P. H. Glatfelter Company (Form: 8-K)

Corporate Headquarters
96 South George Street
York, Pennsylvania 17401 U.S.A.

GLATFELTER REPORTS SECOND QUARTER 2010 RESULTS
- Substantial improvement in core earnings driven by 11 percent organic growth in net sales -

YORK, Pennsylvania – August 3, 2010 – Glatfelter (NYSE: GLT) today reported strong top-line growth and adjusted earnings of $0.02 per diluted share for the quarter ended June 30, 2010 compared to an adjusted loss of $0.22 per share in the second quarter of 2009 .

“Our solid 2010 second quarter results were driven by revenue growth in our Composite Fibers and Specialty Papers business units,” said George H. Glatfelter II, Chairman and Chief Executive Officer. “Shipping volume increased by 14 percent in Composite Fibers generating a 149 percent increase in operating income, while Specialty Papers shipping volume increased 10 percent which increased operating income by $9 million. We also benefited from solid operating performance, improved manufacturing efficiencies and cost control driven by our on-going continuous improvement initiatives.”

Mr. Glatfelter continued, “Integration of the recently completed acquisition of Concert Industries is progressing on plan. We have strengthened our management team, customer relationships are developing well and the business is on track to generate targeted levels of accretion.”

On a GAAP basis, the Company reported net income of $0.1 million or $0.00 per diluted share, for the second quarter of 2010, compared with net income of $19.9 million or $0.43 per diluted share in the 2009 second quarter. Adjusted earnings were $0.9 million, or $0.02 per diluted share, which excludes items of an unusual and non-recurring nature as set forth below, compared with a loss, also on an adjusted basis, of $10.1 million, or $0.22 per diluted share, in the 2009 second quarter. Adjusted earnings is a non-GAAP measure that excludes from the Company’s GAAP-based results certain non-core business items.

The following table sets forth a reconciliation of net income on a GAAP-basis to adjusted earnings:


	Three Months Ended June 30
	2010						2009
In thousands, except per share	After tax income			Diluted EPS			After tax income			Diluted EPS

Net income	$	103		$	0.00		$	19,870		$	0.43
Acquisition and integration related costs		1,318			0.03			—			—
Foreign currency hedge on acquisition price		(403	)		(0.01	)		—			—
Timberland sales and related transaction costs		(99	)		—			441			0.01
Alternative fuel mixture credits		—			—			(30,418	)		(0.67	)

Adjusted earnings (loss)	$	919		$	0.02		$	(10,107	)	$	(0.22	)

Consolidated net sales for the second quarter of 2010 were $362.8 million, a 30 percent increase compared with $279.0 million for the second quarter of 2009, reflecting the February 2010 Concert Industries acquisition, now operated as the Advanced Airlaid Materials business unit, and strong demand in the Company’s other businesses.


	For the quarter ended June 30
Dollars in thousands	2010			2009			Change
Tons shipped		187,847			171,293			16,554			9.7	%
Net sales	$	208,740		$	184,364		$	24,376			13.2	%
Energy and related sales, net		1,915			2,131			(216	)		(10.1	)%
Gross margin percent		*7.5*	%		4.2	%		-		—
Operating income	$	2,729		$		(6,407)	$	9,136		Nm

The $24.4 million increase in net sales was primarily due to a 9.7 percent increase in volumes shipped, an improved mix and a $4.9 million benefit from higher average selling prices in the quarter-over-quarter comparison.

During the second quarters of 2010 and 2009, the Company successfully completed annually scheduled maintenance outages at its Chillicothe, OH and Spring Grove, PA facilities. In line with the Company’s expectations, the maintenance outages adversely impacted operating income by $19.6 million in the second quarter of 2010, compared with $16.1 million in the same quarter a year ago. These required annual outages negatively affect second-quarter results when compared with other quarters.

Specialty Papers’ 2010 second quarter operating profit increased $9.1 million compared with the prior-year quarter primarily due to the benefits of higher volumes shipped, improved mix, operating efficiencies and the lack of market-related downtime during the 2010 second quarter. In the quarter-to-quarter comparison, the adverse impact of higher raw material costs was offset by the benefit of higher average selling prices.

Composite Fibers’ net sales improved due to strengthening demand in all of its product lines as volumes shipped increased 14.4 percent. Net sales increased 7.8 percent despite a $0.2 million adverse impact from lower average selling prices and a $5.4 million adverse impact from the translation of foreign currencies.

Composite Fibers’ operating profit increased $5.3 million in the quarter-to-quarter comparison. Improving market conditions and business development increased production volumes eliminating market-driven down time to benefit operating profit by $3.9 million. In addition, operating efficiencies and the lower cost of energy more than offset the negative impact of higher wood pulp prices.

Advanced Airlaid Materials (Note: this business unit was created upon completion of the previously announced acquisition of Concert Industries on February 12, 2010.)

During the second quarter, Advanced Airlaid Materials’ generated $1.9 million of operating income. Shipping volumes in the quarter were negatively impacted by more than anticipated customer quarter-end inventory management activities. Operating income was negatively impacted by approximately $1.2 million due to the time lag in passing through increased pulp costs to certain customers. In accordance with related contractual arrangements, the impact of higher pulp costs was passed through to customers effective July 1, 2010. In addition, operating income was adversely impacted by $0.2 million as a result of charging cost of products sold for the write-up of acquired inventory to fair value.

Consolidated selling, general and administrative expenses totaled $28.8 million, a $2.3 million increase primarily due to acquisition and integration related costs associated with the Concert acquisition and to the inclusion of this acquired entity’s operating expenses for the quarter.

Interest expense totaled $6.8 million for the second quarter of 2010, an increase of $1.7 million primarily due to the issuance of $100.0 million in bonds in February 2010, used to fund, in part, the Concert acquisition.

For the second quarter of 2010, the Company’s effective tax rate on adjusted earnings was 59.7 percent compared with a 17.8 percent benefit in the same quarter of 2009. The higher effective tax rate in the comparison was primarily due to the expiration of the research and development tax credit at the end of 2009 and the impact of an increase in the German trade tax rate.

For the first six months of 2010, on a GAAP basis, the Company reported a loss of $0.3 million or $0.01 per diluted share, compared with net income of $31.4 million or $0.69 per diluted share in the same period of 2009. The results of operations for both periods include the impact of significant unusual and non-recurring items. The following table sets forth a reconciliation of net income or loss on a GAAP basis to adjusted earnings:


	Six Months Ended June 30
	2010						2009
In thousands, except per share	After tax income			Diluted EPS			After tax income			Diluted EPS

Net income (loss)	$		(271)	$	(0.01	)	$	31,408		$	0.69
Acquisition and integration related costs		8,321			0.18		—			—
Foreign currency hedge on acquisition price		1,673			0.04		—			—
Alternative fuel mixture credits		-			-			(30,418	)		(0.67	)
Timberland sales and related transaction costs		(99	)		-			63		—
Adjusted earnings	$	9,624		$	0.21		$	1,053		$	0.02

Consolidated net sales for the first half of 2010 were $700.1 million, a 22.7 percent increase compared with $570.5 million for the same period of 2009, reflecting much stronger business activity in our legacy businesses and the addition of Advanced Airlaid Materials to the Company.

The accompanying consolidated statement of income for the first six months ended June 30, 2009 includes a pre-tax credit of $40.8 million in cost of products sold representing eligible alternative fuel mixture credits earned through June 30, 2009, net of associated expenses. On an after-tax basis, the Company recognized $30.4 million of alternative fuel mixture credits during the first half of 2009.

Capital expenditures totaled $15.4 million in the first half of 2010 compared with $11.5 million in the same period of 2009. Capital expenditures are expected to be approximately $45 million to $50 million for 2010.

Cash and equivalents totaled $42.6 million as of June 30, 2010 and net debt, excluding cash collateralized borrowings, was $258.4 million, an increase of $176.0 million compared with December 31, 2009, primarily due to the $231.9 million Concert acquisition. Free cash flow (cash provided by operations less capital expenditures) during the second quarter of 2010 was $53.0 million. (Net debt and free cash flow are non-GAAP measures. Refer to the calculation of these measures provided in this release). In April 2010, the Company received a $54.9 million federal income tax refund in connection with the filing of its 2009 corporate income tax return which included the benefit of alternative fuel mixture credits.

For Specialty Papers, the Company expects shipping volumes in the third quarter of 2010 to be approximately 8 percent ahead of the second quarter of 2010 levels and selling prices are expected to increase in the same comparison. In addition, input costs are expected to be about the same as second quarter levels.

For Composite Fibers, the Company anticipates shipping volumes, selling prices and input costs in the third quarter of 2010 to be relatively in line with the second quarter of 2010.

Shipping volumes for the Advanced Airlaid Materials business unit in the third quarter of 2010 are expected to increase by approximately 10 percent compared with the second quarter. Operating income is also expected to increase by $1.2 million from the pass through to customers of past raw material cost increases. The Company continues to expect the acquisition will be modestly accretive to 2010 earnings, excluding acquisition and integration costs. For the remainder of 2010, integration costs are expected to approximate $1.0 million.

Mr. Glatfelter commented, “The leadership positions we hold in our key markets provide us with continuing long-term opportunities for revenue and earnings growth. In the near term our business, in general, is quite strong. We enter the third quarter with solid backlogs and demand across most of our product portfolio. In addition, we remain focused on integrating the Concert acquisition and continue to be confident of achieving the accretion targets established for the acquisition.”

As previously announced, the Company will hold a conference call at 11:00 a.m. (Eastern) today to discuss its second quarter results. The Company’s earnings release and an accompanying financial supplement, which includes significant financial information to be discussed on the conference call, will be available on Glatfelter’s Investor Relations web site at the address indicated below. Information related to the conference call is as follows:


What:	Glatfelter’s2nd Quarter 2010 Earnings Release Conference Call
When:	Tuesday, August 3, 2010, 11:00 a.m. Eastern Time
Number:	US dial 888.335.5539
	International dial 973.582.2857
Conference ID:		87022034
Webcast:	http://www.glatfelter.com/about_us/investor_relations/default.aspx
Rebroadcast Dates:	August 3, 2010 12:00 through August 17, 2010 23:59
Rebroadcast Number:	Within US dial 800.642.1687
	International dial 706.645.9291
Conference ID:		87022034

Interested persons who wish to hear the live webcast should go to the website prior to the starting time to register, download and install any necessary audio software.

Any statements included in this press release which pertain to future 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 other countries in which Glatfelter does business, demand for or pricing of its products, changes in tax legislation, governmental laws, regulations and policies, initiatives of regulatory authorities, acquisition integration risks, technological changes and innovations, market growth rates, cost reduction initiatives, finalization of the allocation of the Concert purchase price, 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.

Headquartered in York, PA, Glatfelter is a global manufacturer of specialty papers and fiber-based 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 Canada, Germany, France, the United Kingdom and the Philippines, a representative office in China and a sales and distribution office in Russia. Glatfelter’s sales approximate $1.4 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.

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


	Three Months Ended						Six Months Ended June
	June 30						30
In thousands, except per share	2010			2009			2010			2009
Net sales	$	362,781		$	278,979		$	700,056		$	570,531
Energy and related sales – net		1,915			2,131			5,522			4,062

Total revenues		364,696			281,110			705,578			574,593
Costs of products sold		329,236			222,109			625,902			472,278

Gross profit		35,460			59,001			79,676			102,315
Selling, general and administrative expenses		28,847			26,548			63,517			51,061
(Gains) losses on dispositions of plant, equipment and timberlands, net		(168	)		27			(168	)		(672	)

Operating income		6,781			32,426			16,327			51,926
Non-operating income (expense)
Interest expense		(6,817	)		(5,144	)		(12,480	)		(10,270	)
Interest income		168			557			338			1,265
Other – net		366			(135	)		(3,617	)		(118	)

Total other income (expense)		(6,283	)		(4,722	)		(15,759	)		(9,123	)

Income before income taxes		498			27,704			568			42,803
Income tax provision		395			7,834			839			11,395

Net income (loss)	$	103		$	19,870			($271	)	$	31,408

Earnings (loss) per share
Basic	$	0.00		$	0.44		$	(0.01	)	$	0.69
Diluted		0.00			0.43			(0.01	)		0.69
Cash dividends declared per common share	$	0.09		$	0.09		$	0.18		$	0.18
Weighted average shares outstanding
Basic		45,908			45,658			45,872			45,624
Diluted		46,313			45,698			45,872			45,654


Three months ended June 30										Advanced Airlaid
In millions	Specialty Papers					Composite Fibers				Materials				Other and Unallocated						Total
	2010		2009			2010		2009		2010		2009		2010			2009			2010			2009
Net sales	$	208.7	$	184.4		$	102.0	$	94.6	$	52.0	$	–	$	–		$	–		$	362.8		$	279.0
Energy and related sales, net		1.9		2.1			–		–		–		–		–			–			1.9			2.1

Total revenue		210.6		186.5			102.0		94.6		52.0		–		–			–			364.7			281.1
Cost of products sold		194.9		178.8			84.1		82.7		48.5		–		1.8			(39.4	)		329.2			222.1

Gross profit		15.7		7.7			17.9		11.9		3.6		–		(1.8	)		39.4			35.5			59.0
SG&A		13.0		14.1			9.0		8.3		1.6		–		5.2			4.2			28.8			26.5
Gains on dispositions of plant, equipment and timberlands		–		–			–		–		–		–		(0.2	)		–			(0.2	)		–

Total operating income (loss)		2.7		(6.4	)		8.9		3.6		1.9		–		(6.8	)		35.2			6.8			32.4
Non-operating income (expense)		–		–			–		–		–		–		(6.3	)		(4.7	)		(6.3	)		(4.7	)

Income (loss) before income taxes	$	2.7	$	(6.4	)	$	8.9	$	3.6	$	1.9	$	–	$	(13.1	)	$	30.5		$	0.5		$	27.7

Supplementary Data
Net tons sold		187.8		171.3			23.0		20.1		20.1		–		–			–			230.9			191.4
Depreciation, depletion and amortization	$	8.7	$	8.9		$	5.8	$	5.7	$	1.9	$	–	$	–		$	–		$	16.4		$	14.6
Capital expenditures		5.7		3.4			1.7		2.7		1.9		–		–			0.1			9.3			6.2


Six months ended June 30									Advanced Airlaid
In millions	Specialty Papers				Composite Fibers				Materials				Other and Unallocated						Total
	2010		2009		2010		2009		2010		2009		2010			2009			2010			2009
Net sales	$	416.4	$	384.0	$	203.5	$	186.6	$	80.1	$	–	$	–		$	–		$	700.1		$	570.5
Energy and related sales, net		5.5		4.1		–		–		–		–		–			–			5.5			4.1

Total revenue		422.0		388.1		203.5		186.6		80.1		–		–			–			705.6			574.6
Cost of products sold		376.6		350.1		170.2		160.4		75.4		–		3.8			(38.2	)		625.9			472.3

Gross profit		45.4		37.9		33.3		26.2		4.7		–		(3.8	)		38.2			79.7			102.3
SG&A		26.7		25.9		18.1		17.1		2.6		–		16.1			8.0			63.5			51.1
Gains on dispositions of plant, equipment and timberlands		–		–		–		–		–		–		(0.2	)		(0.7	)		(0.2	)		(0.7	)

Total operating income (loss)		18.7		12.0		15.2		9.1		2.2		–		(19.7	)		30.9			16.3			51.9
Non-operating income (expense)		–		–		–		–		–		–		(15.8	)		(9.1	)		(15.8	)		(9.1	)

Income (loss) before income taxes	$	18.7	$	12.0	$	15.2	$	9.1	$	2.2	$	–	$	(35.5	)	$	21.8		$	0.6		$	42.8

Supplementary Data
Net tons sold		381.0		356.4		44.3		39.3		31.2		–		–			–			456.5			395.6
Depreciation, depletion and amortization	$	17.3	$	17.8	$	11.9	$	11.3	$	3.0	$	–	$	–		$	–		$	32.2		$	29.1
Capital expenditures		8.7		7.0		3.2		4.4		3.5		–		–			0.1			15.4			11.5

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.


	Six months ended
	June 30
In thousands	2010			2009
Cash Flow Data
Cash provided (used) by:
Operating activities	$	82,675		$	64,867
Investing activities		(244,343	)		27,103
Financing activities		70,236			(47,857	)
Depreciation, depletion and amortization		32,166			29,050
Capital expenditures		15,445			11,475
June 30				December 31
		2010			2009

Balance Sheet Data
Cash and cash equivalents	$	42,627		$	135,420
Total assets		1,265,134			1,190,294
Total debt		337,771			254,583
Shareholders’ equity		475,405			510,704

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 operations, which consists of the production and sale of specialty papers, composite fibers papers and airlaid non-woven materials. 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 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, acquisition and integration related costs, 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 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, acquisition and integration related 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 operations are performing, which management believes is useful to investors because it allows comparison of such 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.


Calculation of Net Debt	June 30	December 31
In thousands	2010			2009
Short term debt		$	5,875	$	3,888
Long term debt	331,896				250,695

Total	337,771				254,583
Less: Cash	(42,627)				(135,420	)

Total debt less cash	295,144				119,163
Less: Collateralized debt	(36,695)				(36,695	)

Net Debt	$258,449			$	82,468

At this time I would like to welcome everyone to the second quarter earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions). Thank you.

Thank you, Brandy. Good morning and welcome to Glatfelter’s second quarter earnings conference call. Joining me on the call this morning are George Glatfelter, our Chairman and Chief Executive Officer; Dante Parrini, Executive Vice President and Chief Operating Officer; and John Jacunski, our Senior Vice President and CFO.

Before we begin I’ll make a few comments. First, during today’s call we will use the term “adjusted earnings,” a non-GAAP financial measure, as it excludes from our GAAP-based results certain items that we do not consider to be part of our core business operation. A reconciliation of adjusted earnings to our GAAP-based results, together with a discussion of why we use this measure, is included in today’s earnings release.

Second, any statements made today concerning our expectations about future trends or performance are forward-looking statements. Please refer to our 2009 Form 10-K available on our website for factors that could cause actual results to differ materially from these forward-looking statements. These statements are only as of today and we undertake no obligation to update them.

Finally, we provided a slide presentation that is available on our website and through the webcast provider. You may want to refer to these slides to enhance your understanding of our results this quarter. Thank you.

Okay thank you, Glenn. Good morning everyone and welcome. I hope you’ve had the opportunity to review our second quarter earnings release issued this morning. We had a good quarter. Adjusted earnings for the second quarter improved significantly compared to last year. Our earnings were $919,000 or $0.02 per share compared with a loss of $10.1 million or $0.22 per share in the same quarter of 2009.

I’m pleased with these results. They were driven by strong top-line growth as well as through operating efficiencies and cost control measures we’ve worked very hard to instill throughout our business.

During the quarter we once again benefited from the depth and the diversity of our product portfolio. Revenue grew by 30%, including organic growth of 11%. We experienced increased shipping volume in nearly every market we served. The increased volume enabled us to operate at capacity and eliminated costly down time and, when coupled with our ongoing focus on cost reduction through established, continuous improvement initiatives across the Company, allowed us to substantially increase our earnings.

We continue to be disciplined with the use of cash in the business and, as a result, generated substantial free cash flow during the quarter of $53 million. Also, our balance sheet remains strong and at the end of the quarter the Company had healthy levels of available liquidity that John will speak to in a moment.

Finally, the integration of Advance Airlaid Materials is progressing well. We’ve strengthened the management team, established productive relationships with our new customer base and we’re on track to meet the earnings accretion targets we’ve established.

I’ll now turn the call over to John to provide more in-depth comments about the second quarter results. John?

Thank you, George. This morning we reported second quarter earnings of $103,000. When adjusted to exclude acquisition integration related costs and Timberland sales we earned $919,000 or $0.02 per share.

As shown on slide four, the primary changes in adjusted earnings per share in the comparison of this quarter’s results to the second quarter of 2009 were higher operating income from the Specialty Papers business unit increased earnings per share by $0.16. Higher operating income from the Composite Fibers business unit increased earnings per share by $0.10.

Operating from the Advance Airlaid Materials business unit added $0.03. Increased net interest expense, primarily related to the Concert Acquisition, reduced earnings per share by $0.04 and a higher effective tax rate reduced earnings per share by $0.02.

Looking at the performance of each of our businesses this quarter, Specialty Papers’ operating profit was $2.7 million in this year’s second quarter compared with a loss of $6.4 million in the 2009 second quarter.

Slide seven presents a waterfall chart of the improved results, which were driven by shipping volumes that increased 9.7% and improved mix and a lack of machine down time this year. The impact of higher selling prices was offset by higher input costs, primarily related to purchase pulp prices.

During the quarter we completed the annual maintenance outages at both of our facilities in line with our expectations. The total cost of the outages was $19.6 million or $0.28 per share compared to $16.1 million or $0.23 per share last year. Our continuous improvement initiatives largely offset the increased scope and cost of the outage in the second quarter of this year.

Slide 10 presents similar information for the Composite Fibers business unit for which operating profit totaled $8.9 million, a $5.3 million or 149% improvement, compared to the second quarter of 2009. The improvement was led by a 14.4% increase in shipping volume, which allowed us to run at capacity and eliminate the impact of market driven down time that we incurred last year.

Our continuous improvement initiatives also drove significant cost reductions in Composite Fibers and we benefitted from lower energy costs during the quarter.

The second quarter of 2010 is the first full quarter that we have operated the Advance Airlaid Materials business unit since we acquired Concert Industries in February of this year and the business generated operating profit of $1.9 million.

Shipping volume this quarter was less than we had expected, primarily due to greater than anticipated quarter end inventory management by some of our customers. In addition, the results were adversely impacted by about $1.2 million due to the time lag in passing on raw material cost increases to customers as allowed by the terms of our contracts. Selling prices under these contracts were increased effective July 1.

Our effective tax rate on adjusted earnings during the second quarter this year was 59.7% compared with 17.8% in the year earlier quarter. A higher tax rate this quarter is primarily due to the expiration of the research and development tax credit at the end of 2009 and the impact on deferred tax liabilities of an increase in tax rates in Germany.

During the second quarter, we generated free cash flow of $53 million compared to $59.8 million in the same quarter of 2009. During the second quarter this year we received a tax refund of $54.9 million related to alternative fuel mixture credits compared to $29.7 million last year.

Capital expenditures were $9.3 million in the 2010 second quarter. We now expect CapEx for the full year of 2010 to be $40 million to $45 million, which is $5 million lower than our previous estimate.

Overall our balance sheet remains strong and we have significant available liquidity. At June 30 we had net debt of $258.5 million, which represents an increase of $176 million from year end reflecting the Concert acquisition.

At the end of the second quarter we had significant liquidity with $42.6 million in cash and $218 million available under our revolving credit agreement.

For the remainder of 2010 we expect to incur approximately $1 million of additional integration costs related to the Concert acquisition.

And finally, I want to make a few comments on the cellulosic biofuel credit. On June 28th the IRS issued a memo that concluded that black liquor used in 2009 qualifies for the cellulosic biofuel producer credit. The credit is $1.01 per gallon and is a non-refundable income tax credit that is taxable.

We continue to review the IRS ruling and consider its applicability to Glatfelter and there remains considerable uncertainty about our ability to realize the benefit of this credit. If Glatfelter is ultimately able to realize the benefit of this credit, it could be worth up to an additional $40 million on an after tax basis.

This concludes my comments on our financial results. Dante will now provide comments about our business unit performance.

Thank you, John, and good morning. Our business units generated significant revenue growth during the quarter and when coupled with solid operating performance and the benefits of our continuous improvement initiatives were able to generate strong operating income.

Looking at each of the business units, I’ll start with Specialty Papers. This unit’s results improved significantly compared with the second quarter of 2009.

Total volumes shipped by Specialty Papers were 9.7% higher in this quarter when compared with the same quarter of a year ago. As a result, both facilities in this business unit have been operating at full capacity. The growth in volume shipped was driven by uncoated specialties, envelopes, security papers and business forms, which was significantly higher in the comparison to the same quarter a year ago, a continuation of trends from the latter half of 2009 reflecting our focus on expanding the products offered to both new and existing customers in these segments.

Carbonless sheets were up 39%, consistent with our performance over the past several quarters, and carbonless rolls were up approximately 3%, breaking the declining trend seen in the last several quarters due to the successful acquisition of new customers and improved economic activity. In addition engineered products increased 5% and envelope and converting paper shipments were 14% higher this quarter versus the second quarter of 2009.

Both publishing paper shipments were off 9.5% compared to a year earlier, as we moved away from less profitable commercial printing and other book publishing grades. However, shipments to the trade books segment of the market increased 20%, thereby improving our overall mix of products in this sector and within our entire Specialty Papers business unit.

Our diverse product line and industry-leading customer service again allowed us to well outperform the broader uncoated free sheet market. As I mentioned earlier, our shipments in the quarter increased approximately 10% while shipments for the uncoated free sheet market declined by 1%. Our ability to develop new business opportunities to fill our machines and continuously improve our mix of products has continued our trend of better than market performance for nearly five years.

Selling prices were higher than a year ago in each market segment with increases ranging from 1 to 4%.

During the quarter we had strong operating performance for this unit’s facilities. In addition, both the Spring Grove and Chillicothe mills successfully completed their annual maintenance outages.

As previously communicated, the scope of work was more extensive this year, requiring both additional down time and spending than last year. As expected, the total cost of the maintenance outages this year was $3.5 million higher than last year. We were able to offset most of this increase through cost reductions achieved under our continuous achievement initiatives.

From an outlook perspective, this business unit’s orders remains strong and we expect our shipping volume in the third quarter of 2010 to be approximately 8% above the second quarter levels. Selling prices are expected to increase in the same comparison as previously announced price increases are more fully implemented. And input costs on balance are expected to remain substantially unchanged.

Now let’s turn to Composite Fibers. This unit’s results also improved dramatically compared with the second quarter of 2009. Much of the improvement reflects stronger demand within the markets served by this business unit, the elimination of market-driven down time and the impact of our cost reduction initiatives.

Overall shipping volumes for this business unit increased 14% this quarter compared to the second quarter of 2009, reflecting stronger demand in each of our market segments. As a result, this business unit’s facilities have been operating at full capacity.

Shipments in Food and Beverage increased 13% compared to the second quarter of 2009 and 6.5% versus the first quarter of 2010 as a result of improved end market demand and customer restocking.

Metallized shipments increased 4.3% as a result of new business development and improving demand in 2010.

Composite Laminates increased 25%, reflecting an improvement in the broader economy and our success in new business development.

And Technical Specialties increased 55% compared to the second quarter of last year, a continuation of the diversification of our product portfolio and recovering end markets. Overall average selling prices were essentially flat compared to the year ago quarter.

Operationally Composite Fibers facilities ran very well during the quarter and our continuous improvement initiatives generated $1.5 million of cost savings in areas such as material usage, waste and yield.

From an outlook perspective for the third quarter of 2010 we expect shipping volumes, selling prices and input costs to all remain in line with the second quarter.

And finally, a few comments on Advanced Airlaid Materials. Shipping volumes for this business unit were a bit below our expectations in the second quarter, as customer quarter end inventory management practices were more significant than anticipated. However, we expect shipments in the third quarter to increase by approximately 10% compared with the second quarter levels. We also expect higher selling prices to improve results in Q3 as we are able to contractually pass through certain higher raw material costs.

As George stated in his opening remarks, our integration efforts are proceeding well. During the quarter we concluded our on-boarding and branding activities, solidified key customer and supplier relationships, completed the successful qualification of the new line in Germany and strengthened the management team, which are all necessary building blocks for Glatfelter to become the global supplier of choice in advanced airlaid materials.

I remain very excited about this acquisition and its global growth prospects for our Company. This concluded my remarks. I will now turn the call back to you, George.

Thank you, Dante. In summary, we enjoyed a successful second quarter and we expect to again deliver solid results in the third quarter. As anticipated, global economic recovery has proven to be a pretty choppy affair and I expect we’ll be confronted with this challenge through at least the remainder of the current year.

However, through the recent global recession and subsequent recovery three things stand out about Glatfelter. These are the things that matter most to our business and each was clearly reflected in our discussion this morning as well as in our second quarter financial results.

First, the diversity of our sales portfolio allowing active and nimble management of our product mix in the face of changing market dynamics, this continued to be a defining characteristic of Glatfelter in the quarter.

Continuous improvement methodology across each of our facilities has helped engage our work force and keep our costs in line. And innovation, focused upon new product development and new business development that has enabled constant reinvention of our product base.

Investors who appreciate the power of product diversification, nimbleness, continuous improvement and innovation have a pretty good basic understanding of what drives the Glatfelter business model, even in the face of sobering economic fundamentals.

I am not saying we’re bullet proof. The economy clearly has an impact upon all businesses and we’re no exception but we have proven to be very resilient and I believe we have the opportunity to remain so through the next quarter. Our performance over the past year has given me confidence that our strategy of specialization, revenue growth and aggressive cost reduction is sound and that we’re executing it well. We did so again in the second quarter.

The final strategic element of this business is the active repositioning of the Company, as most recently reflected in the acquisition of Concert Industries, now known as our Advanced Airlaid business unit. We’ve owned this business for roughly four months and we continue to be excited about its future potential.

We remain on track to realize our goal of achieving modest levels of accretion in 2010, as well as our 2011 target of $0.20 to $0.25, and we believe this acquisition can become a springboard to further penetration of growing worldwide markets for advanced fiber applications in the future.

To conclude, the performance of our Specialty Papers business is strong. We’re positive about the improving trends in Composite Fibers and the Advanced Airlaid Materials integration is proceeding on plan.

This concludes our prepared remarks for today’s call. At this point we’ll turn the call back to Brandy and ask her to open the line to address your questions.

(Operator Instructions). Your first question comes from Anna Torma of Soleil Securities.

Can we revisit the whole Kindle iPad impact, given the recent commentary that we’ve seen by Amazon that eBook sales are outpacing hard cover by nearly two to one and maybe comment on what you’re seeing in your markets and whether you’re needing to accelerate your plans to shift the mix as a result?

Okay, Anna. Good morning. This is George. Dante, why don’t you start with that question and I’ll perhaps conclude with a few comments.

Sure. Clearly eBooks are receiving a lot of attention and they appear to be here to stay. Sometimes when you see data that was released by Amazon, they were making reference to hardback but there’s also a large category of soft cover adult trade books that I don’t believe was reflected in that data.

But nonetheless there’s momentum there. EBooks are still a very small part of the overall book publishing mix and we still believe that there’s a sizable market for permanent trade book paper and we’re committed to remaining the supplier of choice and protecting our leadership position in that particular space.

I also want to call your attention to our overall performance over the last five years, where our specialty papers business unit has consistently outperformed the broader uncoated free sheet market and I believe that’s a distinct and clear reflection of the execution of our strategies to continue to diversify our product portfolio, leverage our flexible cost efficient assets and continue to develop new products in a timely and effective fashion.

So we’re not surprised by any of the market developments we’re seeing. Our core trade book volume shipments were up 20% year-over-year, which is the key component to our book publishing segment, and we will continue to work on diversifying our North American product portfolio and generating new business and new products as quickly as we need to. But we have a high level of confidence that the combination of those activities and our continuous improvement initiatives that consistently address our cost structure will allow us to outperform the broader market.

Great thanks and then just on the Composite Fibers your guidance shows improving demand but yet Q3 margins flat. Do you expect to have a change in the mix there, perhaps with composite laminates coming down or that’s impacting that? Can you give us some color on what you’re seeing in the various products there?

Just to clarify, our guidance for Q3 for Composite Laminates is at the — or for Composite Fibers in total — is that our shipping volume will be in line with the second quarter.

Okay so we’re not and we expected pricing and cost to be about in line as well, so we’re not projecting decline in margins in that business.

But are you seeing — I guess my question is more are you starting to see a mix? I mean, you’ve seen demand in this quarter improve in that segment and I would have expected to see a richer mix coming forward, so are you starting to see a shift in Q3 or is it just slower process of pricing recovery?

Well, there is some seasonality across our four market segments and our largest segment is Food and Beverage and typically this summer period is a slower period, as we ramp up for the busier fall and winter season when you have colder weather across most of Europe. But I would continue to support what John said, that we see volumes, pricing, mix essentially similar to what we see in Q2.

And typically Q2 is the weakest quarter for the Food and Beverage market. Typically we start to see that ramp up again in Q3 and certainly in Q4 and even with a seasonally slower period our shipments in Food and Beverage increased 6.5% over Q1 so we’re seeing good recovery in all of our markets.

We think our mix will be good. We have the capacity to continue to improve that mix with higher margin products so I don’t expect — I don’t think the mix, there’s a problem with the mix, and I don’t think there’s a problem with the margins either.

Could you give us a sense if there’s any discernible trends in geographies and, Dante, I think you touched on it so I guess, for instance, could you say that Europe for instance was weaker than North America in the quarter or in July so far, or in July rather?

No I wouldn’t say that. I think we have been asked on several occasions if the concerns around sovereign debt and what may be happening in euro is affecting — in Europe — is affecting our European based business and we have not seen an effect on demand and we’ve had a pretty strong performance from Europe, eastern Europe and as well as North America, so no discernible difference at this point in time.

Okay and, Dante, I think again you touched on this as well. It seems like obviously price cost mix helps Specialty in the quarter but can you give us a sense of how price and materials shift quarter to quarter into 3Q?

Well, I’ll start with what we said last call, which was we had price increases that were announced that we were expecting in the 3% to 8% range across our various product categories. We realized 1% to 4% price increase in Q2. We expect a continued realization to roll into Q3. Our commentary on input costs were on balance essentially flat quarter-to-quarter from Specialty Papers.

No I think that purchase pulp costs we think have peaked. We saw those prices increase throughout Q2 and we believe we’ll start to see those to edge down through Q3 and probably more pronounced perhaps past Q3. But on balance we would expect purchase pulp is going to be about even Q3 versus Q2, perhaps down slightly but not really that meaningful, considering that it rose all through Q2.

Okay that’s helpful and then, John, is it fair to say Concert’s written up inventory is gone by 4Q?

Q3 is the end — or I’m sorry — Q2 is the end of that, so it is — will not impact our P&L going forward.

Okay and sticking with Concert, is there any seasonality to that business and you mentioned inventory towards the end of the quarter. Is there any restock opportunity that might be out there in that business as well?

I think that the history is that Q2 tends to be a little bit weaker because of customer buying patterns and then usually there’s a bit of a rebound in Q3 and we’ve reflected that in our guidance where we expect volumes to increase by 10% so that’s about the extent of the what I would call seasonality in that business.

But in terms of any sort of restock in some of the product lines is there any opportunity for that I guess from a de-stock level in maybe back half ‘09 or for excess then?

Yes I think it’s more in just normal buying patterns by customers. I don’t believe we’re going to see a significant restocking of inventories. There is perhaps some inventory that’s run down at the end of Q2, as we talked about in our release, so there might be a little bit of that but that’s reflected in our expectation of a 10% increase but I think it’s a little bit of a shift between quarters. I don’t think I would characterize it any differently.

(Operator Instructions). There are no further questions at this time. I’d like to turn the call back over to George.

Okay, Brandy, thank you very much and thanks to all of you for participating in today’s call. As you can tell, we’re quite pleased with the performance of the quarter and we’re looking forward to quarter number three. So, again, thank you for your interest and your support of Glatfelter and we’ll be talking with you at a later date.

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Pennsylvania	001-03560	23-0628360
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

96 S. George Street, Suite 500, York, Pennsylvania		17401
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	P. H. Glatfelter Company

August 4, 2010	By:	David C. Elder

		Name: David C. Elder
		Title: Vice President and Corporate Controller


Exhibit No.		Description

99.1		A copy of the press release dated August 3, 2010, to report results of operations for the three months and six months ended June 30, 2010, is furnished herewith as Exhibit 99.1.
99.2		A copy of the transcript from the Company's teleconference held on August 3, 2010, to discuss its second quarter 2010 results of operations is furnished herewith as Exhibit 99.2.


For Immediate Release	Contacts:

	Investors:	Media:
	John P. Jacunski	William T. Yanavitch
	(717) 225-2794	(717) 225-2747


Calculation of Free Cash Flow	Three months ended June 30
In thousands	2010			2009
Cash from operations	$	62,305		$	66,052
Less:
Capital expenditures		(9,309	)		(6,241	)
Free cash flow	$	52,996		$	59,811


Date of Report (Date of Earliest Event Reported):		August 3, 2010


Registrant’s telephone number, including area code:		717 225 4711