15.	CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

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

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

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

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

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

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	600,346		$	63,173		$	591,926		$	(64,065	)	$	1,191,380
Energy and related sales, net		3,346			—			—			—			3,346
Total revenues		603,692			63,173			591,926			(64,065	)		1,194,726
Costs of products sold		568,067			60,158			488,466			(64,065	)		1,052,626
Gross profit		35,625			3,015			103,460			—			142,100
Selling, general and administrative
expenses		55,976			846			43,662			—			100,484
(Gain) loss on dispositions of plant
equipment and timberlands, net		118			(188	)		20			—			(50	)
Operating income (loss)		(20,469	)		2,357			59,778			—			41,666
Other non-operating
income (expense)
Interest expense		(15,084	)		(619	)		(1,377	)		4,049			(13,031	)
Interest income		451			3,714			93			(4,049	)		209
Equity in earnings of subsidiaries		50,298			51,197			—			(101,495	)		—
Other, net		1,525			(6,445	)		4,014			—			(906	)
Total other non-operating
income (expense)		37,190			47,847			2,730			(101,495	)		(13,728	)
Income before income taxes		16,721			50,204			62,508			(101,495	)		27,938
Income tax provision (benefit)		(1,273	)		(94	)		11,311			—			9,944
Net income		17,994			50,298			51,197			(101,495	)		17,994
Other comprehensive income		50,855			43,878			43,344			(87,222	)		50,855
Comprehensive income	$	68,849		$	94,176		$	94,541		$	(188,717	)	$	68,849

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

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	211,761		$	18,086		$	192,214		$	(16,760	)	$	405,301
Energy and related sales, net		1,346			—			—			—			1,346
Total revenues		213,107			18,086			192,214			(16,760	)		406,647
Costs of products sold		186,297			16,732			159,208			(16,760	)		345,477
Gross profit		26,810			1,354			33,006			—			61,170
Selling, general and administrative
expenses		21,048			(25	)		14,724			—			35,747
(Gain) loss on dispositions of plant
equipment and timberlands, net		7			—			(2	)		—			5
Operating income		5,755			1,379			18,284			—			25,418
Other non-operating
income (expense)
Interest expense		(4,332	)		(1	)		(751	)		1,189			(3,895	)
Interest income		173			1,063			5			(1,189	)		52
Equity in earnings of subsidiaries		17,228			16,225			—			(33,453	)		—
Other, net		(670	)		(819	)		916			—			(573	)
Total other non-operating
income (expense)		12,399			16,468			170			(33,453	)		(4,416	)
Income before income taxes		18,154			17,847			18,454			(33,453	)		21,002
Income tax provision (benefit)		(1,447	)		619			2,229			—			1,401
Net income		19,601			17,228			16,225			(33,453	)		19,601
Other comprehensive loss		(69	)		(2,307	)		(2,462	)		4,769			(69	)
Comprehensive income	$	19,532		$	14,921		$	13,763		$	(28,684	)	$	19,532

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

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net sales	$	638,918		$	54,293		$	573,355		$	(52,634	)	$	1,213,932
Energy and related sales, net		4,013			—			—			—			4,013
Total revenues		642,931			54,293			573,355			(52,634	)		1,217,945
Costs of products sold		582,751			51,493			474,599			(52,634	)		1,056,209
Gross profit		60,180			2,800			98,756			—			161,736
Selling, general and administrative
expenses		62,115			(246	)		42,927			—			104,796
Loss on dispositions of plant
equipment and timberlands, net		11			—			20			—			31
Operating income (loss)		(1,946	)		3,046			55,809			—			56,909
Other non-operating
income (expense)
Interest expense		(13,036	)		(1	)		(2,352	)		3,425			(11,964	)
Interest income		523			3,056			50			(3,425	)		204
Equity in earnings of subsidiaries		46,485			44,050			—			(90,535	)		—
Other, net		(1,787	)		(2,220	)		3,051			—			(956	)
Total other non-operating
income (expense)		32,185			44,885			749			(90,535	)		(12,716	)
Income before income taxes		30,239			47,931			56,558			(90,535	)		44,193
Income tax provision (benefit)		(7,495	)		1,446			12,508			—			6,459
Net income		37,734			46,485			44,050			(90,535	)		37,734
Other comprehensive income (loss)		4,134			(2,691	)		(2,835	)		5,526			4,134
Comprehensive income	$	41,868		$	43,794		$	41,215		$	(85,009	)	$	41,868

Condensed Consolidating Balance Sheet as of September 30, 2017

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	374	$	682		$	83,231	$	—		$	84,287
Other current assets		226,678		287,440			289,956		(316,866	)		487,208
Plant, equipment and timberlands, net		383,014		70,093			402,910		—			856,017
Investments in subsidiaries		885,734		634,893			—		(1,520,627	)		—
Other assets		129,617		—			139,665		—			269,282
Total assets	$	1,625,417	$	993,108		$	915,762	$	(1,837,493	)	$	1,696,794
Liabilities and Shareholders' Equity
Current liabilities	$	436,791	$	58,602		$	157,486	$	(316,866	)	$	336,013
Long-term debt		357,441		49,000			52,584		—			459,025
Deferred income taxes		14,478		(541	)		51,660		—			65,597
Other long-term liabilities		106,111		313			19,139		—			125,563
Total liabilities		914,821		107,374			280,869		(316,866	)		986,198
Shareholders’ equity		710,596		885,734			634,893		(1,520,627	)		710,596
Total liabilities and shareholders’ equity	$	1,625,417	$	993,108		$	915,762	$	(1,837,493	)	$	1,696,794

Condensed Consolidating Balance Sheet as of December 31, 2016

In thousands	Parent Company		Guarantors			Non Guarantors		Adjustments/ Eliminations			Consolidated
Assets
Cash and cash equivalents	$	5,082	$	1,461		$	48,901	$	—		$	55,444
Other current assets		206,002		256,289			242,187		(265,663	)		438,815
Plant, equipment and timberlands, net		360,521		31,455			383,922		—			775,898
Investments in subsidiaries		789,565		540,029			—		(1,329,594	)		—
Other assets		123,010		—			128,092		—			251,102
Total assets	$	1,484,180	$	829,234		$	803,102	$	(1,595,257	)	$	1,521,259
Liabilities and Shareholders' Equity
Current liabilities	$	426,628	$	26,085		$	135,961	$	(265,663	)	$	323,011
Long-term debt		283,686		14,000			65,961		—			363,647
Deferred income taxes		10,221		(729	)		45,503		—			54,995
Other long-term liabilities		109,819		313			15,648		—			125,780
Total liabilities		830,354		39,669			263,073		(265,663	)		867,433
Shareholders’ equity		653,826		789,565			540,029		(1,329,594	)		653,826
Total liabilities and shareholders’ equity	$	1,484,180	$	829,234		$	803,102	$	(1,595,257	)	$	1,521,259

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

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	(17,066	)	$	(3,241	)	$	73,103		$	—		$	52,796
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(55,415	)		(32,847	)		(13,910	)		—			(102,172	)
Proceeds from disposals of plant, equipment and timberlands, net		8			209			—			—			217
Repayments from intercompany loans		—			12,000			—			(12,000	)		—
Advances of intercompany loans		—			(13,500	)		—			13,500			—
Intercompany capital contributed		(2,000	)		(400	)		—			2,400			—
Other		(100	)		—			—			—			(100	)
Total investing activities		(57,507	)		(34,538	)		(13,910	)		3,900			(102,055	)
Financing activities
Net long-term borrowings		73,298			35,000			(18,711	)		—			89,587
Payment of dividends to shareholders		(16,805	)		—			—			—			(16,805	)
Repayments of intercompany loans		—			—			(12,000	)		12,000			—
Borrowings of intercompany loans		13,500			—			—			(13,500	)		—
Intercompany capital received		—			2,000			400			(2,400	)		—
Payment of intercompany dividend		—			—			—			—			—
Payments related to share-based compensation awards and other		(128	)		—			—			—			(128	)
Total financing activities		69,865			37,000			(30,311	)		(3,900	)		72,654
Effect of exchange rate on cash		—			—			5,448			—			5,448
Net increase (decrease) in cash		(4,708	)		(779	)		34,330			—			28,843
Cash at the beginning of period		5,082			1,461			48,901			—			55,444
Cash at the end of period	$	374		$	682		$	83,231		$	—		$	84,287

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

In thousands	Parent Company			Guarantors			Non Guarantors			Adjustments/ Eliminations			Consolidated
Net cash provided (used) by
Operating activities	$	41,753		$	3,748		$	13,936		$	—		$	59,437
Investing activities
Expenditures for purchases of plant, equipment and timberlands		(78,187	)		(21,066	)		(17,695	)		—			(116,948	)
Proceeds from disposals of plant, equipment and timberlands, net		41			—			14			—			55
Repayments from intercompany loans		—			11,101			—			(11,101	)		—
Advances of intercompany loans		—			(12,330	)		—			12,330			—
Intercompany capital (contributed) returned		(17,000	)		(500	)		—			17,500			—
Other		(400	)		—			—			—			(400	)
Total investing activities		(95,546	)		(22,795	)		(17,681	)		18,729			(117,293	)
Financing activities
Net long-term borrowings		—			—			14,983			—			14,983
Payments of borrowing costs		(136	)		—			—			—			(136	)
Payment of dividends to shareholders		(16,134	)		—			—			—			(16,134	)
Repayments of intercompany loans		—			—			(11,101	)		11,101			—
Borrowings of intercompany loans		12,330			—			—			(12,330	)		—
Intercompany capital (returned) received		—			17,000			500			(17,500	)		—
Proceeds from government grants		3,251			2,000			—			—			5,251
Payments related to share-based compensation awards and other		(990	)		—			—			—			(990	)
Total financing activities		(1,679	)		19,000			4,382			(18,729	)		2,974
Effect of exchange rate on cash		—			—			330			—			330
Net increase (decrease) in cash		(55,472	)		(47	)		967			—			(54,552	)
Cash at the beginning of period		59,130			465			45,709			—			105,304
Cash at the end of period	$	3,658		$	418		$	46,676		$	—		$	50,752