ALPHARETTA, GA, February 15,
2017 -- Schweitzer-Mauduit International, Inc. ("SWM" or the
"Company") (NYSE: SWM) reported earnings results for the three
month and full year periods ended December 31, 2016.
NOTE: Non-GAAP
figures (including all adjusted figures) are reconciled to GAAP
measures in tables at the end of this release. All financial
measures are from continuing operations and per share data is on a
diluted basis unless stated otherwise. All financial and
operational comparisons are versus the comparable prior year period
unless stated otherwise.
Fourth Quarter Financial Results Summary
-
Net sales decreased 5.3% to $198.7 million;
lower Engineered Papers (EP) segment sales were partially offset by
the Argotec acquisition. Excluding Argotec (organic), net
sales decreased 10.8%
-
GAAP EPS was $0.55, down 22.5%; Adjusted EPS was
$0.80, down 12.1%
-
Anticipated declines in high-margin low ignition
propensity paper (LIP) and reconstituted tobacco leaf (RTL) volumes
offset the benefits of the Argotec acquisition. Non-cash
trade name impairment expenses related to rebranding impacted GAAP
EPS by $0.39
Full Year Financial Results Summary
-
Net Sales increased 9.9%, driven by the Argotec
acquisition; organic net sales decreased 4.1%
-
GAAP EPS was $2.70, down 8.8%; Adjusted EPS was
$3.26, down 7.1%
Full Year Review & Outlook, Fourth Quarter 2016
Business Highlights
-
Full year 2016 Adjusted EPS of $3.26 exceeded
guidance of $3.15; 2017 Adjusted EPS guidance is $3.15, down
slightly versus 2016, as expected accretion from Conwed will likely
be offset by RTL weakness
-
The recently closed Conwed transaction delivers
further scale to Advanced Materials & Structures (AMS) and is
expected to be SWM's most synergistic acquisition to date,
underpinning anticipated near-term segment margin expansion
-
Fourth quarter Engineered Papers segment net
sales decreased 12.5%, due mainly to anticipated double-digit
volume declines of high-margin RTL and LIP products
-
Fourth quarter cigarette paper volumes including
the Chinese JV (CTM) decreased 9%, reconstituted tobacco volumes
including the Chinese JV (CTS) decreased 20%, and non-tobacco paper
volumes increased 25%
-
EP segment GAAP and adjusted operating profit
margins expanded 250 and 60 basis points, respectively, during the
fourth quarter; strong growth in certain niche products and solid
overall cost performance offset the expected RTL and LIP
weakness
-
Fourth quarter AMS segment net sales increased
14.0%; organic net sales decreased 3.4%, with negative currency
translation impacts accounting for full decline
-
AMS segment GAAP operating profit margin was
negative in the fourth quarter due to non-cash trade name
impairment expenses related to rebranding, which more than offset
the contribution from Argotec; adjusted operating profit margin
expanded 170 basis points due primarily to Argotec
Frederic Villoutreix, Chairman of
the Board and Chief Executive Officer, commented, "We closed 2016
on a very positive note regarding our financial performance and the
announced acquisition of Conwed. Despite lower sales and
earnings compared to a very strong fourth quarter last year, our
results were better than expected due to continued strong execution
within Engineered Papers. As a result, full year Adjusted EPS
was $3.26, exceeding our guidance of $3.15. For the full
year, EP performed significantly better than we anticipated,
Argotec hit our accretion target, and currency translation was less
impactful than originally assumed, while DelStar and our Chinese
JVs performed below our expectations. In 2016, we generated
approximately $100 million of free cash flow and announced another
5% dividend increase, building our track record for dividend growth
and demonstrating our commitment to a balanced capital allocation
strategy."
"Regarding our 2017 guidance for
slightly lower Adjusted EPS, our primary challenge is that expected
Conwed accretion will likely be offset by declines in RTL.
Certain customer reblending decisions expected to impact volumes at
our French mill materialized in 2016 but the full annualized effect
will continue to impact us in 2017. In addition, we benefited
from accelerated year-end RTL orders from other customers, creating
a more difficult year-over-year comparison in 2017. Another
key element of our strong 2016 finish was our high-margin wrapper
and binder reconstituted tobacco products, which serve the US cigar
market. The stronger-than-expected recent results from this
niche business may not be sustainable, and we have assumed a
reversal of this strength in our outlook. There is potential
upside to our guidance should this favorable trend continue and
strong recent EP segment cost performance momentum carry into
2017. Though visibility for a long-term rebound in RTL is
limited, our best indications point to a stabilization of the
business beyond 2017, which could reduce volatility in our
results. Other expected puts and takes that factor into our
guidance include continued growth of Argotec, improved results from
DelStar, and growth of the Chinese JVs, offset by lower LIP
royalties, higher taxes, and the negative earnings impact of a new
interest rate swap that de-risks approximately half of our floating
rate debt."
Mr. Villoutreix concluded, "Our
multi-year strategy of leveraging the strong cash flows from our
tobacco-related businesses and balance sheet capacity to diversify
SWM into growth-oriented end-markets and specialty applications has
dramatically shifted the composition of our overall business.
Total non-tobacco sales are expected to be approximately 50%
of our business this year, up from about 5% in 2013. The
addition of Conwed's specialty netting business not only advances
our diversification efforts, but represents an opportunity to
deliver more substantial synergy value than our previous
transactions with a $10 million run-rate target by the end of
2018. Although our transformation is not complete, given
AMS's relative size and its potential to deliver solid long-term
sales growth and margin expansion, we believe we are nearing our
transformation goal of structurally re-positioning the company to
deliver long-term earnings growth."
Segment Financial Highlights
Allison Aden, Chief Financial
Officer, commented, "Expected volume declines in our LIP and RTL
products drove lower fourth quarter sales and operating profit in
Engineered Papers. Total cigarette paper sales volumes,
including our Chinese JV, decreased 9% in the fourth quarter due to
a double-digit LIP decline. We faced a difficult comparison
versus a year ago when customers were building LIP
inventories. Reconstituted tobacco sales volumes, including
our Chinese JV, were down 20% in the fourth quarter. RTL
volumes performed better than we expected during the fourth quarter
and full year, in part due to favorable timing of certain orders
and strength in niche products. Despite lower volumes across
key product lines, segment margins expanded in the fourth quarter
and full year due to strong operational execution and cost
management. Our Chinese joint ventures contributed $0.08 to
fourth quarter Adjusted EPS, however their full year contribution
of $0.16 was well below our expectations."
"Advanced Materials &
Structures segment fourth quarter net sales declined about 3%
excluding Argotec, with negative currency translation impacts
accounting for the full decline. These results reflect continued
pruning of low-margin industrial sales and soft water filtration
sales offset by growth in other filtration applications.
Excluding acquisitions and currency impacts, full year sales were
down less than 2% with industrial sales exits accounting for more
than the full decline. Argotec's surface protection film sales
continued to grow in the fourth quarter, and will be included in
organic sales growth going forward. Fourth quarter adjusted
segment operating margin improved, reflecting the addition of
Argotec and lower resin costs."
Fourth Quarter
2016 Financial Results
Total net sales were $198.7
million, down 5.3%. The Argotec acquisition contributed $9.2
million of incremental net sales, and favorable net currency
impacts resulted in an approximately $2.2 million benefit.
Excluding currency benefits, net sales decreased 6.3%, and 12.0%
excluding the Argotec acquisition, due primarily to volume declines
in tobacco-related products.
Engineered Papers segment net
sales were $133.6 million, down 12.5%, and down 14.7% excluding
currency benefits. Negative volume trends in RTL and LIP
products, partially offset by non-tobacco volume growth, were the
primary factors contributing to the net sales decline.
Advanced Materials & Structures segment net sales were $65.1
million, up 14.0%, including the Argotec acquisition. Organic
AMS segment net sales decreased 3.4%, but were flat excluding
negative currency impacts. Growth in liquid and air
filtration sales was offset by declines in water filtration and
industrial sales.
GAAP operating profit was $6.2
million, down $18.5 million, and GAAP operating profit margin was
3.1%, down 870 basis points. Non-cash trade name impairment
expense of $20.7 million related to rebranding (discussed below)
was the primary driver of the decline. Adjusted operating
profit was $30.9 million, down $1.8 million, and adjusted operating
profit margin was 15.6%, flat with last year. The Company
benefited from operational and cost improvements and favorable net
currency movements in the EP segment, incremental profits from the
Argotec acquisition, and lower input costs in the AMS
segment. These positive factors were offset by significantly
lower LIP and RTL volumes.
GAAP income was $17.0 million,
down $4.6 million; this equated to GAAP EPS of $0.55, down $0.16.
Non-cash trade name impairment expense of $12.0 million after-tax,
or $0.39 of GAAP EPS, accounted for the decline. Adjusted
income was $24.2 million, down $3.5 million; this equated to
Adjusted EPS of $0.80, down $0.11. Interest expense was $4.0
million, down $0.4 million. Income tax benefit was $12.5
million due to the impact of impairment expenses and discrete
one-time benefits related to favorable deferred tax movements and
income tax valuation allowances. The Company's Chinese JVs
together contributed $0.08 to GAAP EPS and Adjusted EPS, flat
versus last year. Translation impact of net currency movements was
negative $0.01 to both GAAP EPS and Adjusted
EPS.
Regarding items included in GAAP
operating profit, income, and EPS, but excluded from adjusted
operating profit, income, and EPS, the Company had several material
items. Restructuring and impairment expenses were $0.42 per
share, up $0.30. During the fourth quarter, the Company made
strategic decisions to rebrand the DelStar, Argotec and Conwed
businesses in 2017 as SWM while retaining the legacy product level
brand names for marketplace continuity. As a result, the
Company recognized impairment expenses related to certain corporate
level trade names. The non-cash expenses related to this
impairment equated to a GAAP EPS impact of $0.39. Purchase
accounting expenses were $0.06 per share, down $0.02. In
addition, GAAP EPS included a $0.23 per share net positive impact
of discrete items related to deferred tax movements and income tax
valuation allowances which were excluded from Adjusted EPS.
Full Year 2016
Financial Results
Total net sales were $839.9
million, up 9.9%. The Argotec acquisition contributed $106.5
million of incremental net sales and net currency movements had no
impact. Net sales decreased 4.1% excluding the Argotec
acquisition.
Engineered Papers segment net
sales were $559.3 million, down 4.2%, and down 4.8% excluding
currency benefits. Negative volume trends in RTL and LIP
products, and associated negative mix impacts, were partially
offset by conventional cigarette and non-tobacco paper volume
growth. Advanced Materials & Structures segment net sales
were $280.6 million, up 55.7%, including the Argotec
acquisition. Organic AMS segment net sales decreased 3.9%, or
1.7% excluding negative currency translation impacts. Key
factors included the exit of low-margin industrial products and a
decline in certain air filtration products related to one
customer's new product launch during 2015, which offset growth in
other filtration end-markets.
GAAP operating profit was $106.1
million up $3.1 million, and GAAP operating profit margin was
12.6%, down 90 basis points. Non-cash trade name impairment expense
of $20.7 million related to rebranding had a significant impact on
GAAP operating profit. Adjusted operating profit was $144.0
million, up $18.9 million, and adjusted operating profit margin was
17.1%, up 70 basis points. The Company benefited from
operational and cost improvements and favorable net currency
movements in the EP segment, and incremental profits from the
Argotec acquisition. These positive factors were offset by
significantly lower LIP and RTL volumes and associated negative mix
impacts in the EP segment, as well as higher corporate costs.
GAAP income was $82.8 million,
down $7.7 million; this equated to GAAP EPS of $2.70, down $0.26.
Non-cash trade name impairment expense of $12.0 million after tax,
or $0.39 of GAAP EPS was the primary driver of the decline.
Adjusted income was $99.5 million, down $7.6 million; this equated
to Adjusted EPS of $3.26, down $0.25. Interest expense was
$16.6 million, up $6.9 million due to higher debt related to the
Argotec acquisition. Income tax expense was $15.4 million,
down $6.2 million. The effective income tax rate was 16.5%,
down from 20.5%, due to the impact of impairment expenses and
discrete one-time benefits related to favorable deferred tax
movements and income tax valuation allowances. The Company's
Chinese JVs together contributed $0.16 to GAAP EPS and Adjusted
EPS, down $0.06. The negative translation impact of net
currency movements was $0.04 to both GAAP and Adjusted
EPS.
Regarding items included in GAAP
operating profit, income and EPS, but excluded from adjusted
operating profit, income, and EPS, the Company had several material
items. Restructuring and impairment expenses were $0.51 per
share, up $0.12, as the trade name impairment was partially offset
by lower restructuring costs in the Engineered Papers
segment. Purchase accounting expenses, were $0.25 per share,
up $0.09 due to the amortization of intangible assets associated
with the Argotec acquisition. In addition, GAAP EPS included
a $0.20 per share net positive impact of discrete items related to
deferred tax movements and income tax valuation allowances offset
by one-time tax expenses, which were excluded from Adjusted
EPS.
Cash Flow, Debt, and
Dividend
Full year 2016 cash provided by
operating activities was $129.7 million, down $14.9 million.
The Company's working capital-related cash outflows were $11.0
million, versus inflows in 2015 of $12.8 million, primarily due to
decreases in income taxes payable. Capital spending was $27.8
million, up $3.6 million. Capitalized software spending was
$2.8 million, up $1.9 million. Free Cash Flow was $99.1
million, down $20.4 million. In 2016, the Company paid $49.4
million in dividends to shareholders.
Net debt was $333.0 million on
December 31, 2016, versus $385.0 million at December 31,
2015. Pursuant to the debt covenants and certain adjustments
to foreign cash balances contained in the Company's credit
facility, the Company's net debt to adjusted EBITDA was
approximately 2.0x as of December 31, 2016. Following
the closing of the Conwed acquisition in mid-January 2017, this
leverage ratio was approximately 3.2x.
The Company announced that a
quarterly cash dividend of $0.42 per share will be payable on
April 7, 2017 to stockholders of record as of March 10,
2017.
2017 Financial Outlook
The Company issued annual guidance
of $3.15 for 2017E Adjusted Diluted Earnings Per Share from
Continuing Operations. Excluded from guidance are purchase
accounting expenses such as non-cash amortization expenses
associated with intangible assets in the AMS segment, restructuring
and impairment expenses, and potential transaction costs associated
with future acquisitions. Following completion of purchase
accounting expense adjustments related to the Conwed acquisition,
the Company will provide a reconciliation from Adjusted EPS
guidance to GAAP in conjunction with the first quarter 2017
earnings release.
The Company expects 2017 capital
expenditures and capitalized software spending to total
approximately $35 million.
Conference
Call
SWM will hold a conference call to
review fourth quarter and full year 2016 results with investors and
analysts at 8:30 a.m. Eastern time on Thursday, February 16, 2017.
The earnings conference call will be simultaneously broadcast over
the Internet at www.swmintl.com. To listen to the call,
please go to the Company's Web site at least 15 minutes prior to
the call to register and to download and install any necessary
audio software. For those unable to listen to the live broadcast, a
replay will be available on the Company's Web site shortly after
the call.
SWM will use a presentation in
conjunction with its conference call. The presentation can be
found on the Company's Web site in advance of the earnings
conference call. The presentation can also be accessed via
the earnings conference call webcast.
About SWM
SWM is a leading global provider
of highly engineered solutions and advanced materials for a variety
of industries. Historically, SWM primarily served the tobacco
industry, which remains a key focus. SWM also manufactures
specialty papers for other applications and is executing a
strategic transformation to diversify its product portfolio.
SWM's Advanced Materials & Structures segment, which focuses on
resin-based rolled goods, includes DelStar Technologies, acquired
in 2013, Argotec in late 2015, and other recent acquisitions.
These acquisitions expanded the Company's product portfolio and end
segments served to include filtration, surface protection, medical
and industrials. SWM and its subsidiaries conduct business in
over 90 countries and employ approximately 3,000 people worldwide,
with operations in the United States, United Kingdom, Canada,
France, Luxembourg, Russia, Brazil, Poland and China, including two
joint ventures. For further information, please visit SWM's
Web site at www.swmintl.com.
Forward-Looking
Statements
This press release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and other federal
securities laws that are subject to the safe harbor created by such
laws and other legal protections. Forward-looking
statements include, without limitation, those regarding 2017
guidance and future performance, future market and EPS trends,
future EPS contributions of our China JVs and RTL, AMS margins,
sales and volume trends, Argotec financial results, growth
prospects, capital spending, currency rates and trends and impact
on EPS, 2017 momentum, future cash flows, effective tax rates, 2017
LIP sales trends, future RTL volumes, LIP pricing and royalties,
diversification efforts of our AMS segment, accretion from the
Conwed acquisition, future results of DelStar, interest rate swap
impacts, future growth of non-tobacco sales, benefits of AMS' new
enterprise resource planning system, and other statements generally
identified by words such as "believe," "expect," "intend," "plan,"
"potential," "anticipate," "project," "appear," "should," "could,"
"may," "typically," "will," and similar words. These
statements are not guarantees of future performance and involve
certain risks and uncertainties that may cause actual results to
differ materially from our expectations as of the date of this
release. These risks include, among other things, those set
forth in Part I, Item 1A. Risk Factors of our Annual Report on Form
10-K for the year ended December 31, 2015, as well as the following
factors:
-
Changes in sales or production volumes, pricing
and/or manufacturing costs of reconstituted tobacco products,
cigarette paper (including for lower ignition propensity
cigarettes), filtration-related products due to changing customer
demands (including any change by our customers in their tobacco and
tobacco-related blends for their cigarettes, their target inventory
levels and/or the overall demand for their products), new
technologies such as e-cigarettes, inventory adjustments and
rebalancings, competition or otherwise;
-
Changes in the Chinese economy, including
relating to the demand for reconstituted tobacco, premium
cigarettes and netting;
-
Risks associated with the implementation of our
strategic growth initiatives, including diversification, and the
Company's understanding of, and entry into, new industries and
technologies;
-
Changes in the source and intensity of
competition in our commercial segments, including in Asia regarding
our AMS business;
-
Our ability to attract and retain key personnel,
due to our prior restructuring actions, the tobacco industry in
which we operate or otherwise;
-
Weather conditions, including potential impacts,
if any, from climate change, known and unknown, seasonality factors
that affect the demand for virgin tobacco leaf and natural
disasters or unusual weather events;
-
Increases in commodity prices and lack of
availability of such commodities, including energy, wood pulp and
resins, could impact the sales and profitability of our
products;
-
Adverse changes in the oil, gas, and mining
sectors impacting key AMS segment customers;
-
Increases in operating costs due to inflation or
otherwise, such as labor expense, compensation and benefits costs,
including costs related to the comprehensive health care reform law
enacted in the US in 2010;
-
Employee retention and labor
shortages;
-
Changes in employment, wage and hour laws and
regulations in the U.S., France and elsewhere, including loi de
Securisation de l'emploi, unionization rule and regulations by the
National Labor Relations Board, equal pay initiatives, additional
anti-discrimination rules or tests and different interpretations of
exemptions from overtime laws;
-
Labor strikes, stoppages, disruptions or other
disruptions at our facilities;
-
Existing and future governmental regulation and
the enforcement thereof, for example relating to the tobacco
industry, taxation and the environment (including the impact
thereof on our Chinese joint ventures);
-
New reports as to the effect of smoking on human
health or the environment;
-
Changes in general economic, financial and
credit conditions in the U.S., Europe, China and elsewhere,
including the impact thereof on currency exchange rates (including
any weakening of the euro and Real) and on interest
rates;
-
Changes in the manner in which we finance our
debt and future capital needs, including potential
acquisitions;
-
The success of, and costs associated with, our
current or future restructuring initiatives, including the granting
of any needed governmental approvals and the occurrence of work
stoppages or other labor disruptions;
-
Changes in the discount rates, revenue growth,
cash flow growth rates or other assumptions used by the Company in
its assessment for impairment of assets and adverse economic
conditions or other factors that would result in significant
impairment charges;
-
The failure of one or more material suppliers,
including energy, resin and pulp suppliers, to supply materials as
needed to maintain our product plans and cost structure;
-
International conflicts and disputes (for
example, relating to Russia and to the Ukraine), including their
impact on our sales and the adoption of new LIP
regulations;
-
The pace and extent of further international
adoption of LIP cigarette standards and the nature of standards so
adopted;
-
Risks associated with our 50%-owned, non-U.S.
joint ventures relating to control and decision-making, compliance,
accounting standards, transparency and customer relations, among
others;
-
A failure in our risk management and/or currency
or interest rate swaps and hedging programs, including the failures
of any insurance company or counterparty;
-
The number, type, outcomes (by judgment or
settlement) and costs of legal, tax, regulatory or administrative
proceedings, litigation and/or amnesty programs, including those in
Brazil;
-
The outcome and cost of LIP-related intellectual
property infringement and validity litigation in Europe and the
European Patent Office opposition proceedings;
-
Risks associated with acquisitions or other
strategic transactions, including acquired liabilities and
restrictions, retaining customers from businesses acquired,
achieving any expected results or synergies from acquired
businesses, complying with new regulatory frameworks, difficulties
in integrating acquired businesses or implementing strategic
transactions generally and risks associated with international
acquisition transactions, including in countries where we do not
currently have a material presence;
-
Risks associated with dispositions, including
post-closing claims being made against us, disruption to our other
businesses during a sale process or thereafter, credit risks
associated with any buyer of such disposed assets and our ability
to collect funds due from any such buyer;
-
Risks associated with our global asset
realignment initiatives, including: changes in tax law, treaties,
interpretations, or regulatory determinations; audits made by
applicable regulatory authorities and/or our auditor; and our
ability to operate our business in a manner consistent with the
regulatory requirements for such realignment;
-
Increased taxation on tobacco-related
products;
-
Costs and timing of implementation of any
upgrades or changes to our information technology
systems;
-
Failure by us to comply with any privacy or data
security laws or to protect against theft of customer, employee and
corporate sensitive information;
-
Changes in tax rates, the adoption of new U.S.
or international tax legislation or exposure to additional tax
liabilities;
-
Changes in construction and infrastructure
spending and its impact on demand for certain
products;
-
Potential loss of consumer awareness and demand
for acquired companies' products if it is decided to rebrand those
products under the Company's legacy brand names; and
-
Other factors described elsewhere in this
document and from time to time in documents that we file with the
SEC.
All forward-looking statements
made in this document are qualified by these cautionary
statements. These forward-looking statements are made only as
of the date of this document, and we do not undertake any
obligation, other than as may be required by law, to update or
revise any forward-looking or cautionary statements to reflect
changes in assumptions, the occurrence of events, unanticipated or
otherwise, or changes in future operating results over time or
otherwise.
Comparisons of results for current
and any prior periods are not intended to express any future trends
or indications of future performance unless expressed as such, and
should only be viewed as historical data.
For additional factors and further
discussion of these factors, please see SWM's Annual Report on Form
10-K for the period ended December 31, 2015 and other reports we
file from time to time. The financial results reported in
this release are unaudited.
Non-GAAP
Financial Measures
Certain financial measures and
comments contained in this press release exclude restructuring
expenses, certain purchase accounting adjustments related to AMS
segment acquisitions, interest expense, income tax provision,
capital spending, capitalized software, and depreciation and
amortization. This press release also provides certain
information regarding the Company's financial results excluding
currency impacts. This information estimates the impact of
changes in foreign currency rates on the translation of the
Company's current financial results as compared to the applicable
comparable period and is derived by translating the current local
currency results into U.S. Dollars based upon the foreign currency
exchange rates for the applicable comparable period.
Financial measures which exclude or include these items have not
been determined in accordance with accounting principles generally
accepted in the United States (GAAP) and are therefore "non-GAAP"
financial measures. Reconciliations of these non-GAAP financial
measures to the most closely analogous measure determined in
accordance with GAAP are included in the financial schedules
attached to this release.
The Company believes that the
presentation of non-GAAP financial measures in addition to the
related GAAP measures provides investors with greater transparency
to the information used by the Company's management in its
financial and operational decision-making. Management also
believes that the non-GAAP financial measures provide additional
insight for analysts and investors in evaluating the Company's
financial and operational performance in the same way that
management evaluates the Company's financial performance.
Management believes that providing this information enables
investors to better understand the Company's operating performance
and financial condition. These non-GAAP financial measures
are not calculated or presented in accordance with, and are not
alternatives or substitutes for, financial measures prepared in
accordance with GAAP, and should be read only in conjunction with
the Company's financial measures prepared in accordance with
GAAP.
(Tables to Follow)
SOURCE SWM:
CONTACT
Allison Aden
Chief Financial Officer
+1-770-569-4277
Or
Mark Chekanow
Director of Investor Relations
+1-770-569-4229
Web site:
http://www.swmintl.com
SCHWEITZER-MAUDUIT INTERNATIONAL,
INC. AND SUBSIDIARIES
BUSINESS SEGMENT REPORTING
(Dollars in millions)
(Unaudited)
Net
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2016 |
|
2015 |
|
% Change |
|
2016 |
|
2015 |
|
% Change |
Engineered Papers |
$ |
133.6 |
|
|
$ |
152.7 |
|
|
(12.5 |
)% |
|
$ |
559.3 |
|
|
$ |
583.9 |
|
|
(4.2 |
)% |
Advanced Materials &
Structures |
65.1 |
|
|
57.1 |
|
|
14.0 |
% |
|
280.6 |
|
|
180.2 |
|
|
55.7 |
% |
Total Consolidated |
$ |
198.7 |
|
|
$ |
209.8 |
|
|
(5.3 |
)% |
|
$ |
839.9 |
|
|
$ |
764.1 |
|
|
9.9 |
% |
Operating Profit (Loss) from Continuing Operations |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
|
|
|
Return on Net Sales |
|
|
|
|
|
Return on Net Sales |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Engineered Papers |
$ |
34.6 |
|
|
$ |
35.8 |
|
|
25.9 |
% |
|
23.4 |
% |
|
$ |
138.0 |
|
|
$ |
121.5 |
|
|
24.7 |
% |
|
20.8 |
% |
Advanced Materials &
Structures |
(13.8 |
) |
|
3.9 |
|
|
(21.2 |
)% |
|
6.8 |
% |
|
9.0 |
|
|
16.7 |
|
|
3.2 |
% |
|
9.3 |
% |
Unallocated |
(14.6 |
) |
|
(15.0 |
) |
|
|
|
|
|
(40.9 |
) |
|
(35.2 |
) |
|
|
|
|
Total Consolidated |
$ |
6.2 |
|
|
$ |
24.7 |
|
|
3.1 |
% |
|
11.8 |
% |
|
$ |
106.1 |
|
|
$ |
103.0 |
|
|
12.6 |
% |
|
13.5 |
% |
Restructuring and Impairment Expenses and Purchase
Accounting Adjustments |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Engineered Papers |
$ |
0.9 |
|
|
$ |
3.9 |
|
|
$ |
4.0 |
|
|
$ |
14.4 |
|
Advanced Materials &
Structures |
23.8 |
|
|
3.9 |
|
|
33.6 |
|
|
7.3 |
|
Unallocated |
- |
|
|
0.2 |
|
|
0.3 |
|
|
0.4 |
|
Total Consolidated |
$ |
24.7 |
|
|
$ |
8.0 |
|
|
$ |
37.9 |
|
|
$ |
22.1 |
|
Adjusted Operating Profit (Loss) from Continuing
Operations* |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
|
|
|
Return on Net Sales |
|
|
|
|
|
Return on Net Sales |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Engineered Papers |
$ |
35.5 |
|
|
$ |
39.7 |
|
|
26.6 |
% |
|
26.0 |
% |
|
$ |
142.0 |
|
|
$ |
135.9 |
|
|
25.4 |
% |
|
23.3 |
% |
Advanced Materials &
Structures |
10.0 |
|
|
7.8 |
|
|
15.4 |
% |
|
13.7 |
% |
|
42.6 |
|
|
24.0 |
|
|
15.2 |
% |
|
13.3 |
% |
Unallocated |
(14.6 |
) |
|
(14.8 |
) |
|
|
|
|
|
(40.6 |
) |
|
(34.8 |
) |
|
|
|
|
Total Consolidated |
$ |
30.9 |
|
|
$ |
32.7 |
|
|
15.6 |
% |
|
15.6 |
% |
|
$ |
144.0 |
|
|
$ |
125.1 |
|
|
17.1 |
% |
|
16.4 |
% |
* Adjusted Operating Profit (Loss)
from Continuing Operations, a non-GAAP financial measure, is
calculated by adding Restructuring and Impairment Expenses and
Purchase Accounting Adjustments to Operating Profit from Continuing
Operations.
SCHWEITZER-MAUDUIT INTERNATIONAL,
INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND
SUPPLEMENTAL DATA
(Dollars in millions, except per share
amounts)
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net sales |
$ |
198.7 |
|
|
$ |
209.8 |
|
|
$ |
839.9 |
|
|
$ |
764.1 |
|
Plus: Currency impact compared to
prior year |
(2.2 |
) |
|
14.4 |
|
|
(0.3 |
) |
|
73.6 |
|
Constant Currency Net Sales |
$ |
196.5 |
|
|
$ |
224.2 |
|
|
$ |
839.6 |
|
|
$ |
837.7 |
|
|
|
|
|
|
|
|
|
Operating profit from continuing
operations |
$ |
6.2 |
|
|
$ |
24.7 |
|
|
$ |
106.1 |
|
|
$ |
103.0 |
|
Plus: Restructuring and
impairment expense |
21.6 |
|
|
4.1 |
|
|
25.6 |
|
|
14.6 |
|
Plus: Purchase accounting
adjustments |
3.1 |
|
|
3.9 |
|
|
12.3 |
|
|
7.5 |
|
Adjusted Operating Profit from
Continuing Operations |
$ |
30.9 |
|
|
$ |
32.7 |
|
|
$ |
144.0 |
|
|
$ |
125.1 |
|
|
|
|
|
|
|
|
|
Income from continuing
operations |
$ |
17.0 |
|
|
$ |
21.6 |
|
|
$ |
82.8 |
|
|
$ |
90.5 |
|
Plus: Restructuring and
impairment expense |
21.6 |
|
|
4.1 |
|
|
25.6 |
|
|
14.6 |
|
Less: Tax impact of restructuring
and impairment expense |
(9.0 |
) |
|
(0.3 |
) |
|
(10.2 |
) |
|
(2.7 |
) |
Plus: Purchase accounting
adjustments |
3.1 |
|
|
3.9 |
|
|
12.3 |
|
|
7.5 |
|
Less: Tax impact of purchase
accounting adjustments |
(1.1 |
) |
|
(1.6 |
) |
|
(4.5 |
) |
|
(2.8 |
) |
Less: Net deferred tax movements,
one-time tax expense
& income tax valuation allowance |
(7.4 |
) |
|
- |
|
|
(6.5 |
) |
|
- |
|
Adjusted Income from Continuing
Operations |
$ |
24.2 |
|
|
$ |
27.7 |
|
|
$ |
99.5 |
|
|
$ |
107.1 |
|
|
|
|
|
|
|
|
|
Earnings per share - diluted |
$ |
0.55 |
|
|
$ |
0.72 |
|
|
$ |
2.70 |
|
|
$ |
2.94 |
|
Plus: Loss (income) per share
from discontinued operations |
- |
|
|
(0.01 |
) |
|
- |
|
|
0.02 |
|
Earnings per share from
continuing operations |
0.55 |
|
|
0.71 |
|
|
2.70 |
|
|
2.96 |
|
Plus: Restructuring and
impairment expense per share |
0.71 |
|
|
0.13 |
|
|
0.84 |
|
|
0.48 |
|
Less: Tax impact of restructuring
and impairment expense per share |
(0.29 |
) |
|
(0.01 |
) |
|
(0.33 |
) |
|
(0.09 |
) |
Plus: Purchase accounting
adjustments per share |
0.10 |
|
|
0.13 |
|
|
0.40 |
|
|
0.25 |
|
Less: Tax impact of purchase
accounting adjustments per share |
(0.04 |
) |
|
(0.05 |
) |
|
(0.15 |
) |
|
(0.09 |
) |
Less: Net deferred tax movements,
one-time tax expense
& income tax valuation allowance per share |
(0.23 |
) |
|
- |
|
|
(0.20 |
) |
|
- |
|
Adjusted Earnings Per Share from
Continuing Operations - Diluted |
$ |
0.80 |
|
|
$ |
0.91 |
|
|
$ |
3.26 |
|
|
$ |
3.51 |
|
|
|
|
|
|
|
|
|
Income from continuing
operations |
$ |
17.0 |
|
|
$ |
21.6 |
|
|
$ |
82.8 |
|
|
$ |
90.5 |
|
Plus: Interest expense |
4.0 |
|
|
4.4 |
|
|
16.6 |
|
|
9.7 |
|
Plus: Income tax (benefit)
provision |
(12.5 |
) |
|
3.7 |
|
|
15.4 |
|
|
21.6 |
|
Plus: Depreciation &
amortization |
9.5 |
|
|
12.0 |
|
|
42.8 |
|
|
41.0 |
|
Plus: Restructuring and
impairment expense |
21.6 |
|
|
4.1 |
|
|
25.6 |
|
|
14.6 |
|
Adjusted EBITDA from Continuing
Operations |
$ |
39.6 |
|
|
$ |
45.8 |
|
|
$ |
183.2 |
|
|
$ |
177.4 |
|
|
|
|
|
|
|
|
|
Cash provided by operating
activities of continuing operations |
$ |
46.6 |
|
|
$ |
64.9 |
|
|
$ |
129.7 |
|
|
$ |
144.6 |
|
Less: Capital spending |
(10.3 |
) |
|
(10.2 |
) |
|
(27.8 |
) |
|
(24.2 |
) |
Less: Capitalized software
costs |
(1.1 |
) |
|
(0.2 |
) |
|
(2.8 |
) |
|
(0.9 |
) |
Free Cash Flow from Continuing
Operations |
$ |
35.2 |
|
|
$ |
54.5 |
|
|
$ |
99.1 |
|
|
$ |
119.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
|
|
|
Total Debt |
|
|
|
|
$ |
440.4 |
|
|
$ |
571.5 |
|
Less: Cash |
|
|
|
|
107.4 |
|
|
186.5 |
|
Net Debt |
|
|
|
|
$ |
333.0 |
|
|
$ |
385.0 |
|
SCHWEITZER-MAUDUIT INTERNATIONAL,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share
amounts)
(Unaudited)
|
Years Ended December 31, |
|
|
|
2016 |
|
2015 |
|
% Change |
Net sales |
$ |
839.9 |
|
|
$ |
764.1 |
|
|
9.9 |
% |
Cost of products sold |
583.2 |
|
|
539.7 |
|
|
8.1 |
|
Gross profit |
256.7 |
|
|
224.4 |
|
|
14.4 |
|
|
|
|
|
|
|
Selling expense |
25.3 |
|
|
22.2 |
|
|
14.0 |
|
Research expense |
17.5 |
|
|
14.0 |
|
|
25.0 |
|
General expense |
82.2 |
|
|
70.6 |
|
|
16.4 |
|
Total nonmanufacturing
expenses |
125.0 |
|
|
106.8 |
|
|
17.0 |
|
|
|
|
|
|
|
Restructuring and impairment
expense |
25.6 |
|
|
14.6 |
|
|
75.3 |
|
Operating profit |
106.1 |
|
|
103.0 |
|
|
3.0 |
|
Interest expense |
16.6 |
|
|
9.7 |
|
|
71.1 |
|
Other income, net |
3.9 |
|
|
12.2 |
|
|
(68.0 |
) |
Income from continuing operations
before income taxes and income from equity affiliates |
93.4 |
|
|
105.5 |
|
|
(11.5 |
) |
|
|
|
|
|
|
Income tax provision |
15.4 |
|
|
21.6 |
|
|
(28.7 |
) |
Income from equity affiliates,
net of income taxes |
4.8 |
|
|
6.6 |
|
|
(27.3 |
) |
Income from continuing
operations |
82.8 |
|
|
90.5 |
|
|
(8.5 |
) |
Income from discontinued
operations |
- |
|
|
(0.8 |
) |
|
N.M. |
Net income |
$ |
82.8 |
|
|
$ |
89.7 |
|
|
(7.7 |
)% |
|
|
|
|
|
|
Net income per share -
basic: |
|
|
|
|
|
Income per share from continuing
operations |
$ |
2.71 |
|
|
$ |
2.97 |
|
|
(8.8 |
)% |
Income per share from
discontinued operations |
- |
|
|
(0.02 |
) |
|
N.M. |
Net income per share - basic |
$ |
2.71 |
|
|
$ |
2.95 |
|
|
(8.1 |
)% |
|
|
|
|
|
|
Net income per share -
diluted: |
|
|
|
|
|
Income per share from continuing
operations |
$ |
2.70 |
|
|
$ |
2.96 |
|
|
(8.8 |
)% |
Income per share from
discontinued operations |
- |
|
|
(0.02 |
) |
|
N.M. |
Net income per share -
diluted |
$ |
2.70 |
|
|
$ |
2.94 |
|
|
(8.2 |
)% |
|
|
|
|
|
|
Cash dividends declared per
share |
$ |
1.62 |
|
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
30,310,900 |
|
|
30,251,400 |
|
|
|
|
|
|
|
|
|
Diluted |
30,463,400 |
|
|
30,374,300 |
|
|
|
N.M.- Not Meaningful
SCHWEITZER-MAUDUIT INTERNATIONAL,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share
amounts)
(Unaudited)
|
Three Months Ended December 31, |
|
|
|
2016 |
|
2015 |
|
% Change |
Net sales |
$ |
198.7 |
|
|
$ |
209.8 |
|
|
(5.3 |
)% |
Cost of products sold |
135.5 |
|
|
144.0 |
|
|
(5.9 |
) |
Gross profit |
63.2 |
|
|
65.8 |
|
|
(4.0 |
) |
|
|
|
|
|
|
Selling expense |
6.5 |
|
|
6.2 |
|
|
4.8 |
|
Research expense |
4.6 |
|
|
3.5 |
|
|
31.4 |
|
General expense |
24.3 |
|
|
27.3 |
|
|
(11.0 |
) |
Total nonmanufacturing
expenses |
35.4 |
|
|
37.0 |
|
|
(4.3 |
) |
|
|
|
|
|
|
Restructuring and impairment
expense |
21.6 |
|
|
4.1 |
|
|
N.M. |
Operating profit |
6.2 |
|
|
24.7 |
|
|
(74.9 |
) |
Interest expense |
4.0 |
|
|
4.4 |
|
|
(9.1 |
) |
Other income, net |
(0.1 |
) |
|
2.7 |
|
|
N.M. |
Income from continuing operations
before income taxes and income from equity affiliates |
2.1 |
|
|
23.0 |
|
|
(90.9 |
) |
|
|
|
|
|
|
Income tax (benefit)
provision |
(12.5 |
) |
|
3.7 |
|
|
N.M. |
Income from equity affiliates,
net of income taxes |
2.4 |
|
|
2.3 |
|
|
4.3 |
|
Income from continuing
operations |
17.0 |
|
|
21.6 |
|
|
(21.3 |
) |
Income from discontinued
operations |
- |
|
|
0.1 |
|
|
N.M. |
Net income |
$ |
17.0 |
|
|
$ |
21.7 |
|
|
(21.7 |
)% |
|
|
|
|
|
|
Net income per share -
basic: |
|
|
|
|
|
Income per share from continuing
operations |
$ |
0.55 |
|
|
$ |
0.71 |
|
|
(22.5 |
)% |
Income per share from
discontinued operations |
- |
|
|
0.01 |
|
|
N.M. |
Net income per share - basic |
$ |
0.55 |
|
|
$ |
0.72 |
|
|
(23.6 |
)% |
|
|
|
|
|
|
Net income per share -
diluted: |
|
|
|
|
|
Income per share from continuing
operations |
$ |
0.55 |
|
|
$ |
0.71 |
|
|
(22.5 |
)% |
Income per share from
discontinued operations |
- |
|
|
0.01 |
|
|
N.M. |
Net income per share -
diluted |
$ |
0.55 |
|
|
$ |
0.72 |
|
|
(23.6 |
)% |
|
|
|
|
|
|
Cash dividends declared per
share |
$ |
0.42 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
30,318,900 |
|
|
30,276,500 |
|
|
|
|
|
|
|
|
|
Diluted |
30,524,400 |
|
|
30,396,900 |
|
|
|
N.M.- Not Meaningful
SCHWEITZER-MAUDUIT INTERNATIONAL,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in millions)
(Unaudited)
|
December 31,
2016 |
|
December 31,
2015 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
107.4 |
|
|
$ |
186.5 |
|
Accounts receivable, net |
115.1 |
|
|
119.4 |
|
Inventories |
119.4 |
|
|
112.4 |
|
Assets held for sale |
17.3 |
|
|
21.9 |
|
Other current assets |
5.1 |
|
|
4.6 |
|
Property, plant and equipment,
net |
307.4 |
|
|
308.1 |
|
Goodwill |
229.5 |
|
|
233.3 |
|
Other noncurrent assets |
272.5 |
|
|
303.8 |
|
Total Assets |
$ |
1,173.7 |
|
|
$ |
1,290.0 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Current debt |
$ |
3.0 |
|
|
$ |
3.3 |
|
Other current liabilities |
132.8 |
|
|
139.8 |
|
Long-term debt |
437.4 |
|
|
568.2 |
|
Pension and other postretirement
benefits |
33.1 |
|
|
33.5 |
|
Deferred income tax
liabilities |
29.8 |
|
|
45.3 |
|
Other noncurrent liabilities |
29.3 |
|
|
32.0 |
|
Stockholders' equity |
508.3 |
|
|
467.9 |
|
Total Liabilities and
Stockholders' Equity |
$ |
1,173.7 |
|
|
$ |
1,290.0 |
|
Note: In connection with the
Company's acquisition of Argotec Intermediate Holdings LLC during
the fourth quarter of 2015, the Company recorded $109.3 million of
Goodwill and $130.5 million of intangible assets (included in Other
noncurrent assets), of which $115.9 million will be amortized over
approximately 15 years, and an increase of $1.5 million to
inventory to record it at purchase price fair value.
SCHWEITZER-MAUDUIT INTERNATIONAL,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOW
(Dollars in millions)
(Unaudited)
|
Years Ended December 31, |
|
2016 |
|
2015 |
Operations |
|
|
|
Net income |
$ |
82.8 |
|
|
$ |
89.7 |
|
Less: Loss from discontinued
operations |
- |
|
|
(0.8 |
) |
Income from continuing
operations |
82.8 |
|
|
90.5 |
|
Non-cash items included in net
income: |
|
|
|
Depreciation and
amortization |
44.5 |
|
|
41.0 |
|
Impairment |
21.3 |
|
|
6.7 |
|
Deferred income tax benefit |
(13.5 |
) |
|
(6.7 |
) |
Pension and other postretirement
benefits |
3.8 |
|
|
4.2 |
|
Stock-based compensation |
5.8 |
|
|
3.5 |
|
Income from equity affiliate |
(4.8 |
) |
|
(6.6 |
) |
Gain on sale of intangible
assets |
(1.8 |
) |
|
(4.3 |
) |
Excess tax benefits of
stock-based awards |
0.2 |
|
|
(0.5 |
) |
Cash dividends received from
equity affiliates |
3.0 |
|
|
3.9 |
|
Other items |
(0.6 |
) |
|
0.1 |
|
Net changes in operating working
capital |
(11.0 |
) |
|
12.8 |
|
Net cash provided by (used in)
operating activities of: |
|
|
|
Continuing operations |
129.7 |
|
|
144.6 |
|
Discontinued
operations |
- |
|
|
0.1 |
|
Cash provided by operations |
129.7 |
|
|
144.7 |
|
|
|
|
|
Investing |
|
|
|
Capital spending |
(27.8 |
) |
|
(24.2 |
) |
Capitalized software costs |
(2.8 |
) |
|
(0.9 |
) |
Acquisitions, net of cash
acquired |
- |
|
|
(280.6 |
) |
Other investing |
8.2 |
|
|
(8.0 |
) |
Cash used in investing |
(22.4 |
) |
|
(313.7 |
) |
|
|
|
|
Financing |
|
|
|
Cash dividends paid to SWM
stockholders |
(49.4 |
) |
|
(46.9 |
) |
Changes in short-term debt |
- |
|
|
(0.4 |
) |
Proceeds from issuances of
long-term debt |
35.6 |
|
|
488.2 |
|
Payments on long-term debt |
(171.0 |
) |
|
(338.7 |
) |
Payments for debt issuance
costs |
- |
|
|
(7.4 |
) |
Purchases of common stock |
(0.7 |
) |
|
(2.9 |
) |
Excess tax benefits of
stock-based awards |
(0.2 |
) |
|
0.5 |
|
Cash (used in) provided by
financing |
(185.7 |
) |
|
92.4 |
|
|
|
|
|
Effect of exchange rate changes
on cash and cash equivalents |
(0.7 |
) |
|
(27.2 |
) |
|
|
|
|
Decrease in cash and cash
equivalents |
$ |
(79.1 |
) |
|
$ |
(103.8 |
) |
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Schweitzer-Mauduit International Inc via
Globenewswire
Schweitzer Mauduit (NYSE:SWM)
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