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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 1995 1-3560
P. H. GLATFELTER COMPANY
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-0628360
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
228 South Main Street
Spring Grove, Pennsylvania 17362
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (717) 225-4711
including area code -------------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock American Stock Exchange Inc.
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(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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 the past 90 days. Yes X No
------- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in the definitive proxy statement
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / /
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates at March 6, 1996 was $395,422,324.
Common Stock outstanding at March 6, 1996: 42,832,706 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference in this Report on Form 10-K.
1. Proxy Statement dated March 15, 1996 (Part III)
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PART I
Item 1. Business.
P.H. Glatfelter Company (together with its subsidiaries, the
"Company" or the "Registrant"), a paper manufacturing company, began
operations in Spring Grove, Pennsylvania in 1864 and was incorporated as a
Pennsylvania corporation in 1905. On January 30, 1979 the Registrant acquired
by merger Bergstrom Paper Company with paper mills located in Wisconsin and
Ohio. The Ohio mill was sold on September 10, 1984. On May 7, 1987 the
Registrant acquired all of the outstanding capital stock of Ecusta Corporation
with a paper mill located in Pisgah Forest, North Carolina and other operations
in North Dakota, Canada and Australia. Ecusta Corporation was merged into and
became a division of the Registrant on June 30, 1987.
The Registrant's paper mills are located in Spring Grove,
Pennsylvania, Pisgah Forest, North Carolina and Neenah, Wisconsin. It
manufactures printing papers and tobacco and other specialty papers.
The Registrant sells its products throughout the United
States and in a number of foreign countries. Net export sales in 1995,
1994 and 1993 were $54,961,000, $44,821,000 and $38,577,000, respectively.
Most of the Registrant's printing paper products are directed
at the uncoated free-sheet portion of the industry. The Registrant's printing
paper products are used principally for the printing of case bound and
quality paperback books, commercial and financial printing and envelope
converting. Printing papers are manufactured in each of the Registrant's
mills.
In 1995, sales of paper for book publishing and commercial
printing generally were made through wholesale paper merchants, whereas
sales of paper to financial printers and converters generally were made
directly. During 1994, one of the Registrant's wholesale paper merchants,
Central National-Gottesman Inc. (which buys paper through its division,
Lindenmeyr Book Publishing) acquired substantially all of the assets of Perkins
& Squier, another of the Registrant's wholesale paper merchants. As a result,
during 1995 and 1994, Central National-Gottesman Inc. accounted for 14% and 13%
of the Registrant's net sales, respectively.
The Registrant's tobacco and other specialty papers are
used for cigarette manufacturing and other specialty uses such as the
manufacture of playing cards, stamps, labels and surgical gowns. Sales of
these papers are generally made directly to the converter of the paper.
Tobacco papers are manufactured in the Pisgah Forest mill (hereinafter referred
to as the "Ecusta Division" or "Ecusta"). Other specialty papers are
manufactured in each of the Registrant's mills.
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A significant portion of the Pisgah Forest mill's sales are
made to a limited number of major tobacco companies. The current legal and
regulatory pressures on that industry could have an adverse effect on the
future tobacco paper sales and profitability of the Pisgah Forest mill.
Under such conditions, the Registrant would attempt to replace any lost sales
and profitability with lightweight printing and other specialty papers.
Set forth below is the amount (in thousands) and percentage
of net sales contributed by each of the Registrant's two classes of
similar products during each of the years ended December 31, 1995, 1994 and
1993.
Year Ended December 31,
1995 1994 1993
---- ---- ----
Net Sales % Net Sales % Net Sales %
--------- - --------- - --------- -
Printing
Papers $465,135 75% $335,882 70% $341,528 72%
Tobacco
and Other
Specialty
Papers 158,574 25% 142,420 30% 131,981 28%
------- --- ------- --- ------- ---
Total $623,709 100% $478,302 100% $473,509 100%
In October, 1992, Philip Morris Companies, Inc. informed the
Registrant that, effective January 1, 1993, it would cease to make purchases
from the Registrant for its domestic tobacco operations. Philip Morris had
been one of Registrant's six domestic customers for tobacco paper products and
sales to Philip Morris amounted to 7.5% of the Registrant's total sales in
1992. The Registrant succeeded in redirecting the lost Philip Morris product
volume to printing paper customers in 1993 and to printing paper and the
Registrant's remaining tobacco paper customers in 1994. Such sales to printing
paper customers in 1993 and 1994 were not as profitable as sales to Philip
Morris in 1992. Sales to the remaining tobacco paper customers in 1993 and
1994 were also less profitable than in 1992 due to increased competitive
pressure and cost-cutting measures within the tobacco industry. These factors
precluded the Registrant from offsetting significantly higher pulp costs in
1994 through tobacco paper price increases. As a result, the 1993 and 1994
profit performances of the Registrant's Ecusta Division were sharply below that
of 1992. As described in Note 2 to the Consolidated Financial Statements and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, during the fourth quarter of 1994, the Registrant recognized a
$208,949,000
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noncash, pre-tax writedown of impaired assets, $198,189,000 of which related to
the Ecusta Division.
Market conditions affecting the Registrant's tobacco papers
improved during 1995. Although competition for domestic and foreign tobacco
paper sales remained intense, this portion of the paper industry was buoyed by
a lack of capacity increases. Domestic cigarette consumption was approximately
the same in 1995 compared to 1994 while international cigarette consumption
continued to grow. These favorable market conditions enabled Ecusta to sell
more tobacco paper products in 1995, improve the product sales mix, and
increase selling prices for many tobacco paper products. Favorable conditions
are expected to continue during 1996.
The competitiveness of the markets in which the Registrant
sells its products varies. There are numerous concerns in the United States
manufacturing printing papers, and no one company holds a dominant position.
Capacity in the uncoated free-sheet industry, which includes uncoated printing
papers, is not expected to increase significantly for the next few years. In
the tobacco papers business, while there is only one significant domestic
competitor, there are numerous international competitors. Despite recent
events described above, the Registrant remains a major tobacco papers supplier
to the domestic tobacco products industry. If foreign production of tobacco
products by U.S. companies increases significantly it may have an adverse
effect on the Registrant's overall competitive position.
Service, product performance and technological advances are
important competitive factors in all of the Registrant's businesses. The
Registrant believes its reputation in these areas continues to be excellent.
Backlogs are not significant in the Registrant's business.
The principal raw material used at the Spring Grove mill is
pulpwood. In 1995, the Registrant acquired approximately 79% of its pulpwood
from saw mills and independent logging contractors and 21% from Company-owned
timberlands. Hardwood purchases constituted 51% of the pulpwood acquired and
softwood the balance. Hardwoods are still abundant within a relatively short
distance of the Registrant's Spring Grove mill, but the radius within which the
Registrant has been acquiring hardwoods has increased modestly over prior
years. Softwood is obtained primarily from Maryland, Delaware and Virginia.
In order to protect its sources of pulpwood, the Registrant has actively
promoted conservation and forest management among suppliers and woodland
owners. In addition, its subsidiary, The Glatfelter Pulp Wood Company, has
acquired, and is acquiring, woodlands, particularly softwood growing land, with
the objective of having
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sufficient softwood growing on its lands to provide a significant portion of
the Spring Grove mill's future softwood requirements. Wood chips produced from
sawmill waste also accounted for a substantial amount of the Registrant's
pulpwood purchases for the Spring Grove mill.
The Spring Grove pulp mill converts the pulpwood into wood
pulp for use in its papermaking operations. In addition to the pulp it
produces, the Spring Grove mill purchases market pulp from others. During the
fourth quarter of 1994, the Registrant completed the pulp mill modernization
project at the Spring Grove mill. This project, undertaken primarily for
environmental reasons, resulted in an increase in total pulp production
capacity at the mill.
The principal raw material used by the Neenah mill is
high-grade recycled wastepaper. The quality of different types of high-grade
wastepaper varies significantly depending on the amount of contamination.
During 1994 and the first half of 1995, the start-up of various wastepaper
deinking facilities increased the demand for the types of wastepaper,
particularly higher quality high-grade wastepaper, used at the Neenah mill. As
a result, wastepaper prices increased dramatically through the first half of
1995. Wastepaper prices decreased rapidly during the second half of 1995 and by
the end of 1995 had returned to historical levels in part due to expanded
collection systems which increased the supply of wastepaper. It is anticipated
that there will be an adequate supply of wastepaper in the future.
The major raw materials used at the Ecusta Division mill are
purchased wood pulp and processed flax straw, which is derived from linseed
flax plants. Flax had become a less important raw material as a result of the
loss of business of Philip Morris (referred to above), since it was the
Registrant's major customer for flax-based products. Improved market
conditions in 1995 enabled the Registrant to improve its sales mix, including
an increase in flax-based paper sales. Flax-based paper sales are still below
1992 levels. The current supply of flax and wood pulp is sufficient for the
present and anticipated future operations at the Ecusta Division. During 1995,
the Registrant resumed the purchase of Canadian flax straw and the converting
of such straw into processed flax straw.
Wood pulp consumed which was purchased from others comprised
approximately 105,000 short tons or 22% of the total 1995 fiber requirements of
the Registrant. The cost of market pulp increased significantly during the
first nine months of 1995; however, the pulp market began showing signs of
weakening during the fourth quarter of 1995 and prices have decreased
significantly to date in 1996.
The Registrant's Spring Grove mill generates all of its steam
requirements and is 100% self-sufficient in electrical
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energy generation. It also produces excess electricity which is sold to the
local power company under a long-term co-generation contract, which resulted in
1995 net energy sales of $9,455,000. Principal fuel sources used by the
Registrant's Spring Grove mill are coal, spent chemicals, bark and wood waste,
and oil which in 1995 were used to produce approximately 58%, 36%, 5% and 1%,
respectively, of the total energy internally generated at the Spring Grove
mill.
The Pisgah Forest mill generates all of its steam requirements
and a majority of its electrical requirements (64% in 1995) and purchases
electric power for the remainder. The principal fuel source used at the Pisgah
Forest mill is coal (99.2% in 1995).
The Neenah mill generates all of its steam requirements and a
portion of its electric power requirements (14% in 1995) and purchases the
remainder of its electric power requirements. Gas was used to produce
essentially all of the mill's internally generated energy during 1995.
At December 31, 1995, the Registrant had 2,926 active
full-time employees.
Hourly employees at the Registrant's mills are represented by
different locals of the United Paperworkers International Union, AFL-CIO. A
labor agreement covering approximately 975 employees at the Pisgah Forest mill
expires in October 1996. Under this agreement, wages increased 3% in 1995. A
five-year labor agreement covering approximately 740 employees in Spring Grove
was ratified in 1993 and expires in January 1998. Under this agreement, wages
increased by 3% in 1995 and are to increase by 3% in each of 1996 and 1997. In
January 1994, a five-year labor agreement covering approximately 320 employees
in Neenah was ratified. Under this agreement, which expires in August 1997,
wages increased 3% in 1995 and are to increase 3% in 1996.
ENVIRONMENTAL MATTERS
The Registrant is subject to numerous federal, state and
foreign laws and rules and regulations thereunder with respect to solid waste
disposal and the abatement of air and water pollution and noise. It has been
the Registrant's experience over many years that directives with respect to the
abatement of pollution have periodically been made increasingly stringent.
During the past twenty years or more, the Registrant has taken a number of
measures and spent substantial sums of money both for the installation of
facilities and operating expenses in order to abate air, water and noise
pollution and to alleviate the problem of disposal of solid waste. In spite of
the measures it has already taken, the Registrant anticipates that
environmental regulation of the Registrant's operations will
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continue to become more burdensome and that compliance therewith, when and if
technologically feasible, will require additional capital expenditures and
operating expenses. In addition, the Registrant may incur obligations to
remove or mitigate any adverse effects on the environment resulting from its
operations, including the restoration of natural resources, and liability for
personal injury and damage to property, including natural resources. For
further information with respect to such compliance, reference is made to Item
3 of this report.
Compliance with government environmental regulations is a
matter of high priority to the Registrant. In order to meet environmental
requirements, the Registrant has undertaken certain projects, the most
significant of which relates to the modernization of the Spring Grove pulpmill.
The pulpmill modernization project, which began in 1990, was completed during
the fourth quarter of 1994 for a total cost of $171,000,000 (exclusive of
capitalized interest). Of this amount, $20,000,000 was expended through 1991,
$48,000,000 in 1992, $71,000,000 in 1993 and $28,000,000 in 1994. The
remaining $4,000,000 was paid in 1995. Since capital expenditures for
pollution abatement generally do not increase the productivity or efficiency of
the Registrant's mills, the Registrant's earnings have been and will be
adversely affected to the extent that selling prices have not been and cannot
be increased to offset additional incremental operating costs, including
depreciation, resulting from such capital expenditures and to offset additional
interest expense on the amounts expended for environmental purposes. Because
other paper companies located in the United States are generally subject to the
same environmental regulations, the Registrant does not believe that its
competitive position in the U.S. paper industry will be materially adversely
affected by its capital expenditures for, or operating costs of, pollution
abatement facilities for its present mills, any other environmental related
obligations it will incur or the limitations which environmental compliance may
place on its operations.
The Wisconsin Department of Natural Resources ("DNR") is
investigating the presence of polychlorinated biphenyls ("PCBs") in the lower
Fox River on which the Registrant's Neenah mill is located. DNR has alleged
that the Registrant's operations were a source of those PCBs. Among other
areas, DNR's attention has been directed to a specific deposit of PCBs known as
"Deposit A", which is near the Registrant's Neenah mill. DNR has not yet made
any claim with respect to that deposit. The State of Wisconsin has notified
another party that the State considers it to be potentially responsible with
the Registrant for Deposit A. The Registrant performed the work necessary to
upgrade DNR's initial study of the deposit to the usual technical standards of
a remedial investigation/feasibility study. Although DNR has not completed the
remedy selection process for Deposit A, DNR has proposed a project to address
Deposit A that DNR estimates will cost $14.6 million. At least one other
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preliminary cost estimate, which may not be comparable in scope, is
significantly higher. Furthermore, DNR could propose projects to restore
natural resources or otherwise to address the entire Fox River, the cost of
which could exceed the available resources of the Registrant and other
companies upon which most governmental attention has focused. The Registrant
is engaged in discussions with the State of Wisconsin toward resolving any
liability it may have to the state in connection with the Fox River, the
outcome of which cannot be predicted.
In June 1994 the United States Fish and Wildlife Service
("FWS") notified the Registrant and four other parties that FWS considers them
to be potentially responsible for natural resources damages arising from the
presence of PCBs in the lower Fox River and the Bay of Green Bay pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or "Superfund"). In February 1996, FWS provided notice to two
additional parties that it considers them to be potentially responsible for
natural resource damages. FWS indicated that it intended to commence a natural
resources damages assessment ("NRDA"). The State of Wisconsin has declined the
United States' invitation to participate in the NRDA as a co-trustee, and has
repeatedly requested that the United States not undertake the NRDA because the
NRDA and natural resource damage claims would disrupt a program of restoration
activities under the auspices of the DNR through a public/private group known
as the Fox River Coalition. The Registrant is a member of the Fox River
Coalition. The Menominee Indian Tribe has, however, indicated to FWS that it
intends to participate in the NRDA as a co-trustee. In addition, the Menominee
Tribe has commenced litigation in the United States District Court for the
Western District of Wisconsin against the State to establish the tribe's
usufructuary rights to natural resources, including the Fox River; the
Registrant is not a party to that litigation. Further, the Oneida Indian Tribe
has indicated to FWS that it may participate in the NRDA as a co-trustee. The
Registrant is engaged in negotiations with FWS regarding the scope, nature and
propriety of the NRDA and with DNR regarding the scope, nature and propriety of
activities through the Fox River Coalition.
The amount and timing of future expenditures for environmental
compliance, clean-up, remediation or personal injury or property damage
liability cannot be ascertained with any certainty due, among other things, to
the unknown extent and nature of any contamination, the extent and timing of
any technological advances for pollution control, the remedial actions which
may be required and the number and financial resources of any other responsible
parties. The Registrant continues to evaluate its exposure and the level of
its reserves. The Registrant's current assessment is that such expenditures are
not likely to have a material adverse effect on its financial condition,
results of operation or liquidity, but there can be no
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assurance that its reserves will be adequate or that such an effect will not
occur at some future time.
Item 2. Properties.
The Registrant's executive offices are located in Spring
Grove, Pennsylvania, 11 miles southwest of York. The Registrant's paper mills
are located in Spring Grove, Pennsylvania, Pisgah Forest, North Carolina and
Neenah, Wisconsin.
The Spring Grove facilities include seven uncoated paper
machines with a daily capacity ranging from 11 to 298 tons and an aggregate
annual capacity of about 296,000 tons of finished paper. The machines have
been rebuilt and modernized from time to time. An off-machine coater gives the
Registrant a potential annual production capacity for coated paper of
approximately 48,000 tons. Since uncoated paper is used in producing coated
paper, this does not represent an increase in the Spring Grove mill capacity.
The pulpmill has a production capacity of approximately 625 tons of bleached
pulp per day.
The Pisgah Forest facilities include twelve paper machines,
stock preparation equipment, a modified kraft bleached flax pulpmill with
thirteen rotary digesters, a precipitated calcium carbonate plant and a small
recycled pulping operation. The annual light weight paper capacity is
approximately 99,000 tons. Nine paper machines are essentially identical while
the newer three machines have design variations specific for the products
produced. Converting equipment includes winders, calendars, slitters,
perforators and printing presses.
The Neenah facilities, consisting of a paper manufacturing
mill, converting plant and offices, are located at two sites. The Neenah mill
includes three paper machines, with an aggregate annual capacity of
approximately 163,000 tons, a wastepaper processing and warehousing building, a
wastepaper de-inking and bleaching plant, stock preparation equipment, power
plant, water treatment and waste treatment plants and warehousing space. The
converting plant contains a paper processing area and warehouse space.
The Glatfelter Pulp Wood Company, a subsidiary of the
Registrant, owns and manages approximately 110,000 acres of land, most of which
is timberland.
The Registrant owns substantially all of the properties used
in its papermaking operations except for certain land leased from the City of
Neenah under leases expiring in 2050, on which wastewater treatment and storage
facilities and a parking lot are located. All of the Registrant's properties,
other than those which are leased, are free from any major liens or
encumbrances.
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The Registrant considers that all of its buildings are in good structural
condition and well maintained and its properties are suitable and adequate for
present operations.
Item 3. Pending Legal Proceedings.
The Registrant does not believe that the environmental matters
discussed below will have a material effect on its business or consolidated
financial position.
On May 16, 1989, the Pennsylvania Environmental Hearing Board
approved and entered an Amended Consent Adjudication between the Registrant and
the Pennsylvania Department of Environmental Resources, now known as the
Department of Environmental Protection ("DEP") in connection with the
Registrant's permit to discharge effluent into the West Branch of the Codorus
Creek. The Amended Consent Adjudication establishes limitations on in-stream
color, and requires the Registrant to conduct certain studies and to submit
certain reports regarding internal and external measures to control the
discharge of color and certain other adverse byproducts of chlorine bleaching
to the West Branch of the Codorus Creek.
During 1990 and again in 1991, the Pennsylvania DEP proposed
to reissue the Registrant's waste water discharge permit on terms with which
the Registrant does not agree. The Registrant intends to contest those terms
should they be included in the final permit. Among those terms is an
unacceptable term concerning a suspected discharge of 2,3,7,8
tetrachlorodibenzo-p-dioxin ("dioxin"). At the behest of the United States
Environmental Protection Agency ("EPA"), DEP has included the Registrant's
Spring Grove mill on the list of dischargers submitted to and approved by EPA
pursuant to Section 304(l) of the Clean Water Act. EPA has preliminarily
approved that list because EPA suspects that the Spring Grove mill may
discharge dioxin in concentrations of concern. The Registrant believes that
the Spring Grove mill should not be included on the discharger list.
The Registrant has been identified by EPA and the Ohio
Environmental Protection Agency as one of 34 potentially responsible parties
("PRPs") for the clean-up of the Cardington Road Landfill in Montgomery County,
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Ohio. The Registrant has entered into a consent decree with the EPA,
a small number of PRPs known as the Cardington Road Coalition ("CRC") and
certain other PRPs pursuant to which the Registrant will contribute $85,000 in
satisfaction of its liability to such parties for all past and future response
costs at the Cardington Road Site. The consent decree will become effective
upon entry by a federal district court. On March 25, 1994 the Registrant
received notice that the court in Cardington Road Site Coalition v. Snyder
Properties, Inc. (Case No. C-3-88-632 S.D. Ohio), a Superfund cost recovery
action brought by the PRPs who implemented the remedial investigation, had
authorized the filing of a complaint naming the Registrant as a third-party
defendant in such action, but no complaint has been served. The consent decree
provides the Registrant with protection from claims for contribution by PRPs
who are not parties to the consent decree for response costs at the Cardington
Road Site, and provides the Registrant with indemnification by the CRC for
certain other claims. Such protection and indemnification may protect the
Registrant from claims which may be asserted in the Snyder Properties action.
The Wisconsin DNR has reissued the Registrant's wastewater
discharge permit for the Neenah mill on terms unacceptable to the Registrant.
The Registrant has requested an adjudicatory hearing on the terms of that
permit. The Wisconsin Paper Council is presently engaged in joint negotiation
of some issues common to a number of permits issued at the same time to similar
mills.
The State of Wisconsin commenced an action in 1995 against the
Registrant seeking civil penalties and injunctive relief as the result of
certain violations of the Neenah Mill's wastewater discharge permit. On
February 5, 1996, the Registrant reached an agreement in principle to settle
this matter for payment of approximately $130,000 in civil penalties,
forfeitures, court costs and legal fees of the State. In addition, the
Registrant has agreed to conduct an evaluation of its wastewater treatment
plant and to pay stipulated forfeitures for certain further violations during
the term of the evaluation.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Executive Officers of the Registrant.
Executive Officers Office (a) Age
------------------ ------ ---
T. C. Norris Chairman of the Board, President and Chief Executive 57
Officer
G. H. Glatfelter II Senior Vice President (b) 44
R. P. Newcomer Senior Vice President, Treasurer and Chief Financial 47
Officer (c)
R. S. Lawrence Vice President - General Manager, Ecusta Paper 56
Division (d)
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Executive Officers Office (a) Age
------------------ ------ ---
R. L. Miller Vice President - Administration (e) 49
J. F. Myers Vice President - Manufacturing Technology 57
C. M. Smith Comptroller (f) 37
R. S. Wood Secretary and Assistant Treasurer (g) 38
Officers are elected to serve at the pleasure of the Board of
Directors. Except in the case of officers elected to fill a new position or a
vacancy occurring at some other date, officers are elected at the annual
meeting of the Board held immediately after the annual meeting of shareholders.
- -------------------------
(a) Unless otherwise indicated, the offices listed have been held for five
or more years.
(b) Mr. Glatfelter became Senior Vice President in September 1995. From
May 1993 to September 1995, he was Vice President - General Manager,
Glatfelter Paper Division. Prior to May 1993, he was General Manager,
Glatfelter Paper Division.
(c) Mr. Newcomer became Senior Vice President, Treasurer and Chief
Financial Officer in September 1995. From April 1995 to September
1995, he was Vice President, Treasurer and Chief Financial Officer; he
was Vice President and Treasurer from May 1993 to April 1995. Prior
to May 1993, he was Assistant Comptroller.
(d) Mr. Lawrence became Vice President - General Manager, Ecusta Paper
Division on May 1993. Prior to May 1993, he was Director of Planning,
Acquisitions and Governmental Affairs.
(e) Mr. Miller became Vice President - Administration in September 1995.
From August 1994 to September 1995, he was Director of Planning,
Acquisitions and Governmental Affairs. He was Director, Marketing
Services from May 1993 to August 1994; prior to May 1993, he was
Director, Customer Services.
(f) Mr. Smith became Comptroller in May 1993. Prior to May 1993, he was a
Financial Analyst.
(g) Mr. Wood became Secretary and Assistant Treasurer in September 1992.
Prior to September 1992, he was Assistant Secretary and Assistant
Treasurer.
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PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
Common Stock Prices and Dividends Paid Information
The table below shows the high and low prices of the Company's common stock on
the American Stock Exchange (Ticket Symbol "GLT") and the dividends paid per
share for each quarter during the past two years.
1995 1994
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- ----------------------------------------------------------------------------------------------------------
Quarter High Low Dividends High Low Dividends
1st $18 3/8 $15 3/8 $.175 $19 3/8 $15 7/8 $.175
2nd 20 1/4 17 1/2 .175 17 3/8 15 1/8 .175
3rd 23 5/8 19 3/4 .175 18 1/4 14 5/8 .175
4th 22 3/8 15 7/8 .175 17 1/2 15 1/8 .175
As of December 31, 1995, the Company had 4,625 shareholders of record. A
number of the shareholders of record are nominees.
Item 6. Selected Financial Data.
Seven-Year Summary of Selected Consolidated Financial Data
Year Ended December 31
(in thousands except per share amounts)
1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------
Net Sales $623,709 $478,302 $473,509 $540,057 $567,764 $625,429 $598,777
Income (loss) before 65,828 (118,251)(a) 20,409(c) 56,544 76,049 88,332 92,864
accounting changes
Income (loss) per 1.49 (2.67)(a) .46(c) 1.27 1.67 1.88 1.93
common share before
accounting changes
Total assets 673,107 650,810(b) 842,087(d) 648,464 630,115 598,842 550,015
Debt 150,000 174,100 150,000 10,100 __ __ 1,100
Cash dividends $ .70 $ .70 $ .70 $ .70 $ .60 $ .575 $ .50
declared per
common share
(a) After impact of an after tax charge for a writedown of impaired assets
(unusual items) of $127,981,000 or $2.89 per share.
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(b) After impact of writedown of impaired assets (unusual items) of
$208,949,000.
(c) After impact of an after tax charge for rightsizing and restructuring
(unusual items) of $8,430,000 or $.19 per share and the effect of an
increased federal corporate income tax rate of $3,587,000 or $.08 per
share.
(d) Includes an increase of $61,062,000 resulting from the adoption of
Statement of Financial Accounting Standards No. 109.
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Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
OVERVIEW
The Company classifies it sales into two product groups: 1) printing papers;
and 2) tobacco and other specialty papers. The Spring Grove, Pennsylvania and
Neenah, Wisconsin mills produce printing and other specialty papers. The Pisgah
Forest mill (hereinafter referred to as the Ecusta Division or "Ecusta")
produces printing, tobacco and other specialty papers.
Most of the Company's printing paper products are directed at the uncoated
free-sheet portion of the industry. Strong demand for these papers into the
third quarter of 1995 led to an increase in printing paper sales volume and
prices. The demand for printing papers weakened towards the end of the third
quarter and incoming orders remained low during the fourth quarter of 1995. It
is generally believed that this decline was driven by abnormally high customer
inventory levels. Prices for many of the Company's printing paper products
declined marginally during this time. Sluggish conditions are expected to
continue in this market during the first quarter of 1996. As customers deplete
their inventories, the Company is cautiously optimistic that a steadier buying
pattern will develop in the second quarter of 1996 and will remain for the
balance of the year.
Market conditions affecting the Company's tobacco and other specialty papers
products group improved during 1995. Although competition for domestic and
foreign tobacco paper sales remained intense, this portion of the paper
industry was buoyed by a lack of capacity increases. Domestic cigarette
consumption was approximately the same in 1995 compared to 1994 while
international cigarette consumption continued to grow. These favorable market
conditions enabled Ecusta to sell more tobacco paper products in 1995, improve
the product sales mix and increase selling prices for many tobacco paper
products. Favorable conditions are expected to continue during 1996. A
significant portion of Ecusta's sales, however, are made to a limited number of
major tobacco companies. The current legal and regulatory pressures on that
industry could have an adverse effect on the future tobacco paper sales and
profitability of Ecusta. Under such conditions, the Company would attempt to
replace any lost sales and profitability with lightweight printing and other
specialty papers.
1995 COMPARED TO 1994
Net sales in 1995 increased $145,407,000, or 30.4%, over 1994. The Company's
sales volume also increased in 1995 compared to 1994. Overall demand for the
Company's products was very strong into the third quarter of 1995. The demand
for printing papers weakened towards the end of the third quarter and incoming
orders remained below normal levels during the fourth quarter of 1995. Strong
market conditions resulted in significant price increases during the first nine
months of 1995, tempered somewhat by a marginal decline during the fourth
quarter of 1995.
Printing paper sales increased by $129,253,000, or 38.5%, in 1995 compared to
1994. The annual average net printing paper selling price increased 30.7% in
1995 from 1994 due to the significant increase in demand for printing papers as
well as the Company's ability to offset increased raw material costs,
particularly for market pulp, pulp substitutes and wastepaper. The increased
demand for printing papers resulted in a 5.9% increase in sales volume in 1995
compared to 1994. Weakening demand resulted in some marginal price decreases
during the fourth quarter of 1995. Despite these decreases, the average selling
price during the fourth quarter of 1995 was 27.4% higher than the average
selling price during the fourth quarter of 1994.
Net tobacco and other specialty paper sales increased $16,154,000, or 11.3%, in
1995 compared to 1994. The Company had a 14.2% increase in tobacco paper sales
volume in 1995 over 1994. An increase in worldwide demand for tobacco paper
products in general and flax based tobacco papers specifically, and a lack of
industry capacity increases allowed the Company to sell more tobacco paper
volume and improve its sales mix. These factors also resulted in a slight
increase in the average tobacco paper selling price in 1995 compared to 1994.
Other specialty paper sales decreased by 3.5% in 1995 compared to 1994 as
increased average selling prices were more than offset by a decrease in sales
volume.
Increased sales volumes and selling prices led to a significant increase in
operating profit in 1995 compared to 1994. Profit from operations, before
unusual items, interest income and expense and taxes was $116,501,000 compared
to $21,541,000 in 1994. The increase in average selling prices more than offset
the increase in cost of products sold resulting in an increase in gross margin
from 8.5% in 1994 to 22.7% in 1995. The cost of products sold on a per unit
basis increased primarily as a result of higher costs for market pulp, pulp
substitutes and wastepaper. These cost increases more than offset (i) the
ability of the Company to spread its fixed manufacturing costs over more tons
of products manufactured during 1995 compared to 1994, and (ii) the favorable
impact of lower depreciation expense of approximately $10,000,000 during 1995
compared to 1994. Increased depreciation expense at the Spring Grove mill, due
primarily to the completion of the pulpmill modernization project in the fourth
quarter of 1994, was more than offset by a reduction in depreciation at Ecusta
in 1995 of approximately $14,400,000 compared to 1994. The decrease in Ecusta's
depreciation resulted from the writedown of the net assets of Ecusta in the
fourth quarter of 1994.
Selling, general and administrative expenses were $9,157,000 higher in 1995
than in 1994. This increase occurred primarily from higher profit sharing and
incentive related expenses during 1995 compared to 1994. Selling, general and
administrative expenses were 5.8% and 5.7% of net sales for 1995 and 1994,
respectively.
Interest on debt in 1995 increased $3,901,000 over 1994. The Company
capitalized $3,066,000 of interest expense in 1994. No interest expense was
capitalized during 1995. The increase in interest on debt was also due to a
higher variable interest rate on the Company's interest rate swap
14
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
agreement which has a total notional principal amount of $50,000,000. Interest
on short-term borrowings during 1995 was $50,000 less than in 1994. The Company
had no short-term borrowings at the end of 1995.
Results by Mill
The Spring Grove mill's profit from operations increased by $56,792,000 in 1995
compared to 1994. Net sales increased $78,426,000 in 1995 compared to 1994 due
to a significant increase in sales volume and average selling price. Cost of
sales increased primarily due to increased depreciation. Depreciation increased
due to the completion of the pulpmill modernization project during the fourth
quarter of 1994. This project, undertaken primarily for environmental reasons,
resulted in an increase in total pulp production capacity at the mill. The
corresponding reduction in volume of purchased market pulp resulted in
increased profitability at Spring Grove during 1995.
Profit from operations at the Neenah mill showed an increase of $9,298,000 in
1995 compared to 1994. Net sales increased $42,370,000 in 1995 due to a
significant increase in sales volume and average selling price. Neenah's 1995
profit from operations was negatively impacted by a significant increase in the
cost of wastepaper. Wastepaper costs decreased during the second half of 1995
and by the end of 1995 had returned to historical levels.
Profit from operations at Ecusta increased $28,870,000 in 1995 compared to
1994. Net sales increased $24,611,000 in 1995, primarily due to an increase in
average selling price due to an improved sales product mix and Ecusta's ability
to offset increased raw material costs, particularly for market pulp. Ecusta's
increase in raw material costs was more than offset through a combination of
price increases and by a decrease of approximately $14,400,000 in depreciation
costs, due to the writedown of the net assets of Ecusta in the fourth quarter
of 1994. Ecusta's profitability was also significantly enhanced through
comprehensive cost reduction efforts.
1994 COMPARED TO 1993
Overall demand for the Company's products increased significantly in the second
half of 1994, particularly in the fourth quarter, which led to several price
increases for certain printing paper grades. Net sales for the year increased
$4,793,000 in 1994 over 1993. Net sales in the fourth quarter of 1994 were
$19,539,000 higher than in the fourth quarter of 1993.
Printing paper sales decreased $5,646,000 or 1.7% in 1994 compared to 1993. The
annual average net printing paper price decreased 1.3% in 1994 from 1993 due to
the supply of uncoated free sheet papers exceeding demand during the first half
of 1994. Significant increases in demand, particularly in the fourth quarter of
1994, led to price increases for certain printing paper grades. The average net
selling price in the fourth quarter of 1994 was 8.6% higher than in the third
quarter of 1994 and 4.0% higher than in the fourth quarter of 1993.
Net tobacco and other specialty paper sales increased $10,439,000, or 7.9%, in
1994 compared to 1993. Other specialty paper sales increased 18.9% in 1994 over
1993 with a 16.4% increase in sales volume and a 2.2% increase in average net
selling price. Increased competition and cost-cutting measures taken by Ecusta
tobacco paper customers put severe pressure on tobacco paper prices.
Aggressive pricing by the Company resulted in a 16.3% increase in tobacco paper
sales volume in 1994 over 1993, primarily to export customers, but a 9.7%
decrease in average net selling price.
Despite the increase in sales, operating profits slipped significantly in 1994
from 1993. Profit from operations, before unusual items, accounting changes,
interest income and expense and taxes was $21,541,000 compared to $48,563,000
in 1993, a 55.6% decrease. A decrease in average net selling price and
increases in the cost of products sold caused a decrease in gross margin from
15.7% in 1993 to 8.5% in 1994. The cost of products sold increased as a result
of higher costs for market pulp and wastepaper and higher depreciation costs,
primarily as a result of the completion of the Spring Grove pulpmill
modernization project. The Company's gross margin was also negatively impacted
by unplanned mill downtime at the Spring Grove and Neenah mills during the
first quarter of 1994 and above normal downtime at the Spring Grove mill during
the third quarter of 1994 due to the complex integration of equipment required
by the pulpmill modernization project.
Selling, general and administrative expenses were $4,098,000 lower in 1994 than
in 1993. This expected decrease occurred primarily in salaries, wages and other
compensation expenses resulting from the Company's 1993 restructuring efforts.
Profit sharing and incentive expenses were also lower in 1994 than in 1993 due
to lower earnings.
Interest on debt in 1994 increased $3,540,000 over 1993. This increase is due
primarily to a full year of interest expense in 1994 related to the Company's
March 1993 issuance of $150,000,000 principal amount of its 5 7/8% Notes and an
increase in interest expense related to short-term borrowings in 1994. In
addition, during the third quarter of 1994, the Company ceased capitalizing
interest on expenditures relating to the Spring Grove pulpmill modernization
project, resulting in a significant increase in net interest expense.
Results by Mill
The Company's Spring Grove mill showed a decline in its profits from operations
of $5,856,000 in 1994 compared to 1993. Net sales were relatively flat in 1994
compared to 1993 as an overall improvement in average net selling price offset
a slight decline in sales volume. The primary reason for the decline in profits
from operations was an increase in depreciation expense resulting from the
completion of the Spring Grove pulpmill modernization project.
Profit from operations at the Neenah mill showed a decline of $6,322,000 in
1994 compared to 1993. Net sales increased $833,000 in 1994 as a 3.8% increase
in volume more than
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17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
offset a 2.8% decrease in average net selling price. Neenah's profit from
operations was negatively impacted by an increase in the cost of wastepaper,
particularly in the fourth quarter of 1994.
Profit from operations at Ecusta declined $14,844,000 in 1994 compared to 1993
resulting in an operating loss for the year. Net sales increased $3,737,000 in
1994 as an 8.0% increase in sales volume was offset somewhat by a 5.4% decrease
in average net selling price. Ecusta's profit from operations was most
negatively impacted by a sharp increase in the cost of purchased pulp and its
inability to pass the increased costs onto its customers, particularly tobacco
paper customers, due to severe competitive pressures.
1994--UNUSUAL CHARGES
During 1994, the Company closely monitored the Ecusta Division and continued
its efforts to maximize utilization of Ecusta's assets by attempting to direct
sales volume to its more profitable grades and by controlling costs. Despite
these efforts, Ecusta experienced a 1994 operating loss before an unfavorable
LIFO inventory charge, unusual items, interest expense and taxes of $4,921,000.
Ecusta continued to be negatively impacted by the continuing trend of declining
domestic tobacco consumption, a trend which was expected to continue. Increased
competition for foreign tobacco paper sales also negatively impacted Ecusta's
profitability.
Based on 1994 Ecusta operating results, which indicated that market conditions
were unlikely to improve significantly in the near future, the Company
determined that its efforts to return Ecusta to an acceptable level of
profitability would not be successful. As a result, the Company decided to
evaluate other strategic alternatives. As part of its consideration of such
alternatives, the Company solicited offers to buy the Ecusta Division during
the fourth quarter of 1994. In January 1995, the Company rejected all offers
which it received to buy the Ecusta Division because the offers were less than
the Company's valuation of the net assets. Nevertheless, as a result of these
offers, as well as the Company's revised valuation of the net assets of Ecusta,
the Company concluded that the fair value of the net assets was less than the
book value. Accordingly, during the fourth quarter of 1994, the net assets of
Ecusta were written down to fair value, resulting in a $198,189,000 charge to
pre-tax earnings. This writedown had no cash impact on the Company.
The Company concluded that asset impairment recognition was required as the
revised projected undiscounted future cash flows of the Ecusta Division were
less than the carrying value. In developing the revised projections, the
Company considered 1994 actual results and the Company's conclusions concerning
future market conditions and the resulting impact on prices. To determine the
fair value of the Ecusta Division's net assets, the Company projected the
present value of future cash flows using a 13% discount rate. The resulting
fair value, which exceeded the offers received, was used to determine the
amount of the writedown. The writedown of Ecusta's net assets reduced
depreciation expense in 1995 by approximately $14,400,000 and will result in
reduced depreciation in subsequent periods by declining amounts.
During the fourth quarter of 1994, the Company also identified impaired assets
at its Spring Grove and Neenah mills, resulting in a pre-tax charge of
$10,760,000. This writedown primarily related to solid waste disposal assets,
specifically, a sludge combustor at the Neenah mill and an unused landfill at
the Spring Grove mill. During the fourth quarter of 1994, the Company
identified more economical means, acceptable to the appropriate environmental
agencies, by which to dispose of its solid waste at these locations and
concluded that the significant additional expenditures necessary to make the
assets operational were not prudent, resulting in unusable assets.
FINANCIAL CONDITION
Liquidity
During 1995, the Company's cash and cash equivalents increased by $15,751,000.
This increase in cash and cash equivalents was due to cash generated by
operations of $115,751,000 which was largely offset by $32,493,000 for the
funding of capital-related projects, the payment of $30,839,000 for dividends,
the repayment of $24,100,000 of short-term bank borrowings and the purchase of
$19,078,000 of common stock for the treasury.
The Company expects to meet all its near-term and long-term cash needs from a
combination of internally generated funds, cash, cash equivalents, marketable
securities and existing bank lines of credit.
The Company's interest rate risk is limited to its level of variable rate
borrowings. In March 1993, the Company issued $150,000,000 principal amount of
its 5 7/8% Notes and immediately entered into an interest rate swap agreement
having a total notional principal amount of $50,000,000. Under the agreement,
the Company receives a fixed rate of 5 7/8% and pays a floating rate (London
Interbank Offered Rate (LIBOR) plus sixty basis points), as determined at six
month intervals. The floating rate is 6.50625% for the six month period ending
February 29, 1996. Although the Company can pay to terminate the swap agreement
at any time, the Company intends to hold the swap agreement until its March 1,
1998 maturity. The cost to the Company to terminate the agreement fluctuates
with prevailing market interest rates. As of December 31, 1995, the cost to
terminate the swap agreement was approximately $200,000.
Capital Resources
During 1995, the Company expended $32,493,000 for capital projects including
$6,716,000 relating to projects completed during 1994. Most of these
expenditures were for maintenance-related capital; however, approximately
$5,000,000 was expended for environmental capital projects and approximately
$6,000,000 was expended for the Spring
16
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
Grove mill's pulpmill modernization project and turbine generator installation.
These projects were both completed in the fourth quarter of 1994. Capital
spending in 1996 is expected to increase as certain projects originally planned
to begin in 1995 are now expected to commence during 1996.
ENVIRONMENTAL MATTERS
The Company is subject to loss contingencies resulting from regulation by
various federal, state, local and foreign governmental authorities with respect
to the environmental impact of air and water emissions and noise from its mills
as well as its disposal of solid waste generated by its operations. In order to
comply with environmental laws and regulations, the Company has incurred
substantial capital and operating expenditures over the past several years. The
Company anticipates that environmental regulation of the Company's operations
will continue to become more burdensome and that capital expenditures will
continue and operating expenditures will continue, and perhaps increase, in the
future. In addition, the Company may incur obligations to remove or mitigate
any adverse effects on the environment resulting from its operations, including
the restoration of natural resources, and liability for personal injury and
damage to property, including natural resources. Management's current
assessment, after consultation with legal counsel, is that such expenditures
are not likely to have a material adverse effect on the Company's financial
condition, results of operations or liquidity, but there can be no assurance
that its reserves will be adequate or that such an effect will not occur at
some future time.
EFFECTS OF CHANGING PRICES
The moderate levels of inflation during recent years have not had a material
effect on the Company's net sales, revenues or income from operations. Although
the replacement cost of assets increases during inflationary periods, earnings
and adequate cash flow may be maintained through an increase in selling prices.
Statements regarding the Registrant's expectations as to demand for its
products in 1996 and certain other information presented in this Annual Report
on Form 10-K constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Although the Registrant
believes that its expectations are based on reasonable assumptions within the
bounds of its knowledge of its business and operations, there can be no
assurance that actual results will not differ materially from its expectations.
Factors which could cause actual results to differ from expectations include a
significant change in economic growth, changes to paper production capacity,
the gain or loss of significant customers, costs and availability of raw
materials, changes in government policy or regulation and costs and other
effects related to environmental matters.
17
19
Item 8. Financial Statements and Supplementary Data.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands except per share amounts) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
NET SALES $623,709 $478,302 $473,509
OTHER INCOME:
Interest on investments and other--net 1,376 998 2,873
Energy sales--net 9,455 5,645 5,602
Gain from property dispositions, etc.--net 1,852 2,558 21
-------------- -------------- --------------
Total 636,392 487,503 482,005
-------------- -------------- --------------
COSTS AND EXPENSES:
Cost of products sold 482,139 437,745 399,252
Selling, administrative and general expenses 36,376 27,219 31,317
Interest on debt (Notes 1(h) and 13) 10,265 6,364 2,824
-------------- -------------- --------------
528,780 471,328 433,393
Unusual items (Notes 2 and 3) -- 208,949 13,229
-------------- -------------- --------------
Total costs and expenses 528,780 680,277 446,622
-------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES AND
ACCOUNTING CHANGES 107,612 (192,774) 35,383
-------------- -------------- --------------
INCOME TAX PROVISION (CREDIT) (Note 9):
Current 18,123 526 8,167
Deferred 23,661 (75,049) 3,220
Impact of federal tax rate change -- -- 3,587
-------------- -------------- --------------
Total 41,784 (74,523) 14,974
-------------- -------------- --------------
INCOME (LOSS) BEFORE ACCOUNTING CHANGES 65,828 (118,251) 20,409
ACCOUNTING CHANGES (Note 1(i)) -- -- (4,193)
-------------- -------------- --------------
NET INCOME (LOSS) 65,828 (118,251) 16,216
RETAINED EARNINGS AT BEGINNING OF YEAR 396,635 545,770 560,388
-------------- -------------- --------------
TOTAL 462,463 427,519 576,604
CASH DIVIDENDS DECLARED:
Common stock (per share: 1995, $.70; 1994, $.70;
1993, $.70) and preferred stock (Note 4) 30,701 30,884 30,834
-------------- -------------- --------------
RETAINED EARNINGS AT END OF YEAR $431,762 $396,635 $545,770
============== ============== ==============
INCOME (LOSS) PER COMMON SHARE (Notes 1(b) and 4):
Income (loss) before accounting changes $ 1.49 $ (2.67) $ .46
Impact of accounting changes -- -- (.09)
-------------- -------------- --------------
Net income (loss) $ 1.49 $ (2.67) $ .37
============== ============== ==============
See notes to consolidated financial statements.
18
20
CONSOLIDATED BALANCE SHEETS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
DECEMBER 31, 1995 AND 1994
(in thousands except share information) 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1(c)) $ 18,864 $ 3,133
Marketable securities (Note 1(f)) 111 111
Accounts receivable (less allowance for doubtful accounts:
1995, $1,979; 1994, $1,850) 52,052 48,912
Inventories (Note 1(d)) 87,078 81,831
Prepaid expenses 2,318 1,382
-------------- ---------------
Total current assets 160,423 135,369
-------------- ---------------
PLANT, EQUIPMENT AND TIMBERLANDS--NET
(Notes 1(e), 1(h), 2 and 10) 451,461 460,420
OTHER ASSETS (Notes 1(f) and 7) 61,223 55,021
-------------- ---------------
Total $673,107 $650,810
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank borrowings (Note 13) $ -- $ 24,100
Accounts payable 34,623 44,309
Dividends payable 7,597 7,735
Federal, state and local taxes 235 2,489
Accrued compensation, other expenses and deferred
income taxes 41,553 25,639
-------------- ---------------
Total current liabilities 84,008 104,272
-------------- ---------------
LONG-TERM DEBT (Note 13) 150,000 150,000
DEFERRED INCOME TAXES (Notes 1(g), 1(i) and 9) 80,682 60,313
OTHER LONG-TERM LIABILITIES (Notes 6 and 8) 43,011 40,491
COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)
SHAREHOLDERS' EQUITY (Notes 4, 5 and 6):
Capital Stock:
Common, $.01 par value; authorized--120,000,000 shares;
issued (including shares in treasury: 1995, 10,926,668;
1994, 10,162,151)--54,361,980 shares 544 544
Capital in excess of par value 40,921 39,838
Retained earnings 431,762 396,635
-------------- ---------------
Total 473,227 437,017
Less cost of common stock in treasury (157,821) (141,283)
-------------- ---------------
Shareholders' equity 315,406 295,734
-------------- ---------------
Total $673,107 $650,810
============== ===============
See notes to consolidated financial statements.
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21
CONSOLIDATED STATEMENTS OF CASH FLOWS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 65,828 $(118,251) $ 16,216
Unusual item--writedown of impaired assets -- 208,949 --
Accounting changes -- -- 4,193
Items included in net income (loss) not using
(providing) cash:
Depreciation and depletion 32,599 42,906 38,132
Expense related to employee stock purchase plans 975 814 855
Gain on disposition of fixed assets (476) (345) (541)
Changes in assets and liabilities:
Accounts receivable (3,140) (14,572) 4,200
Inventories (5,247) 11,459 (10,507)
Other assets and prepaid expenses (9,999) (11,116) (10,919)
Accounts payable, accrued compensation, other
expenses, deferred income taxes and other
long-term liabilities 17,096 (950) 7,057
Federal, state and local taxes (2,254) (2,383) (3,403)
Deferred income taxes--noncurrent 20,369 (70,196) 97
-------------- --------------- -----------------
Net cash provided by operating activities 115,751 46,315 45,380
-------------- --------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) or maturity of investments--net 2,861 22,073 (27,184)
Proceeds from disposal of fixed assets 987 1,569 1,841
Additions to plant, equipment and timberlands (25,777) (83,499) (112,820)
Increase (decrease) in liabilities related to
fixed asset acquisitions (6,716) 1,860 1,705
-------------- --------------- -----------------
Net cash used in investing activities (28,645) (57,997) (136,458)
-------------- --------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt issuance -- -- 150,000
Borrowing (repayment) of short-term debt--net (24,100) 24,100 (10,100)
Dividends paid (30,839) (30,847) (30,847)
Purchases of common and preferred stock (19,078) -- (4,281)
Employees' contribution--common stock issued under
employee benefit plans 2,642 2,380 2,395
-------------- --------------- -----------------
Net cash provided by (used in) financing activities (71,375) (4,367) 107,167
-------------- --------------- -----------------
Net increase (decrease) in cash and cash equivalents 15,731 (16,049) 16,089
CASH AND CASH EQUIVALENTS:
At beginning of year 3,133 19,182 3,093
-------------- --------------- -----------------
At end of year $ 18,864 $ 3.133 $ 19,182
============== =============== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest (net of amount capitalized) $ 10,366 $ 5,832 $ 155
Income taxes 21,571 2,899 11,716
See notes to consolidated financial statements.
20
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Operations and Principles of Consolidation
P. H. Glatfelter Company and subsidiaries are principally manufacturers of
printing papers and tobacco and other specialty papers. Headquartered in
Spring Grove, Pennsylvania, the Company's paper mills are located in Spring
Grove, Pisgah Forest, North Carolina and Neenah, Wisconsin. The Pisgah Forest
mill is also known as the Ecusta Division. The Company's products are marketed
in most parts of the United States and in many foreign countries, either
through wholesale paper merchants, brokers and agents, or direct to customers.
The accounts of the Company and its wholly-owned, significant subsidiaries are
included in the consolidated financial statements. All intercompany
transactions have been eliminated.
(b) Income (Loss) per Common Share
Net income (loss) per share of common stock is computed on the basis of the
weighted average number of shares of common stock and common stock equivalents
(Note 6) outstanding during each year.
The 1994 net loss per share of common stock of $2.67, as presented in the
Consolidated Statements of Income and Retained Earnings, reflects the negative
impact of the writedown of impaired assets (Note 2). The 1993 net income per
share of common stock of $.37, as presented in the Consolidated Statements of
Income and Retained Earnings, reflects the negative impact of adopting certain
Statements of Financial Accounting Standards (Note 1(i)), rightsizing and
restructuring charges (Note 3) and the increase in the federal corporate income
tax rate from 34% to 35% (Note 9). The 1994 and 1993 net income per share of
common stock, exclusive of these items, would have been $.22 and $.73,
respectively. There were no such items recorded in 1995. A reconciliation of
these amounts follows:
1995 1994 1993
------- -------- -------
Net income (loss)
per share of common
stock reported $1.49 $(2.67) $.37
After tax impact of:
Writedown of
impaired assets -- 2.89 --
Rightsizing and
restructuring charges -- -- .19
Accounting changes -- -- .09
Increase in federal
corporate income
tax rate -- -- .08
---------- --------- ---------
Net income per
share of common
stock exclusive of
the above items $1.49 $ .22 $.73
========== ========= =========
(c) Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with effective
maturities at date of purchase of three months or less to be cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost or market. Raw materials and
in-process and finished inventories are valued using the last-in, first-out
(LIFO) method, and the supplies inventory is valued principally using the
average cost method. Inventories at December 31 are summarized as follows:
1995 1994
----------- -----------
(in thousands)
Raw materials $25,577 $28,894
In-process and finished 30,821 24,202
Supplies 30,680 28,735
----------- -----------
Total $87,078 $81,831
=========== ===========
If the Company had valued all inventories using the average cost method,
inventories would have been $14,563,000 and $8,488,000 higher than reported at
December 31, 1995 and 1994, respectively. During 1994, the Company liquidated
certain LIFO inventories. The effect of the liquidation did not have a
significant impact on net income. If the Company had valued all inventories
using the average cost method in 1993, net income would not have been
significantly different than that reported.
At December 31, 1995 and 1994, the value of the above inventories exceeded
inventories for income tax purposes by approximately $23,000,000 and
$24,200,000, respectively.
(e) Plant, Equipment and Timberlands
Depreciation is computed for financial reporting on the straight-line method
over the estimated useful lives of the respective assets and for income taxes
principally on accelerated methods over lives established by statute or
Treasury Department procedures. Provision is made for deferred income taxes
applicable to this difference.
Maintenance and repairs are charged to income and major renewals and
betterments are capitalized. At the time property is retired or sold, the cost
and related reserve are eliminated and any resultant gain or loss is included
in income.
Depletion of the cost of timber is computed on a unit rate of usage by growing
area based on estimated quantities of recoverable material.
21
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
Plant, equipment and timberlands accounts are summarized as follows:
1995 1994
-------------- --------------
(in thousands)
Land and buildings $110,348 $109,253
Machinery and equipment 847,535 838,416
Other 27,557 26,855
Less accumulated
depreciation (Note 2) (557,075) (535,074)
-------------- --------------
Total 428,365 439,450
Construction in progress 6,220 4,207
Timberlands, less depletion 16,876 16,763
-------------- --------------
Plant, equipment
and timberlands--net $451,461 $460,420
============== ==============
(f) Investments in Debt and Equity Securities
Effective January 1, 1994, the Company changed its method of accounting for
investments in debt and equity securities to conform to Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). The adoption of this Standard did not
have a material impact on the Company's Consolidated Balance Sheets or
Consolidated Statements of Income and Retained Earnings.
Long-term investments, which are due ratably over a 19-year period and are
classified as held-to-maturity, are included in other assets in the
Consolidated Balance Sheets at December 31, 1995 and 1994. The investments
consist of approximately $13,200,000 and $16,000,000 in U. S. Treasury and
government obligations at December 31, 1995 and 1994, respectively. The
estimated fair market value of the investments in such securities approximated
the amortized cost, and therefore, there were no significant unrealized holding
gains or losses as of December 31, 1995 and 1994. Investments in equity
securities of $111,000, classified as available-for-sale, are reported as
marketable securities on the Consolidated Balance Sheets at December 31, 1995
and 1994. The fair market value for such securities approximates cost.
(g) Income Tax Accounting
Effective January 1, 1993, the Company changed its policy of accounting for
income taxes to conform to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") (Notes 1(i) and 9). The Company
previously followed Accounting Principles Board Opinion No. 11, "Accounting for
Income Taxes". Deferred taxes are provided for differences between amounts
shown for financial reporting purposes and those included with tax return
filings that will reverse in future periods.
(h) Capitalized Interest
The Company capitalizes interest incurred in connection with qualified
additions to property. The Company capitalized $3,066,000 and $4,138,000 of
interest in 1994 and 1993, respectively. The Company did not capitalize any
interest in 1995.
(i) Accounting Changes for Statements of
Financial Accounting Standards
Effective January 1, 1993, the Company adopted the provisions of Statements of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS No. 106"), No. 112,
"Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"), and No.
109, "Accounting for Income Taxes" ("SFAS No. 109"). The cumulative effect of
the accounting changes, net of tax charges (credits) due to the adoption of
these Standards in 1993, was as follows:
SFAS No. 106 $ 12,850,000
SFAS No. 112 1,967,000
SFAS No. 109 (10,624,000)
--------------------
$ 4,193,000
====================
SFAS No. 106 requires recognition of the cost of retiree health and insurance
benefits during an employee's active service. The cumulative effect, as of
January 1, 1993, of the adoption of SFAS No. 106 was a one-time charge for
postretirement health care costs of $20,900,000 which, after deferred income
tax benefits of $8,050,000, resulted in a 1993 first quarter net charge of
$12,850,000.
The Company had previously recognized the cost of postretirement benefits in
the period benefits were paid. The effect of this change in accounting for the
years ended December 31, 1995, 1994 and 1993, was an additional pre-tax expense
of approximately $950,000, $300,000 and $770,000, respectively.
SFAS No. 112 requires employers to recognize the obligation to provide
postemployment benefits under certain conditions. Such benefits, relating
primarily to disability-related benefits, were not previously recognized by the
Company until paid. The cumulative effect as of January 1, 1993 of the adoption
of SFAS No. 112 was a provision for accrued postemployment benefits of
$3,201,000 which, after deferred income tax benefits of $1,234,000, resulted in
a 1993 first quarter net charge of $1,967,000.
SFAS No. 109 required a remeasurement of the Company's Ecusta Division
acquisition which resulted in an increase in the fair value of the acquired
assets and the establishment of a deferred income tax liability for the
difference between the book and tax values of such assets. The adoption of SFAS
No. 109 also resulted in a reversal of deferred income taxes provided during
years when the effective income tax rates were higher than those currently in
effect. The cumulative effect of these changes recorded in 1993 was an increase
in plant and equipment of approximately $61,062,000; an increase in deferred
income taxes of approximately $50,438,000; and a credit to operations as a
cumulative effect of the change in method of accounting for income taxes of
approximately $10,624,000.
22
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
(j) Fair Market Value of Financial Instruments
The amounts reported in the Consolidated Balance Sheets for cash and cash
equivalents, marketable securities, trade receivables, other assets and
long-term debt approximate fair value.
(k) Asset Impairment
Assets are reviewed for impairment on an annual basis in conjunction with the
preparation of the annual budget or when a specific event indicates that the
carrying value of an asset may not be recoverable. Recoverability is assessed
based on estimates of future cash flows expected to result from the use and
eventual disposition of the asset. If the sum of expected undiscounted cash
flows is less than the carrying value of the asset, an impairment loss is
recognized. The impairment loss is measured as the amount by which the carrying
amount of the asset exceeds its fair value.
(l) Statement of Financial Accounting Standards Pending Adoption
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 defines a fair value method of
accounting for stock options and other equity instruments. Under the fair value
method, compensation cost is measured at the grant date based on the fair value
of the award and is recognized over the service period, which is usually the
vesting period.
Under SFAS No. 123, the Company is permitted to continue to account for
employee stock-based transactions under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB No. 25"), but would be
required to disclose in a note to the consolidated financial statements pro
forma net income and income per share information as if the Company had applied
the new method of accounting. SFAS No. 123 also requires increased disclosures
for stock-based compensation arrangements regardless of the method chosen to
measure and recognize compensation for employee stock-based arrangements.
The Company has determined that it will continue to account for such
transactions under APB No. 25 and will provide the disclosures required by SFAS
No. 123 during the year ending December 31, 1996.
(m) Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates and
assumptions. Management believes the estimates and assumptions used in the
preparation of these consolidated financial statements are reasonable based
upon currently available facts and known circumstances but recognizes that
actual results may differ from those estimates and assumptions. Such
differences, if any, are not expected to have a material impact on the
Company's financial condition, results of operations or liquidity.
2. WRITEDOWN OF IMPAIRED ASSETS (UNUSUAL ITEMS)
During the fourth quarter of 1994, the Company recognized a noncash, pre-tax
writedown of impaired assets of $208,949,000. Of this amount, $198,189,000
related to the pre-tax writedown of the Company's Ecusta Division to its fair
value primarily due to writedowns related to property, plant and equipment of
$189,441,000 and inventory of $6,406,000.
The Company concluded that asset impairment recognition was required as the
revised projected undiscounted future cash flows of the Ecusta Division were
less than the carrying value. In developing the revised projections, the
Company considered 1994 actual results and the Company's conclusions concerning
future market conditions and the resulting impact on prices. To determine the
fair value of the Ecusta Division's net assets, the Company projected the
present value of future cash flows using a 13% discount rate. The resulting
fair value was used to determine the amount of the writedown.
During the fourth quarter of 1994, the Company also identified impaired
property and equipment at its Spring Grove, Pennsylvania and Neenah, Wisconsin
mills, resulting in a pre-tax charge of $10,760,000. This writedown primarily
related to solid waste disposal assets, specifically, a sludge combustor at the
Neenah mill and an unused landfill at the Spring Grove mill. During the fourth
quarter of 1994, the Company identified more economical means, acceptable to
the appropriate environmental agencies, by which to dispose of its solid waste
at these locations and concluded that the significant additional expenditures
necessary to make the assets operational were not prudent, resulting in
unusable assets.
The aggregate after tax impact of this writedown in 1994 was $127,981,000, or
$2.89 per common share.
3. RIGHTSIZING AND RESTRUCTURING (UNUSUAL ITEMS)
During 1993, the Company incurred net unusual charges of $13,229,000 including
rightsizing and restructuring costs of $16,363,000, partially offset by a gain
of $1,492,000 on the disposal of its Ecusta Division's airplane and a credit of
$1,642,000 resulting from the updating of estimates relating to SFAS No. 106,
subsequent to its adoption on January 1, 1993. The charges primarily include
provisions for the accelerated pension, stock awards and postretirement benefit
costs of early retirements and other terminations in the second quarter of 1993
and other one-time net costs relating to the rightsizing and restructuring of
the Company's operations. The rightsizing and restructuring, which was
completed during 1993, resulted in the early retirement of 156 employees and a
reduction in annual salaries, wages and benefits of approximately $7,500,000.
The after tax impact of these charges was $8,430,000 or $.19 per common share.
23
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
4. CAPITAL STOCK
A summary of the number of shares of common stock outstanding follows:
1995 1994 1993
---------------- ---------------- ----------------
Balance at
beginning
of year 44,199,829 43,987,328 44,057,273
Delivery of
treasury
shares:
Employee
stock
purchase
plans 160,241 197,489 186,955
Restricted
common
stock
award plan
(Note 6) -- 15,012 --
Employee
401(k)
plan
(Note 7) 14,688 -- --
Employee
stock
options
exercised
(Note 6) 39,025 -- --
Shares received
for stock
options
exercised
(Note 6) (22,271) -- --
Purchase
of stock for
treasury (956,200) -- (256,900)
----------------- ----------------- -----------------
Balance at end
of year 43,435,312 44,199,829 43,987,328
================= ================= =================
Under the employee stock purchase plans, eligible hourly employees may acquire
shares of the Company's common stock at its fair market value. Employees may
contribute up to 10% of their compensation, as defined, and the Company may
contribute, as specified in the plans, amounts up to 15% of the employee's
contribution but not more than 3% of the employee's compensation, as defined.
Effective October 1, 1995, the Company replaced the employee stock purchase
plan for salaried employees with a 401(k) plan (Note 7).
On September 22, 1993, the Company's Board of Directors called for the
redemption of all 3,147 outstanding shares of 4 5/8% preferred stock. The
preferred shares were redeemed on October 27, 1993 for $50.75 per share. The
redeemed shares of preferred stock and all preferred stock shares held in
treasury were canceled on October 27, 1993. The Company has 40,000 shares
remaining of 4 5/8% preferred stock authorized but not issued.
5. CAPITAL IN EXCESS OF PAR VALUE
A summary of changes in capital in excess of par value follows:
1995 1994 1993
------------ ------------ ------------
(in thousands)
Balance at beginning
of year $39,838 $39,323 $38,633
Excess of
compensation value
net of tax benefits
over average cost
of treasury shares
delivered for stock
awards and
options (Note 6) 128 67 --
Excess of market value
over average cost of
treasury shares
delivered under
employee stock
purchase plans
(Note 4) 899 448 656
Excess of market value
over average cost of
treasury shares
delivered under the
401(k) plan (Note 7) 56 -- --
Excess of par value
over cost of preferred
shares redeemed -- -- 34
------------ ------------ ------------
Balance at end of year $40,921 $39,838 $39,323
============ ============ ============
6. KEY EMPLOYEE LONG-TERM INCENTIVE PLAN
AND RESTRICTED COMMON STOCK AWARD PLAN
On April 22, 1992, the holders of common stock approved the 1992 Key Employee
Long-Term Incentive Plan ("1992 Plan") which authorizes the issuance of up to
3,000,000 shares of the Company's common stock to eligible participants. The
1992 Plan provides for incentive stock options, non-qualified stock options,
restricted stock awards, performance shares and performance units. The
Company's 1988 Restricted Common Stock Award Plan ("1988 Plan") was
simultaneously amended to provide that no further awards of common shares may
be made thereunder.
24
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
The following summarizes the activity of non-qualified stock options granted to
purchase an equivalent number of shares of common stock for the years ended
December 31, 1993, 1994 and 1995:
Exercise
Price
Options Range
---------- --------
Balance, January 1, 1993 -- --
Options granted 940,000 $ 18
Options canceled (16,000) 18
----------
Balance, December 31, 1993 924,000 18
Options granted 246,000 15
Options canceled (55,000) 15-18
----------
Balance, December 31, 1994 1,115,000 15-18
Options granted 229,660 18
Options exercised (39,025) 15-18
Options canceled (69,725) 15-18
----------
Balance, December 31, 1995 1,235,910 $15-18
==========
There were 556,362 and 389,000 exercisable options as of December 31, 1995 and
1994, respectively. An additional 275,484 options became exercisable as of
January 1, 1996. Options typically become exercisable for 25% of the shares of
common stock issuable on exercise thereof, beginning January 1 of the year
following the date of grant, assuming six months has passed, with options for
an additional 25% of such shares becoming exercisable on January 1 of each of
the next three years. Options not exercisable under this schedule are
exercisable six months from the date of grant. All options expire on the
earlier of termination of employment or ten years from the date of grant.
The exercise price represents the fair market value of the Company's common
stock on the date of grant, or the average fair market value of the Company's
common stock on the first day before and after the date of grant for which fair
market value information was available if such information was not available on
the date of grant. The exercise prices presented above are rounded to the
nearest dollar.
On January 1, 1996, the Company granted to certain key employees non-qualified
options to purchase an aggregate of 110,030 shares of common stock. Subject to
certain conditions, these stock options are exercisable for 25% of such shares
beginning on January 1, 1997 and an additional 25% of such shares beginning on
January 1 of each of the next three years. The stock options, which expire on
December 31, 2005, were granted at an exercise price of $17.16 per share,
representing the average fair market value of the Company's common stock on
Friday, December 29, 1995 and Tuesday, January 2, 1996.
On May 1, 1995 and January 1, 1996, the Company awarded 59,260 and 44,860
shares, respectively, subject to certain conditions, to certain key employees
to be issued in whole or in part depending on the Company's degree of success
in achieving certain financial performance goals during defined four-year
performance periods. The May 1, 1995 and January 1, 1996 awards are for the
performance periods ending December 31, 1998 and 1999, respectively, and if
earned will be distributed the following year. Compensation expense is
recognized over the performance period and is affected by the likelihood of
achieving the performance goals and the fair value of the Company's common
stock at the end of each reporting period. The Company expensed $186,000
related to these awards in 1995.
During 1988 and 1991, 755,000 and 76,000 shares of common stock, respectively,
were awarded under the 1988 Plan. Awarded shares are subject to forfeiture, in
whole or in part, if the recipient ceases to be an employee within a specified
period of time. Compensation expense equal to the fair market value of awarded
shares on the award date is recognized over the period from the award date to
the date the forfeiture provisions lapse. The Company may reduce the number of
shares otherwise required to be delivered by an amount which would have a fair
market value equal to the taxes withheld by the Company on delivery. The
Company may also, at its sole discretion, elect to pay to the recipients in
cash an amount equal to the fair market value of the shares that would
otherwise be required to be delivered. In conjunction with the Company's
rightsizing and restructuring in 1993 (Note 3), the vesting dates were
accelerated to 1993 for 120,000 shares and to 1994 for 28,000 shares.
On March 1, 1994, under the 1988 Plan, in lieu of delivering 28,000 shares, the
Company elected to pay in cash an amount equal to the fair market value of such
shares. On May 2, 1994, 15,012 shares were delivered from treasury (after
reduction of 8,988 shares for taxes). In 1993, the Company paid cash in lieu of
delivering 271,000 shares. Shares awarded under the 1988 Plan cease to be
subject to forfeiture as follows: 182,000 in 1996 and 20,000 in each of 1997,
1998 and 1999.
7. RETIREMENT PLANS
The Company and its subsidiaries have trusteed, noncontributory defined benefit
pension plans covering substantially all of their employees. The benefits are
based, in the case of certain plans, on average salary and years of service
and, in the case of other plans, on a fixed amount for each year of service.
Plan provisions and funding met the requirements of the Employee Retirement
Income Security Act of 1974. Pension income of $6,623,000, $6,082,000 and
$4,205,000 was recognized in 1995, 1994 and 1993, respectively.
25
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
As discussed in Note 3, during 1993, the Company incurred rightsizing and
restructuring costs, including provisions for the costs of termination
benefits. In accordance with Statement of Financial Accounting Standards No.
88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," the Company recognized a charge of
$7,978,000 in 1993 related to early retirement termination benefits.
The following table sets forth the status of the Company's defined benefit
pension plans at December 31, 1995 and 1994:
1995 1994
--------------------------------------- ---------------------------------------
Overfunded Underfunded Overfunded Underfunded
Plans Plans Plans Plans
---------------- ------------------ ---------------- ------------------
Actuarial present value of accumulated (in thousands)
benefit obligation:
Vested employees $(122,716) $(10,347) $ (93,293) $(25,431)
Nonvested employees (7,352) (622) (4,891) (2,413)
--------------- ------------ ---------------- ------------
Total $(130,068) $(10,969) $ (98,184) $(27,844)
=============== ============ ================ ============
Projected benefit obligation for services
rendered to date $(145,766) $(11,936) $(112,776) $(28,750)
Plan assets at fair value (primarily stocks,
bonds and cash equivalents) 289,772 -- 210,584 16,713
--------------- ------------ ---------------- ------------
Plan assets in excess of (less than)
projected benefit obligation 144,006 (11,936) 97,808 (12,037)
Unrecognized net (gain) loss from past
experience different from that assumed (80,824) 1,302 (42,071) 1,011
Unrecognized prior service cost 9,978 -- 7,969 2,801
Unrecognized net (asset) liability at January 1 (17,014) 2,639 (19,127) 3,028
--------------- ------------ ---------------- ------------
Prepaid (accrued) pension cost $ 56,146 $ (7,995) $ 44,579 $ (5,197)
=============== ============ ================ ============
Net pension income, excluding unusual charges, includes the following
components:
1995 1994 1993
------------ ------------ ----------
(in thousands)
Service cost--benefits earned during period $ (3,671) $ (3,572) $(3,462)
Interest cost on projected benefit obligation (10,951) (10,361) (9,529)
Actual return on plan assets 68,583 2,676 21,938
Net amortization and deferral (47,338) 17,339 (4,742)
------------ ------------ -----------
Net pension income $ 6,623 $ 6,082 $ 4,205
============ ============ ===========
The assumptions used in computing the information above were as follows:
1995 1994 1993
-------- -------- -------
Discount rate--pension expense 8.0% 8.0% 7.5%
Expected long-term rate of return on plan assets 8.5% 8.5% 8.5%
Discount rate--projected benefit obligation 7.5% 8.0% 7.0%
Future compensation growth rate 3.5% 3.5% 3.5%
Effective October 1, 1995, the Company established a 401(k) plan for all
salaried employees. Salaried employees may contribute up to 15% of their
compensation to the plan, subject to certain restrictions. The Company will
contribute up to 50% of the employee's contribution, but not more than 3% of
the employee's compensation, as defined, in the form of shares of the Company's
common stock into the Company stock fund maintained under the 401(k) plan.
During 1995, the Company contributed shares of its common stock valued at
$235,000 to the 401(k) plan.
26
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
8. OTHER POSTRETIREMENT BENEFITS
The Company provides certain health care benefits to eligible retired
employees. These benefits include a comprehensive medical plan for retirees
prior to age 65 and fixed supplemental premium payments to retirees over age 65
to help defray the costs of Medicare. As discussed in Note 1(i), the Company
adopted SFAS No. 106, effective January 1, 1993. The plan is not funded; claims
are paid as incurred.
The following table sets forth the plan's status as of December 31:
1995 1994
----------- -----------
(in thousands)
Retirees $ 9,753 $10,137
Fully eligible active plan
participants 4,718 4,705
Other active plan participants 13,860 14,742
----------- -----------
Accumulated postretirement
benefit obligation 28,331 29,584
Unrecognized net loss (5,970) (6,672)
Unrecognized prior service cost 1,506 --
----------- -----------
Accrued postretirement
benefit cost $23,867 $22,912
=========== ===========
Net periodic postretirement benefit cost includes the following components:
1995 1994 1993
---------- --------- ----------
(in thousands)
Service cost $ 730 $ 585 $ 586
Interest on accumulated
benefit obligation 2,171 1,740 1,587
Net amortization
and deferral 112 20 --
--------- --------- ---------
Net periodic post-
retirement
benefit cost $3,013 $2,345 $2,173
========= ========= =========
The Company assumes an increase in the per capita cost of covered health
benefits of 9% for 1996 decreasing ratably to 5.5% in 2000. The weighted
average discount rates used in determining the accumulated postretirement
benefit obligation were 7.5% in 1995, 8.0% in 1994 and 7.0% in 1993. If the
health care cost trend rate increased by 1%, the accumulated postretirement
benefit obligation as of December 31, 1995 would have been approximately
$2,248,000 greater and the net periodic postretirement benefit cost would have
been approximately $275,000 greater.
9. INCOME TAXES
Income taxes are recognized for (a) the amount of taxes payable or refundable
for the current year, and (b) deferred tax liabilities and assets for the
future tax consequences of events that have been recognized in the Company's
consolidated financial statements or tax returns. The effects of income taxes
are measured based on effective tax law and rates.
During 1993, federal tax legislation was enacted that significantly changed the
income tax provisions for the Company. The principal provision of the law
affecting the Company was an increase in the federal corporate income tax rate
from 34% to 35%. Current payable and deferred tax liabilities were increased by
$226,000 and $3,361,000, respectively, as a result of the law change. As a
result, income tax expense from continuing operations for 1993 was increased by
$3,587,000, causing a reduction in net income by the same amount and a
reduction to earnings per share of $.08.
The Company has a federal alternative minimum tax credit carryforward of
$5,090,000 which has no expiration period.
The following table sets forth the domestic and foreign components of pre-tax
income (loss):
1995 1994 1993
------------- ------------- -----------
(in thousands)
United States $104,989 $(194,512) $33,388
Foreign 2,623 1,738 1,995
------------- ------------- -----------
Total pre-tax
income (loss) $107,612 $(192,774) $35,383
============= ============= ===========
The income tax provision (credit) consists of the following:
1995 1994 1993
------------ ------------ -----------
(in thousands)
Current:
Federal $15,851 $ (202) $ 6,423
State 1,711 -- 1,060
Foreign 561 728 684
----------- ------------ -----------
Total current tax
provision 18,123 526 8,167
----------- ------------ -----------
Deferred:
Federal 20,234 (67,446) 2,583
State 3,823 (7,515) 762
Foreign (396) (88) (125)
----------- ------------ -----------
Total deferred
tax provision
(credit) 23,661 (75,049) 3,220
----------- ------------ -----------
Impact of federal tax
rate change -- -- 3,587
----------- ------------ -----------
Total income
tax provision
(credit) $41,784 $(74,523) $14,974
=========== ============ ===========
27
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
The net deferred tax amounts reported on the Company's Consolidated Balance
Sheets as of December 31 are as follows:
1995 1994
----------------------------------------------------------------------- -----------
Federal State Foreign Total Total
----------- ----------- ----------- ------------- -----------
(in thousands)
Current liability $ 3,965 $ 743 $ -- $ 4,708 $ 1,416
Long-term liability 67,083 13,046 553 80,682 60,313
The following are components of the net deferred tax balances as of December
31:
1995 1994
----------------------------------------------------------------------- -----------
Federal State Foreign Total Total
----------- ----------- -------- ------------- -----------
(in thousands)
Deferred tax assets:
Current $ 3,639 $ 681 $ -- $ 4,320 $10,439
Long-term 22,721 3,384 -- 26,105 19,706
----------- ----------- ------- ------------- -----------
$26,360 $ 4,065 $ -- $ 30,425 $30,145
=========== =========== ======= ============= ===========
Deferred tax liabilities:
Current $ 7,604 $ 1,424 $ -- $ 9,028 $11,855
Long-term 89,804 16,430 553 106,787 80,019
----------- ----------- ------- ------------- -----------
$97,408 $17,854 $553 $115,815 $91,874
=========== =========== ======= ============= ===========
The tax effects of temporary differences as of December 31 are as follows:
1995 1994
--------------- -----------
Deferred tax assets: (in thousands)
Reserves $ 6,570 $ 7,416
Compensation 7,678 6,875
Postretirement benefits 9,308 10,542
Federal alternative minimum tax credit 5,090 3,700
Other 1,779 1,612
--------------- -----------
$ 30,425 $30,145
=============== ===========
Deferred tax liabilities:
Property $ 85,640 $60,438
Pension 18,363 14,696
Inventories 8,961 11,838
Other 2,851 4,902
--------------- -----------
$115,815 $91,874
=============== ===========
A reconciliation between the provision (credit) for income taxes, computed by
applying the statutory federal income tax rate of 35% to income (loss) before
income taxes, and the actual provision (credit) for income taxes follows:
1995 1994 1993
----------- ------------ -----------
(in thousands)
Federal income tax provision (credit) at statutory rate $37,664 $(67,471) $12,384
State income taxes, net of federal income tax benefit (provision) 4,201 (10,043) 1,156
Tax effect of exempt earnings of foreign sales corporation (422) (19) (218)
SFAS No. 109 impact of rate increase--Federal -- -- 2,977
SFAS No. 109 impact of rate increase--State -- 2,645 --
Other 341 365 (1,325)
----------- ------------ -----------
Actual provision (credit) for income taxes $41,784 $(74,523) $14,974
=========== ============ ===========
28
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
10. COMMITMENTS AND CONTINGENCIES
The Company is subject to loss contingencies resulting from regulation by
various federal, state, local and foreign governmental authorities with respect
to the environmental impact of air and water emissions and noise from its mills
as well as its disposal of solid waste generated by its operations. In order to
comply with environmental laws and regulations, the Company has incurred
substantial capital and operating expenditures over the past several years. The
Company anticipates that environmental regulation of the Company's operations
will continue to become more burdensome and that capital expenditures will
continue and operating expenditures will continue, and perhaps increase, in the
future. In addition, the Company may incur obligations to remove or mitigate
any adverse effects on the environment resulting from its operations, including
the restoration of natural resources, and liability for personal injury and
damage to property, including natural resources. Because other paper companies
located in the United States are generally subject to the same environmental
regulations, the Company does not believe that its competitive position in the
United States paper industry will be materially adversely affected by its
capital expenditures for, or operating costs of, pollution abatement facilities
for its present mills, any other environmental-related obligations it will
incur or the limitations which environmental compliance may place on its
operations.
The amount and timing of future expenditures for environmental compliance,
clean up, remediation and personal injury and property damage liability cannot
be ascertained with any certainty due, among other things, to the unknown
extent and nature of any contamination, the extent and timing of any
technological advances for pollution control, the remedial actions which may be
required and the number and financial resources of any other responsible
parties. The Company continues to evaluate its exposure and the level of its
reserves. Management's current assessment, after consultation with legal
counsel, is that such expenditures are not likely to have a material adverse
effect on the Company's financial condition, results of operations or
liquidity, but there can be no assurance that its reserves will be adequate or
that such an effect will not occur at some future time.
During 1995, the Company expended approximately $5,000,000 in environmental
capital projects exclusive of approximately $4,000,000 in final payments
related to the $171,000,000 Spring Grove pulp mill modernization project. The
Company estimates that $3,000,000 and $8,000,000 will be expended for
environmental capital projects in 1996 and 1997, respectively.
11. LEGAL PROCEEDINGS
The Company is involved in various lawsuits. Although the ultimate outcome of
these lawsuits cannot be predicted with certainty, the Company's management,
after consultation with legal counsel, does not expect that such lawsuits will
have a material adverse effect on the Company's financial position, results of
operations or liquidity.
12. SIGNIFICANT CUSTOMER AND FOREIGN SALES
The Company sells a significant portion of its printing and writing papers
through wholesale paper merchants. During 1994, two of the Company's wholesale
paper merchants merged into one company, and as a result, during 1995 and 1994,
this customer accounted for 13.9% and 13.0% of the Company's net sales,
respectively. Net sales in dollars to foreign customers were 8.8%, 9.4% and
8.1% of total net sales in 1995, 1994 and 1993, respectively.
13. BORROWINGS
The Company has available lines of credit from two different banks aggregating
$100,000,000 at interest rates approximating money market rates. The Company
had no short-term borrowings as of December 31, 1995. Short-term borrowings
were $24,100,000 as of December 31, 1994, at an average interest rate of 6.3%.
The Company had average net short-term borrowings of $9,447,000 and $13,850,000
during 1995 and 1994, respectively, at an average interest rate of 6.2% and
5.2%, respectively. Maximum short-term borrowings during 1995 and 1994 were
$29,400,000 and $36,900,000, respectively.
In March 1993, the Company issued $150,000,000 principal amount of its 5 7/8%
Notes. These Notes will mature on March 1, 1998 and may not be redeemed prior
to maturity. Interest on the Notes is payable semiannually on March 1 and
September 1. The Notes are unsecured obligations of the Company.
In March 1993, the Company entered into an interest rate swap agreement having
a total notional principal amount of $50,000,000. Under the agreement, the
Company receives a fixed rate of 5 7/8% and pays a floating rate (London
Interbank Offered Rated (LIBOR) plus sixty basis points), as determined at six
month intervals. The floating rate is 6.50625% for the six month period ending
February 29, 1996. The agreement converts a portion of the Company's debt
obligation from a fixed rate to a floating rate basis. Under the agreement,
the Company recognized net interest expense of $453,000 in 1995 and net
interest income of $433,000 in 1994. These amounts are included in "Interest
on debt" on the Company's Consolidated Statements of Income and Retained
Earnings. The Company has pledged $3,600,000 of its other assets as security
under the swap agreement. Although the Company can pay to terminate the swap
agreement at any time, the Company intends to hold the swap agreement until its
March 1, 1998 maturity. The cost to the Company to terminate the agreement
fluctuates with prevailing market interest rates. As of December 31, 1995, the
cost to terminate the swap agreement was approximately $200,000.
The Company has approximately $8,900,000 of letters of credit outstanding as of
December 31, 1995. The Company bears the credit risk on this amount to the
extent that the Company does not comply with the provisions of certain
agreements. The letters of credit do not reduce the amount available under the
Company's lines of credit.
MANAGEMENT'S
RESPONSIBILITY REPORT
The management of P. H. Glatfelter Company has prepared and is responsible for
the Company's consolidated financial statements and other corroborating
information contained herein. Management bears responsibility for the integrity
of these statements which have been prepared in accordance with generally
accepted accounting principles and include management's best judgments and
estimates. All information in this annual report consistently reflects the data
contained in the consolidated financial statements.
The Company maintains a system of internal controls designed to provide
reasonable assurance that assets are safeguarded, transactions are executed and
recorded in accordance with their authorizations, and financial records are
maintained so as to permit the preparation of reliable financial statements.
The system of internal controls is enhanced by written policies and procedures,
an organizational structure providing appropriate segregation of duties,
careful selection and training of qualified people, and periodic reviews
performed by both its internal audit department and independent public
auditors.
The Audit Committee of the Board of Directors, consisting exclusively of
directors who are not Company employees, provides oversight of financial
reporting. The Company's internal audit department and independent auditors
meet with the Audit Committee on a periodic basis to discuss financial
reporting and internal control issues and have completely free access to the
Audit Committee.
/s/ T. C. NORRIS
- ----------------
T. C. Norris
Chairman of the Board, President
and Chief Executive Officer
/s/ R. P. NEWCOMER
- ------------------
R. P. Newcomer
Senior Vice President, Treasurer
and Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
P. H. Glatfelter Company,
Its Shareholders and Directors:
We have audited the accompanying consolidated balance sheets of P. H.
Glatfelter Company and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income and retained earnings and cash flows
for each of the three years in the period ended December 31, 1995. Our audits
also included the financial statement schedule listed in the Index at Item 14.
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of P.H. Glatfelter Company and
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles. Also, in
our opinion, the financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in Note 1(i) to the consolidated financial statements, the Company
changed its method of accounting for income taxes, postretirement benefits
other than pensions and postemployment benefits as of January 1, 1993.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 2, 1996
QUARTERLY FINANCIAL DATA
Net Income
Net Sales Gross Profit (Loss) Income (Loss)
In Thousands In Thousands In Thousands Per Common Share
Quarter 1995 1994 1995 1994 1995 1994 1995 1994
- ------- ------------ ------------ ------------- ----------- ----------- ------------- ------- ---------
1st $155,037 $110,815 $ 29,938 $ 8,794 $12,514 $ 2,034 $ .28 $ .05
2nd 166,879 115,328 40,573 9,836 19,205 2,209 .43 .05
3rd 160,771 120,261 36,561 4,210 17,103 (1,495) .39 (.03)
4th 141,022 131,898 34,498 17,717 17,006 (120,999)(a) .39 (2.73)(a)
------------ ------------ ------------- ----------- ----------- -------------- -------- ---------
Total $623,709 $478,302 $141,570 $40,557 $65,828 $(118,251) $1.49 $(2.67)
============ ============ ============= =========== =========== ============== ======== =========
(a) After impact of an after tax charge for a writedown of impaired assets
(unusual items) of $127,981,000 or $2.89 per share.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) Directors. The information with respect to directors
required under this item is incorporated herein by
29
31
reference to pages 2 through 3 of the Registrant's Proxy Statement dated March
15, 1996.
(b) Executive Officers of the Registrant. The
information with respect to the executive officers required under this item is
set forth in Part I of this Report and incorporated by reference to pages 3 and
16 of the Registrant's Proxy Statement dated March 15, 1996.
Item 11. Executive Compensation.
The information required under this item is incorporated
herein by reference to pages 5 through 13 of the Registrant's Proxy Statement
dated March 15, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required under this item is incorporated
herein by reference to pages 14 through 16 of the Registrant's Proxy Statement
dated March 15, 1996.
Item 13. Certain Relationships and Related Transactions.
The information required under this item is incorporated
herein by reference to page 13 of the Registrant's Proxy Statement dated March
15, 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) 1. A. Financial Statements filed as part
of this report:
Consolidated Statements of Income and Retained
Earnings for the Years Ended December 31, 1995,
1994 and 1993
Consolidated Balance Sheets, December 31, 1995
and 1994
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements for
the Years Ended December 31, 1995, 1994 and
1993
30
32
B. Supplementary Data for each of the
three years in the period ended December 31, 1995.
2. Financial Statement Schedules (Consolidated):
For Each of the Three Years in the Period Ended
December 31, 1995:
II - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because of
the absence of conditions under which they are required or
because the required information is included in the Notes to
the Consolidated Financial Statements.
Individual financial statements of the Registrant are not
presented inasmuch as the Registrant is primarily an operating
company and its consolidated subsidiaries are wholly-owned.
3. Executive Compensation Plans and Arrangements: see
Exhibits 10(a) through 10(g), described below.
Exhibits:
Number Description of Documents
(3)(a) Articles of Amendment dated April 27, 1977, including restated
Articles of Incorporation (incorporated by reference to Exhibit 3(a)
of Registrant's Annual Report on Form 10-K for the year ended December
31, 1993) as amended by Articles of Merger dated January 30, 1979
(incorporated by reference to Exhibit 3(a) of Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993); a Statement
of Reduction of Authorized Shares dated May 12, 1980 (incorporated by
reference to Exhibit 3(a) of Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993); a Statement of Reduction of
Authorized Shares dated September 23, 1981 (incorporated by reference
to Exhibit 3(a) of Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993); a Statement of Reduction of Authorized
Shares dated August 2, 1982 (incorporated by reference to Exhibit 3(a)
of Registrant's Annual Report on Form 10-K for the year ended December
31, 1993); a Statement of Reduction of Authorized Shares dated July
29, 1983 (incorporated by reference to Exhibit 3(a) of Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993); by
Articles of Amendment dated April 25, 1984 (incorporated by reference
to Exhibit 3(a) of Registrant's Annual Report on Form 10-K for the
year
31
33
ended December 31, 1994); a Statement of Reduction of Authorized
Shares dated October 15, 1984 (incorporated by reference to Exhibit
(3)(b) of Registrant's Form 10-K for the year ended December 31,
1984); a Statement of Reduction of Authorized Shares dated December
24, 1985 (incorporated by reference to Exhibit (3)(b) of Registrant's
Form 10-K for the year ended December 31, 1985); by Articles of
Amendment dated April 23, 1986 (incorporated by reference to Exhibit
(3) of Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1986); a Statement of Reduction of Authorized Shares
dated July 11, 1986 (incorporated by reference to Exhibit (3)(b) of
Registrant's Form 10-K for the year ended December 31, 1986); a
Statement of Reduction of Authorized Shares dated March 25, 1988
(incorporated by reference to Exhibit (3)(b) of Registrant's Form 10-K
for the year ended December 31, 1987); a Statement of Reduction of
Authorized Shares dated November 9, 1988 (incorporated by reference to
Exhibit (3)(b) of Registrant's Form 10-K for the year ended December
31, 1988); a Statement of Reduction of Authorized Shares dated April
24, 1989 (incorporated by reference to Exhibit 3(b) of Registrant's
Form 10-K for the year ended December 31, 1989); Articles of Amendment
dated November 29, 1990 (incorporated by reference to Exhibit 3(b) of
Registrant's Form 10-K for the year ended December 31, 1990); Articles
of Amendment dated June 26, 1991 (incorporated by reference to Exhibit
3(b) of Registrant's Form 10-K for the year ended December 31, 1991);
Articles of Amendment dated August 7, 1992 (incorporated by reference
to Exhibit 3(b) of Registrant's Form 10-K for the year ended December
31, 1992); Articles of Amendment dated July 30, 1993 (incorporated by
reference to Exhibit 3(b) of Registrant's Form 10-K for the year ended
December 31, 1993); and Articles of Amendment dated January 26, 1994
(incorporated by reference to Exhibit 3(b) of Registrant's Form 10-K
for the year ended December 31, 1993).
(3)(b) Articles of Incorporation, as amended through January 26, 1994
(restated for the purpose of filing on EDGAR) (incorporated by
reference to Exhibit 3(c) of Registrant's Form 10-K for the year ended
December 31, 1993).
(3)(c) By-Laws as amended through June 28, 1995.
(4)(a) Indenture between P. H. Glatfelter Company and Wachovia Bank of
Georgia, N.A. as Trustee dated as of January 15, 1993 (incorporated by
reference to Exhibit 4(a) of Registrant's Form 10-K for the year ended
December 31, 1993).
32
34
(4)(b) Form of Note issued to Purchasers of 5 7/8% Notes due March 1, 1998
(incorporated by reference to Exhibit 4(b) of Registrant's Form 10-K
for the year ended December 31, 1992).
(9) P. H. Glatfelter Family Shareholders' Voting Trust dated July 1, 1993
(incorporated by reference to Exhibit 1 of the Schedule 13D filed by
P. H. Glatfelter Family Shareholders' Voting Trust dated July 1,
1993).
(10)(a) P. H. Glatfelter Company Management Incentive Plan, adopted as of
January 1, 1994, as amended and restated effective March 16, 1995
(incorporated by reference to Exhibit 10(a) of Registrant's
Form 10-K for the year ended December 31, 1994).
(10)(b) P. H. Glatfelter Company 1988 Restricted Common Stock Award Plan, as
amended and restated June 24, 1992 (incorporated by reference to
Exhibit (10)(c) of Registrant's Form 10-K for the year ended December
31, 1992).
(10)(c) P. H. Glatfelter Company Supplemental Executive Retirement Plan,
effective January 1, 1988, as amended and restated December 22, 1994
(incorporated by reference to Exhibit 10(c) of Registrant's Form 10-K
for the year ended December 31, 1994).
(10)(d) Deferral Benefit Pension Plan of Ecusta Division, effective May 22,
1986 (incorporated by reference to Exhibit (10)(ee) of Registrant's
Form 10-K for the year ended December 31, 1987).
(10)(e) Description of Executive Salary Continuation Plan (incorporated by
reference to Exhibit (10)(g) of Registrant's Form 10-K for the year
ended December 31, 1990).
(10)(f) P. H. Glatfelter Company Plan of Supplemental Retirement Benefits for
the Management Committee, as amended and restated effective June 28,
1989 (incorporated by reference to Exhibit (10)(h) of Registrant's
Form 10-K for the year ended December 31, 1989).
(10)(g) P.H. Glatfelter Company 1992 Key Employee Long-Term Incentive Plan,
effective April 22, 1992 (incorporated by reference to Exhibit (10)(i)
of Registrant's Form 10-K for the year ended December 31, 1992).
(11) Computation of Earnings Per Share
(21) Subsidiaries of the Registrant
(23) Consent of Independent Certified Public Auditors
33
35
(27) Financial Data Schedule
(b) The Registrant filed the following report on Form 8-K during
the quarter ended December 31, 1995:
N O N E
34
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
P. H. GLATFELTER COMPANY
(Registrant)
March 15, 1996
By /s/ T. C. Norris
------------------------
T. C. Norris
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated:
Date Signature Capacity
---- --------- --------
March 15, 1996 /s/ T. C. Norris Principal Executive
------------------------- Officer and Director
T. C. Norris
March 15, 1996 /s/ R. P. Newcomer Principal Financial
------------------------- Officer, Senior Vice
R. P. Newcomer President and
Treasurer
March 15, 1996 /s/ C. M. Smith Comptroller
-------------------------
C. M. Smith
March 15, 1996 /s/ G. Baldwin, Jr. Director
-------------------------
G. Baldwin, Jr.
March , 1996 Director
-------------------------
R. E. Chappell
March 15, 1996 /s/ N. DeBenedictis Director
-------------------------
N. DeBenedictis
March 15, 1996 /s/ G. H. Glatfelter Director
-------------------------
G. H. Glatfelter
March 15, 1996 /s/ G. H. Glatfelter II Director
-------------------------
G. H. Glatfelter II
March 15, 1996 /s/ P. H. Glatfelter III Director
-------------------------
P. H. Glatfelter III
35
37
March 15, 1996 /s/ R. S. Hillas Director
-------------------------
R. S. Hillas
March 15, 1996 /s/ M. A. Johnson II Director
-------------------------
M. A. Johnson II
March 15, 1996 /s/ J. W. Kennedy Director
-------------------------
J. W. Kennedy
March 15, 1996 /s/ P. R. Roedel Director
-------------------------
P. R. Roedel
March 15, 1996 /s/ J. M. Sanzo Director
-------------------------
J. M. Sanzo
March 15, 1996 /s/ R. L. Smoot Director
-------------------------
R. L. Smoot
36
38
P. H. GLATFELTER COMPANY AND SUBSIDIARIES
Financial Statement Schedule
For Each of the Three Years in the
Period Ended December 31, 1995 and
Report of Independent Certified Public Accountants
Prepared for Filing As Part of
Annual Report (Form 10-K)
to the Securities and Exchange Commission
37
39
FINANCIAL STATEMENT SCHEDULE II
P.H. GLATFELTER COMPANY AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------------------------
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCES FOR
-----------------------------------------------------------------------------------
DOUBTFUL ACCOUNTS SALES DISCOUNTS
-------------------------------------- -----------------------------------------
1995 1994 1993 1995 1994 1993
Balance, beginning of year $1,850,000 $1,838,000 $ 890,000 $ 560,100 $ 554,300 $ 490,000
Provision 201,000 12,000 981,000 7,937,700 6,619,900 6,524,800
Write-offs, recoveries and
discounts allowed (72,000) (33,000) (7,996,800) (6,614,100) (6,460,500)
---------- ---------- ---------- ----------- ----------- -----------
Balance, end of year $1,979,000 $1,850,000 $1,838,000 $ 501,000 $ 560,100 $ 554,300
========== ========== ========== =========== =========== ===========
The provision for doubtful accounts included in administrative expense and the
provision for sales discounts is deducted from sales. The related allowances are
deducted from accounts receivable.
38
40
EXHIBIT INDEX
Number
(3)(a) Articles of Amendment dated April 27, 1977, including restated
Articles of Incorporation (incorporated by reference to Exhibit 3(a)
of Registrant's Annual Report on Form 10-K for the year ended December
31, 1993) as amended by Articles of Merger dated January 30, 1979
(incorporated by reference to Exhibit 3(a) of Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993); a Statement
of Reduction of Authorized Shares dated May 12, 1980 (incorporated by
reference to Exhibit 3(a) of Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993); a Statement of Reduction of
Authorized Shares dated September 23, 1981 (incorporated by reference
to Exhibit 3(a) of Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993); a Statement of Reduction of Authorized
Shares dated August 2, 1982 (incorporated by reference to Exhibit 3(a)
of Registrant's Annual Report on Form 10-K for the year ended December
31, 1993); a Statement of Reduction of Authorized Shares dated July
29, 1983 (incorporated by reference to Exhibit 3(a) of Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993); by
Articles of Amendment dated April 25, 1984 (incorporated by reference
to Exhibit 3(a) of Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994); a Statement of Reduction of Authorized
Shares dated October 15, 1984 (incorporated by reference to Exhibit
(3)(b) of Registrant's Form 10-K for the year ended December 31,
1984); a Statement of Reduction of Authorized Shares dated December
24, 1985 (incorporated by reference to Exhibit (3)(b) of Registrant's
Form 10-K for the year ended December 31, 1985); by Articles of
Amendment dated April 23, 1986 (incorporated by reference to Exhibit
(3) of Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1986); a Statement of Reduction of Authorized Shares
dated July 11, 1986 (incorporated by reference to Exhibit (3)(b) of
Registrant's Form 10-K for the year ended December 31, 1986); a
Statement of Reduction of Authorized Shares dated March 25, 1988
(incorporated by reference to Exhibit (3)(b) of Registrant's Form 10-K
for the year ended December 31, 1987); a Statement of Reduction of
Authorized Shares dated November 9, 1988 (incorporated by reference to
Exhibit (3)(b) of Registrant's Form 10-K for the year ended December
31, 1988); a Statement of Reduction of Authorized Shares dated April
24, 1989 (incorporated by reference to Exhibit 3(b) of Registrant's
Form 10-K for the year ended December 31, 1989); Articles of
Amendment dated November 29, 1990 (incorporated by reference to
Exhibit 3(b) of Registrant's
39
41
Form 10-K for the year ended December 31, 1990); Articles of Amendment
dated June 26, 1991 (incorporated by reference to Exhibit 3(b) of
Registrant's Form 10-K for the year ended December 31, 1991);
Articles of Amendment dated August 7, 1992 (incorporated by reference
to Exhibit 3(b) of Registrant's Form 10-K for the year ended December
31, 1992); Articles of Amendment dated July 30, 1993 (incorporated by
reference to Exhibit 3(b) of Registrant's Form 10-K for the year ended
December 31, 1993); and Articles of Amendment dated January 26, 1994
(incorporated by reference to Exhibit 3(b) of Registrant's Form 10-K
for the year ended December 31, 1993).
(3)(b) Articles of Incorporation, as amended through January 26, 1994
(restated for the purpose of filing on EDGAR) (incorporated by
reference to Exhibit 3(c) of Registrant's Form 10-K for the year ended
December 31, 1993).
(3)(c) By-Laws as amended through June 28, 1995.
(4)(a) Indenture between P. H. Glatfelter Company and Wachovia Bank of
Georgia, N.A. as Trustee dated as of January 15, 1993 (incorporated by
reference to Exhibit 4(a) of Registrant's Form 10-K for the year ended
December 31, 1993).
(4)(b) Form of Note issued to Purchasers of 5 7/8% Notes due March 1, 1998
(incorporated by reference to Exhibit 4(b) of Registrant's Form 10-K
for the year ended December 31, 1992).
(9) P. H. Glatfelter Family Shareholders' Voting Trust dated July 1, 1993
(incorporated by reference to Exhibit 1 of the Schedule 13D filed by
P. H. Glatfelter Family Shareholders' Voting Trust dated July 1,
1993).
(10)(a) P. H. Glatfelter Company Management Incentive Plan, adopted as of
January 1, 1994, as amended and restated effective March 16, 1995
(incorporated by reference to Exhibit (10)(a) of Registrant's
Form 10-K for the year ended December 31, 1994).
(10)(b) P. H. Glatfelter Company 1988 Restricted Common Stock Award Plan, as
amended and restated June 24, 1992 (incorporated by reference to
Exhibit (10)(c) of Registrant's Form 10-K for the year ended December
31, 1992).
(10)(c) P. H. Glatfelter Company Supplemental Executive Retirement Plan,
effective January 1, 1988, as amended and restated December 22, 1994
(incorporated by reference to Exhibit 10(c) of Registrant's Form 10-K
for the year ended December 31, 1994).
(10)(d) Deferral Benefit Pension Plan of Ecusta Division, effective May 22,
1986 (incorporated by reference to Exhibit (10)(ee) of Registrant's
Form 10-K for the year ended December 31, 1987).
(10)(e) Description of Executive Salary Continuation Plan (incorporated by
reference to Exhibit (10)(g) of
40
42
Registrant's Form 10-K for the year ended December 31, 1990).
(10)(f) P. H. Glatfelter Company Plan of Supplemental Retirement Benefits for
the Management Committee, as amended and restated effective June 28,
1989 (incorporated by reference to Exhibit (10)(h) of Registrant's
Form 10-K for the year ended December 31, 1989).
(10)(g) P.H. Glatfelter Company 1992 Key Employee Long-Term Incentive Plan,
effective April 22, 1992 (incorporated by reference to Exhibit (10)(i)
of Registrant's Form 10-K for the year ended December 31, 1992).
(11) Computation of Earnings Per Share
(21) Subsidiaries of the Registrant
(23) Consent of Independent Certified Public Auditors
(27) Financial Data Schedule
41