P.H. Glatfelter Company - Company Profile, Information, Business Description, History, Background Information on P.H. Glatfelter Company

96 South George Street
York, Pennsylvania 17401

Company Perspectives:

Vision Statement: The P.H. Glatfelter Company will become a recognized world leader in the production of highly specialized and engineered papers. We will create value for our customers by understanding their needs and by helping them to achieve their business objectives. We will create value for our shareholders through differentiating our business from others within the paper industry as measured by the generation of superior financial results.

Our pursuit of these objectives will be unrelenting and will be conducted with unfailing integrity while striving to provide rewarding challenges and opportunities to our employees, and upholding our responsibility to the global environment as well as to the communities in which we reside.

History of P.H. Glatfelter Company

P.H. Glatfelter Company, a producer of engineered papers (such as tobacco papers 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 thin, flax paper for cigarettes as well as lightweight religious and financial publications. 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. Overall annual production capacity at all of the company's mills worldwide is approximately 600,000 tons. 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.

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 the turn of the century 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 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 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 fourdrinier 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.

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," P.H. Glatfelter II, William's 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 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.

Bergstrom and Ecusta: 1979, 1987

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), Steven 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."

Mid-to-Late 1990s Difficulties

Glatfelter received a huge blow in late 1992 when Philip Morris Co. announced that it would single-source its domestic cigarette paper from Kimberly-Clark Corp. 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 one-time 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. Glatfelter was likely to pay down this debt before seeking additional acquisitions. 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. Another historical development came in September of the following year 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.

Principal Subsidiaries: Balo-I Industrial, Inc. (Philippines); Ecusta Australia Pty. Limited; Ecusta Export Trading Corp. (Barbados); Ecusta Fibres Ltd. (Canada); Glatfelter Investments, Inc.; Glatfelter of Nevada, Inc.; Glenn-Wolfe, Inc.; Mollanvick, Inc.; Newtech Pulp Inc. (Philippines); Papcel-Kiew (Ukraine); Papcel-Papier und Cellulose, Technologie und Handels-GmbH (Germany); Papeteries de Cascadec S.A. (France; 50%); Papierfabrik Schoeller & Hoesch Auslandsbeteiligungen GmbH (Germany); Papierfabrik Schoeller & Hoesch GmbH & Co. KG (Germany); PHG Tea Leaves, Inc.; PHG Verwaltungsgesellschaft mbH (Germany); S&H Verwaltungsgesellschaft mbH (Germany); Schoeller & Hoesch N.A., Inc.; Schoeller & Hoesch S.A.R.L. (France); Spring Grove Water Company; The Glatfelter Pulp Wood Company; Unicon-Papier-und Kunststoffhandels GmbH (Germany).

Principal Divisions: Glatfelter Division; Ecusta Division.

Additional Details

Further Reference

Abelson, Reed, "P.H. Glatfelter Co.," Fortune, June 5, 1989, p. 176.Briggs, Rosland, "Spring Grove, Pa.-Based Tobacco Paper Company Rolls Toward Recovery," Philadelphia Inquirer, May 12, 1999.Cauffiel-Zinn, Jan, "The P.H. Glatfelter Company," Barker (inhouse magazine of P.H. Glatfelter Company), Spring/Summer/Fall/Winter 1989, pp. 12--13."CEO Interview: George H. Glatfelter II," Wall Street Transcript, July 19, 1999."Cigarette Paper Producers' Uncertain Future," Pulp & Paper, May 1999, p. 23.Cochran, Thomas N., "P.H. Glatfelter Co.," Barron's, August 29, 1988, pp. 32--33.Finchem, Kirk, "P.H. Glatfelter: Returns to Growth After Losing Key Customer," Pulp & Paper, December 1996, pp. 42--43, 45.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 Co., Spring Grove, Pa., 1690-1940: 250 Years of Papermaking in America, Stroudsburg, Pa.: Lockwood Trade Journal Co., 1940, p. 88.

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