24.

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Our 5.375% Notes are fully and unconditionally guaranteed, on a joint and several basis, by certain of our 100%-owned domestic subsidiaries, PHG Tea Leaves, Inc., Mollanvick, Inc., and Glatfelter Holdings, LLC. The guarantees are subject to certain customary release provisions including i) the designation of such subsidiary as an unrestricted or excluded subsidiary; (ii) in connection with any sale or disposition of the capital stock of the subsidiary guarantor; and (iii) upon our exercise of our legal defeasance option or our covenant defeasance option, all of which are more fully described in the Indenture dated as of October 3, 2012 among us, the Guarantors and US Bank National Association, as Trustee, relating to the 5.375% Notes. The following presents our consolidating statements of income, including comprehensive income, and cash flows for the years ended December 31, 2013, 2012 and 2011 and our consolidating balance sheets as of December 31, 2013 and 2012. These financial statements reflect P. H. Glatfelter Company (the parent), the guarantor subsidiaries (on a combined basis), the non-guarantor subsidiaries (on a combined basis) and elimination entries necessary to combine such entities on a consolidated basis. Effective December 31, 2013, Glatfelter Pulpwood Company, previously a guarantor, was merged with and into the parent. Accordingly, all condensed consolidating financial statements have been restated to give effect to this merger as of the earliest period presented. In addition, the amounts of intercompany investing and financing activities previously presented net for the years ended December 2012 and 2011 have been presented on a gross basis to conform to the current year’s presentation.

Condensed Consolidating Statement of Income for the

year ended December 31, 2013

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales

887,859

834,756

(16

)

1,722,615

Energy and related sales, net

3,153

–

3,153

Total revenues

891,012

834,756

(16

)

1,725,768

Costs of products sold

812,298

694,819

(24

)

1,507,108

Gross profit

78,714

139,937

218,660

Selling, general and administrative expenses

69,614

718

63,535

–

133,867

Gains on dispositions of plant, equipment and timberlands, net

(1,390

)

(319

)

(17

)

–

(1,726

)

Operating income (loss)

10,490

(398

)

76,419

86,519

Other non-operating income (expense)

Interest expense

(15,456

)

–

(2,508

)

(17,965

)

Interest income

(2,808

)

8,662

(5,544

)

–

310

Other, net

56,843

104

1,802

(58,412

)

337

Total other non-operating income (expense)

38,579

8,766

(6,250

)

(58,413

)

(17,318

)

Income (loss) before income taxes

49,069

8,368

70,169

(58,405

)

69,201

Income tax provision (benefit)

(18,089

)

453

19,675

2,043

Net income (loss)

67,158

7,915

50,494

(58,409

)

67,158

Other comprehensive income (loss)

88,609

6,883

4,223

(11,106

)

88,609

Comprehensive income (loss)

155,767

14,798

54,717

(69,515

)

155,767

Condensed Consolidating Statement of Income for the

year ended December 31, 2012


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	894,777		$	14		$	683,022		$	(25	)	$	1,577,788
Energy and related sales, net		7,000			–			–			–			7,000
Total revenues		901,777			14			683,022			(25	)		1,584,788
Costs of products sold		789,589			13			581,544			(7	)		1,371,139
Gross profit		112,188			1			101,478			(18	)		213,649
Selling, general and administrative expenses		73,877			169			47,544			–			121,590
Gains on dispositions of plant, equipment and timberlands, net		(9,790	)		–			(25	)		–			(9,815	)
Operating income (loss)		48,101			(168	)		53,959			(18	)		101,874
Other non-operating income (expense)
Interest expense		(18,689	)		–			(5	)		–			(18,694	)
Interest income		(3,170	)		7,134			(3,504	)		–			460
Other, net		34,223			477			1,283			(40,682	)		(4,699	)
Total other non-operating income (expense)		12,364			7,611			(2,226	)		(40,682	)		(22,933	)
Income (loss) before income taxes		60,465			7,443			51,733			(40,700	)		78,941
Income tax provision		1,086			1,587			16,889			–			19,562
Net income (loss)		59,379			5,856			34,844			(40,700	)		59,379
Other comprehensive income (loss)		2,775			3,243			3,920			(7,163	)		2,775
Comprehensive income (loss)	$	62,154		$	9,099		$	38,764		$	(47,863	)	$	62,154

Condensed Consolidating Statement of Income for the

year ended December 31, 2011


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	875,077		$	–		$	728,077		$	–		$	1,603,154
Energy and related sales – net		9,344			–			–			–			9,344
Total revenues		884,421			–			728,077			–			1,612,498
Costs of products sold		783,464			–			622,841			–			1,406,305
Gross profit		100,957			–			105,236			–			206,193
Selling, general and administrative expenses		73,263			50			51,558			–			124,871
Gains (losses) on dispositions of plant, equipment and timberlands, net		(4,018	)		80			(12	)		–			(3,950	)
Operating income (loss)		31,712			(130	)		53,690			–			85,272
Other non-operating income (expense)
Interest expense		(30,741	)		–			(1,053	)		–			(31,794	)
Interest income		(558	)		7,802			(5,578	)		(1,000	)		666
Other, net		25,359			(657	)		1,447			(29,448	)		(3,299	)
Total other non-operating income (expense)		(5,940	)		7,145			(5,184	)		(30,448	)		(34,427	)
Income (loss) before income taxes		25,772			7,015			48,506			(30,448	)		50,845
Income tax provision (benefit)		(16,922	)		16,085			9,369			(381	)		8,151
Net income (loss)		42,694			(9,070	)		39,137			(30,067	)		42,694
Other comprehensive income (loss)		(45,494	)		(3,350	)		(5,276	)		8,626			(45,494	)
Comprehensive income (loss)	$	(2,800	)	$	(12,420	)	$	33,861		$	(21,441	)	$	(2,800	)

Condensed Consolidating Balance Sheet as of December 31, 2013

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Assets

Cash and cash equivalents

56,216

501

66,165

—

122,882

Other current assets

208,814

327,152

253,779

(326,045

)

463,700

Plant, equipment and timberlands, net

247,243

1,054

475,043

—

723,340

Other assets

973,748

236,411

214,301

(1,055,972

)

368,488

Total assets

1,486,021

565,118

1,009,288

(1,382,017

)

1,678,410

Liabilities and Shareholders’ Equity

Current liabilities

375,535

2,855

247,855

(337,878

)

288,367

Long-term debt

250,000

—

513,120

(320,795

)

442,325

Deferred income taxes

70,989

(283

)

78,633

(8,319

)

141,020

Other long-term liabilities

105,021

—

13,792

3,409

122,222

Total liabilities

801,545

2,572

853,400

(663,583

)

993,934

Shareholders’ equity

684,476

562,546

155,888

(718,434

)

684,476

Total liabilities and shareholders’ equity

$1,486,021

$565,118

$1,009,288

$(1,382,017)

$1,678,410

Condensed Consolidating Balance Sheet as of December 31, 2012


In thousands	Parent Company		Guarantors		Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	43,781	$	4,278	$	49,620	$	—		$	97,679
Other current assets		200,137		395,145		214,568		(388,671	)		421,179
Plant, equipment and timberlands, net		247,095		1,078		373,013		—			621,186
Other assets		806,254		150,304		45,133		(898,750	)		102,941
Total assets	$	1,297,267	$	550,805	$	682,334	$	(1,287,421	)	$	1,242,985

Liabilities and Shareholders’ Equity
Current liabilities	$	344,741	$	1,864	$	291,547	$	(387,244	)	$	250,908
Long-term debt		250,000		—		—		—			250,000
Deferred income taxes		36,262		2,033		40,972		(17,221	)		62,046
Other long-term liabilities		126,585		—		11,093		2,674			140,352
Total liabilities		757,588		3,897		343,612		(401,791	)		703,306
Shareholders’ equity		539,679		546,908		338,722		(885,630	)		539,679
Total liabilities and shareholders’ equity	$	1,297,267	$	550,805	$	682,334	$	(1,287,421	)	$	1,242,985

Condensed Consolidating Statement of Cash Flows for the year

ended December 31, 2013

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net cash provided (used) by

Operating activities

55,507

4,974

113,154

–

173,635

Investing activities

Expenditures for plant, equipment and timberlands

(39,496

)

–

(63,551

)

–

(103,047

)

Proceeds from disposals of plant, equipment and timberlands, net

1,435

333

179

–

1,947

Repayments from intercompany loans

–

18,223

–

(18,223

)

–

Advances of intercompany loans

–

(27,216

)

–

27,216

–

Intercompany capital contributed

–

(91

)

–

Acquisitions, net of cash acquired

–

(210,911

)

–

(210,911

)

Other

(425

)

–

(425

)

Total investing activities

(38,486

)

(8,751

)

(274,283

)

9,084

(312,436

)

Financing activities

Net proceeds from indebtedness

–

182,230

–

182,230

Payments of note offering costs

(160

)

–

(259

)

–

(419

)

Payment of dividends to shareholders

(16,965

)

–

(16,965

)

Repayments of intercompany loans

(1,100

)

(17,123

)

18,223

–

Borrowings of intercompany loans

15,310

11,906

(27,216

)

–

Intercompany capital received

–

(91

)

–

Payments for share–based compensation awards and other

(1,671

)

–

(1,671

)

Total financing activities

(4,586

)

–

176,845

(9,084

)

163,175

Effect of exchange rate on cash

–

829

–

829

Net increase (decrease) in cash

12,435

(3,777

)

16,545

–

25,203

Cash at the beginning of period

43,781

4,278

49,620

–

97,679

Cash at the end of period

56,216

501

66,165

–

122,882

Condensed Consolidating Statement of Cash Flows for the year

ended December 31, 2012


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	25,787		$	5,958		$	81,101		$	–		$	112,846
Investing activities
Expenditures for plant, equipment and timberlands		(23,463	)		–			(35,289	)		–			(58,752	)
Proceeds from disposals of plant, equipment and timberlands, net		10,236			–			36			–			10,272
Repayments from intercompany loans		6,088			29,343			–			(35,431	)		–
Advances of intercompany loans		(91	)		(34,375	)		(514	)		34,980			–
Other		(225	)		–			–			–			(225	)
Total investing activities		(7,455	)		(5,032	)		(35,767	)		(451	)		(48,705	)
Financing activities
Net proceeds from indebtedness		17,869			–			–			–			17,869
Payments of note offering costs		(4,748	)		–			–			–			(4,748	)
Payment of dividends to shareholders		(15,608	)		–			–			–			(15,608	)
Repurchases of common stock		(5,675	)		–			–			–			(5,675	)
Repayments of intercompany loans		–			–			(35,431	)		35,431			–
Borrowings of intercompany loans		27,875			514			6,591			(34,980	)		–
Proceeds from stock options exercised and other		2,673			–			–			–			2,673
Total financing activities		22,386			514			(28,840	)		451			(5,489	)
Effect of exchange rate on cash		–			–			750			–			750
Net increase in cash		40,718			1,440			17,244			–			59,402
Cash at the beginning of period		3,063			2,838			32,376			–			38,277
Cash at the end of period	$	43,781		$	4,278		$	49,620		$	–		$	97,679

Condensed Consolidating Statement of Cash Flows for the

year ended December 31, 2011


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	81,008		$	(6,816	)	$	67,115		$	(1,000	)	$	140,307
Investing activities
Expenditures for plant, equipment and timberlands		(31,363	)		–			(33,128	)		–			(64,491	)
Proceeds from disposals of plant, equipment and timberlands, net		4,448			–			43			–			4,491
Proceeds from installment note receivable		–			–			43,170			–			43,170
Repayments from intercompany loans		15,539			64,198			–			(79,737	)		–
Advances of intercompany loans		(10,388	)		(70,197	)		(7,600	)		88,185			–
Intercompany capital contributed		(25,000	)		(16,000	)		–			41,000			–
Total investing activities		(46,764	)		(21,999	)		2,485			49,448			(16,830	)
Financing activities
Net (repayments of) proceeds from indebtedness		(76,563	)		–			(37,493	)		–			(114,056	)
Payments of note offering costs		(1,672	)		–			–			–			(1,672	)
Payment of dividends to shareholders		(16,611	)		–			–			–			(16,611	)
Repurchases of common stock		(48,033	)		–			–			–			(48,033	)
Repayments of intercompany loans		(16,300	)		–			(63,437	)		79,737			–
Borrowings of intercompany loans		65,775			7,600			14,810			(88,185	)		–
Intercompany capital received		–			25,000			16,000			(41,000	)		–
Payment of intercompany dividend		–			(1,000	)		–			1,000			–
Proceeds from stock options exercised and other		232			–			–			–			232
Total financing activities		(93,172	)		31,600			(70,120	)		(48,448	)		(180,140	)
Effect of exchange rate on cash		–			–			(848	)		–			(848	)
Net increase (decrease) in cash		(58,928	)		2,785			(1,368	)		–			(57,511	)
Cash at the beginning of period		61,991			53			33,744			–			95,788
Cash at the end of period	$	3,063		$	2,838		$	32,376		$	–		$	38,277