November 4, 2019 -- Schweitzer-Mauduit International, Inc.
("SWM" or the "Company") (NYSE: SWM) reported earnings results for
the three month period ended September 30, 2019.
Adjusted measures are reconciled to GAAP at the
end of this release. Financial and operating comparisons are
versus the prior year period and are from continuing
operations. Figures may not sum to total due to
rounding. Definitions: Advanced Materials & Structures
(AMS), reverse osmosis (RO), Engineered Papers (EP), low ignition
propensity (LIP), reconstituted tobacco leaf (RTL), heat-not-burn
(HnB)
Third Quarter 2019 Financial Results
Summary
• Total sales
were $256.4 million, down 2%, and flat excluding currency impact•
GAAP operating profit was $34.6 million, or 13.5% of
sales, up 11%• Adjusted operating profit was $41.9
million, or 16.3% of sales, up 14%• GAAP EPS was
$0.90, down from $1.33; prior year quarter included $0.68 of
one-time benefits• Adjusted EPS was $1.01, up 29%
Third Quarter 2019 Business Highlights
- AMS segment sales increased 4%, or 5% absent currency impacts,
driven by continued strong gains in transportation and filtration
products, as well as growth in medical
- AMS GAAP and adjusted operating profit margin expanded 540 and
480 basis points, respectively, due to strong organic sales growth,
fixed cost reductions, and favorable resin input costs; adjusted
operating profit increased 39%
- EP segment sales decreased 7%, or 4% absent currency impacts;
positive price/mix performance partially offset lower volumes
- EP GAAP operating profit and adjusted operating profit margin
expanded 130 and 290 basis points, respectively, due to positive
price/mix benefits and lower wood pulp input costs; adjusted
operating profit increased 7%
Dr. Jeff Kramer, Chief Executive Officer,
commented, "Third quarter Adjusted EPS increased nearly 30%,
highlighted by strong organic sales growth in AMS, solid execution
across both businesses, and favorable raw material costs
contributing to healthy profit growth."
"AMS segment profits grew nearly 40% versus last
year when raw material costs had a significant margin impact.
With rising polypropylene costs no longer clouding our results, we
can see the benefits of strong organic growth and cost efficiency
efforts as we delivered nearly 500 basis points of margin
expansion. Top-line strength was generally balanced across our core
end-markets. Filtration and transportation continued to
demonstrate positive momentum and our medical business also
increased, driving solid overall sales growth. EP segment
profits increased 7% as our focus on higher-value products, good
operational execution, and lower wood pulp input costs helped drive
margin expansion. Our continued strategic de-emphasis on
lower-margin non-tobacco products coupled with slightly higher
attrition rates in the US weighed on volumes."
Dr. Kramer concluded, "We continue to deliver on
our vision of profit stability in our paper business and growth in
our AMS platform that was the basis of our 2019 earnings outlook.
To date, results are on plan, cash flow generation is robust, and
we continue to execute against our strategic initiatives of new
product innovations, global capacity additions in our fastest
growing technologies and products, and projects to further improve
our cost structure and efficiency."
Third Quarter 2019 Financial
Results
Advanced Materials &
Structures segment sales were $126.1 million, up 4%, or 5%
absent negative Euro-driven currency impacts. High growth in
transportation, driven by paint protection films and glass
lamination products, led the portfolio. Filtration sales,
largely bolstered by sustained growth in RO water applications,
were also key to the continued organic sales increase.
Medical products contributed to top-line gains, while
infrastructure and construction and industrial sales lagged.
GAAP operating profit was $19.3 million, or 15.3% of sales, up
62%. Adjusted operating profit was $24.4 million, up 39%,
with margin expanding 480 basis points to 19.3%. Organic
sales growth, reduced fixed costs and improved manufacturing
efficiencies, and lower polypropylene resin input costs drove the
increased profitability.
Engineered Papers segment sales
were $130.3 million, down 7%, but down 4% absent negative currency
impacts due mostly to a lower Euro. Positive price/mix
performance of 6% was offset by a volume decline of 10%.
Price/mix benefited from contractual wood pulp-based price
escalators, as well as a higher mix of cigarette papers and wrapper
and binder volumes. The volume decline was driven by
continued de-emphasis of lower margin printing and writing volumes
and declines in tobacco related volumes from industry attrition and
inventory draw-downs by certain customers. GAAP operating
profit was $27.3 million, or 21.0% of sales, down 1%.
Adjusted operating profit was $29.5 million, up 7%, with adjusted
operating margin expanding 290 basis points to 22.6%. Margins
increased primarily due to positive price/mix movements within the
portfolio, improved manufacturing performance, SG&A reductions,
and lower wood pulp input costs. Currency movements resulted
in a negative $0.8 million impact to operating profit.
Unallocated GAAP and adjusted
expenses were each $12.0 million, up $3.7 million, and were 4.7% of
total sales, up 150 basis points. The most significant
component of the increase was higher deferred compensation expenses
compared to the prior year period related to relative stock price
movements during the two periods. Other unallocated expense
drivers included investments in upgraded IT systems to support
growth, and the timing of certain other corporate expenses.
Consolidated sales were $256.4
million, down 2%. GAAP operating profit was $34.6 million, up 11%,
and GAAP operating profit margin was 13.5%. Adjusted
operating profit was $41.9 million, up 14%, and adjusted operating
profit margin was 16.3%, up 220 basis points. Adjusted EBITDA was
$51.4 million, up 11%, and adjusted EBITDA margin was 20.0%, up 210
basis points. GAAP income was $27.7 million, versus $40.9
million; GAAP EPS was $0.90. Adjusted income was $31.2
million, up 25%; Adjusted EPS was $1.01.
Interest expense was $6.7 million, but reflected
a $0.6 million favorable adjustment related to 2Q:19 Brazil tax
assessment expenses. Absent this adjustment, interest expense
on debt was $7.3 million, flat with prior year, as higher effective
interest rates as a result of the bond issuance during the third
quarter of 2018 were offset by lower debt balances. Other
income was $1.7 million, down from $11.2 million, as prior year
results included a $10.2 million benefit, or $0.25 per share, from
the revaluation of a contingent liability.
The Company reported a tax rate of 10.8%, versus
an income tax benefit of $5.6 million in the prior year
period. The change is primarily due to a $13.0 million, or
$0.43 per share, favorable transitional tax adjustment related to
US tax reform recorded in the prior year. Excluding the
impact of non-GAAP adjustments, the third quarter 2019 tax rate was
17.9% (the implied rate reflected in the Company's Adjusted EPS),
down from 19.6% in the prior year quarter. The Company's
Chinese JVs contributed $0.04 to both GAAP and adjusted EPS, up
from $0.01 in the prior year period due to favorable timing.
Net currency movements had a 2% negative impact on sales and a $1.0
million negative impact on operating profits; the translation
impact of net currency movements was negative $0.01 to both GAAP
EPS and Adjusted EPS.
Non-GAAP Adjustments reflect
items included in GAAP operating profit, income, and EPS, but
excluded from adjusted operating profit, income, and EPS (see
non-GAAP reconciliation tables). The most significant adjustment to
third quarter 2019 results were purchase accounting expenses of
$0.13 per share (purchase accounting expenses reflect the ongoing
non-cash intangible asset amortization associated with AMS
acquisitions). Other non-GAAP adjustments included $0.05 per
share of restructuring expenses in the EP segment related to cost
reduction activities. The most significant non-GAAP
adjustments in the third quarter of 2018 were the $0.25 per share
benefit from the contingent liability revaluation, the $0.43 per
share gain from the transitional tax adjustment, and purchase
accounting expenses of $0.12 per share.
2019 Year-to-Date Financial
Results
Advanced Materials &
Structures segment sales were $373.3 million, up 4%.
Consistent with first half results, strong increases in
transportation products, driven by paint protection films and glass
lamination, led the portfolio. Filtration sales, supported by
RO water application growth, also continued to drive organic sales
gains. Medical products sales increased, led by the consumer
finger bandage category. Infrastructure and
construction and industrial sales both declined versus prior
year. GAAP operating profit was $54.6 million, or 14.6% of
sales, up 38%. Adjusted operating profit was $69.9 million,
up 24%, with margin expanding 310 basis points to 18.7%.
Sales growth, reduced fixed costs, SG&A improvements, and lower
polypropylene resin input costs drove the increased
profitability.
Engineered Papers segment sales
were $411.0 million, down 5%, but down 1% absent negative currency
impacts due mostly to a lower Euro. Positive price/mix
performance of 8% nearly offset a volume decline of 9%.
Price/mix benefited from contractual wood pulp-based price
escalators as well as a higher mix of LIP and wrapper and binder
volumes. The volume decline was driven primarily by lower
traditional RTL and HnB products, in part due to a difficult HnB
comparison to the first half of 2018 when customers were launching
new products, and the continued de-emphasis of lower margin
non-tobacco products. Cigarette paper volumes were
flat. GAAP operating profit was $88.5 million, or 21.5% of
sales, down 7%. Adjusted operating profit was $92.0 million,
down 3%, with adjusted operating margin increasing 50 basis points
to 22.4%. Year-to-date margins reflect a soft first quarter
2019 from higher raw material costs and manufacturing
inefficiencies, whereas the subsequent quarters showed significant
sequential improvement over the first quarter from both
manufacturing efficiencies and easing wood pulp input costs.
Currency movements resulted in a negative $3.3 million impact to
operating profit.
Unallocated GAAP and adjusted
expenses were each $33.9 million, up $7.9 million, and were 4.3% of
total sales, up 100 basis points. The primary drivers of the
increase were higher deferred compensation expenses as a result of
positive stock price performance relative to 2018 and higher IT
expenses to support growth initiatives.
Consolidated sales were $784.3
million, down 1%. GAAP operating profit was $109.2 million, up 1%,
and GAAP operating profit margin was 13.9%. Adjusted
operating profit was $128.0 million, up 2%, and adjusted operating
profit margin was 16.3%, up 50 basis points. Adjusted EBITDA
was $156.3 million, up 1%, and adjusted EBITDA margin was 19.9%, up
30 basis points. GAAP income was $65.6 million, versus $87.6
million, and included $6.7 million, or $0.21 per share, of net tax
assessment expenses in Brazil; this equated to GAAP EPS of
$2.12. Adjusted income was $85.1 million, up 5%; this equated
to Adjusted EPS of $2.75.
Interest expense was $29.6 million, up $9.5
million, reflecting $7.1 million of interest related to the Brazil
tax assessments and $2.4 million of higher effective interest rates
on debt as a result of the bond issuance during the third quarter
of 2018. Other expense was $1.6 million and included $2.2
million of expenses related to the Brazil tax assessments, down
from other income of $10.4 million, as the prior year period
reflected a $10.2 million benefit, or $0.25 per share, from a
contingent liability revaluation.
The Company reported a tax rate of 16.4%, versus
10.6% in the prior year period. The increase is primarily due
to the $13.0 million, or $0.43 per share, favorable transitional
tax adjustment related to US tax reform recorded in the prior
year. Excluding the impact of non-GAAP adjustments, the
year-to-date 2019 tax rate was 20.2% (the implied rate reflected in
the Company's Adjusted EPS), down from 23.0% in the prior year
period. The Company's Chinese JVs generated a $0.01 of both
GAAP and adjusted EPS versus a $0.02 per share loss in the prior
year period. Net currency movements had a 2% negative impact
on sales and a $3.8 million negative impact on operating profits;
the translation impact of net currency movements was negative $0.07
to both GAAP EPS and Adjusted EPS.
Non-GAAP Adjustments reflect
items included in GAAP operating profit, income, and EPS, but
excluded from adjusted operating profit, income, and EPS (see
non-GAAP reconciliation tables). Included in year-to-date
results (recorded in 2Q:19) is a negative $0.21 per share tax
assessment from pre-2000 activities in Brazil related to raw
material imports/exports (unfavorable) and social security taxes
(favorable partial offset). The majority of the expenses
consist of interest and penalties. Purchase accounting
expenses were $0.41 per share (purchase accounting expenses reflect
the ongoing non-cash intangible asset amortization associated with
AMS acquisitions) and restructuring and impairment expenses were
$0.06 per share in the EP segment related to cost reduction
activities. The most significant non-GAAP adjustments in the
prior year period were $0.42 per share of purchase accounting
expenses, the $0.25 benefit from the contingent liability
revaluation, and the $0.43 gain from the transitional tax
adjustment.
Cash Flow, Debt, & Dividend
Year-to-date 2019 cash provided by operating
activities was $118.9 million, versus $93.0 million in the prior
year period. The Company's working capital-related cash outflows
were $9.1 million, compared to $31.3 million in 2018 due primarily
to favorable accounts receivables balances. Capital spending
and capitalized software totaled $23.9 million, up $3.0 million,
due primarily to planned capacity expansions for our filtration and
transportation products and IT investments to support growth.
Free cash flow was $95.0 million, up from $72.1 million, due to the
higher operating cash flow. Year-to-date, the Company has paid
dividends to stockholders totaling $40.8 million.
Total debt was $561.6 million on
September 30, 2019, down $60.5 million from year end 2018; net
debt was $476.7 million on September 30, 2019, down $51.6
million from year end 2018. Pursuant to the debt covenants,
the Company's net debt to adjusted EBITDA was approximately 2.3x as
of September 30, 2019, down from 2.5x from year end 2018.
The Company announced a quarterly cash dividend
of $0.44 per share. The dividend will be payable on
December 20, 2019 to stockholders of record as of
November 29, 2019.
Conference Call
SWM will hold a conference call to review third
quarter 2019 results with investors and analysts at 8:30 a.m.
Eastern time on Tuesday, November 5, 2019. 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 under the Investor Relations section 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 performance materials company. Our
highly engineered papers, films, nets and nonwovens are designed
and manufactured using natural fibers and polymers for a variety of
industries and applications. We provide our customers with critical
components that enhance the performance of their products. End
markets served include filtration, transportation, infrastructure
and construction, medical, industrial, tobacco, energy, food
services and home décor. SWM and its subsidiaries manufacture on
four continents conduct business in over 90 countries and employ
approximately 3,400 people worldwide. 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 2019 guidance and future performance,
2019 capital expenditures, future market and EPS trends,
sales and volume trends, growth prospects, capital spending,
currency rates and trends and impact on EPS, future cash
flows, the Tax Act, effective tax rates, diversification
efforts of our AMS segment, future results of AMS operations,
future growth of non-tobacco sales, and other statements generally
identified by words such as "believe," "expect," "intend,"
"guidance," "plan," "forecast," "potential," "anticipate,"
"confident," "project," "appear," "future," "should," "likely,"
"could," "may," "typically," "will," and similar words. These
statements are not guarantees of future performance and certain
risks, uncertainties (some of which are beyond the Company’s
control) and assumptions 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, 2018, which can be
found at the SEC’s website www.sec.gov, as well as the following
factors:
- Changes in sales or production volumes, pricing and/or
manufacturing costs of Recon products, cigarette paper (including
for LIP cigarettes), 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 in our EP segment. Additionally,
competition and changes in AMS end-market products due to changing
customer demands;
- Changes in the Chinese economy, including relating to the
demand for reconstituted tobacco, premium cigarettes and netting
and due to impact of tariffs;
- 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. We operate in highly competitive markets
in which alternative supplies and technologies may attract our
customers away from our products. In additional, our
customers may, in some cases, produce for themselves the components
that the Company sells to them for incorporation into their
products, thus reducing or eliminating their purchases from
us;
- 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;
- Seasonal or cyclical market and industry fluctuations which may
result in reduced net sales and operating profits during certain
periods;
- 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, automotive, construction and
infrastructure, 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;
- 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;
- The impact of tariffs, and the imposition of any future
additional tariffs and other trade barriers, and the effects of
retaliatory trade measures;
- 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 and the effects of the ongoing
discussions between the U.K. and European Union to determine the
terms and timing of the U.K.'s withdrawal from the European
Union;
- Changes in the method pursuant to which LIBOR rates are
determined and the potential phasing out of LIBOR after
2021;
- 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, such as those involving
the Russian Federation, Korea and the Middle East, which restrict
our ability to supply products into affected regions, due to the
corresponding effects on demand, the application of international
sanctions, or practical consequences on transportation, banking
transactions, and other commercial activities in troubled
regions;
- Compliance with the FCPA and other anti-corruption laws or
trade control laws, as well as other laws governing our
operations;
- 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,
France and Germany;
- The outcome and cost of LIP-related intellectual property
infringement and validity litigation in Europe and the Glatz's
German Patent Court invalidation proceedings;
- Recent changes to U.S. federal income tax law, the overall
impact and interpretation of which remain uncertain and could be
material, in addition to the extent to which states may conform to
the newly enacted federal tax law as well as the impact of the tax
reform on holders of our common stock;
- Risks associated with our technological advantages in our
intellectual property and the likelihood that our current
technological advantages are unable to continue indefinitely;
- 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, 2018, and other reports we file from
time to time, which can be found at the SEC’s website www.sec.gov.
The discussion of these risks is specifically incorporated by
reference into this release. 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 intended to be considered in
isolation or as alternatives or substitutes for, or superior to,
financial measures prepared and presented in accordance with GAAP,
and should be read only in conjunction with the Company's financial
measures prepared and presented in accordance with GAAP. The
non-GAAP financial measures used in this release may be different
from the measures used by other companies.
(Tables to Follow)
SOURCE SWM:
CONTACT
Andrew WamserChief Financial
Officer+1-770-569-4271
Or
Mark ChekanowDirector of Investor
Relations+1-770-569-4229
Web site: http://www.swmintl.com
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND
SUBSIDIARIESBUSINESS SEGMENT
REPORTING(Dollars in
millions)(Unaudited)
Net
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
AMS |
$ |
126.1 |
|
|
$ |
120.8 |
|
|
4.4 |
% |
|
$ |
373.3 |
|
|
$ |
360.1 |
|
|
3.7 |
% |
EP |
130.3 |
|
|
139.5 |
|
|
(6.6 |
)% |
|
411.0 |
|
|
432.5 |
|
|
(5.0 |
)% |
Total Consolidated |
$ |
256.4 |
|
|
$ |
260.3 |
|
|
(1.5 |
)% |
|
$ |
784.3 |
|
|
$ |
792.6 |
|
|
(1.0 |
)% |
Operating
Profit |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
Return on Net Sales |
|
|
|
|
|
Return on Net Sales |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
AMS |
$ |
19.3 |
|
|
$ |
11.9 |
|
|
15.3 |
% |
|
9.9 |
% |
|
$ |
54.6 |
|
|
$ |
39.5 |
|
|
14.6 |
% |
|
11.0 |
% |
EP |
27.3 |
|
|
27.5 |
|
|
21.0 |
% |
|
19.7 |
% |
|
88.5 |
|
|
94.7 |
|
|
21.5 |
% |
|
21.9 |
% |
Unallocated |
(12.0 |
) |
|
(8.3 |
) |
|
|
|
|
|
(33.9 |
) |
|
(26.0 |
) |
|
|
|
|
Total Consolidated |
$ |
34.6 |
|
|
$ |
31.1 |
|
|
13.5 |
% |
|
11.9 |
% |
|
$ |
109.2 |
|
|
$ |
108.2 |
|
|
13.9 |
% |
|
13.7 |
% |
Non-GAAP
Adjustments to Operating Profit |
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
AMS - Restructuring &
Impairment Expenses |
$ |
— |
|
|
$ |
0.4 |
|
|
$ |
— |
|
|
$ |
1.2 |
|
AMS - Purchase Accounting
Adjustments |
5.1 |
|
|
5.2 |
|
|
15.3 |
|
|
15.6 |
|
EP - Restructuring &
Impairment Expenses and Tax Assessment |
2.2 |
|
|
— |
|
|
3.5 |
|
|
0.2 |
|
Total Consolidated |
$ |
7.3 |
|
|
$ |
5.6 |
|
|
$ |
18.8 |
|
|
$ |
17.0 |
|
Adjusted
Operating Profit * |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
Return on Net Sales |
|
|
|
|
|
Return on Net Sales |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
AMS |
$ |
24.4 |
|
|
$ |
17.5 |
|
|
19.3 |
% |
|
14.5 |
% |
|
$ |
69.9 |
|
|
$ |
56.3 |
|
|
18.7 |
% |
|
15.6 |
% |
EP |
29.5 |
|
|
27.5 |
|
|
22.6 |
% |
|
19.7 |
% |
|
92.0 |
|
|
94.9 |
|
|
22.4 |
% |
|
21.9 |
% |
Unallocated |
(12.0 |
) |
|
(8.3 |
) |
|
|
|
|
|
(33.9 |
) |
|
(26.0 |
) |
|
|
|
|
Total Consolidated |
$ |
41.9 |
|
|
$ |
36.7 |
|
|
16.3 |
% |
|
14.1 |
% |
|
$ |
128.0 |
|
|
$ |
125.2 |
|
|
16.3 |
% |
|
15.8 |
% |
* Adjusted Operating Profit, a non-GAAP
financial measure, is calculated by adding Restructuring &
Impairment Expenses and Purchase Accounting Adjustments to
Operating Profit.
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL
MEASURES AND SUPPLEMENTAL DATA(Dollars in
millions, except per share amounts)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Operating profit |
$ |
34.6 |
|
|
$ |
31.1 |
|
|
$ |
109.2 |
|
|
$ |
108.2 |
|
Plus: Restructuring and
impairment expense |
1.6 |
|
|
0.4 |
|
|
2.0 |
|
|
1.4 |
|
Plus: Purchase accounting
adjustments |
5.1 |
|
|
5.2 |
|
|
15.3 |
|
|
15.6 |
|
Plus: Brazil tax
assessments |
0.6 |
|
|
— |
|
|
1.5 |
|
|
— |
|
Adjusted Operating Profit |
$ |
41.9 |
|
|
$ |
36.7 |
|
|
$ |
128.0 |
|
|
$ |
125.2 |
|
|
|
|
|
|
|
|
|
Income |
$ |
27.7 |
|
|
$ |
40.9 |
|
|
$ |
65.6 |
|
|
$ |
87.6 |
|
Plus: Restructuring and
impairment expense |
1.6 |
|
|
0.4 |
|
|
2.0 |
|
|
1.4 |
|
Less: Tax impact of
restructuring and impairment expense |
(0.2 |
) |
|
(0.1 |
) |
|
(0.3 |
) |
|
(0.4 |
) |
Plus: Purchase accounting
adjustments |
5.1 |
|
|
5.4 |
|
|
15.3 |
|
|
16.3 |
|
Less: Tax impact of purchase
accounting adjustments |
(0.9 |
) |
|
(1.0 |
) |
|
(2.8 |
) |
|
(3.0 |
) |
Plus: Brazil tax
assessments |
— |
|
|
— |
|
|
10.8 |
|
|
— |
|
Less: Tax impact of Brazil tax
assessments |
(1.0 |
) |
|
— |
|
|
(4.1 |
) |
|
— |
|
Less: Revaluation of
contingent consideration |
— |
|
|
(10.2 |
) |
|
— |
|
|
(10.2 |
) |
Plus: Tax impact of
revaluation of contingent consideration |
— |
|
|
2.5 |
|
|
— |
|
|
2.5 |
|
Less: Transitional Tax
Adjustment |
(0.6 |
) |
|
(13.0 |
) |
|
(0.6 |
) |
|
(13.0 |
) |
Less: Tax legislative changes,
net of other discrete items |
(0.5 |
) |
|
— |
|
|
(0.8 |
) |
|
— |
|
Adjusted Income |
$ |
31.2 |
|
|
$ |
24.9 |
|
|
$ |
85.1 |
|
|
$ |
81.2 |
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted |
$ |
0.90 |
|
|
$ |
1.33 |
|
|
$ |
2.12 |
|
|
$ |
2.83 |
|
Plus: Income per share from
discontinued operations |
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
Earnings per share from
continuing operations |
0.90 |
|
|
1.33 |
|
|
2.12 |
|
|
2.84 |
|
Plus: Restructuring and
impairment expense |
0.06 |
|
|
0.01 |
|
|
0.07 |
|
|
0.04 |
|
Less: Tax impact of
restructuring and impairment expense |
(0.01 |
) |
|
— |
|
|
(0.01 |
) |
|
(0.01 |
) |
Plus: Purchase accounting
adjustments |
0.16 |
|
|
0.17 |
|
|
0.50 |
|
|
0.53 |
|
Less: Tax impact of purchase
accounting adjustment |
(0.03 |
) |
|
(0.05 |
) |
|
(0.09 |
) |
|
(0.11 |
) |
Plus: Brazil tax
assessments |
— |
|
|
— |
|
|
0.35 |
|
|
— |
|
Less: Tax impact of Brazil tax
assessments |
(0.03 |
) |
|
— |
|
|
(0.14 |
) |
|
— |
|
Plus: Revaluation of
contingent consideration |
— |
|
|
(0.33 |
) |
|
— |
|
|
(0.33 |
) |
Less: Tax impact of
revaluation of contingent consideration |
— |
|
|
0.08 |
|
|
— |
|
|
0.08 |
|
Less: Transitional Tax
Adjustment |
(0.02 |
) |
|
(0.43 |
) |
|
(0.02 |
) |
|
(0.43 |
) |
Less: Tax legislative changes,
net of other discrete items |
(0.02 |
) |
|
— |
|
|
(0.03 |
) |
|
— |
|
Adjusted Earnings Per Share -
Diluted |
$ |
1.01 |
|
|
$ |
0.78 |
|
|
$ |
2.75 |
|
|
$ |
2.61 |
|
Brazil Tax Assessments - YTD Financial Statement
Classification and Impact
Income
Statement Classification |
(Expense)Benefit |
Diluted Earnings per Share |
Cost of products sold 1 |
$ |
(1.5 |
) |
$ |
(0.05 |
) |
Operating profit 1 |
(1.5 |
) |
(0.05 |
) |
Other expense 2 |
(2.2 |
) |
(0.07 |
) |
Interest expense 2 |
(7.1 |
) |
(0.23 |
) |
Income from continuing operations
before income taxes |
(10.8 |
) |
(0.35 |
) |
Income tax benefit |
4.1 |
|
0.14 |
|
Net income |
$ |
(6.7 |
) |
$ |
(0.21 |
) |
1 Cost of products sold reflects the net of $2.6
million of expense associated with the Raw Materials Assessment and
$1.1 million benefit associated with the Social Security
Assessment. Amounts are reflected in Engineered Papers
reporting segment in segment disclosures.2 Other expense includes
penalties and fees associated with the Raw Materials
Assessment. Interest expense relates to the Raw Materials
Assessment.NOTE: During the third quarter of 2019, the Company
reclassified $0.6 million of Interest expense related to the Brazil
tax assessments (recorded during 2Q:19) to Cost of products sold
and increased the Income tax benefit by $1.0 million. There
is a $1.0 million increase in Net income for 3Q:19 and YTD as a
result of the revised tax benefit.
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL
MEASURES AND SUPPLEMENTAL DATA(Dollars in
millions, except per share amounts)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income |
$ |
27.7 |
|
|
$ |
41.0 |
|
|
$ |
65.6 |
|
|
$ |
87.3 |
|
Plus: Loss from discontinued
operations |
— |
|
|
(0.1 |
) |
|
— |
|
|
0.3 |
|
Income from continuing
operations |
27.7 |
|
|
40.9 |
|
|
65.6 |
|
|
87.6 |
|
Plus: Interest expense on
debt |
7.3 |
|
|
7.3 |
|
|
22.5 |
|
|
20.1 |
|
Plus: Interest expense
(benefit) on Brazil tax assessments |
(0.6 |
) |
|
— |
|
|
7.1 |
|
|
— |
|
Plus: Provision for income
taxes |
3.2 |
|
|
(5.6 |
) |
|
12.8 |
|
|
10.4 |
|
Plus: Depreciation &
amortization |
14.6 |
|
|
15.0 |
|
|
43.6 |
|
|
45.5 |
|
Plus: Restructuring and
impairment expense |
1.6 |
|
|
0.4 |
|
|
2.0 |
|
|
1.4 |
|
Plus: (Income) loss from
equity affiliates |
(1.3 |
) |
|
(0.3 |
) |
|
(0.4 |
) |
|
0.5 |
|
Plus: Other (income) expense,
net |
(1.7 |
) |
|
(11.2 |
) |
|
1.6 |
|
|
(10.4 |
) |
Plus: Brazil tax
assessments |
0.6 |
|
|
— |
|
|
1.5 |
|
|
— |
|
Adjusted EBITDA from
continuing operations |
$ |
51.4 |
|
|
$ |
46.5 |
|
|
$ |
156.3 |
|
|
$ |
155.1 |
|
|
|
|
|
|
|
|
|
AMS adjusted EBITDA |
$ |
27.8 |
|
|
$ |
21.0 |
|
|
$ |
79.9 |
|
|
$ |
67.6 |
|
EP adjusted EBITDA |
35.4 |
|
|
33.9 |
|
|
109.6 |
|
|
113.5 |
|
Unallocated adjusted
EBITDA |
(11.8 |
) |
|
(8.4 |
) |
|
(33.2 |
) |
|
(26.0 |
) |
Adjusted EBITDA from
continuing operations |
$ |
51.4 |
|
|
$ |
46.5 |
|
|
$ |
156.3 |
|
|
$ |
155.1 |
|
|
|
|
|
|
|
|
|
Cash provided by operating
activities |
$ |
63.9 |
|
|
$ |
37.1 |
|
|
$ |
118.9 |
|
|
$ |
93.0 |
|
Less: Capital spending |
(4.8 |
) |
|
(6.1 |
) |
|
(20.0 |
) |
|
(19.8 |
) |
Less: Capitalized software
costs |
(1.1 |
) |
|
(0.5 |
) |
|
(3.9 |
) |
|
(1.1 |
) |
Free Cash Flow |
$ |
58.0 |
|
|
$ |
30.5 |
|
|
$ |
95.0 |
|
|
$ |
72.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
Total Debt |
|
|
|
|
$ |
561.6 |
|
|
$ |
622.1 |
|
Less: Cash |
|
|
|
|
84.9 |
|
|
93.8 |
|
Net Debt |
|
|
|
|
$ |
476.7 |
|
|
$ |
528.3 |
|
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