

$
43,039

$
0.98

~~(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~~valuation specialists) of ~~individual per share amounts set forth above may not agree~~$7.1 million, employee separation and other costs of $0.6 million, inventory valuation step-up costs of $0.5 million and other costs, all of which are directly related to ~~adjusted earnings per share~~acquisitions.

(4)Primarily reflects employee separation costs of $0.4 million, equipment write-down of $0.4 million and other costs of $0.1 million directly associated with closure of synthetic fiber production facility in the U.K..

(5)Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated. For items originating in the U.S., no tax effect is recognized due to ~~rounding.~~

the previously established valuation allowance on the net deferred tax assets. No tax effects were recognized on the goodwill impairment as there were no related deferred taxes.

~~- 25 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~Business Unit Performance~~

~~The sum~~(6)Reflects the tax effect of ~~individual amounts set forth above may not agree to~~applying certain provisions of the ~~consolidated financial statements included herein due to rounding.~~

CARES Act of 2020.

~~Business Units~~Segment Financial Performance


	Six months ended June 30,
Dollars in thousands		2022		2021
Net Sales
Composite Fibers		$	259,167	$	282,847
Airlaid Material		293,172		187,738
Spunlace		193,304		—
Total		$	745,643	$	470,585

Operating income (loss)
Composite Fibers		$	5,444	$	27,128
Airlaid Material		24,165		15,628
Spunlace		(3,380)		—
Other and unallocated		(133,194)		(17,314)
Total		$	(106,965)	$	25,442

Depreciation and amortization
Composite Fibers		$	11,315	$	13,981
Airlaid Material		15,171		12,615
Spunlace		5,859		—
Other and unallocated		2,591		1,870
Total		$	34,936	$	28,466

Capital expenditures
Composite Fibers		$	10,258	$	5,655
Airlaid Material		5,532		3,036
Spunlace		3,886		—
Other and unallocated		3,021		2,520
Total		$	22,697	$	11,211

Tons shipped (metric)
Composite Fibers		52,457		68,611
Airlaid Material		83,733		63,179
Spunlace		40,094		—
Total		176,284		$	131,790

Segments Results of individual ~~business units~~operating segments 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~~segments 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.~~segments. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. The costs incurred by support areas not

- 31 -

directly aligned with the ~~business unit~~segment 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.~~

table set forth above.

Management evaluates results of operations of the ~~business units~~operating segments before ~~pension expense,~~ certain corporate level costs and the effects of certain gains or losses not considered to be related to the core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of ~~business units~~the segments 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~~operating segments 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.

~~- 26 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

Sales and Costs of Products Sold


	Nine months ended September 30										Six months ended June 30,
In thousands	2017			2016			Change			In thousands	2022			2021			Change
Net sales	$	1,191,380		$	1,213,932		$	(22,552	)	Net sales	$	745,643		$	470,585		$	275,058
Energy and related sales, net		3,346			4,013			(667	)
Total revenues		1,194,726			1,217,945			(23,219	)
Costs of products sold		1,052,626			1,056,209			(3,583	)	Costs of products sold	676,581			395,735			280,846
Gross profit	$	142,100		$	161,736		$	(19,636	)	Gross profit	$	69,062		$	74,850		$	(5,788)
Gross profit as a percent of Net sales		11.9	%		13.3	%				Gross profit as a percent of Net sales	9.3		%	15.9		%

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

segment:


	Nine months ended September 30							Six months ended June 30,
Percent of Total	2017			2016			Percent of Total	2022		2021
Business Unit
Segment							Segment
Composite Fibers		33.6	%		32.3	%	Composite Fibers	34.8	%	60.1	%
Advanced Airlaid Material		16.0			15.1
Specialty Papers		50.4			52.6
Airlaid Materials							Airlaid Materials	39.3		39.9
Spunlace							Spunlace	25.9		—
Total		100.0	%		100.0	%	Total	100.0	%	100.0	%

Net sales totaled ~~$1,191.4~~$745.6 million and ~~$1,213.9~~$470.6 million in the first ~~nine~~six months of ~~2017~~2022 and ~~2016,~~2021, respectively. Net sales for Composite Fibers and Airlaid Materials (including Mount Holly) decreased by 2.0% and increased by 63.7%, respectively, on a constant currency basis. The ~~$22.5~~Spunlace segment, formed in connection with the Jacob Holm acquisition, had net sales of approximately $193.3 million ~~decrease was primarily driven by $22.4 million~~in the first six months of ~~lower selling prices. Shipping volumes decreased 1.1%.~~

2022.

Composite Fibers’ net sales ~~increased $9.0~~decreased $23.7 million or ~~2.3%. Shipping volumes increased 6.7%. However, currency translation~~8.4% in the first six months of 2022, compared to the year-ago quarter. Wallcover shipments were below prior year by 49% due to lower shipments to customers in Russia and ~~lower~~Ukraine, resulting from the continuation of the military conflict in this region and prohibition of the export of sanctioned wallcover base paper and tea filter products to Russia. Lower shipments were partially offset by higher selling prices ~~adversely~~of $32.0 million. Currency translation was unfavorable $18.0 million.

Composite Fibers had operating income of $5.4 million in the first six months of 2022 compared with $27.1 million in the year-ago period. Higher selling prices and energy surcharges of $32.0 million fell $14.0 million short of recovering continued inflation in energy and raw material. Lower shipments and market related downtime, primarily in our Dresden facility, negatively impacted results by $12.2 million. The impact of currency and related hedging positively impacted earnings by $4.5 million. The primary drivers of the ~~comparison by $6.7 million and $6.3 million, respectively.~~

change in Composite Fibers’ operating income are summarized in the following chart (presented in millions):

- 32 -

Airlaid Materials’ net sales increased $105.4 million in the year-over-year comparison driven by higher shipments in all major product categories and higher selling prices from cost-pass-through arrangements with customers. Shipments were 32.5% higher driven by strong growth in the tabletop, wipes, and hygiene product categories, including the benefit from a full six months of Mount Holly in 2022. Currency translation was $14.1 million unfavorable.

Airlaid Materials’ operating income, for the first ~~nine~~six months of ~~2017 increased $5.0~~2022, of $24.2 million ~~to $45.5~~was $8.5 million ~~compared to~~higher than the ~~year-ago~~same period ~~primarily due to a $9.7~~in 2021. Higher shipments and product mix positively impacted results by $11.9 million. Selling price increases of $36.4 million ~~benefit from improved operations including~~was $2.4 million short of offsetting the higher raw material prices and energy inflation costs. Operations were favorable $1.6 million driven by higher production, which offset other general inflationary pressures. The impact of ~~our cost optimization program initiated in late 2016~~currency and ~~the benefit of higher shipping volumes, improved machine utilization rates and reduced downtime.~~related hedging negatively impacted earnings by $2.5 million. The primary drivers are summarized in the following ~~chart:~~

~~Advanced Airlaid Materials’~~chart (presented in millions):

Spunlace net sales for the first six months were approximately $193.3 million. An operating loss of $3.4 million was mainly driven by higher raw material and energy costs only partially offset by higher selling prices and energy surcharges.

Asset Impairment During the first quarter of 2022, in connection with an assessment of potential impairment of long-lived and indefinite-lived intangible assets stemming from the compounding impacts resulting from the Russia/Ukraine military conflict and related sanctions, we recorded a $117.3 million non-cash asset impairment charge related to Composite Fibers' Dresden facility and an impairment of Composite Fibers' goodwill. Dresden is a single-line facility that produces wallcover base paper, the majority of which is directly sold into the Russian and Ukrainian markets. As a direct

- 33 -

result of the economic impacts from the conflict, including disruptions in the underlying financial systems and prohibition of the export of sanctioned wallcover base paper to Russia, management expects a significant reduction in wallcover revenues and associated cash flows for the foreseeable future. In addition, the conflict is expected to significantly impact energy prices and also impact other Composite Fibers products that are subject to export sanctions into Russia. During the year ended December 31, 2021, we had total net sales of wallcover and other products to customers in Russia and Ukraine totaling approximately $95 million. We do not expect significant sales to customers in this region for the foreseeable future as a result of the military conflict, its impact on Ukrainian customers, and the economic sanctions on sales of certain products to customers in Russia. Accordingly, a charge was recorded to reduce the carrying value of the Dresden fixed assets and intangible assets (technological know-how, customer relationships, and an indefinite-lived trade name), along with Composite Fiber's goodwill to fair value.

In addition, as a result of economic sanctions and disruptions to the financial markets, certain customers are not able to satisfy outstanding accounts receivables. As such, during the first quarter of 2022, we recognized bad debt expense of approximately $2.9 million directly related to Russian and Ukrainian customers which is included in “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of income for the six months ended June 30, 2022. At June 30, 2022, we had accounts receivable, net of reserves, from customers in this region totaling approximately $2.6 million which we expect to collect in normal course. However, if circumstances change such that some customers are unable to satisfy their obligations, we may be required to recognize additional bad debt expense in future periods. Furthermore, during the first quarter of 2022, we increased ~~$7.0~~inventory reserves by approximately $1.0 million, primarily related to wallcover products. The charge related to inventory reserves is included in “Cost of products sold” in the accompanying condensed consolidated statements of income for the six months ended June 30, 2022. Substantially all other products which we will no longer be able to export to Russia due to sanctions can be sold to existing customers outside the Russia/Ukraine region.

Other and Unallocated The amount of operating expense not allocated to a reporting segment in the Segment Financial Information totaled $133.2 million in the ~~year-over-year comparison primarily due~~first six months of 2022 compared with $17.3 million in the same period a year ago. Excluding the items identified to ~~higher shipping volumes which increase 3.4% due to higher shipments~~present “adjusted earnings,” unallocated expenses for the first six months of ~~wipes and personal hygiene products.~~

~~Advanced Airlaid Materials’ operating income totaled $22.8 million, an increase of $3.1~~2022 decreased $0.3 million compared to the same period ~~a year ago. The primary drivers are summarized~~ in 2021.

Income taxes In the ~~following chart:~~

~~Specialty Papers’ net sales decreased $38.6~~first six months of 2022, our loss from continuing operations totaled $124.2 million ~~or 6.0%, due to a 3.2% decrease in shipping volumes~~ and ~~a $16.4~~we recorded an income tax benefit of $13.5 million. On adjusted pre-tax loss of $2.3 million, ~~impact from lower selling prices.~~

~~Operating~~ income ~~totaled $11.9~~tax provision was $5.5 million in the first ~~nine~~six months of 2017, compared with $27.9 million for the first nine months of 2016. The business unit continues to be adversely impacted by a supply/demand imbalance affecting the broader uncoated freesheet market as reflected as lower pricing and volume in the chart below. Aggressive cost control actions, lower maintenance spending and improved operating performance contributed to the $8.3 million benefit from operations. The primary drivers of the change are summarized in the following chart:

~~- 27 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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

Nine months ended
September 30

In thousands
2017

2016

Change

Energy sales
$
2,379

$
2,919

$
(540
)
Costs to produce

(3,121
)

(3,229
)

108

Net

(742
)

(310
)

(432
)
Renewable energy credits

4,088

4,323

(235
)
Total
$
3,346

$
4,013

$
(667
)

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

~~Other and Unallocated~~ The amount of net operating expenses not allocated to a business unit and reported as “Other and Unallocated” in our table of Business Unit Performance totaled $38.7 million in the first nine months of 2017 compared with $31.2 million in the first nine months of 2016. The increase in Other and Unallocated expenses2022, which primarily related to ~~costs incurred in connection with our cost optimization actions~~reserves for uncertain tax positions and ~~the Airlaid capacity expansion project, partially offset by lower costs~~valuation allowances for ~~Specialty Papers’ environmental compliance project and the legal costs~~losses for ~~the Fox River matter.~~

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

Nine months ended
September 30

In thousands
2017

2016

Change

Recorded as:

Costs of products sold
$
2,534

$
1,761

$
773

SG&A expense

2,441

2,365

76

Total
$
4,975

$
4,126

$
849

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 is expected towhich no tax benefit could be ~~approximately $6.6 million compared with $5.5 million in 2016 (which excludes a $7.3 million settlement charge).~~

~~Income taxes~~ ~~For the first nine months of 2017, we recorded a provision for income taxes of $9.9 million on pre-tax income of $27.9 million.~~recognized. The comparable amounts in the first ~~nine~~six months of ~~2016~~2021 were ~~$6.5~~adjusted pre-tax income of $27.5 million and ~~$44.2~~income tax expense of $11.0 million,

respectively.

respectively. The effective tax rate was 35.5% in the first nine months of 2017 compared with 14.6% in the same period of 2016. This year’s tax provision includes a benefit of $2.4 million primarily from a tax loss carryback opportunity and the release of U.S. tax reserves due to the lapse of statute of limitations. The tax provision also 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 $13 million and $16 million for the full year 2017. The effective tax rate in future periods may be affected by changes in U.S.-based pre-tax income, including pension expense, and the related impact on the valuation of deferred taxes.

Foreign CurrencyWe own and operate facilities in Canada, Germany, France, the United Kingdom, Spain, and the Philippines. The functional currency of our Canadian operations is the U.S. dollar. However, in Germany, France and ~~France~~Spain, it is the ~~Euro,~~euro, in the UK, it is the British ~~Pound Sterling,~~pound sterling, and in the Philippines the functional currency is the ~~Peso.~~peso. On an annual basis, our euro denominated ~~revenue~~net sales exceeds euro expenses by ~~approximately €125 million to €130~~an estimated €150 million. For the first ~~nine~~six months of ~~2017,~~2022, the average currency exchange rate ~~for euro to the U.S. dollar~~ was ~~1.113~~1.09 dollar/euro compared with ~~1.116 for~~1.20 in the same period of ~~2016.~~2021. With respect to the British ~~Pound Sterling,~~pound sterling, Canadian dollar, and Philippine ~~Peso,~~peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the euro. As a result, we are exposed to changes in currency exchange rates and such changes could be significant. The translation of the results from international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

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

2022.

In thousands
Nine months ended
September 30, 2017

Favorable
(unfavorable)

Net sales

$
(6,752
)

Costs of products sold

7,366

SG&A expenses

615

Income taxes and other

320

Net income

$
1,549


In thousands	Six months ended June 30,
	Favorable (unfavorable)
Net sales	$	(32,135)
Costs of products sold	31,774
SG&A expenses	2,010
Income taxes and other	241
Net loss	$	1,890

- 34 -

The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in ~~2017~~2022 were the same as ~~2016.~~2021. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

~~- 28 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

Three months ended ~~September~~June 30, ~~2017~~2022 versus the three months ended ~~September~~June 30, ~~2016~~

2021

OverviewFor the ~~third~~second quarter of ~~2017, net income totaled $12.1~~2022, we reported loss from continuing operations of $2.5 million, or ~~$0.27~~$0.05 per ~~diluted~~ share compared with ~~net~~ income of ~~$19.6~~$1.5 million ~~or $0.44~~and $0.03 per diluted share in the third quarter of 2016. On an adjusted basis earnings for the third quarter of 2017 was $21.9 million, or $0.50 per diluted share compared with $24.0 million, or $0.54 per diluted share, for the same period a year ~~ago.~~

earlier period. The following table sets forth summarized consolidated results of operations:

Three months ended
September 30

In thousands, except per share
2017

2016

Net sales
$
413,325

$
405,301

Gross profit

54,735

61,170

Operating income

21,360

25,418

Net income

12,105

19,601

Earnings per share

0.27

0.44

Three months ended June 30,
In thousands, except per share 2022 2021
Net sales $ 363,963 $ 244,911
Gross profit 37,397 35,554
Operating income 8,924 8,123
Continuing operations:
Income (loss) (2,460) 1,492
Earnings per share (0.05) 0.03
Net income (loss) (2,052) 1,410
Earnings per share (0.05) 0.03

The reported results are in accordance with generally accepted accounting principles in the United States (“GAAP”) and reflect the impact of significant items including strategic initiatives and corporate headquarters relocation costs, among others. On an adjusted earnings basis, a non-GAAP measure, we had a loss from continuing operations of $1.6 million, or $0.04 per share for the second quarter of 2022, compared with income of $8.0 million, or $0.18 per diluted share, a year ago.

Our second quarter of 2022 operating results reflect: i) the continuation of the compounding impacts of the Russia/Ukraine military conflict commencing on February 24, 2022 including the adverse impact of the prohibition of the export of sanctioned products into Russia; ii) the completion of two significant acquisitions in 2021, which collectively added $123.2 million of net sales; iii) the adverse impact of significant inflationary pressures, particularly energy costs, which outpaced our efforts to realize higher selling prices; and iv) interest expense increased reflecting the acquisition financing.

The following table sets forth the reconciliation of net income to adjusted earnings for the ~~three months ended September 30, 2017~~period indicated:


	Three months ended June 30,
	2022				2021
In thousands, except per share	Amount		EPS		Amount		EPS
Net income (loss)	$	(2,052)	$	(0.04)	$	1,410	$	0.03
Exclude: Income from discontinued operations, net of tax	(408)		(0.01)		82		—
Income (loss) from continuing operations	(2,460)		(0.05)		1,492		0.03
Adjustments (pre-tax):


Strategic initiatives (1)	653				7,831
Corporate headquarters relocation	135				206

Timberland sales and related costs	—				(1,553)
Total adjustments (pre-tax)	788				6,484
Income taxes (2)	(20)				(50)
CARES Act of 2020 tax provision (3)	96				90
Total after-tax adjustments	864		0.01		6,524		0.15
Adjusted earnings (loss) from continuing operations	$	(1,596)	$	(0.04)	$	8,016	$	0.18

(1)For 2022, primarily reflects professional services fees (including legal, audit, valuation specialists and ~~2016:~~

consulting) of $0.5 million, employee separation and other costs of $0.4 million and other costs, all of which are directly related to acquisitions. For 2021, reflects professional services fees related to acquisitions (including transaction advisory, legal, audit and valuation specialists) of $6.5 million, employee separation and other costs of $0.6 million, inventory valuation step-up costs of $0.5 million and other costs all of which are directly related to acquisitions.

Three months ended September 30

2017

2016

In thousands, except per share
Amount

Diluted EPS

Amount

Diluted EPS

Net income
$
12,105

$
0.27

$
19,601

$
0.44

Adjustments (pre-tax)

Cost optimization

6,839

-

Specialty Papers' environmental compliance and other

596

5,520

Airlaid capacity expansion costs

2,581

1,051

Timberland sales and related costs

(114
)

-

Total adjustments (pre-tax)

9,902

6,571

Income taxes (1)

(123
)

(2,193
)

Total after-tax adjustments

9,779

0.22

4,378

0.10

Adjusted earnings
$
21,884

$
0.50

$
23,979

$
0.54

(2)Tax effect on adjustments calculated based on the incremental effective tax rate of the jurisdiction in which each adjustment originated. For items originating in the U.S., no tax effect is recognized due to the previously established valuation allowance on the net deferred tax assets.

~~(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.~~

(3)Reflects the tax effect of applying certain provisions of the CARES Act of 2020.

- 35 -

~~Business Unit~~

Segment Financial Performance


	Three months ended June 30,
Dollars in thousands		2022		2021
Net sales
Composite Fibers		$	123,338	$	141,598
Airlaid Material		143,708		103,313
Spunlace		96,917		—
Total		$	363,963	$	244,911

Operating income (loss)
Composite Fibers		$	5,779	$	11,063
Airlaid Material		11,944		8,431
Spunlace		(1,808)		—
Other and unallocated		(6,991)		(11,371)
Total		$	8,924	$	8,123

Depreciation and amortization
Composite Fibers		$	4,796	$	7,000
Airlaid Material		7,542		6,767
Spunlace		2,945		—
Other and unallocated		1,169		966
Total		$	16,452	$	14,733

Capital expenditures
Composite Fibers		$	4,131	$	2,882
Airlaid Material		2,064		1,297
Spunlace		1,801		—
Other and unallocated		2,353		1,653
Total		$	10,349	$	5,832

Tons shipped (metric)
Composite Fibers		24,246		34,471
Airlaid Material		40,681		34,315
Spunlace		19,358		—
Total		84,285		$	68,786

~~The sum~~

Segments Results of individual ~~amounts~~operating segments 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 segments are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the segments. 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 segment are allocated primarily based on an estimated utilization of support area services or are included in “Other and Unallocated” in the table set forth ~~above may~~above.

Management evaluates results of operations of the operating segments before certain corporate level costs and the effects of certain gains or losses not ~~agree~~considered to be related to the ~~consolidated financial statements included herein due to rounding.~~

core business operations. Management believes that this is a more meaningful representation of the operating performance of its core businesses, the profitability of the segments

- 2936 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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 operating segments 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.

Sales and Costs of Products Sold


	Three months ended September 30										Three months ended June 30,
In thousands	2017			2016			Change			In thousands	2022			2021			Change
Net sales	$	413,325		$	405,301		$	8,024		Net sales	$	363,963		$	244,911		$	119,052
Energy and related sales, net		1,236			1,346			(110	)
Total revenues		414,561			406,647			7,914
Costs of products sold		359,826			345,477			14,349		Costs of products sold	326,566			209,357			117,209
Gross profit	$	54,735		$	61,170		$	(6,435	)	Gross profit	$	37,397		$	35,554		$	1,843
Gross profit as a percent of Net sales		13.2	%		15.1	%				Gross profit as a percent of Net sales	10.3		%	14.5		%

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

segment:


	Three months ended September 30							Three months ended June 30,
Percent of Total	2017			2016			Percent of Total	2022		2021
Business Unit
Segment							Segment
Composite Fibers		34.4	%		32.5	%	Composite Fibers	33.9	%	57.8	%
Advanced Airlaid Material		16.4			15.3
Specialty Papers		49.2			52.2
Airlaid Materials							Airlaid Materials	39.5		42.2
Spunlace							Spunlace	26.6		—
Total		100.0	%		100.0	%	Total	100.0	%	100.0	%

Net sales totaled ~~$413.3~~$364.0 million and ~~$405.3~~$244.9 million in the ~~third quarters~~second quarter of ~~2017~~2022 and ~~2016,~~2021, respectively. ~~Shipping volumes~~Net sales for Composite Fibers and Airlaid Materials (including Mount Holly) decreased by 4.4% and increased ~~2.1% and foreign~~by 47.7%, respectively, on a constant currency ~~translation favorably impacted~~basis. The Spunlace segment, formed in connection with the ~~quarter-over-quarter comparison by $6.0 million. Lower selling prices unfavorably impacted~~Jacob Holm acquisition, had net sales of approximately $96.9 million in the ~~comparison by $8.0 million.~~

second quarter of 2022.

Composite Fibers’ net sales ~~increased $10.7~~decreased $18.3 million or ~~8.1%, primarily due to higher shipping volumes and $4.2 million of favorable currency translation partially offset by $2.3 million from lower selling prices.~~

~~Composite Fibers’ third~~12.9% in the second quarter of ~~2017 operating income increased to $16.4 million, an increase of $2.4 million~~2022, compared to the ~~year ago~~year-ago quarter. Higher ~~shipping volumes combined~~selling prices of $14.4 million were more than offset by lower shipments of 29.7%. Wallcover shipments were below prior year by 62% due to lower shipments to customers in Russia and Ukraine, resulting from the continuation of the geopolitical conflict in this region and prohibition of the export of sanctioned wallcover and tea filter products into Russia. Currency translation was unfavorable $12.0 million.

Composite Fibers had operating income for the second quarter of $5.8 million compared with ~~higher machine utilization rates~~$11.1 million operating income in the second quarter of 2021. Lower shipments and ~~solid operating performance improved~~market-related downtime, primarily in our Dresden facility, negatively impacted results by $6.4 million. Higher selling prices and energy surcharges of $14.4 million fell $2.5 million short of fully recovering continued inflation in energy, raw material and freight of $16.9 million. The impact of currency and related hedging positively impacted earnings by ~~$5.8~~$3.6 million mainly driven by weakening of the British Pound. The primary drivers of the change in Composite Fibers’ operating income are summarized in the following chart (presented in millions):

- 37 -

Airlaid Materials’ net sales increased $40.4 million in the year-over-year comparison driven by the Mount Holly acquisition, higher shipments in all major product categories, and higher selling prices from cost-pass-through arrangements with customers. Shipments were 18.6% higher driven by strong growth in the wipes, tabletop, and hygiene product categories. Currency translation was $8.9 million unfavorable.

Airlaid Materials’ second quarter operating income of $11.9 million was $3.5 million higher when compared to the second quarter of 2021. Higher shipments positively impacted results by $3.9 million. Selling price increases and energy surcharges of $18.0 million fully offset the higher raw material and energy costs which improved results by $0.8 million. Operations were slightly favorable by $0.3 million as higher production was mostly offset by general inflationary pressures. The impact of currency and related hedging negatively impacted earnings by $1.5 million due to a weakening Euro. The primary drivers are summarized in the following ~~chart:~~

chart (presented in millions):

~~Advanced Airlaid Materials’~~

Spunlace net sales ~~increased $5.9~~for the second quarter were approximately $96.9 million. An operating loss of $1.8 million was mainly driven by higher raw material and energy costs only partially offset by higher selling prices and energy surcharges.

Other and Unallocated The amount of operating expense not allocated to a reporting segment in the Segment Financial Information totaled $7.0 million in the ~~quarter-over-quarter comparison. Shipping volumes increased 4.2% primarily due to continued growth~~second quarter of ~~personal hygiene and wipes products and $1.8 million favorable impact from currency translation.~~

~~Advanced Airlaid Materials’ operating income totaled $8.2 million~~2022 compared with ~~$6.4 million in the third quarter of 2016. The primary drivers are summarized in the following chart:~~

~~Specialty Papers’ net sales decreased $8.6 million, or 4.0%, as its markets continued to be impacted by a supply-demand imbalance resulting in $6.5 million of lower selling prices.~~

~~Specialty Papers’ operating income totaled $12.5 million in the third quarter of 2017, compared with $18.7~~$11.4 million in the same period a year ago. ~~The primary drivers are summarized in~~Excluding the ~~following chart:~~

~~Aggressive cost control actions and lower maintenance spending more than offset the adverse impact of market-related downtime and higher depreciation, and increased operating income by $1.8 million.~~

~~- 30 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~We sell excess power generated by the Spring Grove, PA facility. The following table summarizes this activity~~items identified to present “adjusted earnings,” unallocated expenses for the ~~third quarters~~second quarter of ~~2017~~2022 increased $1.3 million compared to the second quarter of 2021.

- 38 -

Income taxes In the second quarter of 2022, our income from continuing operations totaled $0.8 million and ~~2016:~~

Three months ended
September 30

In thousands
2017

2016

Change

Energy sales
$
586

$
1,101

$
(515
)

Costs to produce

(754
)

(1,187
)

433

Net

(168
)

(86
)

(82
)

Renewable energy credits

1,404

1,432

(28
)

Total
$
1,236

$
1,346

$
(110
)

~~Other and Unallocated~~ ~~The amount~~we recorded an income tax provision of ~~net operating expenses not allocated to a business unit and reported as “Other and Unallocated” in our table~~$3.3 million. On adjusted pre-tax income of ~~Business Unit Performance excluding gains from sales of timberlands, totaled $15.8~~$1.6 million, the income tax expense was $3.2 million in the ~~third~~second quarter of ~~2017 compared with $13.6 million in the third quarter of 2016. The increase in Other and Unallocated expenses~~2022, which primarily related to ~~costs incurred in connection with our cost optimization actions~~reserves for uncertain tax positions and ~~the Airlaid capacity expansion project, partially offset by lower costs~~valuation allowances for ~~Specialty Papers’ environmental compliance project and the legal costs~~losses for ~~the Fox River matter.~~

During the third quarter the Company recorded $6.8 million of one-time costs of actions primarily related to the permanent shutdown of a machine and a 15% reduction in salaried workforce in the Specialty Papers business unit. The costs incurred consisted of $4.5 million related to the write-off of the machine and associated spares parts and the balance represented severance costs for the salaried positions. These costs have been excluded from the business unit results and from adjusted earnings.

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

Three months ended
September 30

In thousands
2017

2016

Change

Recorded as:

Costs of products sold
$
842

$
582

$
260

SG&A expense

819

788

31

Total
$
1,661

$
1,370

$
291

~~Income taxes~~ ~~For the third quarter of 2017, we recorded a $4.3 million provision for income~~which no tax ~~pre-tax income of $16.4 million.~~benefit could be recognized. The comparable amounts in the ~~third~~same quarter of ~~2016~~2021 were ~~$1.4 million of tax provision on~~adjusted pre-tax income of ~~$21.0 million. The current quarter’s~~$12.0 million and income tax ~~provision includes a benefit~~expense of ~~$2.4~~$4.0 million, ~~primarily from a tax loss carryback opportunity~~respectively.

Foreign Currency We own and operate facilities in Canada, Germany, France, the United Kingdom, Spain, and the ~~release~~Philippines. The functional currency of our Canadian operations is the U.S. ~~tax reserves due~~dollar. However, in Germany, France and Spain, 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 net sales exceeds euro expenses by an estimated €150 million. For the three months ended June 30, 2022, the average currency exchange rate was 1.07 dollar/euro compared with 1.19 in the same period of 2021. With respect to the ~~lapse~~British pound sterling, Canadian dollar, and Philippine peso, we have differing amounts of ~~statute~~inflows and outflows of ~~limitations.~~

~~Foreign Currency~~these currencies, although to a lesser degree than the euro. As a result, we are exposed to changes in currency exchange rates and such changes could be significant. The translation of the results from international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

The table below summarizes the translation impact on reported results that changes in currency

exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the ~~third~~second quarter of ~~2017.~~

2022.

In thousands
Three months ended
September 30, 2017

Favorable (unfavorable)

Net sales

$
6,047

Costs of products sold

(4,340
)

SG&A expenses

(448
)

Income taxes and other

(47
)

Net income

$
1,212


In thousands	Three months ended June 30, 2022
	Favorable (unfavorable)
Net sales	$	(20,875)
Costs of products sold	21,553
SG&A expenses	1,384
Income taxes and other	190
Net loss	$	2,252

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:

Nine months ended
September 30

In thousands
2017

2016

Cash and cash equivalents at

beginning of period
$
55,444

$
105,304

Cash provided (used) by

Operating activities

52,796

59,437

Investing activities

(102,055
)

(117,293
)
Financing activities

72,654

2,974

Effect of exchange rate

changes on cash

5,448

330

Net cash provided (used)

28,843

(54,552
)
Cash and cash equivalents at

end of period
$
84,287

$
50,752

- 39 -


	Six months ended June 30,
In thousands	2022		2021
Cash, cash equivalents and restricted cash at the beginning of period	$	148,814	$	111,665
Cash provided (used) by
Operating activities	(79,535)		1,365
Investing activities	(18,136)		(181,136)
Financing activities	33,546		165,138
Effect of exchange rate changes on cash	(3,587)		(1,432)
Change in cash and cash equivalents from discontinued operations	(231)		(238)
Net cash used	(67,943)		(16,303)
Cash, cash equivalents and restricted cash at the end of period	80,871		95,362
Less: restricted cash in Prepaid and other current assets	(2,000)		(2,000)
Less: restricted cash in Other assets	(7,395)		(9,197)
Cash and cash equivalents at the end of period	$	71,476	$	84,165

At ~~September~~June 30, ~~2017,~~2022, we had ~~$84.3~~$71.5 million in cash and cash equivalents (“cash”) held by both domestic and foreign subsidiaries. ~~Unremitted earnings~~Approximately 89.3% of our foreign subsidiaries are deemed to be indefinitely reinvested and therefore no U.S. tax liability is reflected in the accompanying condensed consolidated financial statements. As of September 30, 2017, the majority of our cash is held by our international subsidiaries and the repatriation of such funds would result in additional tax liability. In addition to our cash and cash equivalents ~~$93.2~~is held by our foreign subsidiaries but could be repatriated without incurring a significant amount of additional taxes.

Cash used by operating activities in the first six months of 2022 totaled $79.5 million ~~is available under our revolving credit agreement, which matures in March 2020.~~

~~- 31 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~Cash~~compared with cash provided by operating activities ~~totaled $52.8 million in the first nine months~~ of ~~2017 compared with $59.4~~$1.4 million in the same period a year ago. ~~The decrease~~The increase was primarily due to an increase in ~~cash from operations~~working capital usage, primarily ~~reflects lower cash earnings~~accounts receivable, inventory and the ~~$9.5~~termination of a factoring arrangement previously utilized by certain former Jacob Holm entities, an $11.5 million ~~payment related~~reduction in adjusted EBITDA, a $7.6 million increase in income taxes paid and a $13.0 million increase in interest paid.


Adjusted EBITDA	Six months ended June 30,
In thousands	2022		2021

Net income (loss)	$	(110,379)	$	9,804
Exclude: Income (loss) from discontinued operations, net of tax	(371)		82
Add back: Taxes on Continuing operations	(13,489)		11,211
Depreciation and amortization	34,936		28,466
Interest expense, net	15,479		3,272
EBITDA	(73,824)		52,835
Adjustments:
Goodwill and other asset impairment charges	117,349		—
Russia/Ukraine conflict charges	3,948		—
Strategic initiatives	2,488		8,434
Share-based compensation (1)	2,419		2,537


Corporate headquarters relocation	223		361
Cost optimization actions	589		—

Timberland sales and related costs	(2,962)		(2,403)
Adjusted EBITDA	$	50,230	$	61,764

(1)Adjusted EBITDA for 2021 has been restated to add back share-based compensation consistent with our amended credit agreement. The share-based compensation adjustment represents the non-cash amount of share-based compensation expense included in results of operations.

EBITDA is a measure used by management to assess our operating performance and is calculated using income (loss) from continuing operations and excludes interest expense, interest income, income taxes and depreciation and amortization. Adjusted EBITDA is calculated using EBITDA and further excludes certain ~~claims in~~items management considers to be unrelated to the ~~Fox River matter, partially offset by $4.0 million~~company’s core operations. The adjustments include asset impairment charges, costs of ~~lower income tax payments.~~

strategic initiatives, certain cost optimization and restructuring activities, corporate headquarters relocation expenses, as well as the elimination of gains

- 40 -

from sales of timberlands. Adjusted EBITDA is a performance measure that excludes costs that we do not consider to be indicative of our ongoing operating performance.

Net cash used by investing activities ~~decreased by $15.2~~was $18.1 million compared with $181.1 million in the ~~year-over-year comparison primarily due to lower capital expenditures.~~same period a year ago. During the six months ended June 30, 2021, we used $172.3 million for the Mount. Holly acquisition. Capital expenditures totaled $22.7 million and $11.2 million for the six months ended June 30, 2022 and 2021, respectively, and are expected to ~~total between $130~~be $45 million ~~and $135~~to $50 million, including $7 million to $8 million for ~~2017, including approximately $13 million~~Spunlace integration, for the ~~Specialty Papers’ environmental compliance projects and approximately $49 million for the Airlaid capacity expansion.~~

full year 2022.

Net cash provided by financing activities totaled ~~$72.7~~$33.5 million in the first ~~nine~~six months of ~~2017~~2022 compared with ~~$3.0~~$165.1 million in the same period of ~~2016.~~2021. The ~~increase~~change in ~~cash provided by~~ financing activities primarily reflects ~~additional~~a decrease in borrowings under our revolving credit agreement.

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

~~Our~~ In 2021, we used borrowings under the revolving credit facility to pay for the Mount Holly acquisition.

As discussed in Item 1 - Financial Information, Note - 16, our Credit Agreement contains a number of customary compliance ~~covenants, the most restrictive of which is a maximum leverage ratio of 3.5x.~~covenants. As of ~~September~~June 30, ~~2017,~~2022, the leverage ratio, as calculated in accordance with the definition in our ~~amended credit agreement,~~Credit Agreement, was ~~2.6x,~~5.3x, well within the ~~limits~~maximum limit allowed under our Credit Agreement. 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 Agreement. As discussed in Note 16 - “Long Term Debt,” on May 9, 2022, we amended our Credit Agreement to increase the maximum leverage ratio to 6.75 to 1.0 until the quarter ended December 31, 2023, after which the maximum ratio will step down to 4.0 to 1.0.

Details of our outstanding long-term indebtedness are set forth in our credit agreement. Based on our expectations of future results of operations and capital needs, we do not believe the debt covenants will impact our operations or limit our ability to undertake financings that may be necessary to meet our capital needs.

~~The 5.375% Notes contain cross default provisions that could result in all such notes becoming due and payable in the event of a failure to repay debt outstanding~~ under the credit agreement at maturity, or a default under the credit agreement that accelerates the debt outstanding thereunder. As of September 30, 2017, we met all of the requirements of our debt covenants. The significant terms of the debt instruments

~~are more fully discussed in~~ Item 1 - Financial Statements – Note ~~10.~~

16 -“Long-Term Debt."

Financing activities ~~includes~~include cash used for common stock ~~dividends which increased in the comparison reflecting a 4% increase in our quarterly cash dividend.~~dividends. In the first ~~nine~~six months of ~~2017,~~2022 and 2021, we used ~~$16.8~~$12.5 million and $12.0 million, respectively, of cash for dividends on our common ~~stock compared with $16.1 million in the same period of 2016.~~stock. 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.

~~As more fully discussed in Item 1 - Financial Statements – Note 13 – Commitments, Contingencies~~

At June 30, 2022, we had ample liquidity consisting of $71.5 million of cash on hand and Legal Proceedings (“Note 13”), 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 13, it is conceivable the resolution$131.6 million of this matter may require us to spend in excess of $20.0 million in the next twelve months. Although we are unable to determine with any degree of certainty the amount we may be required to spend the recent developments provide greater clarity to the extent of such amounts.

capacity under our revolving credit facility. We expect to meet all of our near and long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility and other long-term debt. ~~However, as discussed in Note 13, 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 ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, 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 fourth quarter of 2017 are expected to be approximately 10% lower than the third quarter driven by normal seasonality with the majority of the impact of lower shipping volumes expected to be offset by improved product mix. Selling prices and overall raw material and energy prices are expected to be in-line with the third quarter.

- 3241 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

Advanced Airlaid Materials’ shipping volumes in the fourth quarter are expected to be approximately 3% lower than the third quarter due to normal seasonality. Selling prices and raw material and energy prices are expected to increase slightly compared with the third quarter. For 2018, we anticipate shipping volumes to be 10% to 15% higher than 2017 driven by the start-up of the Fort Smith, Arkansas facility.

Specialty Papers’ shipping volumes in the fourth quarter are expected to be approximately 5% lower than the third quarter of 2017 due to normal seasonality. Selling prices are expected to be in-line and raw material and energy prices are expected to increase compared to the third quarter. Specialty Papers will also benefit by $1 million more than the third quarter from the cost reduction actions.

In addition, costs associated with the Specialty Papers environmental compliance projects and Advanced Airlaid Materials capacity expansion are expected to be $1 million and $3 million, respectively, during the fourth quarter and zero and $3 million in 2018.

~~Consolidated capital expenditures are expected to total between $130 million and $135 million for 2017 and approximately between $65 million to $70 million in 2018.~~

~~The effective tax rate on adjusted earnings is expected to be approximately 35% for the fourth quarter of 2017 and for 2018.~~

~~- 33 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

ITEM 3. QUANTITATIVE AND ~~QUALITATI~~VEQUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK~~S

RISKS

	Year Ended December 31															September 30, 2017
Dollars in thousands	2017			2018			2019			2020			2021			Carrying Value		Fair Value
																					Year Ended December 31															June 30, 2022
In thousands, except percentages																				In thousands, except percentages	2022			2023			2024			2025			2026			Carrying Value		Fair Value
Long-term debt																				Long-term debt
Average principal outstanding																				Average principal outstanding
At fixed interest rates – Bond	$	250,000		$	250,000		$	250,000		$	218,750		$	—		$	250,000	$	254,265
At variable interest rates																				At variable interest rates	$	272,541		$	261,116		$	255,403		$	81,161		$	54,700		$	275,398	$	275,398
At fixed interest rates – Term Loans		63,942			55,963			44,841			33,720			22,598			63,943		64,583	At fixed interest rates – Term Loans	533,306			521,934			502,221			500,382			500,000			537,163		385,434
At variable interest rates		158,298			158,298			158,298			32,979			—			158,298		158,298
																$	472,241	$	477,146																	$	812,561	$	660,832
Weighted-average interest rate																				Weighted-average interest rate
On fixed rate debt – Bond		5.375	%		5.375	%		5.375	%		5.375	%		—
On variable rate debt																				On variable rate debt	2.44		%	2.44		%	2.44		%	2.44		%	2.44		%
On fixed rate debt – Term Loans		1.89	%		1.89	%		1.88	%		1.86	%		1.82	%					On fixed rate debt – Term Loans	4.51		%	4.58		%	4.74		%	4.75		%	4.75		%
On variable rate debt		2.74	%		2.74	%		2.74	%		2.74	%		—

The table above presents the average principal outstanding and related interest rates for the next five years for debt outstanding as of ~~September~~June 30, ~~2017.~~2022. Fair values included herein have been determined based upon rates currently available to us for debt with similar terms and remaining maturities.

Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At ~~September~~June 30, ~~2017,~~2022, we had ~~$470.2~~$812.6 million of long-term debt, ~~net of unamortized debt issuance costs,~~ of which ~~33.7%~~33.9% was at variable interest rates. Variable-rate debt ~~outstanding~~ represents borrowings under our ~~revolving~~ credit agreement that accrues interest based on one-month U.S. Dollar LIBOR or one-month Euro LIBOR indexes, but in no event less than zero, plus athe applicable margin. At ~~September~~June 30, ~~2017,~~2022, the weighted-average interest rate paid was ~~approximately 2.74%~~equal to 2.44%. A hypothetical 100 basis point increase ~~or decrease~~ in the interest rate on variable rate debt would increase ~~or decrease~~ annual interest expense by $1.6 million.

In the event rates are 100 basis points lower, interest expense would be $0.5 million lower.

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.” For a more complete discussion of this activity, refer to Item 1 – Financial Statements – Note ~~12.~~

18.

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~~Euro denominated revenue exceeds euro expenses by ~~approximately €125 million to €130~~an estimated €150 million. With respect to the British Pound Sterling, Canadian ~~dollar,~~Dollar, and Philippine Peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the ~~euro.~~Euro. As a result, particularly with respect to the ~~euro,~~Euro, we are exposed to changes in currency exchange rates and such changes could be significant.

Long- and indefinite-lived Assets We evaluate the recoverability of our long- and indefinite-lived assets, including plant, equipment, timberlands, goodwill, and other intangible assets periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Goodwill is reviewed for impairment annually during the fourth quarter, or more frequently if impairment indicators are present.

The fair value of our reporting units, which are also our operating segments, is determined using a market approach and a discounted cash flow model. Our evaluations include a variety of qualitative factors and analyses based on estimates of future cash flows expected to be generated from the use of the underlying assets, trends or other determinants of fair value. If the value of an asset determined by these evaluations is less than its carrying amount, a loss is recognized for the difference between the fair value and the carrying value of the asset. Our Airlaid Materials segment’s fair value substantially exceeded its carrying value at the time of its last valuation performed in connection with the last annual impairment test in the fourth quarter of 2021. Our Composite Fibers segment, having performed its last valuation and having recognized a goodwill impairment in the first quarter of 2022, has a fair value that approximates its carrying value. Our Spunlace segment, which was formed in conjunction with the Jacob Holm acquisition on October 29, 2021, also has a fair value that approximates its carrying value. Both Composite Fibers’ and Spunlace’s fair value could be impacted by factors such as unexpected changes in inflation, significant disruptions in the delivery of energy to our sites, particularly in Europe, or the Company’s inability to continue to increase selling prices in response to inflationary pressures. Future adverse changes such as these or in market conditions or poor operating results of the related business may indicate an inability to recover the carrying value of the assets, thereby possibly requiring an impairment charge in the future.

- 42 -

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures Our ~~chief executive officer~~Chief Executive Officer and our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~September~~June 30, ~~2017,~~2022, have concluded that, as of the evaluation date, our disclosure controls and procedures are effective.

Changes in Internal ControlsThere were no changes in our internal control over financial reporting during the three months ended ~~September~~June 30, ~~2017,~~2022, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

- 43 -

PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

The following updated risk factor should be considered in addition to the risk factors set forth under Part I, Item 1A. Risk Factors in our 2021 Form 10-K. Except as described herein, there have been no material changes with respect to the risk factors disclosed in our 2021 Form 10-K.

The conflict between Russia and Ukraine has adversely affected, and may continue to adversely affect, our business, financial condition, and results of operations.

Approximately $95 million of our net sales in 2021, or 7.3% of our net sales in 2021, was earned from customers located in Russia and Ukraine. The geopolitical conditions resulting from the Russia/Ukraine military conflict, including government-imposed sanctions and the current macroeconomic climate in Russia and Ukraine, have adversely impacted both demand for our products and our ability to deliver products to this region, as well as, limited customers' access to financial resources and their ability to satisfy obligations to us. For example, as a direct result of the military conflict, economic sanctions, and the disruptions in the region’s financial systems, our management expects a significant reduction in wallcover revenues and cash flows, for the foreseeable future, from our facility located in Dresden, Germany that produces wallcover paper, a significant portion of which historically was sold into the Ukraine and Russian markets. Certain wallcover base paper, together with certain filtration products produced by our Composite Fibers segment, are subject to sanction restrictions and currently are unable to be sold into the Russian market. As a result, during the first six months of 2022, we recorded a $117.3 million non-cash asset impairment charge related to assets of our Dresden facility and an impairment of our Composite Fibers business' goodwill. Moreover, certain customers have not been able to satisfy outstanding accounts receivables and, as such, during the first six months of 2022, we recognized bad debt expense of approximately $2.9 million directly related to Russian and Ukrainian customers. At June 30, 2022, we had accounts receivable, net of reserves, from customers in this region totaling approximately $2.6 million which we expect to collect in normal course.

In addition, we operate manufacturing sites elsewhere in Europe that have been adversely impacted as a result of the military conflict in Ukraine and related geopolitical events and sanctions. In many instances, these sites depend on the availability of natural gas for use in the production of products. The supply of a substantial portion of the natural gas used may originate from Russia. We expect that shortages in supply and increases in costs of natural gas will adversely impact our ability to operate these sites in an efficient and cost-effective manner, for the foreseeable future.

The risk of cyber-security incidents and cyber attacks has increased in connection with the ongoing conflict, driven by justifications such as retaliation for the sanctions imposed in conjunction with the conflict. It is possible that such incidents or attacks could have collateral effects on additional critical infrastructure and financial institutions globally, which could adversely affect our operations and could increase the frequency and severity of cyber-based attacks against our information technology systems. The proliferation of malware from the conflict, into systems unrelated to the conflict, or cyberattacks against U.S. companies in retaliation for U.S. sanctions against Russia or U.S. support of Ukraine, could also adversely affect our operations and our supply chain.

To the extent the current conflict adversely affects our business, financial condition and results of operations, it may also have the effect of heightening many other risks disclosed in Part I, Item 1A. Risk Factors in our 2021 Form 10-K, any of which could materially and adversely affect our business and results of operations, however, due to the continually evolving nature of the conflict, the potential impact that the conflict could have on such risk factors, and others that cannot yet be identified, remains uncertain.

In the event that current geopolitical tensions fail to abate, or deteriorate further, or additional governmental sanctions are enacted against the Russian economy or its banking and monetary systems, we may face additional adverse consequences to our business and results of operations. Even if the conflict moderates or a resolution between Ukraine and Russia is reached, we expect that we will continue to experience ongoing adverse consequences to our business, financial condition and results of operation resulting from the conflict for the foreseeable future, including because certain of the economic and other sanctions imposed, or that may be imposed, against Russia may continue for a period of time after any resolution has been reached.

- 44 -

~~- 34 -~~

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

~~PART~~ II

ITEM 6. EXHIBITS

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


~~31.1~~			Incorporated by reference to
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~~herewith.
31.2
~~31.2~~	Certification of ~~John P. Jacunski, Executive~~Ramesh Shettigar, Senior Vice President, ~~and~~ Chief Financial Officer and Treasurer of Glatfelter, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002, filed ~~herewith~~herewith.
32.1
~~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~~herewith.
32.2
~~32.2~~	Certification of ~~John P. Jacunski, Executive~~Ramesh Shettigar, Senior Vice President, ~~and~~ Chief Financial Officer and Treasurer of Glatfelter, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, furnished ~~herewith~~herewith.
10.1		First Amendment to Fourth Amended and Restated Credit Agreement	Ex. 10.1 to Form 8-K filed May 10, 2022
~~101.INS~~ 10.2		Glatfelter Corporation 2022 Long-Term Incentive Plan	Ex. 99.1 to Form S-8 filed May 11, 2022
10.3		Form of Restricted Stock Unit Award Certificate (form effective as of May 5, 2022)
10.4		Form of Performance Share Award Certificate (form effective as of May 5, 2022)
10.5		Form of Restricted Stock Unit Award Certificate for CEO (form effective as of May 5, 2022)
10.6		Form of Performance Share Award Certificate for CEO (form effective as of May 5, 2022)
10.7		Form of Non-Employee Director Restricted Stock Unit Award Certificate (form effective as of May 5, 2022)
101.INS		Inline XBRL Instance Document ~~filed herewith~~ – the instance document does not appear in the Interactive Data file because its iXBRL tags are embedded within the Inline XBRL document.
101.SCH
~~101.SCH~~	Inline XBRL Taxonomy Extension ~~Schema, filed herewith~~ Schema.
101.CAL
~~101.CAL~~	Inline XBRL Extension Calculation ~~Linkbase, filed herewith~~ Linkbase.
101.DEF
~~101.DEF~~	Inline XBRL Extension Definition ~~Linkbase, filed herewith~~ Linkbase.
101.LAB
~~101.LAB~~	Inline XBRL Extension Label ~~Linkbase, filed herewith~~ Linkbase.
101.PRE
~~101.PRE~~	Inline XBRL Extension Presentation ~~Linkbase, filed herewith~~ Linkbase.
104
Cover Page Interactive Data File (formatted as an inline XBRL and contained in Exhibit 101).

- 45 -

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)~~

Glatfelter Corporation

(Registrant)

~~October 31, 2017~~

August 2, 2022

/s/ David C. Elder

David C. Elder

Vice President, Finance

and Chief Accounting Officer

(Principal Accounting Officer)

- 3546 -

~~GLATFELTER~~

~~09.30.17 Form 10-Q~~

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

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

PART II – OTHER INFORMATION			35

Item 6	Exhibits		35

	SIGNATURES		35

In thousands	Currency translation adjustments			Unrealized gain (loss) on cash flow hedges			Change in pensions			Change in other postretirement defined benefit plans			Total
Balance at July 1, 2017	$	(66,879	)	$	(3,097	)	$	(105,824	)	$	4,719		$	(171,081	)
Other comprehensive income before reclassifications (net of tax)		16,559			(1,533	)		—			—			15,026
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			19			2,424			(139	)		2,304
Net current period other comprehensive income (loss)		16,559			(1,514	)		2,424			(139	)		17,330
Balance at September 30, 2017	$	(50,320	)	$	(4,611	)	$	(103,400	)	$	4,580		$	(153,751	)
Balance at July 1, 2016	$	(74,486	)	$	785		$	(115,786	)	$	3,204		$	(186,283	)
Other comprehensive income before reclassifications (net of tax)		(1,530	)		(1,195	)		—			—			(2,725	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			337			2,464			(145	)		2,656
Net current period other comprehensive income (loss)		(1,530	)		(858	)		2,464			(145	)		(69	)
Balance at September 30, 2016	$	(76,016	)	$	(73	)	$	(113,322	)	$	3,059		$	(186,352	)

	Three months ended September 30						Nine months ended September 30
In thousands	2017			2016			2017			2016
Description													Line Item in Statements of Income
Cash flow hedges (Note 12)
(Gains) losses on cash flow hedges	$	29		$	347		$	(1,687	)	$	264		Costs of products sold
Tax expense (benefit)		(10	)		(10	)		444			(6	)	Income tax provision
Net of tax		19			337			(1,243	)		258
Retirement plan obligations (Note 7)
Amortization of deferred benefit pension plans
Prior service costs		532			506			1,592			1,519		Costs of products sold
		176			168			528			504		Selling, general and administrative
Actuarial losses		2,290			2,450			6,852			7,350		Costs of products sold
		788			843			2,359			2,530		Selling, general and administrative
		3,786			3,967			11,331			11,903
Tax benefit		(1,362	)		(1,503	)		(4,075	)		(4,511	)	Income tax provision
Net of tax		2,424			2,464			7,256			7,392
Amortization of deferred benefit other plans
Prior service costs		(37	)		(37	)		(112	)		(112	)	Costs of products sold
		(8	)		(8	)		(24	)		(24	)	Selling, general and administrative
Actuarial losses		(77	)		(156	)		(233	)		(467	)	Costs of products sold
		(17	)		(33	)		(50	)		(100	)	Selling, general and administrative
		(139	)		(234	)		(419	)		(703	)
Tax expense		—			89			—			268		Income tax provision
Net of tax		(139	)		(145	)		(419	)		(435	)
Total reclassifications, net of tax	$	2,304		$	2,656		$	5,594		$	7,215

	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		(61,190	)		10.70
Canceled / forfeited		(17,630	)		18.46		(143,932	)		17.87
Outstanding at September 30,		2,685,936		$	17.67		2,738,545		$	17.64

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

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

	September 30, 2017				December 31, 2016
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value
Variable rate debt	$	158,298	$	158,298	$	61,595	$	61,595
Fixed-rate bonds		250,000		254,265		250,000		256,563
2.40% Term loan		8,012		8,207		8,282		8,877
2.05% Term loan		34,659		35,223		35,163		37,089
1.30% Term Loan		9,698		9,644		9,788		10,062
1.55% Term loan		11,574		11,509		10,333		10,082
Total	$	472,241	$	477,146	$	375,161	$	384,268

In thousands	September 30 2017		December 31 2016
Derivative
Sell/Buy - sell notional
Philippine Peso / British Pound		19,047		—
Euro / British Pound		11,428		10,373
U.S. Dollar / Euro		1,471		—
Canadian Dollar / U.S. Dollar		20		—
Sell/Buy - buy notional
Euro / Philippine Peso		857,103		699,279
British Pound / Philippine Peso		644,076		557,025
U.S. Dollar / Euro		7,799		15,379
Euro / U.S. Dollar		54,135		43,951
U.S. Dollar / Canadian Dollar		32,760		35,290
British Pound / Euro		335		—

Three months ended September 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	$	142.3	$	131.7	$	67.8	$	61.9	$	203.2	$	211.8	$	—		$	—		$	413.3		$	405.3
Energy and related sales, net		—	—			—	—			1.2		1.3		—			—			1.2			1.3
Total revenue		142.3		131.7		67.8	61.9			204.4		213.1		—			—			414.6			406.6
Cost of products sold		115.0		105.8		57.2		53.5		179.7		180.1		7.9			6.1			359.8			345.5
Gross profit (loss)		27.3		25.9		10.6		8.4		24.7		33.0		(7.9	)		(6.1	)		54.7			61.2
SG&A		10.9		11.9		2.4		2.0		12.2		14.3		7.9			7.5			33.4			35.7
(Gains) losses on dispositions of plant, equipment and timberlands, net		—		—		—		—		—		—		—			—			—			—
Total operating income (loss)		16.4		14.0		8.2		6.4		12.5		18.7		(15.8	)		(13.6	)		21.4			25.4
Non-operating expense		—		—		—		—		—		—		(5.0	)		(4.4	)		(5.0	)		(4.4	)
Income (loss) before income taxes	$	16.4	$	14.0	$	8.2	$	6.4	$	12.5	$	18.7	$	(20.8	)	$	(18.0	)	$	16.4		$	21.0
Supplementary Data
Net tons sold (thousands)		43.8		39.1		26.2		25.2		197.1		197.3		—			—			267.1			261.5
Depreciation, depletion and amortization	$	7.1	$	6.9	$	2.5	$	2.4	$	8.0	$	6.4	$	3.8		$	0.6		$	21.4		$	16.3
Capital expenditures		3.8		5.1		12.6		4.3		10.2		26.7		4.5			0.5			31.1			36.6

Nine months ended September 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	$	400.6	$	391.6	$	190.4	$	183.4	$	600.3	$	638.9	$	—		$	—		$	1,191.4		$	1,213.9
Energy and related sales, net		—	—			—	—			3.3		4.0		—			—			3.3			4.0
Total revenue		400.6	391.6			190.4		183.4		603.6		642.9		—			—			1,194.7			1,217.9
Cost of products sold		322.2		316.0		160.7		157.5		555.7		574.1		14.0			8.6			1,052.6			1,056.2
Gross profit (loss)		78.4		75.6		29.7		25.9		47.9		68.8		(14.0	)		(8.6	)		142.1			161.7
SG&A		32.9		35.1		6.9		6.2		36.0		40.9		24.7			22.6			100.5			104.8
(Gains) losses on dispositions of plant,
equipment and timberlands, net		—		—		—		—		—		—		—			—			—			—
Total operating income (loss)		45.5		40.5		22.8		19.7		11.9		27.9		(38.7	)		(31.2	)		41.7			56.9
Non-operating expense		—		—		—		—		—		—		(13.7	)		(12.7	)		(13.7	)		(12.7	)
Income (loss) before income taxes	$	45.5	$	40.5	$	22.8	$	19.7	$	11.9	$	27.9	$	(52.4	)	$	(43.9	)	$	27.9		$	44.2
Supplementary Data
Net tons sold (thousands)		124.5		116.7		76.6		74.1		578.4		597.7		—			—			779.5			788.5
Depreciation, depletion and amortization	$	20.9	$	21.2	$	7.1	$	7.0	$	22.9	$	19.7	$	5.4		$	1.8		$	56.3		$	49.7
Capital expenditures		10.6		13.7		36.1		25.0		44.2		77.4		11.3			0.8			102.2			116.9

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	203,205		$	20,588		$	211,331		$	(21,799	)	$	413,325
Energy and related sales, net		1,236			—			—			—			1,236
Total revenues		204,441			20,588			211,331			(21,799	)		414,561
Costs of products sold		188,677			19,525			173,423			(21,799	)		359,826
Gross profit		15,764			1,063			37,908			—			54,735
Selling, general and administrative
expenses		18,730			536			14,133			—			33,399
(Gain) loss on dispositions of plant
equipment and timberlands, net		70			(114	)		20			—			(24	)
Operating income (loss)		(3,036	)		641			23,755			—			21,360
Other non-operating
income (expense)
Interest expense		(5,241	)		(300	)		(436	)		1,430			(4,547	)
Interest income		160			1,316			5			(1,430	)		51
Equity in earnings of subsidiaries		17,880			18,096			—			(35,976	)		—
Other, net		498			(1,920	)		944			—			(478	)
Total other non-operating
income (expense)		13,297			17,192			513			(35,976	)		(4,974	)
Income before income taxes		10,261			17,833			24,268			(35,976	)		16,386
Income tax provision (benefit)		(1,844	)		(47	)		6,172			—			4,281
Net income		12,105			17,880			18,096			(35,976	)		12,105
Other comprehensive income		17,330			14,812			14,959			(29,771	)		17,330
Comprehensive income	$	29,435		$	32,692		$	33,055		$	(65,747	)	$	29,435

In thousands	Nine months ended September 30, 2017
	Favorable (unfavorable)
Net sales		$	(6,752	)
Costs of products sold			7,366
SG&A expenses			615
Income taxes and other			320
Net income		$	1,549

In thousands	Three months ended September 30, 2017
	Favorable (unfavorable)
Net sales		$	6,047
Costs of products sold			(4,340	)
SG&A expenses			(448	)
Income taxes and other			(47	)
Net income		$	1,212