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 every Interactive Data File required to be submitted 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 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.

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

Common Stock outstanding on ~~July 24, 2019~~April 30, 2020 totaled ~~44,171,151~~44,311,663 shares.

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

Item 1	Financial Statements			Financial Statements
	Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2019 and 2018 (unaudited)		2
	Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2019 and 2018 (unaudited)		3	Condensed Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 (unaudited)		2
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 (unaudited)		4	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019 (unaudited)		3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)		5	Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (unaudited)		4
	Statements of Shareholders’ Equity for the three months and six months ended June 30, 2019 and 2018 (unaudited)		6	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		7	Statements of Shareholders’ Equity for the three months ended March 31, 2020 and 2019 (unaudited)		6
	1.	Organization	7	Notes to Condensed Consolidated Financial Statements (unaudited)		7
	2.	Accounting Policies	7	1.	Organization	7
	3.	Acquisition	8	2.	Accounting Policies	7
	4.	Revenue	9	3.	Restructuring	8
	5.	Discontinued Operations	10	4.	Revenue	8
	6.	Gain on Disposition of Plant, Equipment and Timberlands	11	5.	Discontinued Operations	9
	7.	Earnings Per Share	11	6.	Gain on Disposition of Plant, Equipment and Timberlands	10
	8.	Accumulated Other Comprehensive Income	12	7.	Earnings Per Share	10
	9.	Income Taxes	13	8.	Accumulated Other Comprehensive Income	11
	10.	Stock-based Compensation	14	9.	Income Taxes	11
	11.	Retirement Plans and Other Post- Retirement Benefits	16	10.	Stock-based Compensation	13
	12.	Inventories	16	11.	Retirement Plans and Other Post- Retirement Benefits	14
	13.	Capitalized Interest	17	12.	Inventories	15
	14.	Leases	17	13.	Leases	15
	15.	Long-term Debt	18	14.	Long-term Debt	16
	16.	Fair Value of Financial Instruments	19	15.	Fair Value of Financial Instruments	17
	17.	Financial Derivatives and Hedging Activities	19	16.	Financial Derivatives and Hedging Activities	17
	18.	Commitments, Contingencies and Legal Proceedings	22	17.	Commitments, Contingencies and Legal Proceedings	20
	19.	Segment Information	23	18.	Segment Information	21

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3	Quantitative and Qualitative Disclosures About Market Risks		36	Quantitative and Qualitative Disclosures About Market Risks		32
Item 4	Controls and Procedures		36	Controls and Procedures		33

PART II – OTHER INFORMATION	PART II – OTHER INFORMATION		37	PART II – OTHER INFORMATION

Item 1A				Risk Factors		33
Item 6	Exhibits		37	Exhibits		34

	SIGNATURES		37	SIGNATURES		35

	Three months ended June 30						Six months ended June 30						Three months ended March 31
In thousands, except per share	2019			2018			2019			2018			2020			2019

Net sales	$	235,053		$	215,742		$	464,186		$	426,949		$	231,560		$	229,133
Costs of products sold		197,553			182,443			391,069			357,090			194,685			193,516
Gross profit		37,500			33,299			73,117			69,859			36,875			35,617
Selling, general and administrative expenses		22,800			26,185			47,422			56,116			24,594			24,622
Gains on dispositions of plant, equipment and timberlands, net		(423	)		(574	)		(1,092	)		(1,690	)		—			(669	)
Operating income		15,123			7,688			26,787			15,433			12,281			11,664
Non-operating income (expense)
Interest expense		(1,865	)		(3,822	)		(6,611	)		(7,272	)		(1,778	)		(4,746	)
Interest income		241			26			746			80			264			505
Other, net		(1,551	)		(799	)		(2,513	)		(1,122	)		(753	)		(962	)
Total non-operating expense		(3,175	)		(4,595	)		(8,378	)		(8,314	)		(2,267	)		(5,203	)
Income from continuing operations before income taxes		11,948			3,093			18,409			7,119			10,014			6,461
Income tax provision		5,655			1,813			7,513			3,575			2,608			1,858
Income from continuing operations		6,293			1,280			10,896			3,544			7,406			4,603

Discontinued operations:
Income (loss) before income taxes		(485	)		(18,517	)		229			(14,058	)
Income tax provision (benefit)		(23	)		(9,838	)		8			(8,831	)
Income (loss) from discontinued operations		(462	)		(8,679	)		221			(5,227	)
Net income (loss)	$	5,831		$	(7,399	)	$	11,117		$	(1,683	)
Income before income taxes														—			714
Income tax provision														—			31
Income from discontinued operations														—			683
Net income													$	7,406		$	5,286

Basic earnings per share
Income from continuing operations	$	0.14		$	0.03		$	0.25		$	0.08		$	0.17		$	0.10
Income (loss) from discontinued operations		(0.01	)		(0.20	)		0.01			(0.12	)
Basic earnings (loss) per share	$	0.13		$	(0.17	)	$	0.26		$	(0.04	)
Income from discontinued operations														—			0.02
Basic earnings per share													$	0.17		$	0.12

Diluted earnings (loss) per share
Diluted earnings per share
Income from continuing operations	$	0.14		$	0.03		$	0.25		$	0.08		$	0.17		$	0.10
Income (loss) from discontinued operations		(0.01	)		(0.20	)		—			(0.12	)
Diluted earnings (loss) per share	$	0.13		$	(0.17	)	$	0.25		$	(0.04	)
Income from discontinued operations														—		$	0.02
Diluted earnings per share													$	0.17		$	0.12

Cash dividends declared per common share	$	0.13		$	0.13		$	0.26		$	0.26		$	0.13		$	0.13

Weighted average shares outstanding
Basic		44,140			43,770			44,084			43,735			44,275			44,027
Diluted		44,382			44,487			44,351			44,531			44,530			44,279

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

	Three months ended June 30					Six months ended June 30						Three months ended March 31
In thousands	2019		2018			2019			2018			2020			2019
Net income (loss)	$	5,831	$	(7,399	)	$	11,117		$	(1,683	)
Net income												$	7,406		$	5,286
Foreign currency translation adjustments		1,426		(33,223	)		(3,379	)		(20,476	)		(13,903	)		(5,163	)
Net change in:
Deferred gains on cash flow hedges, net of taxes of $78, $(1,719), $(756) and $(1,136), respectively		21		4,549			2,243			2,747
Unrecognized retirement obligations, net of taxes of $(1,241), $(965), $(1,386) and $(1,942), respectively		4,352		3,021			4,840			6,096
Other comprehensive income (loss)		5,799		(25,653	)		3,704			(11,633	)
Deferred gains (losses) on cash flow hedges, net of taxes of $401 and $(834), respectively													(1,317	)		2,222
Unrecognized retirement obligations, net of taxes of $51 and $(145), respectively													(101	)		846
Other comprehensive loss													(15,321	)		(2,095	)
Comprehensive income (loss)	$	11,630	$	(33,052	)	$	14,821		$	(13,316	)	$	(7,915	)	$	3,191

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

	June 30			December 31			March 31			December 31
In thousands	2019			2018			2020			2019
Assets
Cash and cash equivalents	$	58,945		$	142,685		$	104,225		$	126,201
Accounts receivable, net		136,548			119,772			128,738			124,442
Inventories		192,123			173,411			189,449			190,415
Prepaid expenses and other current assets		42,758			33,418			38,982			36,274
Total current assets		430,374			469,286			461,394			477,332

Plant, equipment and timberlands, net		541,856			556,044			517,431			537,421
Goodwill		153,158			153,463			146,986			150,816
Intangible assets, net		88,882			93,614			79,709			83,735
Other assets		81,720			67,347			38,672			34,490
Total assets	$	1,295,990		$	1,339,754		$	1,244,192		$	1,283,794

Liabilities and Shareholders' Equity
Current portion of long-term debt	$	23,238		$	10,785		$	24,952		$	22,940
Accounts payable		115,241			120,701			112,905			130,039
Dividends payable		5,742			5,719			5,761			5,752
Environmental liabilities		6,867			23,000			8,000			9,000
Other current liabilities		74,059			72,597			60,197			62,772
Total current liabilities		225,147			232,802			211,815			230,503

Long-term debt		361,792			400,962			325,532			336,919
Deferred income taxes		78,968			78,651			72,369			76,374
Other long-term liabilities		86,964			88,441			91,566			84,039
Total liabilities		752,871			800,856			701,282			727,835

Commitments and contingencies		—			—			-			-

Shareholders’ equity
Common stock		544			544			544			544
Capital in excess of par value		59,920			62,239			59,623			59,900
Retained earnings		769,940			770,305			727,440			725,795
Accumulated other comprehensive loss		(133,736	)		(137,440	)		(93,217	)		(77,896	)
		696,668			695,648			694,390			708,343
Less cost of common stock in treasury		(153,549	)		(156,750	)		(151,480	)		(152,384	)
Total shareholders’ equity		543,119			538,898			542,910			555,959
Total liabilities and shareholders’ equity	$	1,295,990		$	1,339,754		$	1,244,192		$	1,283,794

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

	Six months ended June 30						Three months ended March 31
In thousands	2019			2018			2020			2019
Operating activities
Net income (loss)	$	11,117		$	(1,683	)
(Income) loss from discontinued operations, net of taxes		(221	)		5,227
Net income							$	7,406		$	5,286
Income from discontinued operations, net of taxes								—			(683	)

Adjustments to reconcile to net cash used by continuing operations:
Adjustments to reconcile to net cash provided (used) by continuing operations:
Depreciation, depletion and amortization		25,520			23,195			15,402			12,788
Amortization of debt issue costs and original issue discount		1,380			580			147			1,236
Deferred income tax benefit		(143	)		(3,437	)		(2,612	)		(1,240	)
Gains on dispositions of plant, equipment and timberlands, net		(1,092	)		(1,690	)		—			(669	)
Share-based compensation		1,638			3,505			1,085			477
Change in operating assets and liabilities
Accounts receivable		(17,004	)		(14,791	)		(7,203	)		(10,364	)
Inventories		(19,513	)		(29,040	)		(3,688	)		(13,233	)
Prepaid and other current assets		(6,593	)		(760	)		(2,315	)		(4,149	)
Accounts payable		(3,465	)		1,824			(11,605	)		2,066
Accruals and other current liabilities		(12,258	)		(6,471	)		(2,931	)		(15,956	)
Other		1,349			(332	)		711			296
Net cash used by operating activities from continuing operations		(19,285	)		(23,873	)		(5,603	)		(24,145	)

Investing activities
Expenditures for purchases of plant, equipment and timberlands		(10,633	)		(25,937	)		(7,014	)		(5,865	)
Proceeds from disposals of plant, equipment and timberlands, net		1,116			1,804			—			689
Acquisition, net of cash acquired		(1,974	)		—			—			(1,974	)
Other		(90	)		(68	)		—			(90	)
Net cash used by investing activities from continuing operations		(11,581	)		(24,201	)		(7,014	)		(7,240	)

Financing activities
Net (repayments) borrowings under revolving credit facility		(19,294	)		46,660			2,452			(11,488	)
Repayment of 5.375% Notes		(250,000	)		—			—			(250,000	)
Proceeds from term loans		248,644			—			—			248,644
Payments of borrowing costs		(2,170	)		—			—			(1,757	)
Repayment of term loans		(5,326	)		(5,647	)		(3,089	)		(2,646	)
Payments of dividends		(11,452	)		(11,368	)		(5,752	)		(5,720	)
Payments related to share-based compensation awards and other		(755	)		(980	)		(458	)		(644	)
Net cash provided (used) by financing activities from continuing operations		(40,353	)		28,665
Net cash used by financing activities from continuing operations								(6,847	)		(23,611	)
Effect of exchange rate changes on cash		(291	)		(3,230	)		(937	)		(658	)
Net decrease in cash and cash equivalents		(71,510	)		(22,639	)
Change in cash and cash equivalents from discontinued operations		(12,230	)		13,609
Cash and cash equivalents at the beginning of period		142,685			116,219
Net decrease in cash, cash equivalents and restricted cash								(20,401	)		(55,654	)
Change in cash, cash equivalents and restricted cash from discontinued operations								(316	)		(10,365	)
Cash, cash equivalents and restricted cash at the beginning of period								126,201			142,685
Cash, cash equivalents and restricted cash at the end of period								105,484			76,666
Less: restricted cash included in "Prepaid expenses and other current assets"								(1,259	)		—
Cash and cash equivalents at the end of period	$	58,945		$	107,189		$	104,225		$	76,666

Supplemental cash flow information
Cash paid for:
Interest, net of amounts capitalized	$	7,742		$	6,935
Interest							$	1,443		$	5,989
Income taxes, net		7,157			6,804			3,446			2,956

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

In thousands	Common stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity			Common stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Shareholders’ Equity
Balance at April 1, 2019	$	544	$	60,565		$	769,857		$	(139,535	)	$	(155,243	)	$	536,188
Balance at January 1, 2020																		$	544	$	59,900		$	725,795		$	(77,896	)	$	(152,384	)	$	555,959
Net income							5,831									5,831								7,406									7,406
Other comprehensive income										5,799						5,799
Comprehensive income																11,630
Cash dividends declared ($0.13 per share)							(5,748	)								(5,748	)
Share-based compensation expense				1,161												1,161
Delivery of treasury shares
RSUs and PSAs				(1,429	)								1,427			(2	)
Employee stock options exercised — net				(377	)								267			(110	)
Balance at June 30, 2019	$	544	$	59,920		$	769,940		$	(133,736	)	$	(153,549	)	$	543,119

Balance at April 1, 2018	$	544	$	62,359		$	970,736		$	(148,953	)	$	(160,694	)	$	723,992
Net loss							(7,399	)								(7,399	)
Other comprehensive loss										(25,653	)					(25,653	)										(15,321	)					(15,321	)
Comprehensive loss																(33,052	)																(7,915	)
Cash dividends declared ($0.13 per share)							(5,694	)								(5,694	)							(5,761	)								(5,761	)
Share-based compensation expense				1,722												1,722					1,085												1,085
Delivery of treasury shares
RSUs and PSAs				(1,216	)								1,215			(1	)				(1,213	)								807			(406	)
Employee stock options exercised — net				(38	)								23			(15	)				(149	)								97			(52	)
Balance at June 30, 2018	$	544	$	62,827		$	957,643		$	(174,606	)	$	(159,456	)	$	686,952
Balance at March 31, 2020																		$	544	$	59,623		$	727,440		$	(93,217	)	$	(151,480	)	$	542,910

Balance at January 1, 2019	$	544	$	62,239		$	770,305		$	(137,440	)	$	(156,750	)	$	538,898		$	544	$	62,239		$	770,305		$	(137,440	)	$	(156,750	)	$	538,898
Net income							11,117									11,117								5,286									5,286
Other comprehensive income										3,704						3,704
Other comprehensive loss																											(2,095	)					(2,095	)
Comprehensive income																14,821																	3,191
Cash dividends declared ($0.26 per share)							(11,482	)								(11,482	)
Cash dividends declared ($0.13 per share)																								(5,734	)								(5,734	)
Share-based compensation expense				1,638												1,638					477												477
Delivery of treasury shares
RSUs and PSAs				(2,421	)								2,097			(324	)				(992	)								670			(322	)
Employee stock options exercised — net				(1,536	)								1,104			(432	)				(1,159	)								837			(322	)
Balance at June 30, 2019	$	544	$	59,920		$	769,940		$	(133,736	)	$	(153,549	)	$	543,119

Balance at January 1, 2018	$	544	$	62,594		$	948,411		$	(140,675	)	$	(161,946	)	$	708,928
Reclassification pursuant to ASU No. 2018-02							22,298			(22,298	)					—
Net loss							(1,683	)								(1,683	)
Other comprehensive loss										(11,633	)					(11,633	)
Comprehensive loss																(13,316	)
Cash dividends declared ($0.26 per share)							(11,383	)								(11,383	)
Share-based compensation expense				3,704												3,704
Delivery of treasury shares
RSUs and PSAs				(2,376	)								1,900			(476	)
Employee stock options exercised — net				(1,095	)								590			(505	)
Balance at June 30, 2018	$	544	$	62,827		$	957,643		$	(174,606	)	$	(159,456	)	$	686,952
Balance at March 31, 2019																		$	544	$	60,565		$	769,857		$	(139,535	)	$	(155,243	)	$	536,188

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

P. H. Glatfelter Company and subsidiaries (“Glatfelter”) is a leading global supplier of engineered materials. Its high-quality, innovative and customizable solutions are found in tea and single-serve coffee filtration, personal hygiene ~~and packaging products,~~ as well as in many diverse packaging, home improvement and industrial applications. We are headquartered in York, ~~Pennsylvania,~~PA, and operate facilities in the United States, Canada, Germany, France, the United Kingdom and the Philippines. We have sales and distribution offices in the U.S., Europe, Russia and China and our products are marketed worldwide, either directly to customers or through brokers and agents. The terms “we,” “us,” “our,” “the Company,” or “Glatfelter,” refer to P. H. Glatfelter Company and subsidiaries unless the context indicates otherwise.

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 you have read the audited consolidated financial statements included in our ~~2018~~2019 Annual Report on Form 10-K.

Discontinued Operations The results of operations for our former Specialty Papers ~~Business Unit~~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 actual results may differ from those estimates and assumptions.

Recently Issued Accounting Pronouncements In ~~February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ (“ASU 842”). This ASU requires organizations to recognize on its balance sheet the assets and liabilities for the rights and obligations created by leases. We adopted ASU 842 as of January 1, 2019 and elected to follow a modified retrospective method which permitted us to adopt the standard without restating previously reported periods. As a result of adopting ASU 842, we recorded a right of use asset and corresponding lease obligation of approximately $14.1 million. Refer to Note 14 “Leases” for additional information.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~"Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities"~~ (“ASU No. 2017-12”), which simplifies the application of hedge accounting and more closely aligns hedge accounting with an entity’s risk management strategies. ASU No. 2017-12 also amends the manner in which hedge effectiveness may be performed and changes the presentation of hedge ineffectiveness in the financial statements. We adopted ASU No. 2017-12 effective January 1, 2019 but it had an insignificant effect on our results of operations and financial position.

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~~We adopted this standard is effective ~~for us in the first quarter of~~January 1, 2020 ~~and must be adopted~~ using a modified retrospective approach. ~~We are currently assessing the impact~~The adoption of this standard ~~may have on~~did not impact our results of operations ~~and~~or financial position.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update eliminates, clarifies, and modifies certain guidance related to the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact this ASU will have on our financial statements and related disclosures as well as the timing of adoption.

~~On October 1, 2018,~~In the first quarter of 2020 we completed our acquisition of Georgia-Pacific’s European nonwovens business (the “GP Business”) for $186 million including a working capital adjustment and post-closing purchase price adjustments of $2.0 million.

announced restructuring actions within the Composite Fibers operating segment. The ~~acquisition~~actions primarily consisted of ~~Georgia-Pacific’s operations located in Steinfurt, Germany, along with sales offices located in France and Italy. The Steinfurt facility produces high-quality airlaid products for~~ the table-top, wipes, hygiene, food pad, and other nonwoven materials markets, competing in the marketplace with nonwoven technologies and substrates, as well as other materials focused primarily on consumer based end-use applications. The facility is a state-of-the-art, 32,000-metric-ton-capacity manufacturing facility that employs approximately 220 people. Steinfurt’s results were reported prospectively from the acquisition date as partconsolidation of our ~~Advanced Airlaid Materials business unit.~~

~~We financed the transaction through a combination of cash on hand and borrowings under~~metallizing operation from Gernsbach, Germany to our ~~revolving credit facility.~~

The preliminary allocation set forth in the following table is based on all information available to us at the present time and is subject to change. In the event new information, primarily related to the finalization of the values of certain intangible assets, becomes available, the measurement of the amounts of goodwill reflected may be affected. The preliminary allocation of the purchase price to assets acquired and liabilities assumed is as follows:

For purposes of allocating the total purchase price, assets acquired and liabilities assumed are recorded at their estimated fair market value. The allocation set forth above is based on management’s estimate of the fair value using valuation techniques such as discounted cash flow models, appraisals and similar methodologies. The amount allocated to intangible assets represents the estimated value of customer relationships, technological know-how and trade name.

Caerphilly, U.K. site. In connection with ~~the Steinfurt acquisition~~this we recorded ~~$75.3~~a non-cash charge of $2.5 million associated with accelerated depreciation and cash severance costs totaling $3.5 million. The restructuring charge is recorded under the caption “Costs of ~~goodwill and $43.6 million~~product sold” in the accompanying condensed consolidated statements of intangible assets. The goodwill arising from the acquisition largely relates to strategic benefits, product and market diversification, assembled workforce, and similar factors. For tax purposes, none of the goodwill is deductible. Intangible assets consist of technology, customer relationships and tradename.

~~The following table summarizes unaudited pro forma financial information~~income for the ~~indicated periods~~three months ended March 31, 2020.

We expect to record additional non-cash charges and severance costs in the second and third quarters of ~~2018 as if the acquisition occurred as of January 1, 2018:~~2020 aggregating approximately $4.0 million to $5.0 million.

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

	Three months ended June 30				Six months ended June 30				Three months ended March 31
In thousands	2019		2018		2019		2018		2020		2019
Composite Fibers
Food & beverage	$	70,390	$	70,186	$	141,843	$	140,583	$	71,458	$	71,453
Wallcovering		22,958		27,789		41,508		55,921		19,893		18,550
Technical specialties		19,266		21,609		38,554		42,567		20,007		19,288
Composite laminates		9,218		8,960		17,693		18,358		9,763		8,475
Metallized		10,749		14,390		21,700		27,102		11,590		10,951
		132,581		142,934		261,298		284,531		132,711		128,717
Advanced Airlaid Materials
Airlaid Materials
Feminine hygiene		51,851		46,937		106,839		95,410		50,096		54,988
Specialty wipes		17,656		10,495		34,988		18,262		17,212		17,332
Table top		16,347		2,179		29,678		4,244		15,052		13,331
Adult incontinence		6,365		5,190		11,853		9,622		6,145		5,488
Home care		4,352		3,875		8,316		7,902		5,212		3,964
Other		5,901		4,132		11,214		6,978		5,132		5,313
		102,472		72,808		202,888		142,418		98,849		100,416

TOTAL	$	235,053	$	215,742	$	464,186	$	426,949
Total									$	231,560	$	229,133

	Three months ended June 30				Six months ended June 30				Three months ended March 31
In thousands	2019		2018		2019		2018		2020		2019
Composite Fibers
Europe, Middle East and Africa	$	80,002	$	91,790	$	157,916	$	186,572	$	79,586	$	77,914
Americas		33,964		28,992		65,604		53,040		32,721		31,640
Asia Pacific		18,615		22,152		37,778		44,919		20,404		19,163
		132,581		142,934		261,298		284,531		132,711		128,717
Advanced Airlaid Materials

Airlaid Materials
Europe, Middle East and Africa		55,206		35,905		109,645		72,133		52,720		54,439
Americas		45,261		36,310		89,595		69,128		44,386		44,334
Asia Pacific		2,005		593		3,648		1,157		1,743		1,643
		102,472		72,808		202,888		142,418		98,849		100,416

TOTAL	$	235,053	$	215,742	$	464,186	$	426,949
Total									$	231,560	$	229,133

On October 31, 2018, we completed the previously announced sale of our Specialty Papers ~~Business Unit~~business on a cash free and debt free basis to Pixelle Specialty Solutions LLC, an affiliate of Lindsay Goldberg (the “Purchaser”) for $360 million. Cash proceeds from the sale were approximately $323 million in cash reflecting estimated purchase price adjustments as of the closing date and the assumption by the Purchaser of approximately $38 million in retiree healthcare liabilities. In addition, the Purchaser assumed approximately $210 million of pension liabilities relating to Specialty Papers’ employees and ~~will receive~~received approximately ~~$280~~$274 million of related assets from the Company’s existing pension plan.

In connection with the sale of Specialty Papers, we entered into a Transition Services Agreement with Purchaser pursuant to which we agreed to provide various back-office and information technology support until the business is fully separated from ~~us.~~

The following table sets forth a summary of discontinued operations included in the condensed consolidated statements of income:

	Three months ended June 30						Six months ended June 30						Three months ended March 31
In thousands	2019			2018			2019			2018			2020		2019
Net sales	$	—		$	190,031		$	—		$	389,469		$	—	$	—
Energy and related sales, net		—			944			—			2,373			—		—
Total revenues		—			190,975			—			391,842			—		—
Costs of products sold		—			202,671			—			391,192			—		—
Gross profit (loss)		—			(11,696	)		—			650
Gross profit														—		—
Selling, general and administrative expenses		485			5,376			(229	)		12,508			—		(714	)
Gains on dispositions of plant, equipment and timberlands, net		—			(5	)		—			(443	)		—		—
Operating income (loss)		(485	)		(17,067	)		229			(11,415	)
Operating income														—		714
Non-operating income (expense)
Interest expense		—			(1,991	)		—			(3,736	)		—		—
Other, net		—			541			—			1,093			—		—
Income (loss) before income taxes		(485	)		(18,517	)		229			(14,058	)
Income tax (provision) benefit		23			(9,838	)		(8	)		(8,831	)
Income (loss) from discontinued operations	$	(462	)	$	(8,679	)	$	221		$	(5,227	)
Impairment charge														—		—
Income before income taxes														—		714
Income tax (provision)														—		31
Income from discontinued operations													$	—	$	683

The amounts presented above are derived from the segment reporting for Specialty Papers adjusted to include certain retirement benefit costs and to exclude corporate shared services costs which are required to remain in continuing operations. Interest expense was allocated to discontinued operations based on borrowings under the revolving credit facility required to be repaid with proceeds from the sale of Specialty Papers.

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						Three months ended March 31
In thousands	2019			2018			2020			2019
Net cash provided (used) by operating activities	$	(10,658	)	$	23,911
Net cash used by investing activities		(1,572	)		(10,427	)
Net cash (provided) used by operating activities							$	(316	)	$	(8,931	)
Net cash (used) provided by investing activities								—			(1,434	)
Net cash provided by financing activities		—			125			—			—
Change in cash and cash equivalents from discontinued operations	$	(12,230	)	$	13,609		$	(316	)	$	(10,365	)

~~During the first six months of 2019 and 2018 we completed the~~The following table sets forth sales of timberlands and other assets ~~included~~completed during the first three months of 2019. There were no such sales in ~~continuing operations:~~the first quarter of 2020.

Dollars in thousands	Acres		Proceeds		Gain		Acres		Proceeds		Gain
2019
Timberlands		361	$	902	$	881		218	$	475	$	458
Other	n/a			214		211	n/a			214		211
Total			$	1,116	$	1,092			$	689	$	669
2018
Timberlands		1,029	$	1,785	$	1,680
Other	n/a			19		10
Total			$	1,804	$	1,690

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

	Three months ended June 30				Three months ended March 31
In thousands, except per share	2019		2018		2020		2019
Income from continuing operations	$	6,293	$	1,280	$	7,406	$	4,603
Weighted average common shares
outstanding used in basic EPS		44,140		43,770		44,275		44,027
Effect of dilutive SOSARs,
PSAs and RSUs		242		717		255		252
Weighted average common shares
outstanding and common share
equivalents used in diluted EPS		44,382		44,487		44,530		44,279

Earnings per share from continuing operations
Basic	$	0.14	$	0.03	$	0.17	$	0.10
Diluted		0.14		0.03		0.17		0.10

The numerator used to compute income per share from discontinued operations was ~~$(0.462) million and $(8.679) million for the second quarter of 2019 and 2018, respectively, and $0.221 million and $(5.227)~~$0.683 million for the first ~~six months of 2019 and 2018, respectively.~~quarter 2019. The denominator used to compute per share amounts of loss from discontinued operations is the same as the denominator used for per share amounts of income from continuing operations.

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

	June 30				March 31
In thousands	2019		2018		2020		2019
Three months ended		1,233		2,393		1,231		1,582
Six months ended		1,233		2,393

The following table sets forth details of the changes in accumulated other comprehensive income (losses) for the three months ended March 31, 2020 and ~~six months ended June 30, 2019 and 2018.~~2019.

In thousands
Currency translation adjustments

Unrealized gain (loss) on cash flow hedges

Change in pensions

Change in other postretirement defined benefit plans

Total

Balance at April 1, 2019
$
(74,427
)

$
4,421

$
(70,810
)

$
1,281

$
(139,535
)
Other comprehensive income before reclassifications (net of tax)

1,426

1,040

4,926

—

7,392

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

—

(1,019
)

(441
)

(133
)

(1,593
)
Net current period other comprehensive income (loss)

1,426

21

4,485

(133
)

5,799

Balance at June 30, 2019
$
(73,001
)

$
4,442

$
(66,325
)

$
1,148

$
(133,736
)

Balance at April 1, 2018
$
(29,092
)

$
(5,894
)

$
(118,428
)

$
4,461

$
(148,953
)
Other comprehensive income (loss) before reclassifications (net of tax)

(33,223
)

3,368

—

—

(29,855
)
Amounts reclassified from accumulated
other comprehensive income (net of tax)

—

1,181

3,261

(240
)

4,202

Net current period other comprehensive income (loss)

(33,223
)

4,549

3,261

(240
)

(25,653
)
Balance at June 30, 2018
$
(62,315
)

$
(1,345
)

$
(115,167
)

$
4,221

$
(174,606
)

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, 2020	$	(76,346	)	$	4,316		$	(7,253	)	$	1,387		$	(77,896	)
Other comprehensive income (loss) before reclassifications (net of tax)		(13,903	)		283			—			—			(13,620	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(1,600	)		148			(249	)		(1,701	)
Net current period other comprehensive income (loss)		(13,903	)		(1,317	)		148			(249	)		(15,321	)
Balance at March 31, 2020	$	(90,249	)	$	2,999		$	(7,105	)	$	1,138		$	(93,217	)

Balance at January 1, 2019	$	(69,622	)	$	2,199		$	(71,431	)	$	1,414		$	(137,440	)
Other comprehensive income (loss) before reclassifications (net of tax)		(4,805	)		2,641			—			—			(2,164	)
Amounts reclassified from accumulated other comprehensive income (net of tax)		—			(419	)		621			(133	)		69
Net current period other comprehensive income (loss)		(4,805	)		2,222			621			(133	)		(2,095	)
Balance at March 31, 2019	$	(74,427	)	$	4,421		$	(70,810	)	$	1,281		$	(139,535	)

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

	Three months ended June 30						Six months ended June 30							Three months ended March 31
In thousands	2019			2018			2019			2018				2020			2019
Description													Line Item in Statements of Income							Line Item in Statements of Income
Cash flow hedges (Note 17)
(Gains) losses on cash flow hedges	$	(1,411	)	$	1,636		$	(1,996	)	$	3,595		Costs of products sold
Tax expense (benefit)		392			(455	)		558			(999	)	Income tax provision
Cash flow hedges (Note 16)																				��
Gains on cash flow hedges														$	(2,182	)	$	(585	)	Costs of products sold
Tax expense															582			166		Income tax provision
Net of tax		(1,019	)		1,181			(1,438	)		2,596				(1,600	)		(419	)
Retirement plan obligations (Note 11)
Amortization of deferred benefit pension plans
Prior service costs		54			4			88			11		Other, net		12			34		Other, net
Actuarial losses		789			2,060			1,564			4,119		Other, net		160			775		Other, net
Discontinued operations amortization of defined benefit pension plans		—			2,240			—			4,344		Discontinued operations
		843			4,304			1,652			8,474				172			809
Tax benefit		(1,284	)		(1,043	)		(1,472	)		(2,049	)	Income tax provision		(24	)		(188	)	Income tax provision
Net of tax		(441	)		3,261			180			6,425				148			621
Amortization of deferred benefit other plans
Prior service costs		(3	)		—			(5	)		—		Other, net		(116	)		(2	)	Other, net
Actuarial gains		(173	)		(17	)		(346	)		(33	)	Other, net		(209	)		(173	)	Other, net
Discontinued operations amortization of defined benefit other plans		—			(301	)		—			(403	)	Discontinued operations
		(176	)		(318	)		(351	)		(436	)			(325	)		(175	)
Tax expense		43			78			85			107		Income tax provision		76		42			Income tax provision
Net of tax		(133	)		(240	)		(266	)		(329	)			(249	)		(133	)
Total reclassifications, net of tax	$	(1,593	)	$	4,202		$	(1,524	)	$	8,692			$	(1,701	)	$	69

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

In the first quarter of 2020, pretax income totaled $10.0 million and the provision for income taxes totaled $2.6 million. The effective income tax rate for the ~~tax associated~~first quarter of 2020 benefited by $2.6 million recorded in connection with ~~the Global Intangible Low-Taxed Income (GILTI) provision~~passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) of 2020. This Act, which was signed into law on March 27, 2020, modified the net operating loss (“NOL”) provisions of previous law to allow losses arising in a taxable year beginning after December 31, 2017 ~~Tax Cuts~~ and ~~Jobs Act~~before January 1, 2021, to be carried back five years. We are in the ~~period in~~process of evaluating additional tax planning opportunities which ~~it is incurred. The GILTI provisions require entities~~may allow us to ~~include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.~~carry back additional NOLs.

For the ~~six~~three months ended June 30, 2019, our effective tax rate increased by approximately 8% as a result of the GILTI provisions due to our U.S. federal tax loss carryforward position which limits our ability to recognize the associated foreign tax credits and a deduction of up to 50% of the GILTI income. Due to our U.S. federal tax loss carryforward position, there is no impact to cash taxes related to the GILTI provisions.

~~For the six months ended June 30, 2019,~~March 31, 2020, we recorded ~~an additional~~a decrease in our valuation allowance of ~~$1.6~~$4.0 million against our net deferred tax assets ~~primarily due to uncertainty regarding our~~in connection with passage of the CARES Act and the ability to ~~utilize federal net~~carry our “net operating ~~losses and credit carryforwards.~~loss” back five years. In assessing the need for a valuation allowance, ~~we consider~~management considers all available positive and negative evidence in ~~our~~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 ~~tax~~ assets will not be realized.

As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had ~~$30.6~~$32.7 million and ~~$29.6~~$30.5 million ~~respectively,~~ of gross unrecognized tax benefits. As of ~~June 30, 2019,~~March 31, 2020, if such benefits were to be recognized, approximately ~~$20.4~~$21.9 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:

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of federal, state and foreign examinations, and the lapse of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may decrease within the next twelve months by a range of ~~zero~~0 to ~~$6.2~~$1.2 million. Substantially all this range relates to tax positions taken in ~~Germany~~Canada and the U.S.

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

	Six months ended June 30				Three months ended March 31
In millions	2019		2018		2020		2019
Interest expense (income)	$	0.2	$	0.1	$	0.1	$	0.1
Penalties		—		—

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

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

~~Restricted Stock Units (“RSU”) and Performance Share Awards (“PSAs”)~~ Awards of RSUs and PSAs are made under our LTIP. The vesting of RSUs ~~vest~~is generally based on the passage of time, generally ~~on a graded scale~~ over a three ~~four, and five-year~~-year period or in certain instances the RSUs were issued with five-year cliff vesting. PSAs are issued to ~~participants~~members of management and vesting is based on achievement of cumulative financial performance targets covering a ~~two-year~~two year period followed by an additional one-year service period. ~~In addition, beginning in 2018, PSA awards include a modifier based on our three-year total shareholder return (“TSR”) relative to the TSR of the S&P SmallCap 600 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. In addition, ~~the number of shares earned may be further increased or decreased~~PSA awards include a modifier based on ~~our TSR~~the three-year total shareholder return relative to ~~the S&P SmallCap 600 Index.~~

a broad market index. For RSUs the grant date fair value of the awards, ~~which is equal to~~or the closing price per common share on the date of the award, is used to determine the amount of expense to be recognized over the applicable service period. For PSAs, the grant date fair value is estimated using a lattice model. The significant inputs include the stock price, volatility, dividend yield, and risk-free rate of return. Settlement of RSUs and PSAs will be made in shares of our common stock currently held in treasury.

Units	2019			2018			2020			2019
Balance at January 1,		756,786			929,386			896,463			756,786
Granted		449,054			389,065			294,315			384,766
Forfeited		(127,603	)		(70,891	)		(17,455	)		(122,444	)
Shares delivered		(163,078	)		(150,020	)		(78,509	)		(67,646	)
Balance at June 30,		915,159			1,097,540
Balance at March 31,								1,094,814			951,462

The amount granted in 2020 and 2019 includes 168,663 and ~~2018 includes 218,422 and 183,355,~~214,899, 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				March 31
In thousands	2019		2018		2020		2019
Three months ended	$	1,161	$	1,596	$	1,085	$	434
Six months ended		1,595		3,261

Stock Only Stock Appreciation Rights (“SOSARs”) Under terms of the SOSAR, a recipient receives the right to a payment in the form of shares of common stock equal to the difference, if any, in the fair market value of one share of common stock at the time of exercising the SOSAR and the exercise price. The SOSARs vest ratably over a three year period and have a term of ten years. NoNaN SOSARs were awarded since 2016.

	2019					2018					2020					2019
SOSARS	Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price		Shares			Wtd Avg Exercise Price
Outstanding at January 1,		2,334,742		$	18.08		2,561,846		$	17.87		1,291,947		$	20.05		2,334,742		$	18.08
Granted		—			—		—			—		—			—		—			—
Exercised		(441,920	)		14.31		(148,145	)		13.26		(44,710	)		12.94		(283,060	)		13.95
Canceled / forfeited		(446,435	)		21.06		(20,994	)		18.76		(2,841	)		17.27		(258,439	)		20.82
Outstanding at June 30,		1,446,387		$	19.31		2,392,707		$	18.15
Outstanding at March 31,												1,244,396		$	20.31		1,793,243		$	18.96

The following table sets forth SOSAR compensation expense included in continuing operations for the periods indicated:

	June 30				March 31
In thousands	2019		2018		2020		2019
Three months ended	$	—	$	64	$	—	$	43
Six months ended		43		244

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.

	Six months ended June 30						Three months ended March 31
In thousands	2019			2018			2020			2019
Pension Benefits
Service cost	$	857		$	1,189		$	44		$	484
Interest cost		6,787			6,482			301			3,450
Expected return on plan assets		(7,395	)		(11,061	)		—			(3,696	)
Amortization of prior service cost		88			11			12			34
Amortization of unrecognized loss		1,564			4,119			160			775
Total net periodic benefit cost	$	1,901		$	740		$	517		$	1,047

Other Benefits
Service cost	$	18		$	30		$	7		$	9
Interest cost		168			159			46			84
Amortization of prior service credit		(5	)		—			(116	)		(2	)
Amortization of actuarial gain		(346	)		(33	)		(209	)		(173	)
Total net periodic benefit cost	$	(165	)	$	156
Total net periodic benefit credit							$	(272	)	$	(82	)

~~In April~~During 2019, ~~we informed participants that~~ our qualified pension plan ~~benefits would be frozen as of May 31, 2019 and the plan~~ was terminated, ~~June 30, 2019. We~~and all plan liabilities were settled by either a lump sum distribution or assumed by a third-party in exchange for a transfer of assets from the pension plan trust fund. For active participants, the pension benefit was replaced ~~this benefit for active employees~~ with an ~~enhanced~~enhance defined contribution ~~plan. In connection with the termination,~~plan, or 401(k), to which we ~~remeasured~~contributed a percent of eligible compensation. Currently we contribute 10%.

As of March 31, 2020, $51.1 million of assets remained in the pension ~~liability~~trust and ~~recognized a gain~~was included in cash and cash equivalents in the accompanying condensed consolidated balance sheet. We expect to complete the reversion of ~~$1.9 million~~the qualified pension plan assets in the second quarter of 2020, after a portion of the assets are transferred to a trust fund to be used to make contributions over the next seven years to the 401(k) plan and satisfying excise tax obligations, approximately $33 million is expected to revert to us and will be available for general corporate purposes.

In December 2019, ~~as an adjustment~~our Board of Directors approved the freezing of benefit accruals in the non-qualified pension plan for active participants effective December 31, 2019. As of January 1, 2020, each active participant’s frozen non-qualified pension benefit was transferred to ~~other comprehensive income (loss)~~a newly approved Deferred Compensation Plan non-qualified benefit plan and earns interest credits going forward. The Deferred Compensation Plan also provides for employer contributions and, in the future, the Plan may provide for elective employee deferrals. Under the Deferred Compensation Plan, participants are eligible to receive annual Company contributions that such

participants would have received under the P. H. Glatfelter 401(k) Savings Plan but for certain limitations imposed by the Internal Revenue Code on 401(k) plan contributions (“Company Contributions”).

	June 30		December 31		March 31		December 31
In thousands	2019		2018		2020		2019
Raw materials	$	53,708	$	50,205	$	55,940	$	59,164
In-process and finished		99,880		84,894		94,059		92,231
Supplies		38,535		38,312		39,450		39,020
Total	$	192,123	$	173,411	$	189,449	$	190,415

~~The following table sets forth details of interest incurred, capitalized and expensed included in continuing operations:~~

~~Capitalized interest relates to spending for the Airlaid capacity expansion project.~~

We enter into a variety of arrangements in which we are the lessee for the use of automobiles, forklifts and other production equipment, production facilities, warehouses and office space. 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 currently do not have any finance leases.

Operating lease right of use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. We use our incremental borrowing rate based on information available at the commencement date in determining the lease liabilities as our leases generally do not provide an implicit rate. Lease terms 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.

~~We also have arrangements with both lease and non-lease components.~~ The ~~Company elected~~following table sets forth information related to our leases as of the practical expedient not to separate non-lease components from lease components for the Company’s real estate and automobile leases. We elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for arrangements less than twelve months in duration.periods indicated.

At June 30, 2019, the ROU assets and corresponding lease obligation included in our condensed consolidated balance sheet totaled $12.6 million and had a weighted average remaining maturity of 37 months. The weighted average discount rate used to value the leases at inception was 3.01%. We recognized $3.0 million of operating lease expense during the first six months of 2019.

The following table sets forth required future minimum lease payments for the ~~periods~~years indicated:

	June 30		December 31
In thousands		2019		2018
2019	$	2,761	$	5,020
2020		4,579		3,861	$	3,553
2021		3,066		2,515		4,076
2022		1,605		1,426		2,641
2023		577		584		1,343
2024						939
Thereafter		339		383		4,218

	June 30			December 31			March 31			December 31
In thousands	2019			2018			2020			2019
Revolving credit facility, due Mar. 2020	$	—		$	114,495
Revolving credit facility, due Feb. 2024		94,454			—		$	84,622		$	84,255
5.375% Notes, due Oct. 2020		—			250,000
Term loan, due Feb. 2024		250,360			—			231,993			240,969
2.40% Term Loan, due Jun. 2022		4,877			5,725			3,912			4,012
2.05% Term Loan, due Mar. 2023		22,778			25,972			19,006			19,487
1.30% Term Loan, due Jun. 2023		6,503			7,361			5,478			5,617
1.55% Term Loan, due Sep. 2025		8,715			9,470			7,719			7,915
Total long-term debt		387,687			413,023			352,730			362,255
Less current portion		(23,238	)		(10,785	)		(24,952	)		(22,940	)
Unamortized deferred issuance costs		(2,657	)		(1,276	)		(2,246	)		(2,396	)
Long-term debt, net of current portion	$	361,792		$	400,962		$	325,532		$	336,919

On February 8, 2019, we entered into an amended and restated $400 million Revolving Credit Facility and a €220 million Term Loan with a consortium of banks (together, the “Credit Agreement”). The proceeds of the Term Loan due Feb. 2024 were used to redeem in its entirety the 5.375% Notes. The principal amount of the Term Loan amortizes in consecutive quarterly installments of principal, with each such quarterly installment to be in an amount equal to 1.25% of the Term Loan funded, commencing on July 1, 2019 and continuing quarterly thereafter. The €220 million Term Loan is designated as a net investment hedge of our Euro functional currency foreign subsidiaries. During the first six months of 2019, we recognized a pre-tax loss of $1.7 million from changes in currency exchange rates through Other Comprehensive Income (Loss).

For all USU.S. dollar denominated borrowings under the Revolving Credit Facility, the borrowing rate is, at our option, either, (a) the bank’s base rate which is equal to the greater of i) the prime rate; ii) the federal funds rate plus 50 basis points; or iii) the ~~daily~~ Euro-rate plus 100 basis points plus an applicable spread over either i), ii) or iii) ranging from 12.5 basis points to 100 basis points based on the Company’s leverage ratio and its corporate credit ratings determined by Standard & Poor’s Rating Services and Moody’s Investor Service, Inc. (the “Corporate Credit Rating”); or (b) the ~~daily~~ Euro-rate plus an applicable margin ranging from 112.5 basis points to 200 basis points based on the Company’s leverage ratio and the Corporate Credit Rating. For non-US dollar denominated borrowings, ~~interest~~the borrowing rate is, at our option, based on (b) ~~above.~~above or for Euro denominated borrowings, the Euro Interbank Offering Rate (“EURIBOR”) 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.

In October 2019, we entered into a €180 million notional value floating-to-fixed interest rate swap agreement with certain financial institutions. Under the terms of the swap, we will pay a fixed interest rate of the applicable margin plus 0.0395% on €180 million of the underlying variable rate term loan. We will receive the greater of 0.00% or EURIBOR.

The Credit Agreement contains a number of customary covenants for financings of this type that, among other things, restrict our ability to dispose of or create liens on assets, incur additional indebtedness, repay other indebtedness, limits certain intercompany financing arrangements, make acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial tests and ratios including: i) maximum net debt to EBITDA ratio (the “leverage ratio”); and ii) a consolidated EBITDA to interest expense ratio. The most restrictive of our covenants is a maximum leverage ratio of 4.0x provided that such ratio increases to 4.5x during the period of four fiscal quarters immediately following a material acquisition such as Steinfurt. As of ~~June 30, 2019,~~March 31, 2020, the leverage ratio, as calculated in accordance with the definition in our Credit Agreement, was ~~3.5x.~~2.2x. 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.

All remaining principal outstanding and accrued interest under the Credit Agreement will be due and payable on February 8, 2024.

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:

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 Credit Agreement.

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

Letters of credit issued to us by certain financial institutions totaled ~~$5.2~~$7.3 million as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. The letters of credit, which reduce amounts available under our Revolving Credit Facility, primarily provide financial assurances for the benefit of certain state workers compensation insurance agencies in conjunction with our self-insurance ~~program.~~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. NoNaN amounts are outstanding under the letters of credit.

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

	June 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Variable rate debt	$	94,454	$	94,454	$	114,495	$	114,495	$	84,622	$	84,622	$	84,255	$	84,255
Fixed-rate bonds		—		—		250,000		249,010
Term loan, due Feb. 2024		250,360		250,360		—		—		231,993		231,993		240,969		240,969
2.40% Term loan		4,877		4,976		5,725		5,836		3,912		3,598		4,012		4,076
2.05% Term loan		22,778		23,190		25,972		26,346		19,006		17,906		19,487		19,764
1.30% Term Loan		6,503		6,526		7,361		7,341		5,478		5,131		5,617		5,624
1.55% Term loan		8,715		8,812		9,470		9,453		7,719		7,504		7,915		7,975
Total	$	387,687	$	388,318	$	413,023	$	412,481	$	352,730	$	350,754	$	362,255	$	362,663

The values set forth above are based on observable inputs and other relevant market data (Level 2). The fair value of financial derivatives is set forth below in Note ~~17.~~16.

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”).; 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 ~~June 30, 2019,~~March 31, 2020, 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 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.

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

In thousands	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Derivative
Sell/Buy - sell notional
Philippine Peso / British Pound		—		13,140
Philippine Peso / Euro		18,312		16,446
Euro / British Pound		16,987		15,250		18,121		17,702
U.S. Dollar / Euro		6,619		88		10,446		5,347
Canadian Dollar / U.S. Dollar		3,030		—
U.S. Dollar / Canadian Dollar						1,160		1,523

Sell/Buy - buy notional
Euro / Philippine Peso		936,919		1,069,006		956,431		1,039,432
British Pound / Philippine Peso		1,076,319		980,137		1,082,044		1,077,871
Euro / U.S. Dollar		93,495		76,417		76,032		82,317
U.S. Dollar / Canadian Dollar		37,563		35,154		34,079		34,094
British Pound / Euro		—		216
Canadian Dollar / U.S. Dollar						1,160		1,523

The €220 million Term Loan is designated as a net investment hedge of our Euro functional currency foreign subsidiaries. During the first three months of 2020, we recognized a pre-tax gain of $5.9 million from changes in currency exchange rates through Other Comprehensive Income (Loss)

Derivatives Not Designated as Hedging Instruments - Foreign Currency Hedges We also 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	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Derivative

Sell/Buy - sell notional
U.S. Dollar / British Pound		24,000		25,500		20,000		25,500
British Pound / Euro		3,000		2,000		3,000		3,000


Sell/Buy - buy notional
Euro / U.S. Dollar		15,000		11,000		2,000		8,000
British Pound / Euro		9,000		8,000		3,000		7,000

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

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

In thousands	June 30 2019		December 31 2018		June 30 2019		December 31 2018		March 31 2020		December 31 2019		March 31 2020		December 31 2019
	Prepaid Expenses and Other				Other				Prepaid Expenses and Other				Other
Balance sheet caption	Current Assets				Current Liabilities				Current Assets				Current Liabilities
Designated as hedging:

Forward foreign currency exchange contracts	$	4,880	$	4,381	$	79	$	1,548	$	4,351	$	4,314	$	1,481	$	34
Not designated as hedging:

Forward foreign currency exchange contracts	$	452	$	103	$	346	$	122	$	402	$	566	$	591	$	205

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:

~~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 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.”

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	2019			2018			2020			2019
Balance at January 1,	$	3,004		$	(5,640	)	$	5,859		$	3,004
Deferred (losses) gains on cash flow hedges		5,044			288
Deferred gains on cash flow hedges								463			3,641
Reclassified to earnings		(2,045	)		3,595			(2,182	)		(585	)
Balance at June 30,	$	6,003		$	(1,757	)
Balance at March 31,							$	4,140		$	6,060

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.

Background. We have previously reported that we ~~faced~~face significant uncertainties associated with environmental claims arising out of the presence of polychlorinated biphenyls (“PCBs”) in sediments in the lower Fox River, on which our former Neenah facility was located, and in the Bay of Green Bay, Wisconsin (collectively, the “Site”). ~~We have resolved these uncertainties as described below.~~

Since the early 1990s, the United States, the State of Wisconsin ~~(collectively, the “Governments”)~~ and two Indian tribes (collectively, the “Governments”) have pursued ~~the~~a cleanup of a 39-mile stretch of river from Little Lake Butte des Morts into Green Bay and natural resource damages (“NRDs”).

The United States originally notified several entities that they were potentially responsible parties (“PRPs”); however, after giving effect to settlements reached with the Governments, the remaining PRPs exposed to continuing obligations to implement the remainder of the cleanup consist of us, Georgia Pacific Consumer Products, L.P. (“Georgia Pacific”) and NCR Corporation (“NCR”).

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

~~The United States originally notified several entities that they were potentially responsible parties (“PRPs”).~~ We, with contributions of certain other PRPs, implemented the remedial action in OU1 under a consent decree with the Governments. That work is complete, other than on-going monitoring and maintenance.

For OU2-5, ~~after giving effect~~work has proceeded primarily under a Unilateral Administrative Order (“UAO”) issued in November 2007 by the EPA to ~~settlements reached with the Governments, the remaining PRPs exposed to continuing obligations to implement the remainder of the cleanup consisted of~~ us ~~Georgia Pacific Consumer Products, L.P. (“Georgia Pacific”)~~ and ~~NCR Corporation (“NCR”).~~seven other respondents. The majority of the work in OU 2-5 has been funded or conducted by parties other than us. The cleanup is expected to continue at least through ~~2019, followed by~~2020 and decommissioning ~~and post-remediation long-term monitoring and maintenance.~~thereafter.

In 2017, the United States entered into a consent decree with the State of Wisconsin, NCR, and Appvion under which NCR agreed to complete the remaining cleanup and both NCR and Appvion agreed not to seek to recover from us or anyone else any amounts they have spent or would spend, and we and others would be barred from seeking claims against NCR or Appvion. Under the consent decree, the Governments agreed to seek long term monitoring and maintenance in OU2-5 from us and Georgia Pacific; as the result of earlier settlements, Georgia Pacific was only responsible for that work in the most downstream three miles of the river (“OU4b”) and the bay of Green Bay (“OU5”). The Governments agreed to seek their past and future oversight costs only from us.

We and Georgia Pacific had claims against each other to reallocate the costs that we had each incurred or would incur. In 2017, we entered into a settlement agreement with Georgia Pacific to settle these claims. Georgia Pacific agreed to implement the monitoring and maintenance in OU4b and OU5 and we agreed to monitoring and maintenance of all other upstream operable units. We paid Georgia Pacific $9.5 million in August 2017 in connection with this settlement.

~~After years of extensive and complex litigation, in~~ January 2019, we reached an agreement with the United States, the State of Wisconsin, and Georgia-Pacific to resolve all remaining claims among those parties. ~~A consent decree (“Glatfelter consent decree”) documenting that agreement was entered in the federal district court on March 14, 2019.~~ Under the Glatfelter consent decree, we ~~paid $20.5 million to settle~~settled the United States’ and Wisconsin’s claims for response costs ~~incurred~~paid by them ~~prior to~~before October 2018 and for NRDs. We also agreed to reimburse the governments for future oversight costs incurred over the next 30 years. We anticipate that a significant portion of the oversight costs will be incurred in the next few years while the remediation is being completed. Once finished, costs will be an order of magnitude lower in most years during the period of long-term monitoring and maintenance. In addition, ~~to our previous agreement to be responsible for long-term monitoring and maintenance of OU-1, under this consent decree,~~ we ~~agreed to be~~are primarily responsible for long-term monitoring and maintenance in ~~OU2-OU4a.~~ OU2-OU4a and for reimbursement of government oversight costs paid after October 2018. Finally, we remain responsible for our obligation to continue long-term monitoring and maintenance under our OU1 consent decree.

Cost estimates. Under terms of the Glatfelter consent decree, in January 2019 we paid $20.5 million to the United States in satisfaction of the governments’ claims for costs incurred prior to October 2018, and NRDs.

We are subject to remaining obligations under the OU1 consent decree, which now consist primarily of long-term monitoring and maintenance and for long term monitoring and maintenance ~~will continue~~in 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. In the first quarter of 2018, we entered into a fixed-price, 30-year agreement with a third party for the performance of all of our monitoring and maintenance obligations in OU1 through OU4a with limited exceptions, such as, for extraordinary amounts of cap maintenance or replacement. Our obligation under this agreement is included in our total reserve for the Site. 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 anthe 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 ~~that~~the escrow account exceeds the amount due under our fixed-price contract. ~~The difference at present~~As of March 31, 2020, the balance in the escrow is less than amounts due under the fixed-price contract by approximately $2$1.8 million. We ~~are also required~~secured our obligation to ~~secure the payment of~~pay that difference with a ~~renewal~~ letter of ~~credit or another instrument~~credit.

At March 31, 2020, the escrow account balance totaled $9.0 million which is included in the ~~interim.~~condensed consolidated balance sheet under the caption “other assets.”

Under the consent decree, we will be responsible for reimbursement of government oversight costs incurred from October 2018 and later over approximately the next 30 years. We anticipate that a significant portion of the oversight costs will be incurred until such time as remediation is completed. Once completed, costs will be an order of magnitude lower in most years during the period of long-term monitoring and maintenance.

Reserves for the Site. Our reserve for past and future government oversight costs and long-term monitoring and maintenance is set forth below:

	Six months ended June 30						Three months ended March 31
In thousands		2019			2018			2020			2019
Balance at January 1,	$	45,001		$	43,144		$	21,870		$	45,001
Payments		(20,641	)		(2,708	)		(131	)		(20,535	)
Reserve adjustment		(2,509	)		—			—			(2,509	)
Assumption of WTM I escrow		—			4,746
Accretion		98			66			52		56
Balance at June 30,	$	21,949		$	45,248
Balance at March 31,							$	21,791		$	22,013

The payments set forth above represent the $20.5 million paid in 2019 pursuant to the Glatfelter consent decree and for amounts due under the long-term monitoring and maintenance agreement. Of our total reserve for the Fox River, ~~$6.9~~$8.0 million is recorded in the accompanying ~~June 30, 2019~~March 31, 2020 condensed consolidated balance sheet under the caption “Environmental liabilities” and the remaining ~~$15.0~~$13.8 million is recorded under the caption “Other long term liabilities.” ~~In connection~~

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 that our costs associated with the ~~court approval of our January 2019 consent decree, we reduced our reserve~~Fox River matter could exceed the aggregate amounts accrued by ~~$2.5 million and recorded the adjustment as~~ a ~~reduction in “Selling, general and administrative” expenses in the condensed consolidated statements of income.~~material amount.

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

Three months ended June 30					Advanced Airlaid				Other and
Dollars in millions	Composite Fibers				Materials				Unallocated						Total
Three months ended March 31																													Other and
Dollars in thousands																					Composite Fibers				Airlaid Materials				Unallocated						Total
	2019		2018		2019		2018		2019			2018			2019			2018			2020		2019		2020		2019		2020			2019			2020			2019
Net sales	$	132.6	$	142.9	$	102.5	$	72.8	$	—		$	—		$	235.1		$	215.7		$	132,711	$	128,717	$	98,849	$	100,416	$	—		$	—		$	231,560		$	229,133
Cost of products sold		109.6		118.0		87.8		62.8		0.2			1.6			197.6			182.4			106,985		106,563		82,246		85,989		5,454			964			194,685			193,516
Gross profit (loss)		23.0		24.9		14.7		10.0		(0.2	)		(1.6	)		37.5			33.3			25,726		22,154		16,603		14,427		(5,454	)		(964	)		36,875			35,617
SG&A		10.0		11.7		4.3		2.4		8.5			12.1			22.8			26.2			10,624		10,805		4,581		4,389		9,389			9,428			24,594			24,622
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		(0.4	)		(0.6	)		(0.4	)		(0.6	)		—		—		—		—		—			(669	)		—			(669	)
Total operating income (loss)		13.0		13.2		10.4		7.6		(8.3	)		(13.1	)		15.1			7.7			15,102		11,349		12,022		10,038		(14,843	)		(9,723	)		12,281			11,664
Non-operating expense		—		—		—		—		(3.2	)		(4.6	)		(3.2	)		(4.6	)		—		—		—		—		(2,267	)		(5,203	)		(2,267	)		(5,203	)
Income (loss) before income taxes	$	13.0	$	13.2	$	10.4	$	7.6	$	(11.5	)	$	(17.7	)	$	11.9		$	3.1		$	15,102	$	11,349	$	12,022	$	10,038	$	(17,110	)	$	(14,926	)	$	10,014		$	6,461
Supplementary Data
Net tons sold (thousands)		34.5		36.7		34.0		24.5		—			—			68.5			61.2			35,983		31,529		35,039		33,177		—			—			71,022			64,706
Depreciation, depletion and amortization	$	6.6	$	7.2	$	5.3	$	3.5	$	0.8		$	1.2		$	12.7		$	11.9
Depreciation, depletion and amortization⁽¹⁾																					$	6,466	$	6,674	$	5,451	$	5,268	$	3,485		$	846		$	15,402		$	12,788
Capital expenditures		1.5		2.8		2.8		2.5		0.5			0.6			4.8			5.9			3,956		3,188		2,103		2,192		955			485			7,014			5,865

Six months ended June 30

Advanced Airlaid

Other and

Dollars in millions
Composite Fibers

Materials

Unallocated

Total

2019

2018

2019

2018

2019

2018

2019

2018

Net sales
$
261.3

$
284.5

$
202.9

$
142.4

$
—

$
—

$
464.2

$
426.9

Cost of products sold

216.1

232.7

173.8

122.5

1.2

1.9

391.1

357.1

Gross profit (loss)

45.2

51.8

29.1

19.9

(1.2
)

(1.9
)

73.1

69.9

SG&A

20.8

23.3

8.7

5.1

17.9

27.7

47.4

56.1

Gains  on dispositions of plant,
   equipment and timberlands, net

—

—

—

—

(1.1
)

(1.7
)

(1.1
)

(1.7
)
Total operating income (loss)

24.4

28.5

20.4

14.8

(18.0
)

(27.9
)

26.8

15.4

Non-operating expense

—

—

—

—

(8.4
)

(8.3
)

(8.4
)

(8.3
)
Income (loss) before income taxes
$
24.4

$
28.5

$
20.4

$
14.8

$
(26.4
)

$
(36.2
)

$
18.4

$
7.1

Supplementary Data

Net tons sold (thousands)

66.1

73.0

67.2

48.3

—

—

133.3

121.4

Depreciation, depletion and
   amortization
$
13.3

$
14.6

$
10.5

$
6.3

$
1.7

$
2.3

$
25.5

$
23.2

Capital expenditures

4.7

7.9

5.0

15.6

0.9

2.4

10.6

25.9

~~The sum of individual amounts set forth above may not agree to the condensed 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 table set forth above.

Management evaluates results of operations of the ~~business units~~operating segments before 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.

Specialty Papers’ results of operations are reported as discontinued operations. In addition, corporate shared services costs previously included in Specialty Papers’ results are required to be included in income from continuing operations and are reported as “other and unallocated”.

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 ~~2018~~2019 Annual Report on Form 10-K.

Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects and future consolidated financial position or results of operations, made in this Report on Form 10-Q are forward looking. We use words such as “anticipates”, “believes”, “expects”, “future”, “intends” and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from such expectations. The following discussion includes forward-looking statements 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:

COVID-19 Pandemic On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic as the virus spread throughout the world. As the virus continued its rapid spread, a significant portion of the world’s economies was significantly impacted, and will continue to be so, by government mandates that all “non-essential” businesses close and that residents “shelter-in-place” or practice “social distancing.” These actions have had, and are likely to have, a significant adverse impact on a wide range of economies and industries throughout the world, including certain markets we serve. As disclosed in Item 1A – Risk Factors of our 2019 Annual Report on Form 10-K, we included a risk factor stating, “Our business and financial performance may be adversely affected by a weak global economic environment or downturns in the target markets that we serve. - Adverse global economic conditions could impact our target markets resulting in decreased demand for our products. Our results could be adversely affected if economic conditions weaken.” The COVID-19 pandemic and the actions undertaken throughout the world in an attempt to contain the virus have had an unprecedented and significant adverse impact on global economies in terms of reduced GDP, increased unemployment, and insolvencies in a variety of industries and markets. As a result, we have experienced and expect to continue to experience weaker demand for certain of our products due to the effects of the pandemic.

Through the end of the first quarter of 2020, our financial performance and results of operations have not been meaningfully impacted by the weaker economic conditions as our business was determined to be “essential or life-sustaining” and we continued to produce products used in the global response effort to the pandemic. We believe demand for certain of our products, such as Airlaid

Materials’ personal hygiene and wipes, will remain strong in the next quarter. To date, we have successfully maintained our global supply chain securing critical raw materials with minimal disruptions or incremental costs and the demand for substantially all products has been stable as our customers continued to serve critical products to end-user consumers.

Although we anticipate a decline in overall economic activity, we believe demand for the majority of our products remains strong. As disclosed in Item 1A – Risk Factors to our 2019 Annual Report, “approximately $68 million of our revenue in 2019, was earned from customers located in Ukraine, Russia and members of the Commonwealth of Independent States.” The large majority of our revenue from this region consists of wallcover base material. If the governmental authorities continue aggressive actions to fight the spread of COVID-19 in these regions, or if economic hardships continue, we expect sales to some of our customers, such as wallpaper printers, will be adversely impacted.

The health and safety of our employees and their families are a top priority, and we are taking all the necessary measures to protect them. We have instituted several new safety, hygiene and communication protocols throughout our facilities to ensure we maintain our ability to produce product. Accordingly, we are proactively working to identify and mitigate risks to safeguard the continuity of our business. We believe we are well positioned from a liquidity and leverage perspective following the successful cost optimization initiatives and debt refinancing in 2019. As a result, we believe we are able to supply our customers high-quality engineered materials necessary to manufacture a variety of essential and life-sustaining consumer staples including wipes, health and hygiene products, and food and beverage items during this challenging time.

Introduction We manufacture a wide array of engineered ~~materials. We manage~~materials and report our ~~company~~results along two ~~business units:~~segments:

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

~~Six~~Three months ended ~~June 30, 2019~~March 31, 2020 versus the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019

Overview For the first ~~six~~three months of ~~2019,~~2020, we reported ~~net~~ income from continuing operations of ~~$11.1~~$7.4 million, or ~~$0.25~~$0.17 per share compared with ~~a loss of $1.7~~$4.6 million and ~~$0.04~~$0.10 per diluted share in the year earlier period.

~~On October 1, 2018, we acquired Georgia-Pacific’s European nonwovens business based in Steinfurt, Germany (“Steinfurt”).~~ The results were driven by year-over year improved results of ~~Steinfurt, whose annual revenue approximates $99 million, are included prospectively from the date~~both of ~~acquisition.~~our segments. Composite Fibers’ shipments increased by 14.1% and operating profit improved by 33.1% and in Airlaid Materials, shipments increased 5.6% year over year and operating profit increased 19.8%. In addition, ~~we sold~~interest expense, net declined $2.7 million reflecting the benefits of our ~~Specialty Papers business unit on October 31, 2018. Accordingly, the financial results of the business unit are classified as discontinued operations for all periods presented.~~

debt refinancing in 2019. The following table sets forth summarized consolidated results of operations:

	Six months ended June 30					Three months ended March 31
In thousands, except per share	2019		2018			2020		2019
Net sales	$	464,186	$	426,949		$	231,560	$	229,133
Gross profit		73,117		69,859			36,875		35,617
Operating income		26,787		15,433			12,281		11,664
Continuing operations
Income		10,896		3,544			7,406		4,603
Earnings per share		0.25		0.08			0.17		0.10
Discontinued operations
Income (loss)		221		(5,227	)
Earnings (loss) per share		—		(0.12	)
Net income (loss)		11,117		(1,683	)
Earnings (loss) per share		0.25		(0.04	)
Income from discontinued operations							—		683
Earnings per share							—		0.02
Net income							7,406		5,286
Earnings per share						$	0.17	$	0.12

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 from continuing operations for the first ~~six~~three months of ~~2019~~2020 were ~~$15.7~~$10.8 million, or ~~$0.35~~$0.24 per diluted share compared with ~~$7.9~~$7.3 million, or ~~$0.18~~$0.16 per diluted share, for the same period a year ago. The improved results reflect i) growth in Advanced Airlaid Materials, as revenue and operating income each improved by approximately 40%; ii) lower corporate costs in connection with cost reduction initiatives; and iii) lower interest expense, net. Adjusted earnings consists of net income determined in accordance with GAAP adjusted to exclude the impact of the following:

~~Strategic initiatives~~Restructuring charge – Metallized operations.~~. These adjustments~~ This adjustment represents the charges incurred in connection with the decision to restructure a portion of the Composite Fibers segment, primarily ~~reflect professional and legal fees incurred directly related~~consisting of the consolidation of our metallizing operation from Gernsbach, Germany to ~~evaluating and executing certain strategic initiatives including costs~~our Caerphilly, U.K. site. The charge includes a non-cash charge of $2.5 million associated with ~~acquisitions~~accelerated depreciation on machinery that will no longer be used and ~~related integration costs.~~

~~Airlaid capacity expansion costs.~~ ~~These adjustments reflect non-capitalized, one-time~~cash severance costs ~~incurred related to the start-up of a new airlaid production facility in Fort Smith, Arkansas and implementation of a new business system.~~totaling $3.5 million.

Cost optimization actions. These adjustments reflect charges incurred in connection with initiatives to optimize the cost structure of the Company including costs related to the organizational change to a functional operating model. The costs are primarily related to executive separation, other headcount ~~reduction efforts,~~reductions, professional fees, asset write-offs and certain contract termination costs. These adjustments, which have occurred at various times in the past, are irregular in timing and relate to specific identified programs to reduce or optimize the cost structure of a particular ~~business unit~~operating segment or the corporate function.

Qualified pension plan termination. This adjustment reflects professional fees recorded in connection with the Company’s termination of its qualified pension plan and the related actions to settle all obligations to the plan’s participants. In the fourth quarter of 2019, the Company incurred a $75.3 million pension settlement charge in connection with the termination of the plan. Since the pension plan was fully funded, the settlement of the pension obligations did not require the use of the Company’s cash, but instead was accomplished with plan assets.

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

Debt refinancing costs. Represents a charge to write-off unamortized debt issuance costs in connection with the redemption of the Company’s $250 million, 5.375% Notes.

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 and the related integration.

Fox River environmental matter. This adjustment excludes ~~income related to~~a gain for a decrease in the Company’s overall reserve for the Fox River matter primarily due to the resolution of the litigation in the first quarter of 2019.

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

~~U.S. Tax Reform.~~Coronavirus Aid, Relief, and Economic Security (CARES) Act 2020. ~~These adjustments reflect amounts estimating~~This adjustment reflects the ~~impact~~tax benefit recognized as a result of the ~~Tax Cuts and Jobs Act (“TCJA”)~~March 27, 2020 change in U.S. tax law which, ~~was signed into law on December 22, 2017.~~ among others, allowing net operating losses to be carried back five years.

Adjusted earnings and adjusted earnings per share are considered measures not calculated in accordance with GAAP, and therefore are non-GAAP measures. The non-GAAP financial information should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with GAAP. The following table sets forth the reconciliation of net income to adjusted earnings for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

	Six months ended June 30											Year to date ended March 31
	2019					2018						2020					2019
In thousands, except per share	Amount			EPS		Amount			EPS			Amount			EPS		Amount			EPS
Net income	$	11,117		$	0.25		(1,683	)	$	(0.04	)	$	7,406		$	0.17	$	5,286		$	0.12
Exclude: Net income from discontinued operations		(221	)		—		5,227			0.12			—			—		(683	)		(0.02	)
Income from continuing operations		10,896			0.25		3,544			0.08			7,406			0.17		4,603			0.10
Adjustments (pre-tax)
Restructuring charge - Metallized operations													5,987					—
Cost optimization actions		5,907					—						1,748					3,923
Qualified pension plan termination													73					—
Airlaid capacity expansion costs		1,014					4,705						—					1,014
Debt refinancing		992					—						—					992
Strategic initiatives		249					2,195						—					107
Fox River environmental matter		(2,509	)				—						—					(2,509	)
Timberland sales and related costs		(881	)				(1,680	)					—					(458	)
Total adjustments (pre-tax)		4,772					5,220						7,808					3,069
Income taxes (1)		67					(813	)					(1,835	)				(389	)
U.S. Tax Reform		—					(8	)
CARES Act of 2020 tax benefit ⁽²⁾													(2,569	)				-
Total after-tax adjustments		4,839			0.11		4,399			0.10			3,404			0.07		2,680			0.06
Adjusted earnings	$	15,735		$	0.35	$	7,943		$	0.18		$	10,810		$	0.24	$	7,283		$	0.16

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

Six months ended June 30					Advanced Airlaid				Other and
Dollars in millions	Composite Fibers				Materials				Unallocated						Total
Three months ended March 31																													Other and
Dollars in thousands																					Composite Fibers				Airlaid Materials				Unallocated						Total
	2019		2018		2019		2018		2019			2018			2019			2018			2020		2019		2020		2019		2020			2019			2020			2019
Net sales	$	261.3	$	284.5	$	202.9	$	142.4	$	—		$	—		$	464.2		$	426.9		$	132,711	$	128,717	$	98,849	$	100,416	$	—		$	—		$	231,560		$	229,133
Cost of products sold		216.1		232.7		173.8		122.5		1.2			1.9			391.1			357.1			106,985		106,563		82,246		85,989		5,454			964			194,685			193,516
Gross profit (loss)		45.2		51.8		29.1		19.9		(1.2	)		(1.9	)		73.1			69.9			25,726		22,154		16,603		14,427		(5,454	)		(964	)		36,875			35,617
SG&A		20.8		23.3		8.7		5.1		17.9			27.7			47.4			56.1			10,624		10,805		4,581		4,389		9,389			9,428			24,594			24,622
Gains on dispositions of plant, equipment and timberlands, net		—		—		—		—		(1.1	)		(1.7	)		(1.1	)		(1.7	)		—		—		—		—		—			(669	)		—			(669	)
Total operating income (loss)		24.4		28.5		20.4		14.8		(18.0	)		(27.9	)		26.8			15.4			15,102		11,349		12,022		10,038		(14,843	)		(9,723	)		12,281			11,664
Non-operating expense		—		—		—		—		(8.4	)		(8.3	)		(8.4	)		(8.3	)		—		—		—		—		(2,267	)		(5,203	)		(2,267	)		(5,203	)
Income (loss) before income taxes	$	24.4	$	28.5	$	20.4	$	14.8	$	(26.4	)	$	(36.2	)	$	18.4		$	7.1		$	15,102	$	11,349	$	12,022	$	10,038	$	(17,110	)	$	(14,926	)	$	10,014		$	6,461
Supplementary Data
Net tons sold (thousands)		66.1		73.0		67.2		48.3		—			—			133.3			121.4			35,983		31,529		35,039		33,177		—			—			71,022			64,706
Depreciation, depletion and amortization	$	13.3	$	14.6	$	10.5	$	6.3	$	1.7		$	2.3		$	25.5		$	23.2
Depreciation, depletion and amortization⁽¹⁾																					$	6,466	$	6,674	$	5,451	$	5,268	$	3,485		$	846		$	15,402		$	12,788
Capital expenditures		4.7		7.9		5.0		15.6		0.9			2.4			10.6			25.9			3,956		3,188		2,103		2,192		955			485			7,014			5,865

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

	Six months ended June 30								Three months ended March 31
In thousands	2019			2018			Change		2020			2019			Change
Net sales	$	464,186		$	426,949		$	37,237	$	231,560		$	229,133		$	2,427
Costs of products sold		391,069			357,090			33,979		194,685			193,516			1,169
Gross profit	$	73,117		$	69,859		$	3,258	$	36,875		$	35,617		$	1,258
Gross profit as a percent of Net sales		15.8	%		16.4	%				15.9	%		15.5	%

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

	Six months ended June 30						Three months ended March 31
Percent of Total	2019			2018			2020			2019
Business Unit
Segment
Composite Fibers		56.3	%		66.6	%		57.3	%		56.2	%
Advanced Airlaid Material		43.7			33.4
Airlaid Materials								42.7			43.8
Total		100.0	%		100.0	%		100.0	%		100.0	%

Net sales totaled ~~$464.2~~$231.6 million and ~~$426.9~~$229.1 million in the first ~~six~~three months of 2020 and 2019, ~~and 2018,~~ respectively. The increase was primarily due to the Steinfurt acquisition, volume growth in Advanced Airlaid Materials’ legacy business and higher selling prices partially offset by unfavorable currency translation. On a constant currency basis, and ~~excluding the Steinfurt acquisition, Advanced~~Composite Fibers’ net sales increased by 5.5% and Airlaid Material’s net sales increased ~~15.4% and Composite Fibers’ decreased by 3.2%.~~0.1%, which in each segment was primarily due to higher shipping volumes.

Composite Fibers’ net sales ~~decreased $23.2~~increased $4.0 million or ~~8.2% primarily due~~3.1%, compared to ~~a 9.5% decline~~the year-ago first quarter, driven by stronger shipments in ~~shipping volumes~~all product categories which was partially offset by higher average selling prices totaling $1.3 million. Food and beverage shipping volumes were up 2.4% but were more than offset by declines in wallcover and metallized products which were lower by 18.9% and 19.5%, respectively. Currencyunfavorable foreign currency translation ~~was unfavorable by $14.2~~of $3.1 million.

Composite Fibers’ first quarter 2020 operating income ~~for~~of $15.1 million and was $3.8 million, or 33.1%, higher than the first ~~six months~~quarter of ~~2019 totaled $24.4~~2019. Higher shipping volumes across all product categories favorably impacted results by $1.2 million. Operations added $1.0 million primarily driven by higher production rates to meet demand, as well as cost reduction initiatives. A $4.0 million benefit from lower prices for wood pulp and energy was partially offset by a ~~decrease of $4.1~~$2.6 million impact from lower selling prices in certain product categories. Currency favorably impacted results by $0.2 million compared to the ~~year-earlier~~year-ago quarter. Lower shipping volumes and machine downtime to manage inventory levels impacted results by $2.7 million. Higher raw material and energy prices of $6.8 million and costs related to the disruption in the supply of a key raw material were partially offset by benefits of efficient operations and our cost reduction actions. Currency was $2.9 million favorable compared to the year-ago quarter reflecting hedging instruments that matured, more than offsetting the impact of a lower Euro translation rate.

The primary drivers of the change in Composite Fibers’ operating income are summarized in the following chart:

Airlaid Materials’ net sales ~~increased $60.5~~decreased $1.6 million, or ~~42.5%~~1.6%, ~~primarily due to~~in the ~~Steinfurt acquisition~~year-over-year comparison. Strong shipments of table top, home care and wipes products increased volume by 5.6%, while lower selling prices of $4.8 million for contractual pass-through arrangements and a ~~11.5% organic increase in shipping volumes reflecting growth in wipes, hygiene and table top products. Higher average selling prices contributed $2.7~~$1.7 million ~~and~~impact from currency translation ~~was unfavorable by $5.3 million.~~exceeded the benefits of favorable volume.

~~Advanced~~ Airlaid Materials’ operating income for the first ~~six~~three months of ~~2019~~2020 totaled ~~$20.4~~$12.0 million, or ~~37.8%~~19.8% higher than the comparable period a year ago. ~~The increase was primarily~~Higher shipping volumes contributed $1.0 million of additional earnings while price declines due to ~~higher shipping volumes which contributed $7.0 million primarily from the Steinfurt acquisition. Higher selling prices~~raw material pass-through provisions were more than offset by ~~$2.4 million of higher~~lower raw material and energy ~~costs.~~prices, adding net $0.5 million of profit. Operations were $0.4 million favorable, mainly driven by higher production to support the stronger demand. The primary drivers are summarized in the following chart:

Other and Unallocated The amount of “Other and Unallocated” operating expense in our table of ~~Business Unit Performance~~Segment Financial Information totaled ~~$18.0~~$14.8 million in the first ~~six~~three months of ~~2019~~2020 compared with ~~$27.9~~$9.7 million in the first ~~six~~three months of ~~2018. The decrease in Other and Unallocated~~2019. Excluding the items identified to present “adjusted earnings,” unallocated expenses ~~excluding~~for the ~~impact~~first quarter of ~~gains from timberland sales, primarily reflects reduced corporate costs, lower start-up costs related~~2020 declined $0.6 million compared to the ~~Advanced Airlaid Materials capacity expansion program and the reduction in our reserve for the Fox River matter. Other and Unallocated expenses during the~~ first ~~six months~~quarter of 2019, ~~include $5.9 million of costs related to cost optimization including changes in our business model and associated executive separation~~primarily reflecting lower corporate costs.

Income taxes In the first ~~six months~~quarter of ~~2019 and 2018, we recorded an income tax provision of $7.5 million and $3.6 million, respectively, on~~2020, income from continuing operations ~~of $18.4~~totaled $10.0 million and ~~$7.1~~income tax expense totaled $2.6 million. The income tax expense in the first quarter of 2020 includes a $2.6 million tax benefit recorded in connection with passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”). This Act, which was signed into law on March 27, 2020, modified the “net operating loss” provisions of previous law to allow certain losses to be carried back five years. This tax benefit is excluded from net income when arriving at adjusted earnings. We are in the process of evaluating additional tax planning opportunities which may allow us to carry back additional NOLs.

On adjusted pre-tax income of $17.8 million, income tax expense was $7.0 million in the first quarter of 2020. The comparable amounts in the same quarter of 2019 were $9.5 million and $2.2 million, respectively. The ~~lower~~ effective tax rate on adjusted earnings was 39.3% in the first ~~six months~~quarter of ~~2019 compared to the same period of 2018 was primarily due to the closure of certain tax audits.~~2020.

Foreign Currency We own and operate facilities in Canada, Germany, France, the United Kingdom and the Philippines. The functional currency of our Canadian operations is the U.S. dollar. However, in Germany and France it is the Euro, in the UK, it is the British Pound Sterling, and in the Philippines the functional currency is the Peso. On an annual basis, our ~~euro~~Euro denominated revenue

exceeds ~~euro~~Euro expenses by an estimated ~~€160~~€140 million. For the first ~~six~~three months of ~~2019,~~2020, the average currency exchange rate was ~~1.13~~1.10 dollar/euro compared with ~~1.21~~1.14 in the same period of ~~2018.~~2019. With respect to the British Pound Sterling, Canadian Dollar, and Philippine Peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the ~~euro.~~Euro. As a result, we are exposed to changes in currency exchange rates and such changes could be significant. The translation of the results from international operations into U.S. dollars is subject to changes in foreign currency exchange rates.

The table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the first ~~six~~three months of ~~2019.~~2020.

In thousands	Six months ended June 30, 2019				Three months ended March 31, 2020
	Favorable (unfavorable)				Favorable (unfavorable)
Net sales		$	(19,490	)		$	(4,811	)
Costs of products sold			21,073				4,656
SG&A expenses			1,514				364
Income taxes and other			(44	)			190
Net income		$	3,053			$	399

The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in ~~2019~~2020 were the same as ~~2018.~~2019. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

Discontinued Operations We completed the sale of our Specialty Papers business ~~unit~~ on October 31, 2018. Its results of operations are reported as discontinued operations for all periods presented. For the first ~~six~~three months 2020 there was no activity in results of discontinued operations and in the first three months of 2019 we reported income from discontinued operations of $0.2 million compared with a loss of $5.2 million in the same period of 2018. The results for the first six months of 2019 reflect a $1.3 million insurance settlement related to an equipment failure partially offset by professional fees and other costs directly related to the business unit.$0.7 million.

~~Three months ended June 30, 2019 versus the three months ended June 30, 2018~~

~~Overview~~ For the second quarter of 2019, our net income totaled $5.8 million, or $0.13 per share compared with a loss of $7.4 million, or $0.17 per share in the second quarter of 2018. On an adjusted basis earnings from continuing operations for the second quarter of 2019 was $8.5 million, or $0.19 per share compared with $4.0 million, or $0.09 per share, for the same period a year ago. The following table sets forth summarized results of operations:

~~The following table sets forth the reconciliation of net income (loss) to adjusted earnings for the three months ended June 30, 2019 and 2018:~~

Three months ended June 30

Advanced Airlaid

Other and

Dollars in millions
Composite Fibers

Materials

Unallocated

Total

2019

2018

2019

2018

2019

2018

2019

2018

Net sales
$
132.6

$
142.9

$
102.5

$
72.8

$
—

$
—

$
235.1

$
215.7

Cost of products sold

109.6

118.0

87.8

62.8

0.2

1.6

197.6

182.4

Gross profit (loss)

23.0

24.9

14.7

10.0

(0.2
)

(1.6
)

37.5

33.3

SG&A

10.0

11.7

4.3

2.4

8.5

12.1

22.8

26.2

Gains on dispositions of plant,
equipment and timberlands, net

—

—

—

—

(0.4
)

(0.6
)

(0.4
)

(0.6
)
Total operating income (loss)

13.0

13.2

10.4

7.6

(8.3
)

(13.1
)

15.1

7.7

Non-operating expense

—

—

—

—

(3.2
)

(4.6
)

(3.2
)

(4.6
)
Income (loss) before income taxes
$
13.0

$
13.2

$
10.4

$
7.6

$
(11.5
)

$
(17.7
)

$
11.9

$
3.1

Supplementary Data

Net tons sold (thousands)

34.5

36.7

34.0

24.5

—

—

68.5

61.2

Depreciation, depletion and
amortization
$
6.6

$
7.2

$
5.3

$
3.5

$
0.8

$
1.2

$
12.7

$
11.9

Capital expenditures

1.5

2.8

2.8

2.5

0.5

0.6

4.8

5.9

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

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

~~Net sales~~ totaled $235.1 million and $215.7 million in the second quarters of 2019 and 2018, respectively. Excluding the Steinfurt, Germany acquisition and on a constant currency basis, Advanced Airlaid Materials’ net sales increased by 11.7% and Composite Fibers’ net sales decreased by 3.0%.

Composite Fibers’ net sales declined $10.4 million, or 7.2%, primarily due to a 5.9% decline in shipping volumes. The decline in shipping volumes was primarily due to metallized and wallcover products, which were lower by 17.4% and 10.5%, respectively. Currency translation unfavorably impacted the quarter-to-quarter comparison by $6.0 million.

Composite Fibers’ second quarter of 2019 operating income decreased to $13.0 million, down slightly from the year-earlier quarter. Lower shipping volumes impacted results by $1.3 million. Higher raw material prices of $1.5 million and were partially offset by higher selling prices and improved operations totaling $0.8 million. Currency favorably impacted results by $1.8 million compared to the year-ago quarter reflecting hedging instruments that matured, more than offsetting the impact of a lower Euro translation rate. Composite Fibers’ operating margin increased by 60 basis points primarily due to an improved product mix and cost optimization initiatives. The primary drivers are summarized in the following chart:

Advanced Airlaid Materials’ net sales increased $29.7 million in the quarter-over-quarter comparison primarily due to the Steinfurt acquisition and a 9.6% organic increase in shipping volumes reflecting strong growth in wipes, hygiene and table top products. Higher average selling prices contributed $0.8 million and currency translation was unfavorable by $2.2 million.

Advanced Airlaid Materials’ operating income totaled $10.4 million compared with $7.6 million in the second quarter of 2018. The increase was primarily due to higher shipping volumes and the Steinfurt acquisition. Higher selling prices were partially offset by $0.4 million of higher raw material and energy costs. The primary drivers are summarized in the following chart:

~~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 $8.3 million in the second quarter of 2019 compared with $13.1 million in the second quarter of 2018. Excluding the items identified to present “adjusted earnings,” unallocated expenses for the second quarter of 2019 declined $3.7 million compared to the second quarter of 2018, primarily reflecting the impact of corporate cost reduction initiatives.

~~Income Taxes~~ In the second quarter of 2019, we recorded an income tax provision of $5.7 million on income from continuing operations of $11.9 million. The comparable amounts in the same period of 2018 were $1.8 million and $3.1 million, respectively.

~~Foreign Currency~~ The table below summarizes the translation impact on reported results that changes in currency exchange rates had on our non-U.S. based operations from the conversion of these operation’s results for the second quarter of 2019.

The above table only presents the financial reporting impact of foreign currency translations assuming currency exchange rates in 2019 were the same as 2018. It does not present the impact of certain competitive advantages or disadvantages of operating or competing in multi-currency markets.

Our business requires significant expenditures for new or enhanced equipment, to support our research and development efforts, and to support our business strategy. In addition, we have mandatory debt service requirements of both principal and interest. The following table summarizes cash flow information for each of the periods presented:

	Six months ended June 30						Three months ended March 31
In thousands	2019			2018			2020			2019
Cash and cash equivalents at beginning of period	$	142,685		$	116,219
Cash provided (used) by
Cash, cash equivalents and restricted cash at the beginning of period							$	126,201		$	142,685
Cash used by
Operating activities		(19,285	)		(23,873	)		(5,603	)		(24,145	)
Investing activities		(11,581	)		(24,201	)		(7,014	)		(7,240	)
Financing activities		(40,353	)		28,665			(6,847	)		(23,611	)
Effect of exchange rate changes on cash		(291	)		(3,230	)		(937	)		(658	)
Change in cash and cash equivalents from discontinued operations		(12,230	)		13,609			(316	)		(10,365	)
Net cash used		(83,740	)		(9,030	)		(20,717	)		(66,019	)
Cash and cash equivalents at end of period	$	58,945		$	107,189
Cash, cash equivalents and restricted cash at the end of period								105,484			76,666
Less: restricted cash included in "Prepaid expenses and other current assets"								(1,259	)		—
Cash and cash equivalents at the end of period							$	104,225		$	76,666

At ~~June 30, 2019,~~March 31, 2020, we had ~~$58.9~~$104.2 million in cash and cash equivalents held by both domestic and foreign subsidiaries. Unremitted earnings of our foreign subsidiaries as of January 1, 2018 and forward are deemed to be indefinitely reinvested and therefore no U.S. tax liability is reflected in the accompanying condensed consolidated financial statements. Approximately ~~60%~~47% of our cash and cash equivalents 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~~three months of ~~2019~~2020 totaled ~~$19.3~~$5.6 million compared with ~~$23.9~~a use of $24.1 million in the same period a year ago. The improvement in operating cash ~~used by operation~~flow was primarily due to ~~increased~~improved profitability, ~~partially offset by an increased use~~a decrease in cash used for inventory and other working ~~capital. The use~~capital and the effect on the comparison of using $20.5 million ~~of cash~~ in the first ~~six~~three months of 2019 ~~for the~~to settle Fox River ~~matter was substantially offset by lower incentive~~related claims. In addition, cash used for interest payments ~~and other accruals.~~declined $4.5 million in the year-over-year comparison reflecting savings from our debt refinancing in early 2019.

Net cash used by investing activities ~~decreased by $12.6 million~~was essentially unchanged in the year-over-year ~~comparison due~~comparison. Capital expenditures totaled $7.0 million and $5.9 million for the three months ended March 31, 2020 and 2019, respectively, and are expected to ~~lower capital expenditures driven by~~be $30 million to $35 million for the ~~completion of the airlaid capacity expansion in early 2018.~~full year 2020.

Net cash used by financing activities totaled ~~$40.4~~$6.8 million in the first ~~six~~three months of ~~2019~~2020 compared with ~~$28.7~~$23.6 million ~~provided by financing activities~~ in the same period of ~~2018.~~2019. The ~~increase~~change in cash used by financing activities primarily reflects $2.5 million of net borrowings in the first three months of 2020 compared with a net repayment of ~~borrowings under our revolving credit facility.~~$11.5 million in the first three months of 2019.

In the first quarter of 2019, we significantly changed our debt capital structure. On February 8, 2019, we entered into a new credit facility with a consortium of financial institutions. The new five-year facility (the “2019 Facility”) replaces our then existing revolving credit facility and consists of a $400 million variable rate revolver and a €220 million, amortizing term loan. The other terms of the 2019 Facility are substantially similar to our previous revolving credit facility. On February 28, 2019, we redeemed all outstanding 5.375% Notes with proceeds from the new term loan.

The 2019 Facility contains a number of customary compliance covenants, the most restrictive of which is a maximum leverage ratio of 4.0x provided that such ratio increases to 4.5x during the period of four fiscal quarters immediately following a material ~~acquisition such as Steinfurt.~~acquisition. As of ~~June 30, 2019,~~March 31, 2020, the leverage ratio, as calculated in accordance with the definition in our amended credit agreement, was ~~3.5x,~~2.2x, within the limits set forth in our credit agreement. As part of our proactive management of potential risks presented by the COVID-19 pandemic we assessed our liquidity position in a number of more severe scenarios projecting potential implications of the economic crises. We believe the strength of our balance sheet and our production of engineered materials essential to the global response effort provides adequate financial flexibility in this challenging time. 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.

Financing activities include cash used for common stock dividends. In both the first ~~six~~three months of ~~2019~~2020 and ~~2018,~~2019, we used ~~$11.5~~$5.8 million and ~~$11.4~~$5.7 million, respectively, of cash for dividends on our common 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.

At March 31, 2020, we had ample liquidity consisting of $104.2 million of cash on hand and $108.0 million of 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.

Off-Balance-Sheet Arrangements As of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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.

	Year Ended December 31															June 30, 2019				Year Ended December 31															March 31, 2020
Dollars in thousands	2019			2020			2021			2022			2023			Carrying Value		Fair Value
In thousands, except percentages																				2020			2021			2022			2023			2024			Carrying Value		Fair Value
Long-term debt
Average principal outstanding
At variable interest rates																				$	309,083		$	298,538		$	286,486		$	274,435		$	28,680		$	316,615	$	316,615
At fixed interest rates – Term Loans		40,193			32,153			21,434			11,324			5,267			42,873		43,504		39,986			30,954			20,635			10,901			5,070			36,115		34,139
At variable interest rates		340,120			329,167			316,649			304,131			291,613			344,814		344,814
																$	387,687	$	388,318																$	352,730	$	350,754
Weighted-average interest rate
On variable rate debt																					1.50	%		1.50	%		1.50	%		1.50	%		1.50	%
On fixed rate debt – Term Loans		1.88	%		1.86	%		1.82	%		1.77	%		1.67	%						1.87	%		1.86	%		1.82	%		1.77	%		1.67	%
On variable rate debt		1.50	%		1.50	%		1.50	%		1.50	%		1.50	%

Interest rate swap
Pay fixed/received variable (notional)																				€	180,000		€	180,000		€	180,000			—			—
Rate paid																					0.0395	%		0.0395	%		0.0395	%		—			—
Rate received																					—			—			—			—			—

The table above presents the average principal outstanding and related interest rates for the next five years for debt outstanding as of ~~June 30, 2019.~~March 31, 2020. Fair values included herein have been determined based upon rates currently available to us for debt with similar terms and remaining maturities.

Our market risk exposure primarily results from changes in interest rates and currency exchange rates. At ~~June 30, 2019,~~March 31, 2020, we had ~~$385.0~~$350.5 million of long-term debt, net of unamortized debt issuance costs, of which ~~89.6%~~90.3% was at variable interest rates. After giving effect to the interest rate swap agreement, approximately 33.4% of our debt was at variable interest rates. The fixed rate Term Loans and the variable rate debt are all euro-based borrowings and thus the value of which is also subject to currency risk. Variable-rate debt outstanding represents borrowings under ~~the 2019 Facility including both~~our revolving credit ~~borrowings and the amortizing term loan. Interest~~agreement that accrues interest based on ~~LIBOR~~one-month EURIBOR, but in no event less than zero, plus athe applicable margin. At ~~June 30, 2019,~~March 31, 2020, the weighted average EURIBOR on our outstanding debt was (0.38)%. Accordingly, the interest rate paid was ~~approximately~~equal to the margin, or 1.50%. A hypothetical 100 basis point increase ~~or decrease~~ in the interest rate on variable rate debt would increase ~~or decrease~~ annual interest expense by ~~$3.4~~$0.7 million. In the event rates are lower, interest expense would be unchanged.

We entered into a €180 million notional value floating-to-fixed interest rate swap agreement with certain financial institutions. Under the terms of the swap, we will pay a fixed interest rate of 0.0395% on €180 million of the underlying variable rate term loan. We will receive the greater of 0.00% or EURIBOR.

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 16.

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 an estimated ~~€160~~€140 million. With respect to the British Pound Sterling, Canadian Dollar, and Philippine Peso, we have differing amounts of inflows and outflows of these currencies, although to a lesser degree than the ~~euro.~~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.

Evaluation of Disclosure Controls and Procedures Our chief executive officer and our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~June 30, 2019,~~March 31, 2020, have concluded that, as of the evaluation date, our disclosure controls and procedures are effective.

Changes in Internal Controls There were no changes in our internal control over financial reporting during the three months ended ~~June 30, 2019,~~March 31, 2020, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

The following additional risk factor relating to COVID-19 should be read in conjunction with the risk factors set forth under “Item 1A. Risk Factors” (“Item 1A”) in our 2019 Annual Report on Form 10-K (“2019 Form 10-K”). The developments described in this additional risk factor have heightened, or in some cases developed since the filing of our 2019 Form 10-K, certain of the risks disclosed in Item 1A. Except as described herein, there have been no material changes with respect to the risk factors disclosed in our 2019 Form 10-K.

The risks described below and in our 2019 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may occur or become material in the future and adversely affect our business, reputation, financial condition or results of operations. Therefore, historical operating results, financial and business performance, events and trends are often not a reliable indicator of future operating results, financial and business performance, events or trends.

The COVID-19 pandemic outbreak could impact our ability to operate our facilities in an economical manner or could adversely impact demand for our products, which could have a material adverse effect on our operations and business.

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic as the virus spread throughout the world. As the virus continued its rapid spread, a significant portion of the world’s economies was significantly impacted, and will continue to be so, by government mandates that all “non-essential” businesses close and that residents “shelter-in-place” or practice “social distancing.” The actions undertaken across the globe in an attempt to contain the spread of the virus have had an unprecedented and significant adverse impact on global economies in terms of reduced GDP, increased unemployment, and insolvencies in a variety of industries and markets.

In the event economic activity continues to be adversely impacted, or the impact intensifies, due to the spread of COVID-19 or due to actions to control the spread, we could be forced to curtail operations due to reduced customer demand, compliance with government mandates or the inability to adequately staff production facilities due to a widespread or sustained outbreak of COVID-19 at one or more of our facilities. In addition, our global supply chain could be disrupted, demand for our products, or the prices the products are sold, could be adversely impacted if economic conditions in the target markets that we serve remain weak or weaken further. We also could face potential legal actions that could arise due to our operations during the pandemic.

In addition, the COVID-19 pandemic’s impact on various economies throughout the world could lead to financial instabilities or insolvencies of some of our customers or the customers they in turn serve which could impact our ability to sell our products.

As we cannot predict the duration or scope of the COVID-19 pandemic, in the event the spread continues or the government actions intensify, our results of operations and/or financial position could be adversely impacted.

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

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.

In thousands	Preliminary Allocation
Assets
Cash and cash equivalents	$	7,540
Accounts receivable		13,277
Inventory		11,133
Prepaid and other current assets		290
Plant, equipment and timberlands		66,167
Intangible assets		43,573
Goodwill		75,349
Total assets		217,329
Liabilities
Accounts payable		8,577
Deferred tax liabilities		19,119
Other long term liabilities		1,162
Total liabilities		28,858
Total		188,471
less cash acquired		(7,540	)
Total purchase price	$	180,931

	Open Tax Years
Jurisdiction	Examinations not yet initiated		Examination in progress

United States
Federal	~~2015~~2016 - ~~2018~~2019		N/A
State	~~2014~~2015 - ~~2018~~2019		2015 - ~~2017~~2018
Canada⁽¹⁾	~~2011-2013; 2018~~2012 - 2019	~~2014 - 2017~~	N/A
Germany⁽¹⁾	2016 - ~~2018~~2019	~~2012 - 2015~~	N/A
France	2018 - 2019		N/A
United Kingdom	~~2017~~2018 - ~~2018~~2019		N/A
Philippines	~~2018~~2019		2016 - ~~2017~~2018

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
Apr. 26, 2016		10,000		1.30	%	Jun. 2023
May 4, 2016		7,195		1.55	%	Sep. 2025

Large accelerated filer	☒			Accelerated filer	☐
Non-accelerated filer	☐			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.						☐

In thousands	Three months ended June 30, 2019
	Favorable (unfavorable)
Net sales		$	(8,204	)
Costs of products sold			9,763
SG&A expenses			606
Income taxes and other			63
Net income		$	2,228


~~10.1~~	~~P.H. Glatfelter Company Supplemental Executive Retirement Plan (Amended and Restated)~~

~~10.2~~	~~Amendment No. 2019-1 to the P.H. Glatfelter Company Supplemental Management Pension Plan~~

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

31.2	Certification of Samuel L. Hillard, Senior Vice President and Chief Financial Officer, pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002, filed herewith.

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

32.2	Certification of Samuel L. Hillard, Senior Vice President and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, furnished herewith.

101.INS	Inline XBRL Instance Document - – the instance document does not appear in the Interactive Data file because its iXBRL tags are embedded within the Inline XBRL ~~document.~~document, filed herewith.

101.SCH	XBRL Taxonomy Extension Schema, filed herewith.

101.CAL	XBRL Extension Calculation Linkbase, filed herewith.

101.DEF	XBRL Extension Definition Linkbase, filed herewith.

101.LAB	XBRL Extension Label Linkbase, filed herewith.

101.PRE	XBRL Extension Presentation Linkbase, filed herewith.

104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, has been formatted in Inline XBRL.

	P. H. GLATFELTER COMPANY (Registrant)

~~July 30, 2019~~May 5, 2020

	By	/s/ David C. Elder
		David C. Elder
		Vice President, Finance and Chief Accounting Officer