25.

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

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

The following presents our condensed consolidating statements of income, including comprehensive income, and cash flows for the years ended December 31, 2015, 2014 and 2013 and our condensed consolidating balance sheets as of December 31, 2015 and 2014. The condensed consolidating financial statements set forth below include the addition of CFNA and GAMNA as guarantors during 2015 and all prior periods have been restated to retroactively effect this change.

Condensed Consolidating Statement of Income for the

year ended December 31, 2015

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net sales

875,026

84,704

779,380

(78,026

)

1,661,084

Energy and related sales, net

5,664

–

5,664

Total revenues

880,690

84,704

779,380

(78,026

)

1,666,748

Costs of products sold

811,329

80,455

650,025

(78,026

)

1,463,783

Gross profit

69,361

4,249

129,355

–

202,965

Selling, general and administrative expenses

71,751

821

55,134

–

127,706

Gains on dispositions of plant, equipment and timberlands, net

(19,720

)

(1,183

)

(210

)

–

(21,113

)

Operating income

17,330

4,611

74,431

–

96,372

Other non-operating income (expense)

Interest expense

(18,147

)

–

(36,859

)

37,542

(17,464

)

Interest income

673

37,127

(37,543

)

283

Equity in earnings of subsidiaries

61,946

24,737

–

(86,683

)

–

Other, net

(3,389

)

(1,471

)

4,245

–

(615

)

Total other non-operating income (expense)

41,083

60,393

(32,588

)

(86,684

)

(17,796

)

Income before income taxes

58,413

65,004

41,843

(86,684

)

78,576

Income tax provision (benefit)

(6,162

)

2,922

17,241

–

14,001

Net income

64,575

62,082

24,602

(86,684

)

64,575

Other comprehensive income (loss)

(35,616

)

(41,010

)

29,680

11,330

(35,616

)

Comprehensive income

28,959

21,072

54,282

(75,354

)

28,959

Condensed Consolidating Statement of Income for the

year ended December 31, 2014


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	902,892		$	78,077		$	897,363		$	(75,917	)	$	1,802,415
Energy and related sales, net		7,927			–			–			–			7,927
Total revenues		910,819			78,077			897,363			(75,917	)		1,810,342
Costs of products sold		830,710			74,414			745,981			(75,917	)		1,575,188
Gross profit		80,109			3,663			151,382			–			235,154
Selling, general and administrative expenses		67,086			1,765			64,384			–			133,235
Gains on dispositions of plant, equipment and timberlands, net		(3,545	)		(1,316	)		–			–			(4,861	)
Operating income		16,568			3,214			86,998			–			106,780
Other non-operating income (expense)
Interest expense		(19,105	)		–			(102,571	)		102,755			(18,921	)
Interest income		638			102,241			36			(102,756	)		159
Equity in earnings of subsidiaries		67,590			(34,265	)		–			(33,325	)		–
Other, net		(1,366	)		317			414			–			(635	)
Total other non-operating income (expense)		47,757			68,293			(102,121	)		(33,326	)		(19,397	)
Income (loss) before income taxes		64,325			71,507			(15,123	)		(33,326	)		87,383
Income tax provision (benefit)		(4,921	)		3,916			19,142			–			18,137
Net income (loss)		69,246			67,591			(34,265	)		(33,326	)		69,246
Other comprehensive income (loss)		(79,513	)		(40,704	)		28,840			11,864			(79,513	)
Comprehensive income (loss)	$	(10,267	)	$	26,887		$	(5,425	)	$	(21,462	)	$	(10,267	)

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		$	80,991		$	830,625		$	(76,860	)	$	1,722,615
Energy and related sales, net		3,153			–			–			–			3,153
Total revenues		891,012			80,991			830,625			(76,860	)		1,725,768
Costs of products sold		812,173			76,640			695,163			(76,868	)		1,507,108
Gross profit		78,839			4,351			135,462			8			218,660
Selling, general and administrative expenses		69,614			1,952			62,301			–			133,867
Gains on dispositions of plant, equipment and timberlands, net		(1,390	)		(319	)		(17	)		–			(1,726	)
Operating income		10,615			2,718			73,178			8			86,519
Other non-operating income (expense)
Interest expense		(18,891	)		–			(8,064	)		8,990			(17,965	)
Interest income		627			8,662			12			(8,991	)		310
Equity in earnings of subsidiaries		58,354			48,474			–			(106,828	)		–
Other, net		(1,569	)		104			1,802			–			337
Total other non-operating income (expense)		38,521			57,240			(6,250	)		(106,829	)		(17,318	)
Income before income taxes		49,136			59,958			66,928			(106,821	)		69,201
Income tax provision (benefit)		(18,022	)		1,611			18,454			–			2,043
Net income		67,158			58,347			48,474			(106,821	)		67,158
Other comprehensive income		88,609			6,883			4,223			(11,106	)		88,609
Comprehensive income	$	155,767		$	65,230		$	52,697		$	(117,927	)	$	155,767

Condensed Consolidating Balance Sheet as of December 31, 2015

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Assets

Cash and cash equivalents

59,130

465

45,709

–

105,304

Other current assets

199,690

238,515

239,367

(230,509

)

447,063

Plant, equipment and timberlands, net

286,334

1,114

411,416

–

698,864

Investments in subsidiaries

737,450

507,116

–

(1,244,566

)

–

Other assets

109,511

–

142,882

–

252,393

Total assets

1,392,115

747,210

839,374

(1,475,075

)

1,503,624

Liabilities and Shareholders’ Equity

Current liabilities

363,037

9,725

162,081

(230,523

)

304,320

Long-term debt

250,000

–

106,504

–

356,504

Deferred income taxes

28,561

(79

)

47,976

–

76,458

Other long-term liabilities

87,270

–

15,825

–

103,095

Total liabilities

728,868

9,646

332,386

(230,523

)

840,377

Shareholders’ equity

663,247

737,564

506,988

(1,244,552

)

663,247

Total liabilities and shareholders’ equity

1,392,115

747,210

839,374

(1,475,075

)

1,503,624

Condensed Consolidating Balance Sheet as of December 31, 2014


In thousands	Parent Company		Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	42,208	$	509		$	57,120		$	–		$	99,837
Other current assets		216,940		439,910			254,911			(436,976	)		474,785
Plant, equipment and timberlands, net		255,255		996			441,357			–			697,608
Investments in subsidiaries		826,084		401,540			–			(1,227,624	)		–
Other assets		121,125		–			186,128			(17,979	)		289,274
Total assets	$	1,461,612	$	842,955		$	939,516		$	(1,682,579	)	$	1,561,504

Liabilities and Shareholders’ Equity
Current liabilities	$	403,662	$	13,143		$	307,184		$	(444,258	)	$	279,731
Long-term debt		250,000		–			721,457			(572,579	)		398,878
Deferred income taxes		46,483		(506	)		70,328			(12,289	)		104,016
Other long-term liabilities		112,358		24			11,608			5,780			129,770
Total liabilities		812,503		12,661			1,110,577			(1,023,346	)		912,395
Shareholders’ equity		649,109		830,294			(171,061	)		(659,233	)		649,109
Total liabilities and shareholders’ equity	$	1,461,612	$	842,955		$	939,516		$	(1,682,579	)	$	1,561,504

Condensed Consolidating Statement of Cash Flows for the year

ended December 31, 2015

In thousands

Parent
Company

Guarantors

Non
Guarantors

Adjustments/
Eliminations

Consolidated

Net cash provided (used) by

Operating activities

34,391

627

98,725

–

133,743

Investing activities

Expenditures for purchases of plant, equipment and timberlands

(65,265

)

(109

)

(34,515

)

–

(99,889

)

Proceeds from disposal plant, equipment and timberlands, net

22,741

1,213

505

–

24,459

Repayments from intercompany loans

–

57,855

–

(57,855

)

–

Advances of intercompany loans

–

(49,230

)

–

49,230

–

Intercompany capital (contributed) returned

10,100

(300

)

–

(9,800

)

–

Acquisitions, net of cash acquired

–

(224

)

–

(224

)

Other

(1,600

)

–

(1,600

)

Total investing activities

(34,024

)

9,429

(34,234

)

(18,425

)

(77,254

)

Financing activities

Net repayments of indebtedness

–

(24,650

)

–

(24,650

)

Payments of note offering costs

(1,329

)

–

(1,329

)

Payment of dividends to shareholders

(20,443

)

–

(20,443

)

Repayments of intercompany loans

(9,158

)

–

(48,697

)

57,855

–

Borrowings of intercompany loans

49,230

–

(49,230

)

–

Intercompany capital (returned) received

–

(10,100

)

300

9,800

–

Payments related to share-based compensation awards and other

(1,745

)

–

151

–

(1,594

)

Total financing activities

16,555

(10,100

)

(72,896

)

18,425

(48,016

)

Effect of exchange rate on cash

–

(3,006

)

–

(3,006

)

Net increase (decrease) in cash

16,922

(44

)

(11,411

)

–

5,467

Cash at the beginning of period

42,208

509

57,120

–

99,837

Cash at the end of period

59,130

465

45,709

–

105,304

Condensed Consolidating Statement of Cash Flows for the year

ended December 31, 2014


In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	36,240		$	4,159		$	59,178		$	–		$	99,577
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(34,518	)		–			(31,528	)		–			(66,046	)
Proceeds from disposal plant, equipment and timberlands, net		3,707			1,355			10			–			5,072
Repayments from intercompany loans		–			20,840			–			(20,840	)		–
Advances of intercompany loans		(12,671	)		(26,340	)		–			39,011			–
Acquisitions, net of cash acquired		–			–			(8,015	)		–			(8,015	)
Other		(600	)		–			–			–			(600	)
Total investing activities		(44,082	)		(4,145	)		(39,533	)		18,171			(69,589	)
Financing activities
Net repayments of indebtedness		–			–			(18,128	)		–			(18,128	)
Payment of dividends to shareholders		(18,696	)		–			–			–			(18,696	)
Repurchases of common stock		(12,180	)		–			–			–			(12,180	)
Repayments of intercompany loans		–			–			(20,840	)		20,840			–
Borrowings of intercompany loans		26,340			–			12,671			(39,011	)		–
Payments related to share-based compensation awards and other		(1,630	)		–			(247	)		–			(1,877	)
Total financing activities		(6,166	)		–			(26,544	)		(18,171	)		(50,881	)
Effect of exchange rate on cash		–			–			(2,152	)		–			(2,152	)
Net increase (decrease) in cash		(14,008	)		14			(9,051	)		–			(23,045	)
Cash at the beginning of period		56,216			495			66,171			–			122,882
Cash at the end of period	$	42,208		$	509		$	57,120		$	–		$	99,837

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		$	4,977		$	113,151		$	–		$	173,635
Investing activities
Expenditures for plant, equipment and timberlands		(39,496	)		–			(63,551	)		–			(103,047	)
Proceeds from disposal 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, net		–			(91	)		–			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			(91	)		–
Payments related to 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			(3,774	)		16,542			–			25,203
Cash at the beginning of period		43,781			4,269			49,629			–			97,679
Cash at the end of period	$	56,216		$	495		$	66,171		$	–		$	122,882