Glatfelter Reports Record Quarterly Sales and 2008 Second Quarter Results

YORK, Pa.--(Business Wire)--
Glatfelter (NYSE:GLT) today reported record quarterly net sales of
$320.2 million for the second quarter ended June 30, 2008, an 11.2%
increase compared with $288.1 million for the second quarter of 2007.
Net income for the 2008 second quarter was $3.2 million, or $0.07 per
diluted share, compared with a net income of $2.0 million, or a $0.04
per diluted share, for same quarter of last year.

Second quarter 2008 net income benefited from a $0.5 million
reversal of a reserve associated with the sale of the Company's Neenah
facility, partially offset by $0.2 million in acquisition integration
costs, each after taxes. The second-quarter 2007 results included $3.5
million in gains from the sale of timberlands and $0.7 million in
acquisition integration costs, all after taxes. Excluding these items
from each period's results, second-quarter 2008 adjusted earnings,
which constitute a non-GAAP financial measure, were $0.06 per diluted
share, compared to a net loss of $0.02 per diluted share in the second
quarter of 2007. For a reconciliation of adjusted earnings to GAAP
earnings, refer to the tabular presentation at the end of this
release.

"Each of our business units performed relatively well this
quarter, particularly considering the unrelenting pressure from rising
input costs that have outpaced our ability to increase selling
prices," said George H. Glatfelter II, Chairman and Chief Executive
Officer. "During the quarter, we successfully completed the annual
maintenance outages at both Specialty Papers' facilities and we
continue to generate productivity improvements at our Chillicothe
facility. The Composite Fibers business unit's operating results were
in line with last year despite increasing input costs and the
completion of an upgrade to a paper machine to increase capacity to
serve the growing food and beverage and technical specialties markets.
Throughout our businesses, we remain focused on aggressively driving
out costs to help offset the impact of rising input costs. We believe
these actions will help sustain the Company's progress despite the
challenging environment."

Second-Quarter Business Unit Results

Specialty Papers

Second quarter 2008 net sales in the Company's Specialty Papers
business unit totaled $207.3 million, a 2.3% increase compared with
$202.6 million in the year-earlier quarter. Specialty Papers'
operating loss for the 2008-second quarter totaled $0.7 million
although this was a $1.6 million improvement compared to the same
quarter of 2007.

The improvement in operating income reflects significant
productivity improvements at the Chillicothe facility, as well as a
$9.0 million increase in average selling prices across all product
lines. The benefit of the price increases was offset by $11.6 million
of higher energy and raw material costs. As expected, volumes shipped
were essentially unchanged from the same period last year, and the
product mix was slightly unfavorable due to an expected decline in the
carbonless market. During each of the second quarters of 2008 and
2007, the Company completed the annually scheduled maintenance outages
at its Spring Grove, PA and Chillicothe, OH facilities. These required
outages result in increased maintenance spending and reduced
production leading to unfavorable manufacturing costs and lower
product sales negatively affecting the second quarter results when
compared to other quarters. The maintenance outages adversely impacted
gross profit by approximately $15.6 million in the second quarter of
2008, which was at the low-end of the Company's expectations, compared
to $15.3 million in the same quarter a year ago. During the second
quarter, the Company also incurred $0.4 million in severance costs
related to its continuing initiatives to reduce the cost structure at
the Chillicothe facility.

Composite Fibers

Net sales in the Composite Fibers business unit increased $27.4
million, or 32.1% to $112.9 million for the 2008 second quarter,
largely due to the November 2007 Caerphilly acquisition and the impact
of foreign currency translation. Operating income was in line with the
second quarter of 2007 at $6.8 million despite a $1.0 million impact
from lower production and accelerated depreciation associated with the
paper machine upgrade in Gernsbach, Germany.

On a constant currency basis, higher average selling prices
contributed $3.0 million to operating income in the 2008 second
quarter. Volumes increased approximately 23.4% primarily due to
shipments of metallized paper from Caerphilly (acquired in November
2007). The increased volumes also reflect greater shipments of
composite laminates and food and beverage products. The cost of raw
materials, primarily pulp and energy, was $4.9 million higher than a
year ago. In addition, the Caerphilly acquisition was slightly
dilutive to second quarter 2008 earnings and as previously announced,
the Company continues to expect Caerphilly to be neutral to earnings
for 2008 and slightly accretive in 2009.

Mr. Glatfelter added, "The sustained rising demand for our food
and beverage products is creating exciting opportunities for
Glatfelter's Composite Fibers business unit. The investments we have
made, such as the Lydney acquisition and upgrades to existing paper
machines, have expanded our footprint and capabilities to better serve
this high-growth, high-margin market. These actions will help ensure
that we capitalize on these opportunities and drive value for
Glatfelter's shareholders and our customers."

Other Financial Highlights

Selling, general and administrative ("SG&A") expenses increased by
$1.6 million in the quarter-to-quarter comparison and totaled $25.4
million in the second quarter of 2008. The increase was due to higher
performance-based incentive compensation expenses, the effect of
foreign currency translation adjustments and the inclusion of
Caerphilly's results in 2008.

Interest expense in the second quarter of 2008 totaled $5.8
million, a decline of $1.6 million compared with the same quarter of
2007. The decrease in interest expense was due to lower debt
outstanding together with a lower interest rate environment.

For the second quarter of 2008, the Company recorded income taxes
of $115,000 on adjusted earnings for an effective rate of 4.0%. The
second quarter tax rate reflects a $0.9 million benefit from an
adjustment recorded upon the filing of an international subsidiary's
tax return and the reversal of a tax reserve in a foreign jurisdiction
where a statute expired.

Year to Date Results

For the first six months of 2008, the Company's net income totaled
$22.8 million or $0.50 per diluted share, compared to a net income of
$5.3 million or $0.12 per diluted share in the same period of 2007.
The year-to-date results for 2008 include $8.7 million in gains from
the sale of timberlands, and a $0.5 million benefit from the reversal
of a reserve associated with the 2006 shutdown of the Company's Neenah
facility, partially offset by $0.6 million in acquisition integration
costs, all after taxes. Reported results for the first six months of
2007 include, all on an after-tax basis, $5.4 million in gains from
the sale of timberlands, a $3.7 million charge for the Fox River
environmental matter and $1.3 million in acquisition integration costs
and shutdown and restructuring charges.

Outlook

"Clearly we will confront a challenging business environment in
the second half of the year," said Mr. Glatfelter. "While we expect
our average selling prices to increase across all product lines in the
Specialty Papers business unit, we do not expect pricing to outpace
rising input costs. Therefore, our commitment to aggressive cost
reduction initiatives will continue in order to mitigate the remaining
adverse effects of higher costs. During the second half of 2008, we
expect shipment volume for this business unit to be in line with the
same period of 2007."

Mr. Glatfelter continued, "In the Composite Fibers business unit,
cost pressure also remains a concern. However, higher average selling
prices coupled with continuous improvement initiatives are expected to
more than offset the impact of rising input costs. We expect to see
solid demand in this business unit with shipping volume in the second
half of 2008 at levels higher than the same period in 2007, reflecting
additional volume attributable to the Caerphilly acquisition."

In connection with the previously announced $38 million investment
to install state-of-the-art inclined wire and through air-drying
technology on a paper machine, the Company expects to record
accelerated depreciation expense of $0.7 million per quarter through
the third quarter of 2009, associated with the upgraded machine
components. In addition, the start up of the machine upgrade completed
in the second quarter of 2008 is expected to negatively impact
earnings per share by up to $0.01 during the third quarter of 2008.

The Company also expects to record in the second half of 2008
charges estimated to total $0.5 million to $1.0 million associated
with profit improvement initiatives at the Chillicothe facility.

Conference Call

As previously announced, the Company will hold a conference call
today at 11:00AM (Eastern) to discuss its second-quarter results.
During the conference call, management will be referring to a slide
presentation to supplement their prepared remarks. This presentation
is available on the Company's Investor Relations web page as well as
through the webcast discussed below.

Interested persons who wish to hear the live webcast should go to
the Company's Investor Relations web page at
http://www.glatfelter.com/about_us/investor_relations/default.aspx
prior to the starting time to register, download and install any
necessary audio software.

You may also participate by calling 888-335-5539 within the US and
973-582-2857 internationally (conference ID 54648878) at 10:55 AM
(Eastern) on August 5, 2008. A taped replay of the conference call
will be available within two hours of the conclusion of the call and
until August 19, 2008. To access the taped replay, call 800-642-1687
within the US and 706-645-9291 internationally and enter conference ID
54648878.

Caution Concerning Forward-Looking Statements

Any statements included in this press release which pertain to
future financial and business performance, conditions and strategies
and other financial and business matters, are "forward-looking
statements" within the meaning of the safe harbor provisions of the
United States Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are
subject to numerous risks, uncertainties and other unpredictable or
uncontrollable factors which may cause actual results or performance
to differ materially from the Company's expectations. Various risks
and factors that could cause future results to differ materially from
those expressed in the forward-looking statements include, but are not
limited to: changes in industry, business, market, political and
economic conditions in the U.S. and in other countries in which
Glatfelter currently does business, demand for or pricing of its
products; changes in tax legislation, governmental laws, regulations
and policies and actions of regulatory bodies; orderly execution of
regularly scheduled maintenance outages; technological changes and
innovations and other factors. In light of these risks, uncertainties
and other factors, the forward-looking events discussed in this press
release may not occur and readers are cautioned not to place undue
reliance on these forward-looking statements. The forward-looking
statements speak only as of the date of this press release and
Glatfelter undertakes no obligation and does not intend to update
these forward-looking statements to reflect events or circumstances
occurring after the date of this press release. More information about
these factors is contained in Glatfelter's filings with the U.S.
Securities and Exchange Commission, which are available at
www.glatfelter.com.

About Glatfelter

Headquartered in York, PA, Glatfelter is a global manufacturer of
specialty papers and engineered products, offering over a century of
experience, technical expertise and world-class service. U.S.
operations include facilities in Spring Grove, PA and Chillicothe and
Fremont, OH. International operations include facilities in Germany,
France, the United Kingdom and the Philippines and a representative
office in China. Glatfelter's sales exceed $1 billion annually and its
common stock is traded on the New York Stock Exchange under the ticker
symbol GLT. Additional information may be found at www.glatfelter.com.

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P. H. Glatfelter Company and subsidiaries
Consolidated Statements of Income
(unaudited)

Three Months Ended Six Months Ended
June 30 June 30
In thousands, except per share 2008 2007 2008 2007
----------------------------------------------------------------------

Net sales $320,224 $288,091 $625,723 $569,080
Energy sales - net 2,743 2,424 4,727 4,638
----------------------------------------
Total revenues 322,967 290,515 630,450 573,718
Costs of products sold 290,569 261,715 553,794 508,209
----------------------------------------
Gross profit 32,398 28,800 76,656 65,509
Selling, general and
administrative expenses 25,377 23,776 49,512 52,503
Shutdown and restructuring
charges (856) (63) (856) 162
Gains on dispositions of
plant, equipment and
timberlands, net 16 (5,693) (14,502) (8,887)
----------------------------------------
Operating income 7,861 10,780 42,502 21,731
Nonoperating income (expense)
Interest expense (5,827) (7,424) (11,972) (14,761)
Interest income 1,357 848 2,961 1,589
Other - net 103 (364) 171 267
----------------------------------------
Total other income
(expense) (4,367) (6,940) (8,840) (12,905)
----------------------------------------
Income before income taxes 3,494 3,840 33,662 8,826
Income tax provision 338 1,842 10,831 3,575
----------------------------------------
Net income $3,156 $1,998 $22,831 $5,251
========================================

Earnings Per Share
Basic $0.07 $0.04 $0.51 $0.12
Diluted 0.07 0.04 0.50 0.12
========================================
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Business Unit Financial Information
(unaudited)

Three months ended June 30
In thousands Specialty Papers Composite Fibers
----------------------------------------------------------------------
2008 2007 2008 2007
-----------------------------------------
Net sales $207,296 $202,606 $112,928 $85,486
Energy sales, net 2,743 2,424 - -
-----------------------------------------
Total revenue 210,039 205,030 112,928 $85,486
Cost of products sold 196,948 192,817 96,462 70,522
-----------------------------------------
Gross profit 13,091 12,213 16,466 14,964
SG&A 13,772 14,521 9,689 8,182
Shutdown and restructuring
charges - - - -
Gains on dispositions of
plant, equipment and
timberlands - - - -
-----------------------------------------
Total operating income (loss) (681) (2,308) 6,777 6,782
Non-operating income
(expense) - - - -
-----------------------------------------
Income (loss) before income
taxes $(681) $(2,308) $6,777 $6,782
-----------------------------------------

Supplementary Data
Net tons sold 182,700 183,344 22,356 18,118
Depreciation expense $8,980 $8,881 $6,968 $5,250

Three months ended June 30 Other and
In thousands Unallocated Total
----------------------------------------------------------------------
2008 2007 2008 2007
-----------------------------------------
Net sales $- $(1) $320,224 $288,091
Energy sales, net - - 2,743 2,424
-----------------------------------------
Total revenue - (1) 322,967 290,515
Cost of products sold (2,841) (1,624) 290,569 261,715
-----------------------------------------
Gross profit 2,841 1,623 32,398 28,800
SG&A 1,916 1,073 25,377 23,776
Shutdown and restructuring
charges (856) (63) (856) (63)
Gains on dispositions of
plant, equipment and
timberlands 16 (5,693) 16 (5,693)
-----------------------------------------
Total operating income (loss) 1,765 6,306 7,861 10,780
Non-operating income
(expense) (4,367) (6,940) (4,367) (6,940)
-----------------------------------------
Income (loss) before income
taxes $(2,602) $(634) $3,494 $3,840
-----------------------------------------

Supplementary Data
Net tons sold - - 205,056 201,462
Depreciation expense - - $15,948 $14,131
*T

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Business Unit Performance For The Six Months Ended June 30,
----------------------------------------------------------------------

In thousands Specialty Papers Composite Fibers
----------------------------------------------------------------------
2008 2007 2008 2007
-----------------------------------------
Net sales $408,242 $399,510 $217,480 $169,570
Energy sales, net 4,727 4,638 - -
-----------------------------------------
Total revenue 412,969 404,148 217,480 169,570
Cost of products sold 374,224 370,737 184,858 141,312
-----------------------------------------
Gross profit 38,745 33,411 32,622 28,258
SG&A 27,979 29,048 19,709 16,494
Shutdown and restructuring
charges - - - -
Gains on dispositions of
plant, equipment and
timberlands - - - -
-----------------------------------------
Total operating income 10,766 4,363 12,913 11,764
Nonoperating income
(expense) - - - -
-----------------------------------------
Income (loss) before income
taxes $10,766 $4,363 $12,913 $11,764
-----------------------------------------

Supplementary Data
Net tons sold 364,911 358,464 43,695 36,475
Depreciation expense $17,612 $17,532 $13,054 $10,333

Other and
In thousands Unallocated Total
----------------------------------------------------------------------
2008 2007 2008 2007
-----------------------------------------
Net sales $1 $- $625,723 $569,080
Energy sales, net - - 4,727 4,638
-----------------------------------------
Total revenue 1 - 630,450 573,718
Cost of products sold (5,288) (3,840) 553,794 508,209
-----------------------------------------
Gross profit 5,289 3,840 76,656 65,509
SG&A 1,824 6,961 49,512 52,503
Shutdown and restructuring
charges (856) 162 (856) 162
Gains on dispositions of
plant, equipment and
timberlands (14,502) (8,887) (14,502) (8,887)
-----------------------------------------
Total operating income 18,823 5,604 42,502 21,731
Nonoperating income
(expense) (8,840) (12,905) (8,840) (12,905)
-----------------------------------------
Income (loss) before income
taxes $9,983 $(7,301) $33,662 $8,826
-----------------------------------------

Supplementary Data
Net tons sold - - 408,606 394,939
Depreciation expense - - $30,666 $27,865
*T

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Selected Financial Information
(unaudited)

Six Months Ended June 30
In thousands 2008 2007
----------------------------------------------------------------------

Cash Flow Data
Cash provided (used) by:
Operating activities $(3,047) $17,636
Investing activities (10,410) (4,773)
Financing activities 1,412 (22,604)

Depreciation, depletion and amortization 30,666 27,865
Capital expenditures 25,407 14,221

June 30, December 31,
2008 2007
------------------------
Balance Sheet Data
Cash and cash equivalents $18,611 $29,833
Total assets 1,333,599 1,287,067
Total debt 322,040 313,185
Shareholders' equity 509,528 476,068
*T

Reconciliation of GAAP Financial Information to Non-GAAP Financial
Information

This press release includes a discussion of earnings before the
effects of certain specifically identified items, which is referred to
as adjusted earnings, a non-GAAP measure. The Company uses non-GAAP
adjusted earnings to supplement the understanding of its consolidated
financial statements presented in accordance with GAAP. Non-GAAP
adjusted earnings is meant to present the financial performance of the
Company's core papermaking operation, which consists of the production
and sale of specialty papers and composite fibers papers. Management
and the Company's Board of Directors use non-GAAP adjusted earnings to
evaluate the performance of the Company's fundamental business in
relation to prior periods. The performance of the Company's
papermaking operations is evaluated based upon numerous items such as
tons sold, average selling prices, gross margins and overhead, among
others. Gains on the sale of timberlands, charges for environmental
reserves and shutdown and restructuring charges are excluded from the
Company's calculation of non-GAAP adjusted earnings because management
believes each of these items is unique and not part of the Company's
core papermaking business, and will only impact the Company's
financial results for a limited period of time. Gains from timberland
sales are distinct from revenues generated from paper product sales.
Unlike items such as cost of raw materials and overhead costs,
shutdown and restructuring costs are unique items that do not
represent direct costs incurred in the manufacture and sale of the
Company's products.

Unlike net income determined in accordance with GAAP, non-GAAP
adjusted earnings does not reflect all charges and gains recorded by
the Company for the applicable period and, therefore, does not present
a complete picture of the Company's results of operations for the
respective period. However, non-GAAP adjusted earnings provides a
measure of how the Company's core papermaking operations are
performing, which management believes is useful to investors because
it allows comparison of such papermaking operations from period to
period.

Non-GAAP adjusted earnings should not be considered in isolation
from, or as a substitute for, measures of financial performance
prepared in accordance with GAAP. The following tables set forth a
reconciliation of results determined in accordance with accounting
principles generally accepted in the United States of America to
non-GAAP adjusted earnings discussed herein.

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Three Months Ended June 30
2008 2007
After tax Diluted After tax Diluted
In thousands, except per share income EPS income EPS
----------------------------------------------------------------------

Net income $3,156 $0.07 $1,998 $0.04
Timberland sales - - (3,486) (0.08)
(Reversal of) shutdown and
restructuring charges (532) (0.01) - -
Acquisition integration 177 0.00 704 0.02
------------------------------------
Adjusted earnings (loss) $2,801 $0.06 $(784) $(0.02)
====================================
*T

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Six Months Ended June 30
2008 2007
After After
tax Diluted tax Diluted
In thousands, except per share income EPS income EPS
----------------------------------------------------------------------

Net income $22,831 $0.50 $5,251 $0.12
Timberland sales (8,656) (0.19) (5,400) (0.12)
Environmental remediation - - 3,693 0.08
(Reversal of) shutdown and
restructuring charges (532) (0.01) 147 0.00
Acquisition integration 588 0.01 1,112 0.03
---------------------------------
Adjusted earnings $14,231 $0.31 $4,803 $0.11
=================================
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The sum of individual per share amounts set forth above may not
agree to adjusted income per share due to rounding.

Glatfelter
Investors:
John P. Jacunski, 717-225-2794
or
Media:
William T. Yanavitch, 717-225-2747

Copyright Business Wire 2008