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P. H. Glatfelter Company

P. H. Glatfelter Company

96 South George Street, Suite 500
York, Pennsylvania 17401-1434
U.S.A.
Telephone: (717) 225-4711
Fax: (717) 225-6834
Web site: http://www.glatfelter.com

Public Company
Founded:
1864 as Spring Forge Mill
Incorporated: 1906
Employees: 3,450
Sales: $589.2 million (2005)
Stock Exchanges: New York
Ticker Symbol: GLT
NAIC: 322110 Pulp Mills; 322121 Paper (Except Newsprint) Mills; 322222 Coated and Laminated Paper Manufacturing; 322224 Uncoated Paper and Multiwall Bag Manufacturing; 322232 Envelope Manufacturing; 322233 Stationery, Tablet, and Related Product Manufacturing; 322299 All Other Converted Paper Product Manufacturing

P. H. Glatfelter Company, a producer of engineered papers (such as papers for playing cards and sophisticated filter papers) and specialty printing papers, was founded in 1864 in the rolling hills of south central Pennsylvania. Since the early 20th century it has been an industry leader in uncoated printing paper, used largely in hardback versions of novels and other trade books. Other Glatfelter products have included high-quality recycled paper for trade and reference books and papers for pressure-sensitive postage stamps. An increasingly global manufacturer, Glatfelter in 1998 acquired Schoeller & Hoesch Group, a maker of engineered papers based in Germany and the world's leading producer of papers for the tea bag industry. Another key acquisition was the April 2006 purchase of the carbonless and specialty papers business of NewPage Corporation, through which Glatfelter gained mills in Chillicothe and Fremont, Ohio. Guiding the company over the years has been an old-fashioned business philosophy emphasizing long-term goals and fiscal conservatism.

PENNSYLVANIA ROOTS

Spring Grove, the original home of P. H. Glatfelter Company, was established in 1747 along the Codorus Creek some ten miles north of the Pennsylvania-Maryland border. To the west of the town were the Blue Ridge Mountains, and to the east, beyond the larger town of York (where the company relocated in 1999), flowed the wide Susquehanna River. The town's original name, Spring Forge, reflected its early industry, an iron forge, which during the American Revolution manufactured supplies for the Continental Army. The forge was in operation until 1851, when Jacob Hauer bought the buildings and converted them into a paper mill.

Some 20 miles southeast, near the Maryland town of Gunpowder Falls, another paper mill, called Loucks, Hoffman & Company, began operations in the 1850s. It was here in 1856 that 19-year-old Philip H. Glatfelter began his first job in the paper trade. Glatfelter, whose wife, Amanda, was the sister of Jacob Loucks, worked in the firm for seven years, and in 1863, at the height of the Civil War, Glatfelter decided to go into business on his own.

By this time Hauer had died, and his Spring Paper Mill was being sold at an orphan's (probate) court. A printed announcement of the sale mentioned a "tract of land containing about 101 acres a large stone paper mill, a frame machine house, stone stock house, and four tenant houses." The mill itself had two Burnham water wheels propelled by the Codorus Creek, four large-capacity engines, and a 62-inch cylinder paper machine. Glatfelter learned about the mill from Loucks, whose second wife, Mary, was the daughter of Jacob Hauer. On December 23, 1863, one month after President Lincoln's famous speech at nearby Gettysburg, Glatfelter bought the property for $14,000.

Glatfelter's new paper business, initially called Spring Forge Mill, began operations in July 1864 with a daily capacity of 1,500 pounds. Its first product was newsprint, which Glatfelter made from a pulp of rye straw mixed with a smaller amount of straw and rags collected from various cotton gins along the region's railway lines. This pulp material was retrieved in spacious railcars known as barns. Because at the time Spring Forge itself did not have a railway line, "barns" returning from the cotton gins could get no closer than Jefferson and York, some five and ten miles, respectively, from the mill. When the town changed its name in 1882 to Spring Grove, the company thus became the Spring Grove Mill.

For the first 25 years newsprint continued to be the company's main product, and during this period it made impressive gains in production. From the initial capacity of 1,500 pounds per day, the mill was able to expand to 3,500 pounds in 1873, 60,000 in 1885, and 110,000 by 1895. This increased capacity was made possible by the company's investment in new, modern facilities. In 1874, for example, the mill was moved farther north along the Codorus Creek, and next to it the company constructed a new building costing $200,000 and containing an 82-inch paper machine. Two years later Spring Forge celebrated the opening of its rail line, which ran through the mill's new site.

In 1880 Glatfelter entered into an agreement with Pusey and Jones Company of Delaware to build a 102-inch fourdrinier machine, allowing the mill to produce a considerably wider roll of paper. Named after Henry and Sealy Fourdrinier, who patented an early form of the machine in England in 1806, the fourdrinier machine fed pulp onto a continuous wire belt, shook it to remove excess water, and then pressed and dried the pulp into paper. Glatfelter's new fourdrinier machine was until 1887 the largest in the world, and the extremely wide paper rolls made by the machine helped him gain new customers. In 1887, when the Philadelphia Public Ledger began operating two 94-inch printing presses, Spring Grove Mill was the only business in the country that could supply the paper. The mill also produced paper for a variety of other newspapers in Pennsylvania and Maryland, including the Philadelphia Evening Telegraph.

HIGH-QUALITY PAPER: LATE
19TH CENTURY

Soon Glatfelter also changed his pulp-making methods, which would result in a better quality paper. Prior to 1881 the mill mechanically separated the fibers of the raw materials, probably with the use of a grinder. This process, acceptable for newsprint and other paper intended for temporary use, had a number of drawbacks. Mechanical separation tended to fragment and shorten the fibers, thus lessening their ability to bind and make strong paper. Moreover, fragmentation left considerable debris in the pulp, and various remaining chemical constituents caused the paper to grow yellow with age. Even when new, such paper did not have a "high whiteness" and was difficult to bleach.

COMPANY PERSPECTIVES

Beyond Paperit's all the things we do, above and beyond making great paper, that make us unique.

As a result, Glatfelter began to take note of a new chemical method called the soda process, which enabled a high-quality paper to be made from wood fibers. It was developed in 1851 by Englishman Hugh Burgess, who a few years later immigrated to the United States to set up a paper mill in Pennsylvania. In the soda process, wood chips were boiled in a caustic alkali at a high temperature and pressure; afterward, the separated fibers were washed in water and then bleached. In 1881 Glatfelter built a giant soda-process mill, which was used to make pulp from jack pine, poplar wood, and straw. Straw, however, came to be used in decreasing quantities. By 1885 this new production helped the company surpass $500,000 in total sales, and four years later the number of employees reached 110. With its new pulp-processing method, the company in 1892 was able to make one of its most important changes: the suspension of newsprint production and the subsequent focus on high-quality paper for books, lithographs, and business forms. For this purpose, another soda-process pulp mill was installed in 1895, and by 1900 the company had become an industry leader of high-quality uncoated printing paper.

The founder's son, William L. Glatfelter, entered the business in 1887 after graduating from Gettysburg College, and that year he began a long apprenticeship under the guidance of his father. He had worked at the mill for 19 years when, in 1906, the business was incorporated as P. H. Glatfelter Company. The following year the founder died, and the reins to the company were handed to his son.

President of the company from 1907 to 1930, William Glatfelter oversaw a tremendous increase in production, as well as continued advances in chemically processed wood pulp. In 1918, in order to manage the mill's growing need for wood, he established Glatfelter Wood Pulp Company, a wholly owned subsidiary, with more than 10,000 acres of timberland in southern Maryland. Additional timberland in Maryland and eastern Virginia would eventually boost the acreage to 107,000.

William Glatfelter was responsible for instituting a number of other major projects, many of which were completed in the early 1920s. A new basin for storing up to 50,000 tons of coal, the fuel used to fire the company's high-pressured boilers, was constructed during this period, as was a large indoor loading room, where newly manufactured paper was placed on waiting railroad cars. A tachometer, which measured rotational speed, was attached to all of the company's machines, thus providing a more accurate way to monitor production. Most spectacular was the new fourdrinier paper machine, installed in 1922, which was capable of making rolls of fine paper 170 inches wide. This giant paper machine, designed by Glatfelter engineers and housed in a new building, was the world's first four-drinier to have an easily replaceable wire belt. Perhaps reflecting these changes, Spring Grove's Main Street, where the company's office building was located, was first paved in 1922.

KEY DATES

1864:
Philip H. Glatfelter restarts operations at the Spring Forge Mill in Spring Forge, Pennsylvania, that he had purchased the previous year; first product is newsprint.
1882:
When the town of Spring Forge changes its name to Spring Grove, Glatfelter likewise changes the firm's name to Spring Grove Mill.
1892:
Company shifts production from newsprint to high-quality uncoated printing paper.
1906:
Business is incorporated as P. H. Glatfelter Company.
1907:
Company founder dies; his son, William L. Glatfelter, takes the reins.
1918:
The subsidiary Glatfelter Wood Pulp Company is incorporated.
1930:
W. L. Glatfelter dies and is succeeded by his son, Philip H. Glatfelter II.
1939:
Ten-year, $2 million modernization program is completed.
1964:
$40 million expansion program is launched.
1970:
P. H. Glatfelter II retires; his son, Philip H. Glatfelter III, takes over.
1979:
Bergstrom Paper Company, maker of recycled printing paper, is acquired.
1980:
Thomas C. Norris is named president, becoming the first person outside the Glatfelter family to run the company.
1987:
Company acquires Ecusta Corporation, producer of tobacco paper.
1994:
Glatfelter suffers a net loss of $118.3 million stemming from a $128 million charge to write down the value of its Ecusta Division.
1998:
Schoeller & Hoesch Group of Gernsbach, Germany, is acquired; George H. Glatfelter II is named president and CEO.
1999:
Headquarters are moved from Spring Grove to York, Pennsylvania.
2001:
Glatfelter sells its Ecusta Division as part of its exit from the tobacco paper sector.
2006:
Company acquires the carbonless and specialty papers business of NewPage Corporation.

SURVIVING GREAT DEPRESSION

In 1928, just a year before the great stock market crash, annual production at P. H. Glatfelter Company had reached 50 million pounds, and the number of employees stood at 300. That year, in keeping with the company's policy of "maintaining a modern, efficient mill," Philip H. Glatfelter II, William's son, introduced a new, ten-year modernization program, which included the installation in 1930 of an even larger, 190-inch four-drinier machine. As a result, the outlook for the company seemed especially bright, but soon conditions noticeably changed for the worse. By 1930 the country was quickly falling into an economic crisis, and sales at P. H. Glatfelter Company and other paper concerns were plummeting. William Glatfelter, moreover, unexpectedly died in April. Unlike many other firms, P. H. Glatfelter Company managed to survive the Great Depression of the 1930s, and its new president, P. H. Glatfelter II, was even able to complete his modernization program, at a cost of some $2 million. As part of this program, one of the company's pulp mills was refurbished, and its capacity was doubled. When the economy picked up again during World War II, P. H. Glatfelter Company added, among other improvements, new equipment for bleaching paper.

P. H. Glatfelter II, president until January 1, 1970, guided the company through the postwar economic boom and started a new effort at reforestation and environmental stewardship. In 1947 the company set aside 600 acres of land near Fairfield, Pennsylvania, to create the state's first tree farm. Between 1950 and 1962 it spent $1.6 million to build a wastewater treatment plant, and a new 400-ton boiler was installed in 1963 to more efficiently burn a pulp byproduct called black liquor. During this time there were also millions of dollars spent on capital improvements for increased production. For example, the company's seventh and eighth paper machines were added in 1956 and 1965, respectively, and between 1964 and 1968 capital expenditures alone were nearly $40 million.

An especially ambitious project was the P. H. Glatfelter Dam, completed in 1965 along a stretch of the Codorus Creek about five miles south of Spring Grove. The dam created a 15-billion-gallon reservoir called Lake Marburg, which was intended to guarantee a reliable water supply for the Glatfelter mill farther downstream. In addition, the reservoir was eventually surrounded by a newly created 3,326-acre Codorus State Park, which included a public swimming pool, and provided opportunities for camping, hiking, horseback riding, and boating. The project cost some $10 million, split equally between P. H. Glatfelter Company and the Pennsylvania Bureau of State Parks.

KEY ACQUISITIONS: BERGSTROM
AND ECUSTA

P. H. Glatfelter II retired in 1970 and his son, P. H. Glatfelter III, became president, a position he held for a decade. An early challenge for the new president was Hurricane Agnes, which hit the eastern seaboard in June 1972 and created severe floods in Spring Grove. According to P. H. Glatfelter III, the flood "caused more damage and financial loss to the Company than any other single event." Among other notable developments during his tenure was the 1973 decision by Glatfelter employees to join the United Paperworkers International Union, and in 1977 the company received the Isaac Walton League of America Clean Water Award. The company entered a new product line in 1979 with its purchase of Bergstrom Paper Company, a leading manufacturer of recycled printing paper, with mills in Neenah, Wisconsin, and West Carrollton, Ohio. The West Carrollton mill was sold in 1984, but during the 1980s the company rebuilt all three paper machines at the Neenah plant.

Thomas C. Norris, named president in 1980, was the first person outside the Glatfelter family to run the company. His experience with P. H. Glatfelter Company stretched back to 1958, when he took a part-time job in the paper mill at the age of 19. Like his predecessors, Norris oversaw a program of new capital expenditures, including the rebuilding of two paper machines at Spring Grove. Even more significant was the company's 1987, $220 million purchase of Ecusta Corporation, located in Pisgah Forest, North Carolina, which made extremely thin flax paper for the tobacco industry. The purchase of Ecusta doubled the number of Glatfelter employees from 1,700 to 3,400 and provided, along with uncoated and recycled printing paper, a third major underpinning of the company's sales. Uncoated printing paper, however, remained its core product, which by the early 1990s made up some 30 percent of all paper used in the United States for hardcover trade books. Among the many well-known books printed on Glatfelter paper were Norman Mailer's Harlot's Ghost (1992), Stephen King's Four Past Midnight (1990), and Alexandra Ripley's Scarlett (1991), the sequel to Margaret Mitchell's Gone with the Wind, which in 1936 used Glatfelter paper for the original printing. Great Books of the Western World, a multivolume publication of classics, was printed with recycled paper from the Neenah mill.

P. H. Glatfelter Company headed into the 1990s with an exceptionally strong financial base, secured by its remarkable lack of debt. Although P. H. Glatfelter Company had occasionally borrowed money, for example, $179 million in 1987 to complete its acquisition of Ecusta, even this loan was paid off in just two years. The company's strength was also found in its emphasis on specialized, high-quality paper, which was much less affected by recurring business cycles than large-volume, "commodity" paper products. In 1988 Glatfelter's chief financial officer, M. A. Johnson II, explained, "Our emphasis is on profit, not on volume. That's why we continue to be a niche company, one that is competing in areas where we're not banging heads with people who are commodity-oriented." Starting in the mid-1980s, the company expressed considerable self-confidence in its financial strength by its repurchase of millions of outstanding shares of Glatfelter stock.

With its financial security and its emphasis on specialty products, P. H. Glatfelter Company was able to profitably weather the declining market conditions for paper, which, beginning in 1990, were spurred by industry overproduction. Glatfelter's record sales of $569 million in 1988, $598 million in 1989, and $625 million in 1990 tumbled to $567 million and $540 million, respectively, in 1991 and 1992. Even so, the company still posted a respectable net profit of $56.5 million in 1992, down from a high of $92.9 million in 1989. The company's good health was credited to its old-fashioned, conservative business philosophy, as well as to the able guidance of President, CEO, and Chairman Thomas Norris, who in 1992 was one of only 11 corporate leaders given Financial World 's Silver Award for "superior business leadership and achievement."

DIFFICULTIES

Glatfelter received a huge blow in late 1992 when Philip Morris Companies Inc. announced that it would single-source its domestic cigarette paper from Kimberly-Clark Corporation. Glatfelter's Ecusta Division thus lost its largest domestic tobacco paper customer. Overall company revenues thereby dropped to a lower level for the two years following, running at $473.5 million in 1993 and $478.3 million in 1994. During 1994's fourth quarter, Glatfelter attempted to sell Ecusta, but the offers that came in were considered to be below market value. The company subsequently decided to take a onetime charge of $128 million to write down the value of Ecusta, leading to a net loss of $118.3 million for 1994. This followed a barely profitable 1993, when earnings stood at $16.2 million.

Glatfelter rebounded some in the mid-1990s, but continued to be buffeted by difficult market conditions through the entire second half of the decade. Overcapacity in the tobacco paper sector and increased competition in the area of specialty papers forced prices down, depressing both revenues and earnings. Glatfelter's tobacco paper business was particularly vulnerable as cigarette liability lawsuits and subsequent settlements were forcing cigarette makers to raise prices and to pressure their paper suppliers to lower their prices. In 1998 Glatfelter responded to these pressures by announcing layoffs at Ecusta's Pisgah Forest facility, with head count reduced by about 215, generating annual savings of approximately $8.4 million.

Glatfelter also looked overseas for a potential boost, acquiring Schoeller & Hoesch Group from Deutsche Beteiligungs AG in January 1998 for about $158 million. Schoeller & Hoesch, with sales of $173 million, was headquartered in Gernsbach, Germany, where it owned and operated a paper mill. The company also held a 50 percent controlling interest in a paper mill in Odet, France, and owned other production facilities in Wisches, France; the Philippines; and Summerville, South Carolina. Schoeller & Hoesch was founded in 1881 as a pulp producer, then evolved into a leading producer of engineered papers; it was similar to Glatfelter in its focus on maintaining leading positions in a number of niche growth markets. At the time of the acquisition, Schoeller & Hoesch was the world's number one maker of tea bags, with global market share in excess of 30 percent. The German firm also held 19 percent of the European market for cigarette papers, 24 percent of the European market for metalized label paper, and 25 percent of the global market for overlay paper. One of the unique aspects of Schoeller & Hoesch was its pulp mill in the Philippines, which processed abaca fiber, a versatile fiber with a broad range of applications.

As a result of this acquisition, Glatfelter's revenues reached a record $705.1 million in 1998. Its debt load was also substantially increased, however, leaving its debt-to-capital ratio at 45 percent, not unusual by industry standards but high for the conservative-minded company. In order to further enhance its international visibility, Glatfelter in late 1998 moved its stock from the American Stock Exchange to the New York Stock Exchange. In a change-filled year, Norris announced in June that he intended to retire in 2000. George H. Glatfelter II, who had been senior vice-president, was named the new president and CEO, with Norris remaining chairman until his retirement in May 2000. As a nephew of P. H. Glatfelter III and great-great-grandson of the founder, G. H. Glatfelter II represented the fifth generation of Glatfelters to run the company. Another historical development came in September 1999 when the company relocated its headquarters from Spring Grove to York, Pennsylvania. Glatfelter's executives were thereby separated from the facilities in the company's founding town, enabling them to focus on the company's entire worldwide operations and leave management of the Spring Grove mill and the Glatfelter division to the appropriate managers. Revenues for 1999 fell 3.4 percent, to $680.5 million, principally because paper prices were forced down as a result of an industry oversupply.

RESTRUCTURING AMID A
PROLONGED DOWNTURN

In early 2000 Glatfelter retreated further from the tobacco paper sector by reducing the production capacity at its Ecusta Division by about one-third and cutting the workforce there by approximately 300. Then in March the company launched an ambitious strategic plan, aiming to cut annual costs by $50 million and push revenues over the $1 billion mark by 2004. Further changes came in 2001 when Glatfelter elected to exit from tobacco papers altogether in order to focus its full attention on specialty papers and engineered products. The Ecusta Division was sold to Purico Ltd. of the United Kingdom for approximately $39 million plus the assumption of about $30 million in liabilities. Glatfelter recorded a pretax loss of $58.4 million on the sale, which slashed 2001 earnings to just $7 million. At the same time, Schoeller & Hoesch began a two-year program of shifting its tobacco papers production to other products, the completion of which signaled Glatfelter's departure from that sector.

In the fall of 2001 Glatfelter introduced a new corporate logo and a new slogan, "Beyond Paper." The changes, according to Robert P. Newcomer, company president and chief operating officer, were meant to represent the firm's worldwide employees who "go above and beyond what is expected to meet customers' needs." Concurrently, the company began referring to itself as simply Glatfelter, dropping the initials P. H., although its official name remained P. H. Glatfelter Company.

The new logo's teal green color was meant to represent the company's commitment to the environment. For years, Glatfelter had been criticized for discharges into the Codorus Creek and for odor coming from the Spring Grove plant. During the 1990s the Pennsylvania Department of Environmental Protection (DEP) had fined the company several times for violations of water and air pollution laws. In August 2001 Glatfelter settled a lawsuit brought by the Pennsylvania Public Interest Research Group for $2 million plus a commitment to spend an additional $32 million on improvements to the Spring Grove mill to eliminate the Codorus Creek's distinctive red color. In November the company announced plans to spend $6.2 million on a project to eliminate most of the odors coming from the mill. In addition, Glatfelter was one of several companies that federal and state regulators had identified as being responsible for pollution in the lower Fox River and in the Bay of Green Bay, downstream from the firm's Neenah, Wisconsin, plant. By 2005 Glatfelter was estimating that its share of the remediation costs were likely to range between $61 million and $137 million, over a period of as much as 20 years or more.

After sales dropped to $652.5 million in 2001, a decline of nearly 12 percent, in concert with the poor economic climate, Glatfelter announced in April 2002 that its goal of generating $1 billion in sales by 2004 was unlikely to be met. In fact, sales fell still further in 2002, declining to $553.6 million, as the industry downturn dragged on. Glatfelter incurred another negative mark on its environmental record in June 2003 when it agreed to pay a $1.5 million fine to the Pennsylvania DEP for illegally discharging waste into the Codorus Creek on a weekly basis from around the mid-1980s through December 2001.

As it contended with stagnant revenues in 2003 and 2004, Glatfelter implemented a series of restructurings to strengthen its future earnings. After selling 25,500 acres of timberland in Maryland for $38 million in early 2003, Glatfelter that September announced plans to shut down a paper-making machine and the deinking process at its Neenah facility and in the process cut the staff by more than half, or 190 positions. In December 2003 the company shut down one of the six paper machines at its Spring Grove mill. Then the following April, Glatfelter announced cutbacks at Spring Grove, eventually laying off 175 employees there, or 20 percent of the workers. Restructuring and other charges for 2003 and 2004 totaled $25 million and $20.4 million, respectively. At the same time, Glatfelter was pushing to generate a higher percentage of its revenues from newly introduced products, such as round tea bags, paper used in inkjet printers, and casting papers used in the production of simulated leather. By 2004, nearly 50 percent of sales came from products introduced within the previous five years.

2006: TURNING ACQUISITIVE

Glatfelter's 2005 results, highlighted by increases in both revenues and gross profits, appeared to show a company in a recovery long in the making. From this strengthened position, Glatfelter began seeking out strategic acquisitions. In April 2006 the company acquired the carbonless and specialty papers business of NewPage Corporation for approximately $80 million. Carbonless paper, which has ink built into it, is commonly used for duplicates of personal checks and multiple-part forms. Glatfelter gained plants in Chillicothe and Fremont, Ohio, employing about 1,700 workers and generating annual sales of about $440 million, potentially increasing the company's revenues over $1 billion. The new facilities enabled Glatfelter to shut down its aging Neenah plant and shift that plant's production to the Chillicothe mill. Pretax charges of more than $50 million were incurred in connection with this closure.

Also in 2006 Glatfelter announced plans to sell an additional 40,000 acres of timberland over the following three to five years. In a March announcement, the company revealed that it had purchased J R Crompton, Ltd.'s Lydney Mill in Gloucestershire, England, for $65.1 million and had signed an agreement with Crompton to acquire its Simpson Clough Mill in Lancashire for $21.7 million. These mills produced wet-laid, nonwoven products, such as tea and coffee filter papers, lens tissue, and double-sided adhesive tape substrates. In June, however, the Simpson Clough Mill deal fell through because of complications arising out of Crompton's bankruptcy proceedings. At the same time, the European Commission opened an in-depth probe of Glatfelter's purchase of the Lydney Mill, raising the very real possibility that the deal might be blocked. Regulators were concerned that the purchase of the mill would provide Glatfelter with a very high share of the European market for coffee filters and tea bags. A rejection of the deal, coupled with the failure to consummate the other U.K. mill purchase, was likely to represent a clear, though perhaps only short-term, setback to Glatfelter's ambitions to become a global leader in specialty papers and engineered products.

Thomas Riggs

Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

PHG Tea Leaves, Inc.; GLT International Finance LLC; The Glatfelter Pulp Wood Company; GPW Timber-lands, LLC; Transwelt, Inc.; Glenn-Wolfe, Inc.; Mollanvick, Inc.; GPW Springing Member, Inc.; Schoeller & Hoesch N.A., Inc.; Papierfabrik Schoeller & Hoesch GmbH & Co. KG (Germany); Papcel-Papier und Cellulose, Technologie und Handels-GmbH (Germany); Papierfabrik Schoeller & Hoesch Auslandsbeteiligungen GmbH (Germany); PHG Verwaltungsgesellschaft mbH (Germany); S&H Verwaltungsgesellschaft mbH (Germany); TL Verwaltungsgesellschaft mbH (Germany); Unicon-Papier-und Kunststoff handels GmbH (Germany); Schoeller & Hoesch S.A.S. (France); Glatfelter-UK, Ltd.; Balo-I Industrial, Inc. (Philippines); Newtech Pulp Inc. (Philippines); Papcel-Kiew (Ukraine).

PRINCIPAL OPERATING UNITS

Specialty Papers; Long Fiber & Overlay Papers.

PRINCIPAL COMPETITORS

Ahlstrom Corporation; International Paper Company; MeadWestvaco Corporation; Sappi Limited; Stora Enso Oyj; J R Crompton, Ltd.; Domtar Inc.; Weyerhaeuser Company; Blue Ridge Paper Products Inc.

FURTHER READING

Abelson, Reed, "P. H. Glatfelter Co.," Fortune, June 5, 1989, p. 176.

Berg, Joel, "Paper Company Remakes Itself," Central Penn Business Journal, November 9, 2001, p. 1.

"Beyond Paper: Glatfelter's Progress," Tea and Coffee Trade Journal, March 2002, pp. 6566.

Briggs, Rosland, "Spring Grove, Pa.-based Tobacco Paper Company Rolls Toward Recovery," Philadelphia Inquirer, May 12, 1999.

Cecil, Andra Maria, "Glatfelter Adds to Family," York (Pa.) Daily Record, March 14, 2006.

, "Glatfelter Eyes Specialty Market," York (Pa.) Daily Record, April 27, 2005, p. 8.

, "Glatfelter to Buy Ohio Business," York (Pa.) Daily Record, February 23, 2006, p. 1.

, "U.K. 'High Note' Sours for Glatfelter," York (Pa.) Daily Record, June 14, 2006, p. 8.

"CEO Interview: George H. Glatfelter II," Wall Street Transcript, July 19, 1999.

"Cigarette Paper Producers' Uncertain Future," Pulp and Paper, May 1999, p. 23.

Cochran, Thomas N., "P. H. Glatfelter Co.," Barron's, August 29, 1988, pp. 3233.

Dagan, David, "Glatfelter Cements Niche Strategy with Big Ohio Deal," Central Penn Business Journal, March 3, 2006, p. 5.

Finchem, Kirk, "P. H. Glatfelter: Returns to Growth After Losing Key Customer," Pulp and Paper, December 1996, pp. 4243, 45.

"Glatfelter to Buy NewPage Specialties," Pulp and Paper, April 2006, pp. 89.

Henriques, Diana B., "A Paper Company That Loves Itself," New York Times, December 23, 1990, p. F12.

Lipper, Mark, Paper, People, Progress: The Story of the P. H. Glatfelter Company of Spring Grove, Pennsylvania, Spring Grove, Pa.: P. H. Glatfelter Company, 1980, 193 p.

Morris, Kathleen, and Elicia Brown, "1992 CEO of the Year Silver Award Winners," Financial World, March 31, 1992, p. 34.

125 Schoeller & Hoesch, Gernsbach, Germany: Papierfabrik Schoeller & Hoesch GmbH & Co., 2006, 54 p.

P. H. Glatfelter Co., Spring Grove, Pa., 16901940: 250 Years of Papermaking in America, Stroudsburg, Pa.: Lockwood Trade Journal Co., 1940, p. 88.

Power, Christopher, "Six Score and Two Years Ago," Forbes, March 10, 1986, pp. 107 +.

Smith, Sharon, "P. H. Glatfelter Gets a Makeover," York (Pa.) Daily Record, October 23, 2001, p. B6.

Starr, Michelle, "Spring Grove Paper Mill to Cut 175 Jobs," York (Pa.) Daily Record, April 23, 2004.

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P. H. Glatfelter Company

P. H. Glatfelter Company

228 South Main Street
Spring Grove, Pennsylvania 17362
U.S.A.
(717) 225-4711
Fax: (717) 225-6834

Public Company
Incorporated: 1906
Employees: 3,200
Sales: $540 million
Stock Exchanges: American
SICs: 2611 Pulp Mills; 2621 Paper Mills

P. H. Glatfelter Company, a producer of high-quality, specialty paper, was founded in 1864 in the rolling hills of south central Pennsylvania. Since the early 20th century it has been an industry leader of uncoated printing paper, used largely in hardback versions of novels and other trade books. Other Glatfelter products have included high-quality recycled paper for trade and reference books, and thin, flax paper for cigarettes as well as religious and financial publications. Guiding the company over the years has been an old-fashioned business philosophy emphasizing long-term goals and fiscal conservatism.

Spring Grove, the home of P. H. Glatfelter Company, was established in 1747 along the Codorus Creek some ten miles north of the Pennsylvania-Maryland border. To the west of the town were the Blue Ridge Mountains, and to the east, beyond the larger town of York, flowed the wide Susquehanna River. The towns original name, Spring Forge, reflected its early industry, an iron forge, which during the American Revolution manufactured supplies for the Continental Army. The forge was in operation until 1851, when Jacob Hauer bought the buildings and converted them into a paper mill.

Some 20 miles southeast, near the Maryland town of Gunpowder Falls, another paper mill, called Loucks, Hoffman & Company, began operations in the 1850s. It was here in 1856 that 19-year-old Philip H. Glatfelter began his first job in the paper trade. Glatfelterwhose wife, Amanda, was the sister of Jacob Loucksworked in the firm for seven years, and in 1863, at the height of the American Civil War, Glatfelter decided to go into business on his own.

By this time Hauer had died, and his Spring Paper Mill was being sold at an orphans (probate) court. A printed announcement of the sale mentioned a tract of land containing about 101 acres a large stone paper mill, a frame machine house, stone stock house, and four tenant houses. The mill itself had two Burnham water wheels propelled by the Codorus Creek, four large-capacity engines, and a 62-inch cylinder paper machine. Glatfelter learned about the mill from Loucks, whose second wife, Mary, was the daughter of Jacob Hauer. On December 23, 1863one month after President Lincolns famous speech at nearby GettysbergGlatfelter bought the property for $14,000.

Glatfelters new paper business, initially called Spring Forge Mill, began operations in July of 1864 with a daily capacity of 1,500 pounds. Its first product was newsprint, which Glatfelter made from a pulp of rye straw mixed with a smaller amount of straw and rags collected from various cotton gins along the regions railway lines. This pulp material was retrieved in spacious railcars known as barns. Because at the time Spring Forge itself did not have a railway line, barns returning from the cotton gins could get no closer than Jefferson and York, some five and ten miles, respectively, from the mill. When the town changed its name in 1882 to Spring Grove, the company thus became the Spring Grove Mill.

For the first 25 years newsprint continued to be the companys main product, and during this period it made impressive gains in production. From the initial capacity of 1,500 pounds per day, the mill was able to expand to 3,500 pounds in 1873, 60,000 in 1885, and 110,000 by 1895. This increased capacity was made possible by the companys investment in new, modern facilities. In 1874, for example, the mill was moved farther north along the Codorus Creek, and next to it the company constructed a new building costing $200,000 and containing an 82-inch paper machine. Two years later Spring Forge celebrated the opening of its rail line, which ran through the mills new site.

In 1880 Glatfelter entered into an agreement with Pusey and Jones Company of Delaware to build a 102-inch fourdrinier machine, allowing the mill to produce a considerably wider roll of paper. Named after Henry and Sealy Fourdrinier, who patented an early form of the machine in England in 1806, the fourdrinier machine fed pulp onto a continuous wire belt, shook it to remove excess water, and then pressed and dried the pulp into paper. Glatfelters new fourdrinier machine was until 1887 the largest in the world, and the extremely wide paper rolls made by the machine helped him gain new customers. In 1887, when the Philadelphia Public Ledger began operating two 94-inch printing presses, Spring Grove Mill was the only business in the country that could supply the paper. The mill also produced paper for a variety of other newspapers in Pennsylvania and Maryland, including the Philadelphia Evening Telegraph.

Soon Glatfelter also changed his pulp-making methods, which would result in a better quality paper. Prior to 1881 the mill mechanically separated the fibers of the raw materials, probably with the use of a grinder. This process, acceptable for newsprint and other paper intended for temporary use, had a number of drawbacks. Mechanical separation tended to fragment and shorten the fibers, thus lessening their ability to bind and make strong paper. Moreover, fragmentation left considerable debris in the pulp, and various remaining chemical constituents caused the paper to grow yellow with age. Even when new, such paper did not have a high whiteness and was difficult to bleach.

As a result, Glatfelter began to take note of a new chemical method called the soda process, which enabled a high-quality paper to be made from wood fibers. It was developed in 1851 by Englishman Hugh Burgess, who a few years later immigrated to the United States to set up a paper mill in Pennsylvania. In the soda process, wood chips were boiled in a caustic alkali at a high temperature and pressure; afterward, the separated fibers were washed in water and then bleached. In 1881 Glatfelter built a giant soda-process mill, which was used to make pulp from jack pine, poplar wood, and straw. Straw, however, came to be used in decreasing quantities. By 1885 this new production helped the company surpass $500,000 in total sales, and four years later the number of employees reached 110. With its new pulp-processing method, the company in 1892 was able to make one of its most important changesthe suspension of newsprint production and the subsequent focus on high-quality paper for books, lithographs, and business forms. For this purpose, another soda-process pulp mill was installed in 1895, and by the turn of the century the company had become an industry leader of high-quality uncoated printing paper.

The founders son, William L. Glatfelter, entered the business in 1887 after graduating from Gettysburg College, and that year he began a long apprenticeship under the guidance of his father. He had already worked at the mill for 19 years when, in 1906, the business was incorporated as P. H. Glatfelter Company. The following year the founder died, and the reins to the company were handed to his son.

President of the company from 1907 to 1930, William Glatfelter oversaw a tremendous increase in production, as well as continued advances in chemically processed wood pulp. In 1918, in order to manage the mills growing need for wood, he established Glatfelter Wood Pulp Company, a wholly owned subsidiary, with more than 10,000 acres of timberland in southern Maryland. Additional timberland in Maryland and eastern Virginia would eventually boost the acreage to 107,000.

William Glatfelter was responsible for instituting a number of other major projects, many of which were completed in the early 1920s. A new basin for storing up to 50,000 tons of coalthe fuel used to fire the companys high-pressured boilerswas constructed during this period, as was a large indoor loading room, where newly manufactured paper was placed on waiting railroad cars. A tachometer, which measured rotational speed, was attached to all of the companys machines, thus providing a more accurate way to monitor production. Most spectacular was the new fourdrinier paper machine, installed in 1922, which was capable of making rolls of fine paper 170 inches wide. This giant paper machine, designed by Glatfelter engineers and housed in a new building, was the worlds first fourdrinier to have an easily replaceable wire belt. Perhaps reflecting these changes, Spring Groves Main Street, where the companys office building was located, was first paved in 1922.

In 1928, just a year before the great stock market crash, annual production at P. H. Glatfelter Company had reached 50 million pounds, and the number of employees stood at 300. That year, in keeping with the companys policy of maintaining a modern, efficient mill, P. H. Glatfelter II, Williams son, introduced a new, ten-year modernization program, which included the installation of an even larger, 190-inch fourdrinier machine. As a result, the outlook for the company seemed especially bright, but just two years later conditions noticeably changed for the worse. By 1930 the country was quickly falling into an economic crisis, and sales at P. H. Glatfelter Company and other paper concerns were plummeting. William Glatfelter, moreover, unexpectedly died in April. Unlike many other firms, P. H. Glatfelter Company managed to survive the Depression of the 1930s, and its new president, P. H. Glatfelter II, was even able to complete his modernization program, at a cost of some $2 million. As part of this program, one of the companys pulp mills was refurbished, and its capacity was doubled. When the economy picked up again during World War II, P. H. Glatfelter Company added, among other improvements, new equipment for bleaching paper.

P. H. Glatfelter II, president until January 1, 1970, guided the company through the postwar economic boom and started a new effort at reforestation and environmental stewardship. In 1947 the company set aside 600 acres of land near Fairfield, Pennsylvania, to create the states first tree farm. Between 1950 and 1962 it spent $1.6 million to build a waste-water treatment plant, and a new 400-ton boiler was installed in 1963 to more efficiently burn a pulp by-product called black liquor. During this time there were also millions of dollars spent on capital improvements for increased production. For example, the companys seventh and eighth paper machines were added in 1956 and 1965, respectively, and between 1964 and 1968 capital expenditures alone were nearly $40 million.

An especially ambitious project was the P. H. Glatfelter Dam, completed in 1965 along a stretch of the Codorus Creek about five miles south of Spring Grove. The dam created a 15-billiongallon reservoir called Lake Marburg, which was intended to guarantee a reliable water supply for the Glatfelter mill farther downstream. In addition, the reservoir was eventually surrounded by a newly created 3,326-acre Codorus State Park, which included a public swimming pool, and provided opportunities for camping, hiking, horseback riding, and boating. The project cost some $10 million, split equally between P. H. Glatfelter Company and the Pennsylvania Bureau of State Parks.

P. H. Glatfelter II retired in 1970 and his son, P. H. Glatfelter III, became president, a position he held for a decade. An early challenge for the new president was Hurricane Agnes, which hit the eastern seaboard in June of 1972 and created severe floods in Spring Grove. According to P. H. Glatfelter III, the flood caused more damage and financial loss to the Company than any other single event. Among other notable developments during his tenure was the 1973 decision by Glatfelter employees to join the United Paperworkers International Union, and in 1977 the company received the Isaac Walton League of America Clean Water Award. The company entered a new product line in 1979 with its purchase of Bergstrom Paper Company, a leading manufacturer of recycled printing paper, with mills in Neenah, Wisconsin, and West Carrollton, Ohio. The West Carrollton mill was sold in 1984, but during the 1980s the company rebuilt all three paper machines at the Neenah plant.

Thomas C. Norris, named president in 1980, was the first person outside the Glatfelter family to run the company. His experience with P. H. Glatfelter Company stretched back to 1958, when he took a part-time job in the paper mill at the age of 19. Like his predecessors, Norris oversaw a program of new capital expenditures, including the rebuilding of two paper machines at Spring Grove. Even more significant was the companys 1987, $220-million purchase of Ecusta Corporation, located in Pisgah Forest, North Carolina, which made extremely thin flax paper for the tobacco industry. The purchase of Ecusta doubled the number of Glatfelter employees from 1,700 to 3,400 and provided, along with uncoated and recycled printing paper, the third major underpinning of the companys sales. Uncoated printing paper, however, remained its core product, which by the early 1990s made up some 30 percent of all paper used in the United States for hardcover trade books. Among the many well-known books printed on Glatfelter paper were Norman Mailers Harlots Ghost (1992), Steven Kings Four Past Midnight (1990), and Alexandra Ripleys Scarlett (1991), the sequel to Margaret Mitchells Gone With the Wind, which in 1936 used Glatfelter paper for the original printing. Great Books of the Western World, a multivolume publication of classics, was printed with recycled paper from the Neenah mill.

P. H. Glatfelter Company headed into the 1990s with an exceptionally strong financial base, secured by its remarkable lack of debt. Although P. H. Glatfelter Company has occasionally borrowed moneyfor example, $179 million in 1987 to complete its acquisition of Ecustaeven this loan was paid off in just two years. The companys strength was also found in its emphasis on specialized, high-quality paper, which was much less affected by recurring business cycles than large-volume,commodity paper products. In 1988 Glatfelters chief financial officer, M. A. Johnson II, explained,Our emphasis is on profit, not on volume. Thats why we continue to be a niche company, one that is competing in areas where were not banging heads with people who are commodity-oriented. Since the mid-1980s the company has expressed considerable self-confidence in its financial strength by its repurchase of millions of outstanding shares of Glatfelter stock.

With its financial security and its emphasis on specialty products, P. H. Glatfelter Company was able to weather profitably the declining market conditions for paper, which, beginning in 1990, were spurred by industry overproduction. Glatfelters record sales of $569 million in 1988, $598 million in 1989, and $625 million in 1990 tumbled to $567 million and $540 million, respectively, in 1991 and 1992. Even so, the company still posted a respectable net profit of $56.5 million in 1992, down from a high of $92.9 million in 1989. The companys good health was credited to its old-fashioned, conservative business philosophy, as well as to the able guidance of its president, chief executive officer, and chairman of the board, Thomas Norris, who in 1992 was one of only eleven corporate leaders given Financial Worlds Silver Award for superior business leadership and achievement.

Principal Subsidiaries

Ecusta Australia Pty. Limited; Ecusta Fibres Ltd. (Canada); Glatfelter Pulp Wood Company.

Further Reading

Abelson, Reed, P. H. Glatfelter Co., Fortune, June 5, 1989, p. 176.

Cauffiel-Zinn, Jan, The P. H. Glatfelter Company, The Barker (in-house magazine of P. H. Glatfelter Company), spring (pp. 1213), summer (pp. 1213), fall (pp. 1213), and winter (pp. 1213), 1989.

Cochran, Thomas N., P. H. Glatfelter Co., Barrens, August 29, 1988, pp. 3233.

Henriques, Diana B., A Paper Company That Loves Itself, New York Times, December 23, 1990, p. F12.

Lipper, Mark, Paper, People, Progress: The Story of the P. H. Glatfelter Company of Spring Grove, Pennsylvania, Spring Grove, Pennsylvania: P. H. Glatfelter Company, 1980.

Morris, Kathleen and Elicia Brown, 1992 CEO of the Year Silver Award Winners, Financial World, March 31, 1992, p. 34.

P. H. Glatfelter Company Annual Reports, Spring Grove, Pennsylvania: P. H. Glatfelter Company, 198892.

P. H. Glatfelter Co., Spring Grove, Pa., 16901940: 250 Years of Papermaking in America, Stroudsburg, Pennsylvania: Lockwood Trade Journal Co., 1940, p. 88.

Thomas Riggs

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