Glatfelter Corp

Our business requires expenditures for new or enhanced equipment, research and development efforts, and to support our business strategy. In addition, we have mandatory debt service requirements of both principal and interest. The following table summarizes cash flow information for each of the periods presented:

At December 31, 2023, we had $50.3 million in cash and cash equivalents (“cash”), of which approximately 89.0% was held by foreign subsidiaries. Cash held by our foreign subsidiaries can be repatriated without incurring a significant amount of additional taxes.

Cash used by operating activities during the year ended December 31, 2023, totaled $25.6 million compared with $40.8 million in the same period a year ago. The decrease in cash used was primarily due to a decrease in working capital usage of approximately $31.9 million, primarily due to: i) accounts receivable, which was driven by higher accounts receivables in 2022 due in part to the termination of the Spunlace factoring program in the U.S., and lower sales in 2023; ii) inventory, which was driven by higher inventory values in 2022 due to raw material and energy inflation and lower raw material levels in 2023, partially offset by; iii) accounts payable which declined in 2023 due to the abatement of inflationary impacts in 2022 and tighter credit terms by vendors reducing days to pay. Operating cash also improved $15.0 million from a decrease in income taxes paid in 2023, due to higher Canadian income taxes and withholding tax in 2022 and a U.K. income tax refund in 2023 and receipt of $7.6 million of of employee retention credit payments in 2023. These improvements in operating cash flow were partially offset by lower earnings in 2023 compared to 2022, an increase in interest paid of $26.0 million due to higher interest rates on our debt stemming from the debt refinancing in the first quarter of 2023. In addition, cash outflows related to our turnaround strategy and CEO transition increased $19.8 million in 2023 compared to 2022.

Net cash used by investing activities for 2023 totaled $37.1 million which primarily reflects capital expenditures totaling $33.8 million partially offset by $1.7 million in proceeds from the sales of timberlands. Net cash used by investing activities for 2022 totaled $33.1 million which primarily reflects capital expenditures totaling $37.7 million partially offset by $3.2 million in proceeds from the sales of timberlands. Capital expenditures are expected to total between $35 million and $40 million in 2024.

Net cash used by financing activities totaled $0.9 million in 2023 compared with $46.9 million in 2022. The change in the year-to-year comparison primarily reflects increased borrowings under our revolving credit facility for working capital and other operating expenditures in 2022.

Our revolving credit facility due in September 2026, contains a number of customary compliance covenants. As of December 31, 2023, the leverage ratio, as calculated in accordance with the definition in our Credit Agreement, was 3.4x, well within the maximum limit allowed under our Credit Agreement. A breach of these requirements would give rise to certain remedies under the Revolving Credit Facility, among which are the termination of the agreement and accelerated repayment of the outstanding borrowings plus accrued and unpaid interest under the Credit Agreement. As discussed in Note 20 - “Long-Term Debt,” on March 30, 2023, we amended our Credit Agreement to increase the adjust leverage ratio (as defined in Credit Agreement) to 4.25 to 1.0 until the quarter ended December 31, 2024, stepping down to 4.0 to 1.0 at March 31, 2025, and 3.50 to 1.0 at March 31, 2026.

Details of our outstanding long-term indebtedness are set forth under Item 8 - Financial Statements and Supplementary Data – Note 20 -“Long-Term Debt."

We are subject to various federal, state and local laws and regulations intended to protect the environment, as well as human health and safety. At various times, we have incurred costs to comply with these regulations and we could incur additional costs as new regulations are developed or regulatory priorities change.

As more fully discussed in Item 8 - Financial Statements and Supplementary Data – Note 24 –“Commitments, Contingencies and Legal Proceedings,” we are involved in the Lower Fox River in Wisconsin (the “Fox River”), an EPA Superfund site for which we remain potentially liable for certain government oversight and long-term monitoring and maintenance costs. Although there remains some uncertainty as to the amount we may ultimately be required to spend, primarily for government oversight costs, the consent decree specifies the nature of our future obligations.

We expect to meet all our near and long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility and other long-term debt.

At December 31, 2023, we had ample liquidity consisting of $50.3 million of cash on hand and $85.1 million of capacity under our revolving credit facility. We expect to meet all of our near and long-term cash needs from a combination of operating cash flow, cash and cash equivalents, our existing credit facility and other long-term debt.

In October 2022, our credit rating was downgraded by S&P Global Ratings to CCC+ based on its latest assessment of our business. Although the downgrade does not impact our current interest costs or cause a default on any of our debt, it may impact our cost or our ability to refinance our debt or issue new debt in the future on terms as favorable as we might otherwise be able to achieve without the downgrade. Furthermore, the downgrade may increase the risk that our vendors could reduce our credit limits which may require earlier or more frequent payments to operate within our limits which would negatively impact our cash flow.

Off-Balance-Sheet Arrangements As of December 31, 2023 and 2022, we had not entered into any off-balance-sheet arrangements. Financial derivative instruments, to which we are a party, and guarantees of indebtedness, which solely consist of obligations of subsidiaries, are reflected in the consolidated balance sheets included herein in Item 8 – Financial Statements and Supplementary Data.