x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended September 30, 2011 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from __________________to __________________ |
Delaware | 62-1612879 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
100 North Point Center East, Suite 600 Alpharetta, Georgia | 30022 |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
Page | |||
Part I | FINANCIAL INFORMATION | ||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Part II | OTHER INFORMATION | ||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 5. | |||
Item 6. | |||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | ||||||||||||
Net Sales | $ | 211.2 | $ | 182.0 | $ | 598.1 | $ | 557.4 | |||||||
Cost of products sold | 154.9 | 132.5 | 439.5 | 409.1 | |||||||||||
Gross Profit | 56.3 | 49.5 | 158.6 | 148.3 | |||||||||||
Selling expense | 5.7 | 4.5 | 16.3 | 14.3 | |||||||||||
Research expense | 2.3 | 2.1 | 6.7 | 6.2 | |||||||||||
General expense | 14.6 | 11.5 | 42.2 | 33.9 | |||||||||||
Total nonmanufacturing expenses | 22.6 | 18.1 | 65.2 | 54.4 | |||||||||||
Valuation allowance on ICMS business tax credits | 15.9 | — | 15.9 | — | |||||||||||
Restructuring and impairment expense | 6.6 | 0.7 | 8.3 | 7.2 | |||||||||||
Operating Profit | 11.2 | 30.7 | 69.2 | 86.7 | |||||||||||
Interest expense | 1.1 | 0.4 | 1.8 | 1.4 | |||||||||||
Other income (expense), net | (1.1 | ) | 0.8 | (1.0 | ) | (0.5 | ) | ||||||||
Income from Continuing Operations before Income Taxes and Income from Equity Affiliates | 9.0 | 31.1 | 66.4 | 84.8 | |||||||||||
Provision for income taxes | 0.9 | 10.7 | 23.4 | 30.1 | |||||||||||
Income from equity affiliates | 1.4 | 0.8 | 3.4 | 2.1 | |||||||||||
Income from Continuing Operations | 9.5 | 21.2 | 46.4 | 56.8 | |||||||||||
Loss from Discontinued Operations | (0.5 | ) | (3.0 | ) | (1.4 | ) | (5.2 | ) | |||||||
Net Income | $ | 9.0 | $ | 18.2 | $ | 45.0 | $ | 51.6 | |||||||
Net Income (Loss) per Share - Basic: | |||||||||||||||
Income per share from continuing operations | $ | 0.60 | $ | 1.16 | $ | 2.72 | $ | 3.12 | |||||||
Loss per share from discontinued operations | (0.02 | ) | (0.16 | ) | (0.08 | ) | (0.28 | ) | |||||||
Net income per share – basic | $ | 0.58 | $ | 1.00 | $ | 2.64 | $ | 2.84 | |||||||
Net Income (Loss) per Share – Diluted: | |||||||||||||||
Income per share from continuing operations | $ | 0.60 | $ | 1.14 | $ | 2.70 | $ | 3.06 | |||||||
Loss per share from discontinued operations | (0.03 | ) | (0.16 | ) | (0.08 | ) | (0.28 | ) | |||||||
Net income per share – diluted | $ | 0.57 | $ | 0.98 | $ | 2.62 | $ | 2.78 | |||||||
Cash Dividends Declared Per Share | $ | 0.15 | $ | 0.15 | $ | 0.45 | $ | 0.45 | |||||||
Weighted Average Shares Outstanding: | |||||||||||||||
Basic | 15,957,100 | 17,641,000 | 16,827,200 | 17,755,100 | |||||||||||
Diluted | 16,095,600 | 18,007,200 | 16,951,600 | 18,101,900 |
September 30, 2011 | December 31, 2010 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 61.3 | $ | 87.3 | |||
Accounts receivable | 117.9 | 98.9 | |||||
Inventories | 111.8 | 113.8 | |||||
Income taxes receivable | 11.5 | 0.9 | |||||
Other current assets | 11.6 | 11.9 | |||||
Total Current Assets | 314.1 | 312.8 | |||||
Property, Plant and Equipment, net | 439.9 | 440.8 | |||||
Deferred Income Tax Benefits | 12.4 | 11.8 | |||||
Investment in Equity Affiliates | 29.9 | 20.5 | |||||
Goodwill and Intangible Assets | 7.8 | 8.8 | |||||
Other Assets | 34.0 | 55.7 | |||||
Total Assets | $ | 838.1 | $ | 850.4 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities | |||||||
Current debt | $ | 5.0 | $ | 8.7 | |||
Accounts payable | 57.3 | 66.4 | |||||
Accrued expenses | 87.0 | 105.6 | |||||
Current deferred revenue | — | 6.0 | |||||
Total Current Liabilities | 149.3 | 186.7 | |||||
Long-Term Debt | 159.9 | 43.1 | |||||
Pension and Other Postretirement Benefits | 40.0 | 46.3 | |||||
Deferred Income Tax Liabilities | 22.9 | 28.9 | |||||
Other Liabilities | 25.0 | 21.2 | |||||
Total Liabilities | 397.1 | 326.2 | |||||
Stockholders’ Equity: | |||||||
Preferred stock, $0.10 par value; 10,000,000 shares authorized; none issued or outstanding | — | — | |||||
Common stock, $0.10 par value; 100,000,000 shares authorized; 18,732,013 and 18,721,474 shares issued at September 30, 2011 and December 31, 2010, respectively; 16,121,806 and 18,027,903 shares outstanding at September 30, 2011 and December 31, 2010, respectively | 1.9 | 1.9 | |||||
Additional paid-in-capital | 208.0 | 208.8 | |||||
Common stock in treasury, at cost, 2,610,207 and 693,571 shares at September 30, 2011 and December 31, 2010, respectively | (132.1 | ) | (24.4 | ) | |||
Retained earnings | 373.7 | 336.4 | |||||
Accumulated other comprehensive (loss) income, net of tax | (10.5 | ) | 1.5 | ||||
Total Stockholders’ Equity | 441.0 | 524.2 | |||||
Total Liabilities and Stockholders’ Equity | $ | 838.1 | $ | 850.4 |
Common Stock Issued | Treasury Stock | ||||||||||||||||||||||||||||
Shares | Amount | Additional Paid-In Capital | Shares | Amount | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||||||
Balance, December 31, 2009 | 18,633,235 | $ | 1.9 | $ | 205.7 | 758,350 | $ | (14.0 | ) | $ | 281.9 | $ | 6.7 | $ | 482.2 | ||||||||||||||
Net income for the nine months ended September 30, 2010 | 51.6 | 51.6 | |||||||||||||||||||||||||||
Adjustments to unrealized foreign currency translation | 1.1 | 1.1 | |||||||||||||||||||||||||||
Changes in fair value of derivative instruments, net of tax | (1.1 | ) | (1.1 | ) | |||||||||||||||||||||||||
Amortization of postretirement benefit plans’ costs, net of tax | 1.7 | 1.7 | |||||||||||||||||||||||||||
Comprehensive income, net of tax | 53.3 | ||||||||||||||||||||||||||||
Dividends declared ($0.45 per share) | (8.1 | ) | (8.1 | ) | |||||||||||||||||||||||||
Restricted stock issuances, net | (8.6 | ) | (453,473 | ) | 8.6 | — | |||||||||||||||||||||||
Stock-based employee compensation expense | 5.6 | 5.6 | |||||||||||||||||||||||||||
Excess tax benefits of stock-based employee compensation | 1.3 | 1.3 | |||||||||||||||||||||||||||
Stock issued to directors as compensation | 1,939 | 0.1 | 0.1 | ||||||||||||||||||||||||||
Issuance of shares for options exercised | 63,966 | 1.6 | 1.6 | ||||||||||||||||||||||||||
Purchases of treasury stock | 388,694 | (19.0 | ) | (19.0 | ) | ||||||||||||||||||||||||
Balance, September 30, 2010 | 18,699,140 | $ | 1.9 | $ | 205.7 | 693,571 | $ | (24.4 | ) | $ | 325.4 | $ | 8.4 | $ | 517.0 | ||||||||||||||
Balance, December 31, 2010 | 18,721,474 | $ | 1.9 | $ | 208.8 | 693,571 | $ | (24.4 | ) | $ | 336.4 | $ | 1.5 | $ | 524.2 | ||||||||||||||
Net income for the nine months ended September 30, 2011 | 45.0 | 45.0 | |||||||||||||||||||||||||||
Adjustments to unrealized foreign currency translation | (8.9 | ) | (8.9 | ) | |||||||||||||||||||||||||
Changes in fair value of derivative instruments, net of tax | (5.8 | ) | (5.8 | ) | |||||||||||||||||||||||||
Amortization of postretirement benefit plans’ costs, net of tax | 2.7 | 2.7 | |||||||||||||||||||||||||||
Comprehensive income, net of tax | 33.0 | ||||||||||||||||||||||||||||
Dividends declared ($0.45 per share) | (7.7 | ) | (7.7 | ) | |||||||||||||||||||||||||
Restricted stock issuances, net | (13.2 | ) | (318,560 | ) | 13.2 | — | |||||||||||||||||||||||
Stock-based employee compensation expense | 3.0 | 3.0 | |||||||||||||||||||||||||||
Excess tax benefits of stock-based employee compensation | 9.1 | 9.1 | |||||||||||||||||||||||||||
Stock issued to directors as compensation | 476 | — | — | ||||||||||||||||||||||||||
Issuance of shares for options exercised | 10,063 | 0.3 | (1,649 | ) | 0.3 | ||||||||||||||||||||||||
Purchases of treasury stock | 2,236,845 | (120.9 | ) | (120.9 | ) | ||||||||||||||||||||||||
Balance, September 30, 2011 | 18,732,013 | $ | 1.9 | $ | 208.0 | 2,610,207 | $ | (132.1 | ) | $ | 373.7 | $ | (10.5 | ) | $ | 441.0 |
Nine Months Ended | |||||||
September 30, 2011 | September 30, 2010 | ||||||
Operations | |||||||
Net income | $ | 45.0 | $ | 51.6 | |||
Less: Loss from discontinued operations | 1.4 | 5.2 | |||||
Income from continuing operations | 46.4 | 56.8 | |||||
Non-cash items included in net income: | |||||||
Depreciation and amortization | 33.0 | 29.6 | |||||
Restructuring-related impairment | 3.4 | 0.5 | |||||
Valuation allowance on ICMS business tax credits | 15.9 | — | |||||
Amortization of deferred revenue | (6.0 | ) | (6.0 | ) | |||
Deferred income tax provision (benefit) | (6.3 | ) | 20.6 | ||||
Pension and other postretirement benefits | (2.4 | ) | 1.6 | ||||
Stock-based compensation | 3.0 | 5.6 | |||||
Income from equity affiliate | (3.4 | ) | (2.1 | ) | |||
Excess tax benefits of stock-based awards | (9.1 | ) | (1.3 | ) | |||
Other items | (3.1 | ) | (2.8 | ) | |||
Net changes in operating working capital | (29.2 | ) | 22.1 | ||||
Net cash provided (used) by operating activities of: | |||||||
- Continuing operations | 42.2 | 124.6 | |||||
- Discontinued operations | (4.3 | ) | (19.4 | ) | |||
Cash Provided by Operations | 37.9 | 105.2 | |||||
Investing | |||||||
Capital spending | (51.9 | ) | (45.7 | ) | |||
Capitalized software costs | (1.2 | ) | (8.3 | ) | |||
Investment in equity affiliates | (5.3 | ) | — | ||||
Other investing | 2.7 | 0.4 | |||||
Cash Used for Investing | (55.7 | ) | (53.6 | ) | |||
Financing | |||||||
Cash dividends paid to SWM stockholders | (7.7 | ) | (8.1 | ) | |||
Changes in short-term debt | (2.9 | ) | 2.9 | ||||
Proceeds from issuances of long-term debt | 218.7 | 48.1 | |||||
Payments on long-term debt | (103.3 | ) | (55.9 | ) | |||
Purchases of treasury stock | (120.9 | ) | (19.0 | ) | |||
Proceeds from exercise of stock options | 0.3 | 1.6 | |||||
Excess tax benefits of stock-based awards | 9.1 | 1.3 | |||||
Cash Used in Financing | (6.7 | ) | (29.1 | ) | |||
Effect of Exchange Rate Changes on Cash | (1.5 | ) | 1.3 | ||||
Increase (Decrease) in Cash and Cash Equivalents | (26.0 | ) | 23.8 | ||||
Cash and Cash Equivalents at beginning of period | 87.3 | 56.9 | |||||
Cash and Cash Equivalents at end of period | $ | 61.3 | $ | 80.7 |
September 30, 2011 | December 31, 2010 | ||||||
Assets of discontinued operations: | |||||||
Current assets | $ | 1.2 | $ | 3.9 | |||
Noncurrent deferred income tax benefits | 8.8 | 8.0 | |||||
Other assets – assets held for sale | 0.4 | 0.4 | |||||
Liabilities of discontinued operations: | |||||||
Current liabilities | 8.4 | 12.2 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30 | September 30 | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net sales | $ | — | $ | — | $ | — | $ | 0.6 | |||||||
Restructuring and impairment expense | 0.5 | 4.6 | 1.5 | 6.9 | |||||||||||
Loss from discontinued operations before income taxes | (0.6 | ) | (4.6 | ) | (2.1 | ) | (7.9 | ) | |||||||
Income tax benefit | 0.1 | 1.6 | 0.7 | 2.7 | |||||||||||
Loss from discontinued operations | $ | (0.5 | ) | $ | (3.0 | ) | $ | (1.4 | ) | $ | (5.2 | ) |
Nine Months Ended | Year Ended | ||||||
September 30, 2011 | December 31, 2010 | ||||||
Balance at beginning of year | $ | 9.2 | $ | 20.9 | |||
Accruals for announced programs | 1.2 | 7.7 | |||||
Cash payments | (4.2 | ) | (17.8 | ) | |||
Exchange rate impacts | 0.1 | (1.6 | ) | ||||
Balance at end of period | $ | 6.3 | $ | 9.2 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | ||||||||||||
Numerator (basic and diluted): | |||||||||||||||
Net income | $ | 9.0 | $ | 18.2 | $ | 45.0 | $ | 51.6 | |||||||
Less: Dividends paid to participating securities | — | (0.1 | ) | (0.1 | ) | (0.2 | ) | ||||||||
Less: Undistributed earnings available to participating securities | — | (0.4 | ) | (0.5 | ) | (1.0 | ) | ||||||||
Undistributed and distributed earnings available to common shareholders | $ | 9.0 | $ | 17.7 | $ | 44.4 | $ | 50.4 | |||||||
Denominator: | |||||||||||||||
Average number of common shares outstanding | 15,957.1 | 17,641.0 | 16,827.2 | 17,755.1 | |||||||||||
Effect of dilutive stock-based compensation | 138.5 | 366.2 | 124.4 | 346.8 | |||||||||||
Average number of common and potential common shares outstanding | 16,095.6 | 18,007.2 | 16,951.6 | 18,101.9 |
September 30, 2011 | December 31, 2010 | ||||||
Raw materials | $ | 29.6 | $ | 31.7 | |||
Work in process | 25.7 | 23.8 | |||||
Finished goods | 36.3 | 37.1 | |||||
Supplies and other | 20.2 | 21.2 | |||||
Total | $ | 111.8 | $ | 113.8 |
Reconstituted Tobacco | Paper | Total | |||||||||
Goodwill | $ | 5.8 | $ | 2.7 | $ | 8.5 | |||||
Accumulated impairment losses | — | (2.7 | ) | (2.7 | ) | ||||||
Balance as of January 1, 2011 | 5.8 | — | 5.8 | ||||||||
Foreign currency translation adjustments | 0.1 | — | 0.1 | ||||||||
Goodwill | $ | 5.9 | $ | 2.7 | $ | 8.6 | |||||
Accumulated impairment losses | — | (2.7 | ) | (2.7 | ) | ||||||
Balance as of September 30, 2011 | $ | 5.9 | $ | — | $ | 5.9 |
September 30, 2011 | December 31, 2010 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization* | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization* | Net Carrying Amount | ||||||||||||||||||
Customer-related intangibles (Reconstituted Tobacco Segment) | $ | 10.0 | $ | 8.1 | $ | 1.9 | $ | 10.0 | $ | 7.0 | $ | 3.0 |
Nine Months Ended | Year Ended | ||||||
September 30, 2011 | December 31, 2010 | ||||||
Balance at beginning of year | $ | 10.0 | $ | 12.1 | |||
Accruals for announced programs | 4.9 | 10.2 | |||||
Cash payments | (8.3 | ) | (11.2 | ) | |||
Exchange rate impacts | — | (1.1 | ) | ||||
Balance at end of period | $ | 6.6 | $ | 10.0 |
September 30, 2011 | December 31, 2010 | ||||||
Revolving Credit Agreement | $ | 147.8 | $ | — | |||
Euro Revolver | — | 33.5 | |||||
French Employee Profit Sharing | 12.6 | 11.2 | |||||
Bank Overdrafts | 2.3 | 6.6 | |||||
Other | 2.2 | 0.5 | |||||
Total Debt | 164.9 | 51.8 | |||||
Less: Current debt | (5.0 | ) | (8.7 | ) | |||
Long-Term Debt | $ | 159.9 | $ | 43.1 |
Asset Derivatives | Liability Derivatives | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Derivatives designated as hedges: | |||||||||||
Foreign exchange contracts | Accounts Receivable | $ | 1.1 | Accounts Payable | $ | 0.2 | |||||
Foreign exchange contracts | Property, Plant & Equipment | 0.3 | Other Liabilities | 3.5 | |||||||
Foreign exchange contracts | Other Assets | (0.4 | ) | ||||||||
Total derivatives designated as hedges | 1.0 | 3.7 | |||||||||
Derivatives not designated as hedges: | |||||||||||
Interest rate contracts | Other Assets | — | Other Liabilities | 0.3 | |||||||
Foreign exchange contracts | Accounts Receivable | 0.6 | Accounts Payable | — | |||||||
Total derivatives not designated as hedges | 0.6 | 0.3 | |||||||||
Total derivatives | $ | 1.6 | $ | 4.0 |
Asset Derivatives | Liability Derivatives | ||||||||||
Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Derivatives designated as hedges: | |||||||||||
Foreign exchange contracts | Accounts Receivable | $ | 4.2 | Accounts Payable | $ | — | |||||
Foreign exchange contracts | Property, Plant & Equipment | (0.3 | ) | Other Liabilities | — | ||||||
Foreign exchange contracts | Other Assets | 3.6 | |||||||||
Total derivatives designated as hedges | 7.5 | — | |||||||||
Derivatives not designated as hedges: | |||||||||||
Interest rate contracts | Other Assets | — | Other Liabilities | 0.7 | |||||||
Foreign exchange contracts | Accounts Receivable | — | Accounts Payable | 0.4 | |||||||
Total derivatives not designated as hedges | — | 1.1 | |||||||||
Total derivatives | $ | 7.5 | $ | 1.1 |
The Effect of Cash Flow Hedge Derivative Instruments on the Consolidated Statement of Income | |||||||||||||||
for the Three and Nine Months Ended September 30, 2011 | |||||||||||||||
Change in AOCI Gain /(Loss) | Location of Gain /(Loss) reclassified from AOCI into Income (Effective Portion) | Gain /(Loss) Reclassified from AOCI into Income (Effective Portion) | Location of Gain / (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) | Gain / (Loss) Recognized in Income (Ineffective Portion and Amount excluded from Effectiveness Testing) | |||||||||||
Derivatives designated as hedges: | |||||||||||||||
Three Months Ended: | |||||||||||||||
Foreign exchange contracts | $ | (10.2 | ) | Net Sales | $ | 1.4 | Other Income/ (Expense) | $ | — | ||||||
Nine Months Ended: | |||||||||||||||
Foreign exchange contracts | $ | (5.8 | ) | Net Sales | $ | 4.6 | Other Income/ (Expense) | $ | — |
The Effect of Cash Flow Hedge Derivative Instruments on the Consolidated Statement of Income | |||||||||||||||
for the Three and Nine Months Ended September 30, 2010 | |||||||||||||||
Change in AOCI Gain /(Loss) | Location of Gain /(Loss) reclassified from AOCI into Income (Effective Portion) | Gain /(Loss) Reclassified from AOCI into Income (Effective Portion) | Location of Gain / (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) | Gain / (Loss) Recognized in Income (Ineffective Portion and Amount excluded from Effectiveness Testing) | |||||||||||
Derivatives designated as hedges: | |||||||||||||||
Three Months Ended: | |||||||||||||||
Foreign exchange contracts | $ | (1.8 | ) | Net Sales | $ | 2.1 | Other Income/ (Expense) | $ | — | ||||||
Nine Months Ended: | |||||||||||||||
Foreign exchange contracts | $ | (4.7 | ) | Net Sales | $ | 5.5 | Other Income/ (Expense) | $ | — |
Derivatives not designated as hedging instruments | Location of Gain / (Loss) Recognized in Income on Derivatives | Amount of Gain / (Loss) Recognized in Income on Derivatives for the Three Months Ended | ||||||||
September 30, 2011 | September 30, 2010 | |||||||||
Interest rate contracts | Other Income / Expense | $ | 0.1 | $ | (0.1 | ) | ||||
Foreign exchange contracts | Other Income / Expense | 3.5 | — | |||||||
Total | $ | 3.6 | $ | (0.1 | ) |
Derivatives not designated as hedging instruments | Location of Gain / (Loss) Recognized in Income on Derivatives | Amount of Gain / (Loss) Recognized in Income on Derivatives for the Nine Months Ended | ||||||||
September 30, 2011 | September 30, 2010 | |||||||||
Interest rate contracts | Other Income / Expense | $ | 0.4 | $ | (0.5 | ) | ||||
Foreign exchange contracts | Other Income / Expense | 2.5 | (0.1 | ) | ||||||
Total | $ | 2.9 | $ | (0.6 | ) |
Three Months Ended September 30 | |||||||||||||||||||||||
U.S. Pension Benefits | French Pension Benefits | U.S. OPEB Benefits | |||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Service cost | $ | — | $ | — | $ | 0.2 | $ | 0.2 | $ | — | $ | 0.1 | |||||||||||
Interest cost | 1.6 | 1.5 | 0.4 | 0.4 | — | — | |||||||||||||||||
Expected return on plan assets | (2.0 | ) | (2.2 | ) | (0.1 | ) | (0.2 | ) | — | — | |||||||||||||
Amortizations and other | 1.1 | 0.7 | 0.3 | 0.1 | — | — | |||||||||||||||||
Net periodic benefit cost | $ | 0.7 | $ | — | $ | 0.8 | $ | 0.5 | $ | — | $ | 0.1 |
Nine Months Ended September 30 | |||||||||||||||||||||||
U.S. Pension Benefits | French Pension Benefits | U.S. OPEB Benefits | |||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Service cost | $ | — | $ | — | $ | 0.7 | $ | 0.6 | $ | 0.1 | $ | 0.1 | |||||||||||
Interest cost | 4.6 | 4.7 | 1.1 | 1.0 | 0.4 | 0.5 | |||||||||||||||||
Expected return on plan assets | (5.8 | ) | (6.6 | ) | (0.4 | ) | (0.6 | ) | — | — | |||||||||||||
Amortizations and other | 3.3 | 2.3 | 0.7 | 0.3 | — | — | |||||||||||||||||
Net periodic benefit cost | $ | 2.1 | $ | 0.4 | $ | 2.1 | $ | 1.3 | $ | 0.5 | $ | 0.6 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | ||||||||||||||||||||||||
Tax provision at U.S. statutory rate | $ | 3.1 | 35.0 | % | $ | 10.9 | 35.0 | % | $ | 23.2 | 35.0 | % | $ | 29.7 | 35.0 | % | |||||||||||
Tax benefits of foreign legal structure | (1.3 | ) | (15.0 | ) | (0.7 | ) | (2.2 | ) | (2.6 | ) | (3.9 | ) | (1.3 | ) | (1.5 | ) | |||||||||||
Foreign tax incentives | (0.9 | ) | (10.0 | ) | — | — | 0.1 | 0.1 | 0.1 | 0.1 | |||||||||||||||||
Other foreign taxes, net | 1.0 | 11.0 | 0.6 | 1.9 | 3.0 | 4.5 | 1.8 | 2.1 | |||||||||||||||||||
Other, net | (1.0 | ) | (11.0 | ) | (0.1 | ) | (0.3 | ) | (0.3 | ) | (0.5 | ) | (0.2 | ) | (0.2 | ) | |||||||||||
Provision for income taxes | $ | 0.9 | 10.0 | % | $ | 10.7 | 34.4 | % | $ | 23.4 | 35.2 | % | $ | 30.1 | 35.5 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | ||||||||||||||||||||||||
Paper | $ | 157.1 | 74.4 | % | $ | 130.0 | 71.4 | % | $ | 425.4 | 71.1 | % | $ | 394.7 | 70.8 | % | |||||||||||
Reconstituted Tobacco | 54.1 | 25.6 | 52.0 | 28.6 | 172.7 | 28.9 | 162.7 | 29.2 | |||||||||||||||||||
Total Consolidated | $ | 211.2 | 100.0 | % | $ | 182.0 | 100.0 | % | $ | 598.1 | 100.0 | % | $ | 557.4 | 100.0 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | ||||||||||||||||||||||||
Paper | $ | 0.5 | 4.5 | % | $ | 14.2 | 46.3 | % | $ | 21.3 | 30.8 | % | $ | 34.2 | 39.5 | % | |||||||||||
Reconstituted Tobacco | 15.2 | 135.7 | 21.5 | 70.0 | 61.5 | 88.9 | 65.5 | 75.5 | |||||||||||||||||||
Unallocated | (4.5 | ) | (40.2 | ) | (5.0 | ) | (16.3 | ) | (13.6 | ) | (19.7 | ) | (13.0 | ) | (15.0 | ) | |||||||||||
Total Consolidated | $ | 11.2 | 100.0 | % | $ | 30.7 | 100.0 | % | $ | 69.2 | 100.0 | % | $ | 86.7 | 100.0 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | September 30, 2010 | ||||||||||||||||||||||||
Net sales | $ | 211.2 | 100.0 | % | $ | 182.0 | 100.0 | % | $ | 598.1 | 100.0 | % | $ | 557.4 | 100.0 | % | |||||||||||
Gross profit | 56.3 | 26.7 | 49.5 | 27.2 | 158.6 | 26.5 | 148.3 | 26.6 | |||||||||||||||||||
Valuation allowance on ICMS business tax credits | 15.9 | 7.5 | — | — | 15.9 | 2.7 | — | — | |||||||||||||||||||
Restructuring & impairment expense | 6.6 | 3.1 | 0.7 | 0.4 | 8.3 | 1.4 | 7.2 | 1.3 | |||||||||||||||||||
Operating profit | 11.2 | 5.3 | 30.7 | 16.9 | 69.2 | 11.6 | 86.7 | 15.6 | |||||||||||||||||||
Interest expense | 1.1 | 0.5 | 0.4 | 0.2 | 1.8 | 0.3 | 1.4 | 0.3 | |||||||||||||||||||
Income from continuing operations | 9.5 | 4.5 | 21.2 | 11.6 | 46.4 | 7.8 | 56.8 | 10.2 | |||||||||||||||||||
Loss from discontinued operations | (0.5 | ) | (0.2 | ) | (3.0 | ) | (1.6 | ) | (1.4 | ) | (0.2 | ) | (5.2 | ) | (0.9 | ) | |||||||||||
Net income | 9.0 | 4.3 | % | 18.2 | 10.0 | % | 45.0 | 7.5 | % | 51.6 | 9.3 | % | |||||||||||||||
Diluted earnings per share from continuing operations | $ | 0.60 | $ | 1.14 | $ | 2.70 | $ | 3.06 | |||||||||||||||||||
Diluted earnings per share | $ | 0.57 | $ | 0.98 | $ | 2.62 | $ | 2.78 | |||||||||||||||||||
Cash provided by operations | $ | 25.7 | $ | 30.5 | $ | 37.9 | $ | 105.2 | |||||||||||||||||||
Capital spending | $ | 9.8 | $ | 19.9 | $ | 51.9 | $ | 45.7 |
Three Months Ended | Consolidated Sales Volume Change | ||||||||||||||||
Net Sales (dollars in millions) | September 30, 2011 | September 30, 2010 | Change | Percent Change | |||||||||||||
Paper | $ | 157.1 | $ | 130.0 | $ | 27.1 | 20.8 | % | 16 | % | |||||||
Reconstituted Tobacco | 54.1 | 52.0 | 2.1 | 4.0 | (9 | ) | |||||||||||
Total | $ | 211.2 | $ | 182.0 | $ | 29.2 | 16.0 | % | 7 | % |
Amount | Percent | |||||
Changes due to volume | $ | 15.9 | 8.7 | % | ||
Changes in currency exchange rates | 13.4 | 7.3 | ||||
Changes in product mix and selling prices | (0.1 | ) | — | |||
Total | $ | 29.2 | 16.0 | % |
• | Unit sales volumes increased by 7% in the three month period ended September 30, 2011 versus the prior-year quarter. The increase in overall volumes favorably impacted net sales by $15.9 million. |
◦ | Sales volumes for the Paper segment increased by 16%. Sales volume for traditional tobacco-related paper products declined in certain markets partially offset by a 63% increase in LIP paper sales volume and increased sales of mostly low-margin non-tobacco paper products to utilize available paper machine time. The dollar impact of increased LIP volumes more than offset the dollar impact of decline in traditional paper volume. |
◦ | Sales volumes in the Reconstituted Tobacco segment decreased by 9% primarily due to reduced orders from certain major customers. Sales volumes during the third quarter of 2011 declined as expected and were in line with previously announced demand decreases during 2011 from two of our largest customers. |
• | Changes in currency exchange rates increased net sales by $13.4 million, or 7.3%, in the three month period ended September 30, 2011 and primarily reflected the impact of changes in the value of the euro compared with the U.S. dollar in the third quarter of 2011 versus the prior-year quarter. |
• | A sales mix which included a higher proportion of lower-priced Paper products partially offset by $1.4 million in royalty income from customer LIP patent license agreements had a net unfavorable impact of $0.1 million. |
Three Months Ended | ||||||||||||||||||||
September 30, 2011 | September 30, 2010 | Percent Change | Percent of Net Sales | |||||||||||||||||
Change | 2011 | 2010 | ||||||||||||||||||
Net Sales | $ | 211.2 | $ | 182.0 | $ | 29.2 | 16.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of products sold | 154.9 | 132.5 | 22.4 | 16.9 | 73.3 | 72.8 | ||||||||||||||
Gross Profit | $ | 56.3 | $ | 49.5 | $ | 6.8 | 13.7 | % | 26.7 | % | 27.2 | % |
Three Months Ended | ||||||||||||||||||||
September 30, 2011 | September 30, 2010 | Percent Change | Percent of Net Sales | |||||||||||||||||
Change | 2011 | 2010 | ||||||||||||||||||
Selling expense | $ | 5.7 | $ | 4.5 | $ | 1.2 | 26.7 | % | 2.7 | % | 2.5 | % | ||||||||
Research expense | 2.3 | 2.1 | 0.2 | 9.5 | 1.1 | 1.1 | ||||||||||||||
General expense | 14.6 | 11.5 | 3.1 | 27.0 | 6.9 | 6.3 | ||||||||||||||
Nonmanufacturing expenses | $ | 22.6 | $ | 18.1 | $ | 4.5 | 24.9 | % | 10.7 | % | 9.9 | % |
Three Months Ended | Return on Net Sales | ||||||||||||||||
September 30, 2011 | September 30, 2010 | ||||||||||||||||
Change | 2011 | 2010 | |||||||||||||||
Paper | $ | 0.5 | $ | 14.2 | $ | (13.7 | ) | 0.3 | % | 10.9 | % | ||||||
Reconstituted Tobacco | 15.2 | 21.5 | (6.3 | ) | 28.1 | 41.3 | |||||||||||
Unallocated expenses | (4.5 | ) | (5.0 | ) | 0.5 | ||||||||||||
Total | $ | 11.2 | $ | 30.7 | $ | (19.5 | ) | 5.3 | % | 16.9 | % |
• | $15.9 million valuation allowance to fully reserve the Company's ICMS business tax credits |
• | $2.6 million foreign currency impacts, primarily due to a weaker U.S. dollar relative to the Brazilian real |
• | $2.4 million in higher inflationary costs, primarily from wood pulp, labor rates and energy prices |
• | $2.4 million in European LIP start-up expenses |
• | These negative factors were mostly offset by a $15.6 million favorable sales volume impact |
• | $3.4 million in higher restructuring costs related to suspending construction of the Philippine facility |
• | $2.1 million from lower sales volumes |
• | $1.5 million from increased manufacturing costs |
• | These negative factors were partially offset by $1.8 million from foreign currency exchange impacts primarily due to a weaker U.S. dollar relative to the euro |
Nine Months Ended | Consolidated Sales Volume Change | ||||||||||||||||
Net Sales (dollars in millions) | September 30, 2011 | September 30, 2010 | Change | Percent Change | |||||||||||||
Paper | $ | 425.4 | $ | 394.7 | $ | 30.7 | 7.8 | % | 7 | % | |||||||
Reconstituted Tobacco | 172.7 | 162.7 | 10.0 | 6.1 | (1 | ) | |||||||||||
Total | $ | 598.1 | $ | 557.4 | $ | 40.7 | 7.3 | % | 3 | % |
Amount | Percent | |||||
Changes in currency exchange rates | $ | 23.2 | 4.2 | % | ||
Changes due to volume | 23.1 | 4.1 | ||||
Changes in product mix and selling prices | (5.6 | ) | (1.0 | ) | ||
Total | $ | 40.7 | 7.3 | % |
• | Changes in currency exchange rates increased net sales by $23.2 million, or 4.2%, in the nine month period ended September 30, 2011 and primarily reflected the impact of changes in the value of the euro compared with the U.S. dollar during the period versus the prior year. |
• | Unit sales volumes increased by 3% in the nine month period ended September 30, 2011 versus the prior-year period. The increase in overall volumes positively impacted net sales by $23.1 million. |
◦ | Sales volumes for the Paper segment increased by 7%. Sales volume of LIP papers increased by 33%. Sales volumes of traditional tobacco-related papers continued to decline in certain markets but was more than offset by increased sales of non-tobacco papers primarily produced to fill available machine time. |
◦ | Sales volumes in the Reconstituted Tobacco segment decreased by 1% primarily due to decreased demand from certain of SWM's major customers. |
• | A sales mix which included a higher proportion of lower-priced Paper products had an unfavorable impact of $5.6 million, or 1%, on net sales. |
Nine Months Ended | ||||||||||||||||||||
September 30, 2011 | September 30, 2010 | Percent Change | Percent of Net Sales | |||||||||||||||||
Change | 2011 | 2010 | ||||||||||||||||||
Net Sales | $ | 598.1 | $ | 557.4 | $ | 40.7 | 7.3 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of products sold | 439.5 | 409.1 | 30.4 | 7.4 | 73.5 | 73.4 | ||||||||||||||
Gross Profit | $ | 158.6 | $ | 148.3 | $ | 10.3 | 6.9 | % | 26.5 | % | 26.6 | % |
Nine Months Ended | ||||||||||||||||||||
September 30, 2011 | September 30, 2010 | Percent Change | Percent of Net Sales | |||||||||||||||||
Change | 2011 | 2010 | ||||||||||||||||||
Selling expense | $ | 16.3 | $ | 14.3 | $ | 2.0 | 14.0 | % | 2.7 | % | 2.6 | % | ||||||||
Research expense | 6.7 | 6.2 | 0.5 | 8.1 | 1.1 | 1.1 | ||||||||||||||
General expense | 42.2 | 33.9 | 8.3 | 24.5 | 7.1 | 6.1 | ||||||||||||||
Nonmanufacturing expenses | $ | 65.2 | $ | 54.4 | $ | 10.8 | 19.9 | % | 10.9 | % | 9.8 | % |
Nine Months Ended | Return on Net Sales | ||||||||||||||||
September 30, 2011 | September 30, 2010 | ||||||||||||||||
Change | 2011 | 2010 | |||||||||||||||
Paper | $ | 21.3 | $ | 34.2 | $ | (12.9 | ) | 5.0 | % | 8.7 | % | ||||||
Reconstituted Tobacco | 61.5 | 65.5 | (4.0 | ) | 35.6 | 40.3 | |||||||||||
Unallocated expenses | (13.6 | ) | (13.0 | ) | (0.6 | ) | |||||||||||
Total | $ | 69.2 | $ | 86.7 | $ | (17.5 | ) | 11.6 | % | 15.6 | % |
• | $15.9 million valuation allowance to fully reserve the Company's ICMS business tax credits |
• | $9.8 million in higher inflationary costs, including wood pulp, energy, other materials and labor |
• | $5.8 million of foreign currency impacts |
• | $5.7 million in higher nonmanufacturing expenses |
• | $5.4 million of start-up costs at the Poland LIP facility |
• | $1.9 million due to lower average selling prices and mix |
• | These negative factors were partially offset by $20.4 million sales volume impact of high-value products, $4.7 million in benefits from cost saving and operational excellence initiatives and $3.3 million in lower restructuring expenses. |
• | $4.4 million in higher restructuring and impairment expense related to suspending construction of the Philippine facility |
• | $3.4 million from higher inflationary costs, primarily from energy |
• | These negative factors were partially offset by $3.6 million from currency exchange impacts primarily due to a weaker U.S. dollar relative to the euro and $1.7 million from lower manufacturing costs from the Company's operational excellence and cost savings initiatives. |
Cash Flows from Operating Activities ($ in millions) | Nine Months Ended | ||||||
September 30, 2011 | September 30, 2010 | ||||||
Net Income | $ | 45.0 | $ | 51.6 | |||
Less: Loss from discontinued operations | 1.4 | 5.2 | |||||
Income from continuing operations | 46.4 | 56.8 | |||||
Non-cash items included in net income: | |||||||
Depreciation and amortization | 33.0 | 29.6 | |||||
Valuation allowance on ICMS business tax credits | 15.9 | — | |||||
Restructuring-related impairment | 3.4 | 0.5 | |||||
Amortization of deferred revenue | (6.0 | ) | (6.0 | ) | |||
Deferred income tax provision | (6.3 | ) | 20.6 | ||||
Pension and other postretirement benefits | (2.4 | ) | 1.6 | ||||
Stock-based compensation | 3.0 | 5.6 | |||||
Income from equity affiliate | (3.4 | ) | (2.1 | ) | |||
Excess tax benefits of stock-based awards | (9.1 | ) | (1.3 | ) | |||
Other items | (3.1 | ) | (2.8 | ) | |||
Net changes in operating working capital | (29.2 | ) | 22.1 | ||||
Net cash provided by operating activities of: | |||||||
Continuing operations | 42.2 | 124.6 | |||||
Discontinued operations | (4.3 | ) | (19.4 | ) | |||
Cash Provided by Operations | $ | 37.9 | $ | 105.2 |
Operating Working Capital ($ in millions) | Nine Months Ended | ||||||
September 30, 2011 | September 30, 2010 | ||||||
Changes in operating working capital | |||||||
Accounts receivable | $ | (28.6 | ) | $ | (16.2 | ) | |
Inventories | (0.7 | ) | 17.4 | ||||
Prepaid expenses | — | (1.7 | ) | ||||
Accounts payable | (3.2 | ) | 3.9 | ||||
Accrued expenses | 5.3 | — | |||||
Accrued income taxes | (2.0 | ) | 18.7 | ||||
Net changes in operating working capital | $ | (29.2 | ) | $ | 22.1 |
Cash Flows from Investing Activities ($ in millions) | Nine Months Ended | ||||||
September 30, 2011 | September 30, 2010 | ||||||
Capital spending | $ | (51.9 | ) | $ | (45.7 | ) | |
Capitalized software costs | (1.2 | ) | (8.3 | ) | |||
Investment in equity affiliates | (5.3 | ) | — | ||||
Other | 2.7 | 0.4 | |||||
Cash Used for Investing | $ | (55.7 | ) | $ | (53.6 | ) |
Cash Flows from Financing Activities ($ in millions) | Nine Months Ended | ||||||
September 30, 2011 | September 30, 2010 | ||||||
Cash dividends paid to SWM stockholders | $ | (7.7 | ) | $ | (8.1 | ) | |
Net proceeds from (payments on) borrowings | 112.5 | (4.9 | ) | ||||
Purchases of treasury stock | (120.9 | ) | (19.0 | ) | |||
Proceeds from exercises of stock options | 0.3 | 1.6 | |||||
Excess tax benefits of stock-based awards | 9.1 | 1.3 | |||||
Cash Used in Financing | $ | (6.7 | ) | $ | (29.1 | ) |
Debt Instruments and Related Covenants ($ in millions) | Nine Months Ended | ||||||
September 30, 2011 | September 30, 2010 | ||||||
Changes in short-term debt | $ | (2.9 | ) | $ | 2.9 | ||
Proceeds from issuances of long-term debt | 218.7 | 48.1 | |||||
Payments on long-term debt | (103.3 | ) | (55.9 | ) | |||
Net proceeds from (payments on) borrowings | $ | 112.5 | $ | (4.9 | ) |
• | Schweitzer-Mauduit has manufacturing facilities in seven countries, two joint ventures in China, and sells products in over 90 countries. As a result, it is subject to a variety of import and export, tax, foreign currency, labor and other regulations within these countries. Changes in these regulations, or adverse interpretations or applications, as well as changes in currency exchange rates, could adversely impact the Company's business in a variety of ways, including increasing expenses, decreasing sales, limiting its ability to repatriate funds and generally limiting its ability to conduct business. |
• | The Company's sales are concentrated to a limited number of customers. In 2010, 45% of its sales were to its three largest customers. The loss of one or more of these customers, or a significant reduction in one or more of these customers' purchases, could have a material adverse effect on the company's results of operations. |
• | The Company's financial performance is materially impacted by sales of both reconstituted tobacco products and cigarette paper for lower ignition propensity cigarettes. A significant change in sales or production volumes, pricing or manufacturing costs of these products could have a material impact on future financial results. In this regard, Philip Morris - USA began advising the Company in 2009 that it disputes the manner in which the Company has calculated costs for banded cigarette papers under a cost-plus based contract for this product during the period April 2009 through December 2010. Notwithstanding that the dispute is now over a year old, and SWM has consistently advised Philip Morris - USA that it disagrees with its position, Philip Morris -USA to-date has not instituted any formal action to bring this matter to a close. Philip Morris - USA has also consistently paid the full invoiced amount from the date of the first notice of dispute to the present thereby avoiding any contention by SWM that the agreement has been breached for non-payment. Philip Morris - USA's action reflects a requirement found in the Virginia Uniform Commercial Code, the law that governs the contract, that suggests a party making full payment of a disputed invoice potentially waives any right to recover the amount paid unless such payment is accompanied by an explicit reservation of rights. Currently, the disputed amount is approximately $24.4 million. While the Company believes that it has properly calculated the amount it invoiced, the ultimate resolution of this dispute, if unfavorable to the Company, could have a material adverse effect on the Company's results of operations. |
• | As a result of excess capacity in the tobacco-related papers industry and increased operating costs, competitive levels of selling prices for certain of the Company's products are not sufficient to cover those costs with a margin that the Company considers reasonable. Such competitive pressures have resulted in downtime of certain paper machines and, in some cases, accelerated depreciation or impairment charges for certain equipment as well as employee severance expenses associated with downsizing activities. The Company will continue to disclose any such actions as they are announced to affected employees or otherwise become certain and will continue to provide updates to any previously disclosed expectations of expenses associated with such actions. |
• | The demand for our reconstituted tobacco leaf product is subject to change depending on the rate at which this product is included in the blend that forms the column of tobacco in various cigarette brands as well as the supply and cost of natural tobacco leaf, which serves to an extent as a substitute for reconstituted tobacco. A change in the inclusion rate or the dynamics of the natural leaf tobacco market can have a material adverse effect on the volume of reconstituted tobacco sales, the price for reconstituted tobacco or both, either of which can have a material adverse effect on our earnings from that product line. In past years, the Company has experienced the adverse effects for one or more years related to changes in the demand and supply relationship for natural leaf. |
• | In recent years, governmental entities around the world, particularly in the United States and western Europe, have taken or have proposed actions that may have the effect of reducing consumption of tobacco products. Reports with respect to the possible harmful physical effects of cigarette smoking and use of tobacco products have been publicized for many years and, together with actions to restrict or prohibit advertising and promotion of cigarettes or other tobacco products, to limit smoking in public places and to increase taxes on such products, are intended to discourage the consumption of cigarettes and other such products. Also in recent years, certain governmental entities, particularly in North America, have enacted, considered or proposed actions that would require cigarettes to meet specifications aimed at reducing their likelihood of igniting fires when the cigarettes are not actively being smoked. Furthermore, it is not possible to predict what additional legislation or regulations relating to tobacco products will be enacted, or to what extent, if any, such legislation or regulations might affect our business. |
• | Our portfolio of granted patents varies by country, which could have an impact on any competitive advantage provided by patents in individual markets. We rely on patent, trademark, and other intellectual property laws of the United States and other countries to protect our intellectual property rights. In order to maintain the benefits of our patents, we may be required to enforce certain of our patents against infringement through court actions. However, we may be unable to prevent third parties from using our intellectual property or infringing on our patents without our authorization, which may reduce any competitive advantage we have developed. If we have to litigate to protect these rights, any proceedings could be costly, time consuming, could divert management resources, and we may not prevail. We cannot guarantee that any United States or foreign patents, issued or pending, will continue to provide us with any competitive advantage or will not be successfully challenged by third parties. We do not believe that any of our products infringe the valid intellectual property rights of third parties. However, we may be unaware of intellectual property rights of others that may cover some of our products or services. In that event, we may be subject to significant claims for damages. Effectively policing our intellectual property and patents is time consuming and costly, and the steps taken by us may not prevent infringement of our intellectual property, patents or other proprietary rights in our products, technology and trademarks, particularly in foreign countries where in many instances the local laws or legal systems do not offer the same level of protection as in the United States. |
• | Recent uncertainty in the EU financial markets has increased the possibility of significant changes in foreign exchange rates as governments take counter measures. As a large portion of our commercial business is euro denominated, any material change in the euro to U.S. dollar exchange rate could impact our results on a consolidated basis. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum amount of shares that May Yet Be Purchased under the Programs | ||||||||||||||
(# shares) | ($ in millions) | ($ in millions) | ||||||||||||||||
First Quarter 2011 | 803,337 | $ | 57.09 | 525,000 | $ | 30.0 | ||||||||||||
Second Quarter 2011 | 1,143,469 | 51.29 | 1,143,469 | $ | 58.7 | |||||||||||||
July 2011 | 290,039 | 56.22 | 291,741 | 16.3 | ||||||||||||||
August 2011 | — | — | — | — | ||||||||||||||
September 2011 | — | — | — | — | ||||||||||||||
Total Year-to-Date 2011 | 2,236,845 | $ | 53.59 | 1,960,210 | $ | 105.0 | $ | — |
(a) | Exhibits: | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |
101 | The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flow, (iv) the Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income and (v) Notes to Consolidated Financial Statements. (Furnished herewith.) | |
* | These Section 906 certifications are not being incorporated by reference into the Form 10-Q filing or otherwise deemed to be filed with the Securities and Exchange Commission. |
By: | /s/ PETER J. THOMPSON | By: | /s/ MARK A. SPEARS | |
Peter J. Thompson Executive Vice President, Finance & Strategic Planning (duly authorized officer and principal financial officer) | Mark A. Spears Corporate Controller (principal accounting officer) | |||
November 2, 2011 | November 2, 2011 |
• | “Banded cigarette paper” is a type of paper, used to produce lower ignition propensity cigarettes, by applying bands to the paper during the papermaking process. |
• | “Binder” is used to hold the tobacco leaves in a cylindrical shape during the production process of cigars. |
• | “Cigarette paper” wraps the column of tobacco within a cigarette and has varying properties such as basis weight, porosity, opacity, tensile strength, texture and burn rate. |
• | “Commercial and industrial products” include lightweight printing and writing papers, coated papers for packaging and labeling applications, business forms, battery separator paper, drinking straw wrap and other specialized papers. |
• | “Flax” is a cellulose fiber from a flax plant used as a raw material in the production of certain cigarette papers. |
• | “Lower ignition propensity cigarette paper” includes banded and print banded cigarette paper, both of which contain bands, which increase the likelihood that an unattended cigarette will self-extinguish. |
• | “Net debt to EBITDA ratio” is a financial measurement used in bank covenants where “ Net Debt “ is defined as consolidated total debt minus unrestricted cash and cash equivalents in excess of $15 million, and “EBITDA” is defined as net income plus the sum of interest expense, income tax expense, depreciation and amortization, non-cash restructuring and impairment charges, earnings attributable to the minority interest to the extent such earnings are received by the Company and all other non-cash charges minus amortization of deferred revenue and minority interest in the earnings of subsidiaries to the extent such earnings are distributed to holders other than the Company. |
• | “Net debt to capital ratio” is total debt less cash and cash equivalents, divided by the sum of total debt, noncontrolling interest and total stockholders’ equity. |
• | “Net debt to equity ratio” is total debt less cash and cash equivalents, divided by the sum of noncontrolling interest and total stockholders’ equity. |
• | “Net operating working capital” is accounts receivable, inventory, current income tax refunds receivable and prepaid expense, less accounts payable, accrued liabilities and accrued income taxes payable. |
• | “Opacity” is a measure of the extent to which light is allowed to pass through a given material. |
• | “Operating profit return on assets” is operating profit divided by average total assets. |
• | “Plug wrap paper” wraps the outer layer of a cigarette filter and is used to hold the filter materials in a cylindrical form. |
• | “Print banded cigarette paper” is a type of paper, used to produce lower ignition propensity cigarettes, with bands added to the paper during a printing process, subsequent to the papermaking process. |
• | “Reconstituted tobacco” is produced in 2 forms: leaf, or reconstituted tobacco leaf, and wrapper and binder products. Reconstituted tobacco leaf is blended with virgin tobacco as a design aid to achieve certain attributes of finished cigarettes. Wrapper and binder are reconstituted tobacco products used by manufacturers of cigars. |
• | “Restructuring and impairment expense” represents expenses incurred in connection with activities intended to significantly change the size or nature of the business operations, including significantly reduced utilization of operating equipment, exit of a product or market or a significant workforce reduction and charges to reduce property, plant and equipment to its fair value. |
• | “Start-up costs” are costs incurred prior to generation of income producing activities in the case of a new plant, or costs incurred in excess of expected ongoing normal costs in the case of a new or rebuilt machine. Start-up costs can include excess variable costs such as raw materials, utilities and labor and unabsorbed fixed costs. |
• | “Tipping paper” joins the filter element to the tobacco-filled column of the cigarette and is both printable and glueable at high speeds. |
• | “Wrapper” covers the outside of cigars providing a uniform, finished appearance. |
Exhibit Number | Description | ||
31.1 | — | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | — | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | — | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |
101.INS | — | XBRL Instance Document.** | |
101.SCH | XBRL Calculation Schema Document.** | ||
101.CAL | — | XBRL Calculation Linkbase Document.** | |
101. DEF | — | XBRL Taxonomy Definition Linkbase Document.** | |
101.LAB | — | XBRL Taxonomy Label Linkbase Document.** | |
101.PRE | — | XBRL Taxonomy Presentation Linkbase Document.** | |
* | These Section 906 certifications are not being incorporated by reference into the Form 10-Q filing or otherwise deemed to be filed with the Securities and Exchange Commission. | ||
** | In accordance with Regulation S-T, the XBRL-related information in Exhibit No. (101) to this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.” |
1. | I have reviewed this quarterly report on Form 10-Q of Schweitzer-Mauduit International, Inc. (the “Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;3 |
4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
/s/ FREDERIC P. VILLOUTREIX | |
Frédéric P. Villoutreix Chairman of the Board and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Schweitzer-Mauduit International, Inc. (the “Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
/s/ PETER J. THOMPSON | |
Peter J. Thompson Executive Vice President, Finance and Strategic Planning |
By: | /s/ FREDERIC P. VILLOUTREIX | By: | /s/ PETER J. THOMPSON | |
Frédéric P. Villoutreix Chairman of the Board and Chief Executive Officer | Peter J. Thompson Executive Vice President, Finance & Strategic Planning | |||
November 2, 2011 | November 2, 2011 |
Balance Sheet (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Preferred stock (dollars per share) | $ 0.10 | |
Preferred shares authorized (in shares) | 10,000,000 | |
Common stock (dollars per share) | $ 0.10 | |
Common shares authorized (in shares) | 100,000,000 | |
Common shares issued (in shares) | 18,732,013 | 18,721,474 |
Common stock outstanding (in shares) | 16,121,806 | 18,027,903 |
Common stock in treasury (in shares) | 2,610,207 | 693,571 |
Inventories (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories by major class | The following schedule details inventories by major class ($ in millions):
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Document And Entity Information (USD $) | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Oct. 28, 2011 | Jun. 30, 2011 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | SCHWEITZER MAUDUIT INTERNATIONAL INC | ||
Entity Central Index Key | 0001000623 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 902,800,000 | ||
Entity Common Stock, Shares Outstanding | 16,168,842 | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Document Type | 10-Q | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2011 |
Debt (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of total debt | Total debt is summarized in the following table ($ in millions):
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Goodwill and Intangible Assets | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill for each segment for the nine months ended September 30, 2011 were as follows ($ in millions):
The gross carrying amount and accumulated amortization for amortizable intangible assets consisted of the following ($ in millions):
* Accumulated amortization also includes adjustments for foreign currency translation. Amortization expense of intangible assets was $0.3 million and $1.1 million for the three months and nine months ended September 30, 2011, respectively, and $0.4 million and $1.3 million for the three and nine months ended September 30, 2010, respectively. The Company’s customer-related intangibles are amortized to expense using the 150% declining balance method over a 6-year life. Estimated amortization expense for the next three fiscal years is as follows (in millions of dollars): 2011—$1.6 million, 2012—$1.2 million, and 2013—$0.2 million. |
Derivatives (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of asset and liability derivatives and the respective balance sheet locations | The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations at September 30, 2011 ($ in millions):
The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations at December 31, 2010 ($ in millions):
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Schedule of derivative instruments, gain (loss) in income statement | The following tables provide the effect derivative instruments in cash flow hedging relationships had on accumulated other comprehensive income (loss), or AOCI, and results of operations ($ in millions):
The following tables provide the effect derivative instruments not designated as hedging instruments had on net income ($ in millions):
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Segment Information (Details) (USD $) In Millions, unless otherwise specified | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Segment Reporting Information [Line Items] | ||||
Net Sales | $ 211.2 | $ 182.0 | $ 598.1 | $ 557.4 |
Percentage of Net Sales (in hundredths) | 100.00% | 100.00% | 100.00% | 100.00% |
Operating Profit | 11.2 | 30.7 | 69.2 | 86.7 |
Operating Profit (in hundredths) | 100.00% | 100.00% | 100.00% | 100.00% |
Paper [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net Sales | 157.1 | 130.0 | 425.4 | 394.7 |
Percentage of Net Sales (in hundredths) | 74.40% | 71.00% | 71.00% | 71.00% |
Operating Profit | 0.5 | 14.2 | 21.3 | 34.2 |
Operating Profit (in hundredths) | 4.00% | 46.00% | 31.00% | 40.00% |
Reconstituted Tobacco [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net Sales | 54.1 | 52.0 | 172.7 | 162.7 |
Percentage of Net Sales (in hundredths) | 26.00% | 29.00% | 28.90% | 29.00% |
Operating Profit | 15.2 | 21.5 | 61.5 | 65.5 |
Operating Profit (in hundredths) | 135.70% | 70.00% | 89.00% | 76.00% |
Unallocated Amount to Segment [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Operating Profit | $ (4.5) | $ (5.0) | $ (13.6) | $ (13.0) |
Operating Profit (in hundredths) | (40.00%) | (16.00%) | (20.00%) | (15.00%) |
Derivatives by Balance Sheet Location (Details) (USD $) In Millions | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | $ 1.6 | $ 7.5 |
Liability Derivatives | 4.0 | 1.1 |
Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | Accounts Receivable [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | 1.1 | 4.2 |
Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | Property Plant and Equipment [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | 0.3 | (0.3) |
Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | Other Assets [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | (0.4) | 3.6 |
Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | Accounts Payable [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Liability Derivatives | 0.2 | 0 |
Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | Other Liabilities [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Liability Derivatives | 3.5 | 0 |
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Accounts Receivable [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | 0.6 | 0 |
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument [Member] | Accounts Payable [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Liability Derivatives | 0 | 0.4 |
Interest Rate Contract [Member] | Not Designated as Hedging Instrument [Member] | Other Assets [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | 0 | 0 |
Interest Rate Contract [Member] | Not Designated as Hedging Instrument [Member] | Other Liabilities [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Liability Derivatives | 0.3 | 0.7 |
Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | 1.0 | 7.5 |
Liability Derivatives | 3.7 | 0 |
Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Asset Derivatives | 0.6 | 0 |
Liability Derivatives | $ 0.3 | $ 1.1 |
Restructuring Activities (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in restructuring activities | Changes in the restructuring liabilities during the nine month period ended September 30, 2011 and the year ended December 31, 2010 are summarized as follows ($ in millions):
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Postretirement and Other Benefits | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Postretirement and Other Benefits | POSTRETIREMENT AND OTHER BENEFITS The Company sponsors pension benefits in the United States, France, the Philippines and Canada and postretirement healthcare and life insurance, or OPEB, benefits in the United States and Canada. The Company’s Canadian and Philippines pension and OPEB benefits are not material and therefore are not included in the following disclosures. Pension and OPEB Benefits The components of net pension and OPEB benefit costs for U.S. employees and net pension benefit costs for French employees during the three and nine month periods ended September 30, 2011 and 2010 were as follows ($ in millions):
During the full-year 2011, the Company expects to recognize approximately $4.8 million for amortization of accumulated other comprehensive loss related to its U.S. pension and OPEB plans and approximately $0.9 million for its French pension plans. The Company contributed $6.0 million to its U.S. pension plan during the three and nine months ended September 30, 2011. The Company paid $0.3 million and $0.8 million during the three month and nine month periods ended September 30, 2011, respectively, for its U.S. OPEB benefits and expects to pay a total of approximately $1 million during the full-year 2011 for such benefits. |
General | 9 Months Ended |
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Sep. 30, 2011 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
General | Nature of Business Schweitzer-Mauduit International, Inc., or SWM or the Company, is a multinational diversified producer of premium specialty papers headquartered in the United States of America. The Company manufactures and sells paper and reconstituted tobacco products to the tobacco industry as well as specialized paper products for use in other applications. The Company’s tobacco-related products include cigarette, plug wrap and base tipping papers, or Cigarette Papers, used to wrap various parts of a cigarette, reconstituted tobacco leaf, or RTL, which is used as a blend with virgin tobacco in cigarettes and reconstituted tobacco wrappers and binders for machine-made cigars. These products are sold directly to the major tobacco companies or their designated converters in the Americas, Europe, Asia and elsewhere. Non-tobacco industry products are a diverse mix of products, certain of which represent commodity paper grades produced to maximize machine operations. The Company is a manufacturer of high porosity papers, which are used in manufacturing ventilated cigarettes, banded and print banded papers for the production of lower ignition propensity, or LIP, cigarettes and the leading independent producer of RTL used in producing blended cigarettes. The Company conducts business in over 90 countries and currently operates 11 production locations worldwide, with mills in the United States, France, the Philippines, Indonesia, Brazil and Poland. The Company also has a 50% equity interest in two joint ventures in China. Basis of Presentation The accompanying unaudited consolidated financial statements and the notes thereto have been prepared in accordance with the instructions of Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission, or the SEC, and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America, or U.S. GAAP. However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods including the results of a business reclassified as a discontinued operation which is more fully described in Note 2. Discontinued Operations. The results of operations for the three month and nine month periods ended September 30, 2011, are not necessarily indicative of the results to be expected for the full year. The unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on February 25, 2011. Principles of Consolidation The consolidated financial statements include the accounts of the Company and wholly-owned, majority-owned and controlled subsidiaries. The Company’s share of the net income of its 50% owned joint ventures in China are included in the consolidated statements of income as income from equity affiliates. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, inventory valuation, useful lives, fair values, sales returns, receivables valuation, pension, postretirement and other benefits, restructuring and impairment, taxes and contingencies. Actual results could differ materially from those estimates. Recent Accounting Pronouncements There have been no recent accounting pronouncements which are expected to have a material impact on the Company’s results of operations, financial position, or disclosures. |
Debt | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | DEBT Total debt is summarized in the following table ($ in millions):
Credit Agreement In May 2011, the Company entered into a new unsecured revolving credit facility, or Credit Agreement, which replaced its former credit facility executed on July 20, 2006 that was scheduled to expire in July 2012. The five-year revolving Credit Agreement provides for borrowing capacity of approximately $225 million with an option to increase borrowing capacity by $100 million and includes a $100 million equivalent sub-limit available in euro, of which €25 million was drawn at September 30, 2011, and a $25 million equivalent sub-limit available in Philippine pesos. The Credit Agreement contains representations and warranties which are customary for facilities of this type and covenants and provisions that, among other things, require the Company to maintain (a) a Maximum Net Debt to EBITDA Ratio of 3.00 and (b) Minimum Interest Coverage of 3.50. The Company was in compliance with its financial covenants at September 30, 2011. Under the Credit Agreement, interest rates are based on the London Interbank Offered Rate plus an applicable margin that varies from 1.25% to 2.00% depending on the Net Debt to EBITDA Ratio, as defined in the Credit Agreement. The Company will incur commitment fees at an annual rate of 0.20% to 0.30% of the applicable margin on the committed amounts not drawn, depending on the Net Debt to EBITDA Ratio. As of September 30, 2011, the applicable interest rate on Credit Agreement borrowings was 1.50% on US Dollar borrowings and 2.59% on euro borrowings. Interest Expense and Rate Swap Agreements The Company capitalized $0.2 million and $1.1 million of interest expense in the three and nine months ended September 30, 2011, respectively, due to construction of a RTL facility in the Philippines and the EU LIP facility in Poland. The Company maintains interest rate swap agreements on portions of its long-term debt. As a result, as of September 30, 2011, the LIBOR rates on $33.0 million of the Company’s variable-rate long-term debt were fixed at 2.1% through March 2012. The impact of the swap agreements on the consolidated financial statements was not material for the three months and nine months ended September 30, 2011 and 2010. See Note 8. Derivatives for more information. Fair Value of Debt At September 30, 2011 and December 31, 2010, the estimated fair values of the Company’s current and long-term debt approximated the respective carrying amounts since the interest rates were variable and based on current market indices. |
Segment Information | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | SEGMENT INFORMATION Effective during the first quarter of 2011, the Company realigned its management structure to evaluate its business based on product lines in addition to geographies. The realignment resulted in an external reporting segment change to product lines from geographies. The Company's two operating product line segments are also the Company's reportable segments: Paper and Reconstituted Tobacco. The Paper segment primarily produces Cigarette Papers such as cigarette papers, including LIP papers, plug wrap papers and base tipping papers used to wrap various parts of a cigarette for sale to cigarette manufacturers. The Paper segment also includes commercial and industrial products such as lightweight printing and writing papers, battery separator paper, drinking straw wrap, filter paper and other specialized papers. These non-tobacco industry products are generally sold directly to converters and other end-users or brokers. The Reconstituted Tobacco segment produces reconstituted tobacco leaf, or RTL, and wrapper and binder products for sale to cigarette and cigar manufacturers. The accounting policies of these segments are the same as those described in Note 2. Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The Company primarily evaluates segment performance and allocates resources based on operating profit. Expense amounts not associated with segments are referred to as unallocated expenses. Certain of the Company’s assets are used in the production of both segments’ products. Consequently, product line asset information has not been used in segment performance measures. Net Sales ($ in millions)
Operating Profit ($ in millions)
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Derivatives | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | DERIVATIVES In the normal course of business, the Company is exposed to foreign currency exchange rate risk and interest rate risk on its variable-rate debt. To manage these risks, the Company utilizes a variety of practices including, where considered appropriate, derivative instruments. The Company has no derivative instruments for trading or speculative purposes nor any derivatives with credit risk related contingent features. All derivative instruments used by the Company are either exchange traded or are entered into with major financial institutions in order to reduce credit risk and risk of nonperformance by third parties. The fair values of the Company’s derivative instruments are determined using observable inputs and are considered Level 2 assets or liabilities. The Company utilizes currency forward, swap and, to a lesser extent, option contracts to selectively hedge its exposure to foreign currency transaction risk when it is practical and economical to do so. The use of these contracts minimizes transactional exposure to exchange rate changes. Usually, these contracts extend for no more than 12 months. We designate certain of our foreign currency hedges as cash flow hedges. Changes in the fair value of cash flow hedges are reported as a component of other comprehensive income (loss) and reclassified into earnings when the forecasted transaction affects earnings. For foreign exchange contracts not designated as cash flow hedges, changes in the contracts’ fair value are recorded to net income each period. The Company selectively hedges its exposure to interest rate increases on variable-rate, long-term debt when it is practical and economical to do so. The Company utilizes various forms of interest rate hedge agreements, including interest rate swap agreements, typically with contractual terms no longer than 24 months. Changes in the fair value of our interest rate swaps are recorded to net income each period. See Note 7. Debt for more information about our interest rate swaps. The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations at September 30, 2011 ($ in millions):
The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations at December 31, 2010 ($ in millions):
The following tables provide the effect derivative instruments in cash flow hedging relationships had on accumulated other comprehensive income (loss), or AOCI, and results of operations ($ in millions):
The following tables provide the effect derivative instruments not designated as hedging instruments had on net income ($ in millions):
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Discontinued Operations (Details) (Malaucene, France finished tipping paper mill [Member], USD $) In Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
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Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | Dec. 31, 2010 | |
Malaucene, France finished tipping paper mill [Member] | |||||
Assets of discontinued operations: | |||||
Current assets | $ 1.2 | $ 1.2 | $ 3.9 | ||
Noncurrent deferred income tax benefits | 8.8 | 8.8 | 8.0 | ||
Other assets - assets held for sale | 0.4 | 0.4 | 0.4 | ||
Liabilities of discontinued operations: | |||||
Current liabilities | 8.4 | 8.4 | 12.2 | ||
Net sales | 0 | 0 | 0 | 0.6 | |
Restructuring and impairment expense | 0.5 | 4.6 | 1.5 | 6.9 | |
Loss from discontinued operations before income taxes | (0.6) | (4.6) | (2.1) | (7.9) | |
Income tax benefit | 0.1 | 1.6 | 0.7 | 2.7 | |
Loss from discontinued operations | (0.5) | (3.0) | (1.4) | (5.2) | |
Balance at beginning of year | 9.2 | 20.9 | 20.9 | ||
Accruals for announced programs | 1.2 | 7.7 | |||
Cash payments - discontinued operations | (4.2) | (17.8) | |||
Exchange rate impacts | 0.1 | (1.6) | |||
Balance at end of period | $ 6.3 | $ 6.3 | $ 9.2 |
Restructuring Activities | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Activities | RESTRUCTURING ACTIVITIES AND ICMS VALUATION ALLOWANCE Restructuring Activities The Company incurred restructuring expenses of $6.6 million and $0.7 million in the three month periods ended September 30, 2011 and 2010, respectively, and $8.3 million and $7.2 million in the nine month periods ended September 30, 2011 and 2010, respectively, in connection with previously announced restructuring activities. In the Paper segment, rationalization of base paper manufacturing footprint included restructuring actions to close the Lee Mills facilities in Lee, Massachusetts beginning in 2008, workforce reductions and shutting down a paper machine in Spotswood, New Jersey in 2009, workforce reductions and a small machine impairment in Quimperle, France in 2009 and a workforce reduction in Brazil in 2010. The Paper segment expense of $3.2 million and $3.7 million for the three months and nine months ended September 30, 2011, respectively, included $3.2 million related to an early retirement plan offered to 40 French employees of PdM as part of the 2009 workforce reduction. The total cost of the plan, which is expected to be approximately $9.0 million, will be recognized over the remaining required service period of the participants through 2014 and paid to participants through their respective normal retirement ages through 2018. In 2010, primarily all Paper segment restructuring expense in each period was related to severances that were recorded over the remaining service periods of the affected employees. The Reconstituted Tobacco segment expense of $3.4 million and $4.6 million for the three months and nine months ended September 30, 2011, respectively, included $3.4 million impairment of RTL Philippines equipment requiring rework before it can be sold. In January 2011, the Company learned of decreased RTL needs of a major customer. As a consequence, management decided to suspend the construction of the RTL facility in the Philippines. During the third quarter, the Company updated its impairment analysis of its investment in the Philippine RTL facility and recorded an impairment charge. Restructuring and impairment expense for the nine months ended September 30, 2011 also included $1.2 million of expense related to severances and related suspension costs. The carrying value of the Philippine RTL facility was $71.9 million as of September 30, 2011. Restructuring liabilities were classified within accrued expenses in each of the consolidated balance sheets as of September 30, 2011 and December 31, 2010. Changes in the restructuring liabilities during the nine month period ended September 30, 2011 and the year ended December 31, 2010 are summarized as follows ($ in millions):
ICMS Valuation Allowance In the Paper segment, our operations in Brazil are currently generating more value-added tax credits than we utilize. During the three months ended September 30, 2011, the Company recorded a $15.9 million valuation allowance against the entire carrying value of its Imposto sobre Circulaçăo de Mercadorias e Serviços, or ICMS, business tax credits in Brazil. The Company had been seeking a special government action to obtain tax exempt status for the paper industry to enable more rapid utilization of these credits. During the third quarter of 2011, the government of Rio de Janeiro state signed into law an action; however, the action included certain limitations on the use of these credits for the paper industry and has a finite life of 48 months. As a result, utilization of the Company's credits may be delayed barring other changes outside of the Company's control. The credits do not expire. The Company is still pursuing other actions to utilize its credits. Future material changes as a result of new legislation or a change in our operations will be reported separately. Charges and credits associated with normal ongoing activity will be included in Cost of Products Sold in the Consolidated Statements of Income. |
Statement of Shareholders' Equity (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Dividends declared (in dollars per share) | $ 0.15 | $ 0.15 | $ 0.45 | $ 0.45 |
Discontinued Operations | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | DISCONTINUED OPERATIONS Due to ongoing losses, the Company decided in 2009 to close its Malaucène, France finished tipping paper mill. During 2010, the run off operations at our Malaucène, France mill were completed and, therefore operations at the Malaucène mill are reported as discontinued operations for all periods presented. Consequently, results of the Malaucène mill have been removed from each individual line within the statements of income and the operating activities section of the statements of cash flow. In each case a separate line has been added for the net results of the discontinued operation, including previously reported restructuring and impairment amounts. The Company is pursuing actions to dispose of the remaining assets and liabilities related to the Malaucène site. Restructuring expense incurred during all periods presented primarily related to additional severances , claims from employees for additional severances and environmental remediation costs. Included in the Consolidated Balance Sheets are the following major classes of assets and liabilities associated with the discontinued operations ($ in millions):
Summary comparative financial results of discontinued operations were as follows ($ in millions):
Restructuring liabilities related to discontinued operations were classified within accrued expenses in each of the September 30, 2011 and December 31, 2010 consolidated balance sheets. Changes in the restructuring liabilities during 2011 and 2010 are summarized as follows ($ in millions):
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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified | Sep. 30, 2011 |
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Unfavorable Regulatory Action [Member] | |
Loss Contingencies [Line Items] | |
Number of assessments from the tax authorities regarding ICMS taxes | 2 |
Number of tax assessments related to periods that predated acquisition and are covered by indemnification | 1 |
Loss Contingency, Range of Possible Loss, Maximum | $ 32.3 |
Portion covered by indemnification | 17.6 |
Unasserted Claim [Member] | |
Loss Contingencies [Line Items] | |
Loss Contingency, Range of Possible Loss, Maximum | $ 24.4 |
Net Income Per Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | NET INCOME PER SHARE The Company uses the two-class method to calculate earnings per share. The Company has granted restricted stock that contains nonforfeitable rights to dividends on unvested shares. Since these unvested restricted shares are considered participating securities under the two-class method, the Company allocates earnings per share to common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Diluted net income per common share is computed based on net income divided by the weighted average number of common and potential common shares outstanding. Potential common shares during the respective periods are those related to dilutive stock-based compensation, including long-term share-based incentive compensation, stock options outstanding, and directors’ accumulated deferred stock compensation which may be received by the directors in the form of stock or cash. A reconciliation of the average number of common and potential common shares outstanding used in the calculations of basic and diluted net income per share follows ($ in millions, shares in thousands):
There were no anti-dilutive stock options during the three month or nine month periods ended September 30, 2011 or 2010. |
Postretirement and Other Benefits (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Post retirement and Other Benefits | The components of net pension and OPEB benefit costs for U.S. employees and net pension benefit costs for French employees during the three and nine month periods ended September 30, 2011 and 2010 were as follows ($ in millions):
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Net Income Per Share (Details) (USD $) In Millions, except Share data | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Numerator (basic and diluted): | ||||
Net Income (Loss) Attributable to Parent | $ 9.0 | $ 18.2 | $ 45.0 | $ 51.6 |
Distributed Earnings | 0 | (0.1) | (0.1) | (0.2) |
Less: Undistributed earnings available to participating securities | 0 | (0.4) | (0.5) | (1.0) |
Undistributed and distributed earnings available to common shareholders | $ 9.0 | $ 17.7 | $ 44.4 | $ 50.4 |
Denominator: | ||||
Average number of common shares outstanding (in shares) | 15,957,100 | 17,641,000 | 16,827,200 | 17,755,100 |
Effect of dilutive stock-based compensation (in shares) | 138,500 | 366,200 | 124,400 | 346,800 |
Average number of common and potential common shares outstanding (in shares) | 16,095,600 | 18,007,200 | 16,951,600 | 18,101,900 |
Segment Information (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales and Operating Profit | Net Sales ($ in millions)
Operating Profit ($ in millions)
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Income Taxes | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Expense (Benefit) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | INCOME TAXES A reconciliation of income taxes computed at the U.S. federal statutory income tax rate to the provision (benefit) for income taxes is as follows ($ in millions):
Tax benefits of foreign legal structure result from net foreign tax deductions from the restructuring of the Company’s foreign operations in 2003. The proportionate effect of this item on the overall effective income tax rate decreases as earnings increase. Losses realized during the three and nine months ended September 30, 2011 and 2010 at RTL-Philippines are not deductible for income tax purposes in the Philippines due to the presence of tax incentives. Therefore, these losses have the effect of increasing SWM’s effective income tax rate. The Company applied for certain tax incentives in Poland for investment in a special economic zone. These incentives are in the form of credits that will offset qualified taxable income for a limited period of time. Based on granted incentives, commitments achieved, including maintaining certain employment levels, and qualified investment through September 30, 2011, the Company has available credits for which we recorded deferred income tax assets of approximately $12 million, of which approximately $1 million has already been utilized to offset current taxable income through September 30, 2011, and an additional $1 million has been recognized as a net deferred income tax asset at September 30, 2011. Until the November 2011 expected effective date of LIP regulation in the EU, we have recorded a valuation allowance of $10 million to reduce this deferred tax asset to an amount recoverable based on confirmed customer orders. At September 30, 2011 and December 31, 2010, the Company had no significant unrecognized tax benefits related to income taxes. The Company’s policy with respect to penalties and interest in connection with income tax assessments or related to unrecognized tax benefits is to classify penalties as provision for income taxes and interest as interest expense in its consolidated income statement. There were no material income tax penalties or interest accrued during either of the three or nine month periods ended September 30, 2011 or 2010. The Company files income tax returns in the U.S. Federal and several state jurisdictions as well as in many foreign jurisdictions. With certain exceptions, the Company is no longer subject to U.S. Federal, state and local, or foreign income tax examinations for years before 2006. |
Inventories | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | INVENTORIES The following schedule details inventories by major class ($ in millions):
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Discontinued Operations (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal group, including discontinued operation, balance sheet | Included in the Consolidated Balance Sheets are the following major classes of assets and liabilities associated with the discontinued operations ($ in millions):
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Discontinued operations, income(loss) from discontinued operation | Summary comparative financial results of discontinued operations were as follows ($ in millions):
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Discontinued operations, restructuring liabilities | Restructuring liabilities related to discontinued operations were classified within accrued expenses in each of the September 30, 2011 and December 31, 2010 consolidated balance sheets. Changes in the restructuring liabilities during 2011 and 2010 are summarized as follows ($ in millions):
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Income Taxes (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Expense (Benefit) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | A reconciliation of income taxes computed at the U.S. federal statutory income tax rate to the provision (benefit) for income taxes is as follows ($ in millions):
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Net Income Per Share (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of the Common and Potential Common Shares Outstanding | A reconciliation of the average number of common and potential common shares outstanding used in the calculations of basic and diluted net income per share follows ($ in millions, shares in thousands):
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M0>E8WV7/%([U75I1WV5K4,ASET^,`Y+T*)M!S\("IM+S_OSQY`%`OB=AGI,,
M%G1N'-)1UV'Q7/[G8%DI`(3(`XCTP]LT8Q9T20:L,$::3>P>6W/M(UR>$,;N
M0@>K1[6A>E2[E%T_W0^=/V!VGU6/A>NW#8MJ&`A<,Z7CBL78#!PF&M*1S6
M*F!@X;`]!P`6#GO/PF&M@@(6#MMI$+`LF.J,.8[3.W9,YTP\TB=9!JOK\)XG
MJ\WWFFD<)M'5F/1H&/O0;3JBO7^##+N-B^?*H-Z#KA="MZ%2)K3""2F7U3GB
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M&*3&'$LA%A$L?4+JB-07)@SCQ6*51&U:1.X$G1053?HBW?`0HY9XB,C>)'N$
M0\.!S.L'4]D%/7QT-#;]DD0#B;;9<3/>AQ`O)3$`C:`=1Y84;&Z9_::-`M.'
M12)0&H<3=JJ'UXA\C;/PCCD7< ;>!.3"$'Q+A4_A$\QFO6HT'HVK@+\Z_P>&K
MPBK)H\D*_YA5QZ/9J'& `_EMT'R6K:)\YC+:N^[)A!8JN>Y*D&X:EN6P$N^W+L`5=B->`VG[[7A!N
MFUT9R+9OZ:8A26X@>;ZFB+K/)T5ZMF8X70@91O>$$Q!NYWE4Y)^CXG.:3/;`
MJ&58CFVINN&9AF;YKJ19;+*E93J&9O1G@,KJ!H#7`_,BP+ ]JM(_PZ%;6>N0!A"D2`*0Y\&,(8 09L?=C7D@=8VK6VM:-ME6D2#9VRPUCW#INX;
M3^[L$[D+15VK=GUK1SO:_:TIT:W4N&4BW(&DFN\=01OL=WC0.J/NTTU=.GBT
MG#9?VGPM%!4Y=[3YTN;KI9BOKFA;)RQ49XQ0DR>%='WDM[4S>I[US41UNQ$/
M;Z,X*Q=`!VF>R_PYTQ$OKDU[9:5=@DES_NV%-&OO'M0ZY\Y?+JY>-1E.KRF<
M1Z79G ]K
ME&YWU@A+L@81VMBSY17/=%T![Y]ST/R+V\-VBAU=`7%GOQ;-NP_Y?#PO9UWE
M6Y5W%90G\'%T>A+43?#E'Q_PGY5ZNY.@;(,\F,XG(+3]#0$@4S0MB'0QQF$<
MX_FH:)!1UTTQ+>?3H+TN4!UFM\$U6NLVN"KR\;_G>8/U6F,LIL,W?`,-A4].
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MAN_+:@PD;FZ#O`UNX$GX;P^NF[[=/7=Q]P508]X6"++KL1ODV!YBU.VIWP&T
MDP-!2?*7=GC;NZ:8H&U;/J]TE9Q%,"HO\Z:8S8J3X'HROPQNFOS:87.>P]MF
M7>5I3SW'&3W<$)SU7P)8B&YWZ_>\*>LYDJ69.5KFJZ]XF$23(K]PS_[\]>>3
MX`971Y'9[KDY,OU\4E3CKMCQ>]E<(ML65%P^OMW`!83-"8!##4<0-QU-I_GH
M"M5@F@_$Z*@)R"]H!8_'_I]C$#=X^FQR._"RF_L\O&/DZ(\';SK)+1MP&BTH
MDZ,\0(6MK?"]O=CU4@84Q-/HUT">M"US!V$Q:8L;X')Q&GRLJW>>S-P!+>_5
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MA'$@4E`O3G& ;^UN%O7>(^2B+3#U1]O8IMZ/)35K43=3-G;KIL>BQ:I*=JBD?
MX15C-L6C=E_"[^!TPN3&87)(+%!W(8B]J!\C1'QB3VH.61U$+_9":7#C4M"-
M2^0OY*\G144)%DW#T.R&1/A_LOQ/OLLWS[.(%:T$8_ @ID.(A2)N>F26-Q=D^B.L/O3!.`#0I#E1]AE4<`"
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M6_U^##$R\:06*HH8YE*#/UR[QDQ!!--76.UC\I6'9"C`$58(4T%"+H/YK@8,
M$?/&6OVIR>_6^07+IXBGD,<9=X7F'@T@!&":*.%%[*XCVIW,WC\[.%3:\Q71
M5$BM87ADKM@CT/ -P%[L3I9A-.-.2XW%H89'L&7ZB!L04W%`S9I*9#.^R",:TL.C
M`^OCPPZG+@X,BU,+ZX%NF';`>!UV*.*6NQCA=@]PC^?4H;[E>V"!X&<>YR9Q
M"*^Q'#N$+`I<#7&*5@987_=-$B##\I'%_(!BY$Y3'L9\NBCE>9SY]2'EG,3B
MT^7CDM@EN?#\=&&ZH]-L+C)8/E5C[T,JB;6/P1#1&I^%`:8!0'56&I(P)S-\\SH#N9[G/HD:>&&>9+Y`]
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M4OK*KN,TY;LXV;3:+C@E]/N=EX+)3/MOK
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MHMO+\^H:>*^:3.YZJ=1ZF?RU^ZY4#!OH(&S@9&@]I
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M?]^Q[*SXWX:BZPJ?V`W4?X-2/WV`9X]Z0,_02;'"*(DRJ_$X#P:
MC^'FSR'<\2&*XP]B="&RGC80_6@4QOF[WH'9TZ+!NUX0]HL#ABWL,I>PP,*!
MC1WDF9:N$\Q<2AW*_)XV2:**W4D^Z!U;5FE^E8Q_)JUGR!5](9V6*^>>XQ'3
MMAW?HH:!41#@2JZ6[3E4OR]7A)\DU[,P%OFI^"[@ZX^B^"PRV:XX'(H%ACHG
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M,[PFD_)!Q_JAA2I>EW+P%";!:A[!X:F`^_,B*B8%Z#<%1.VGJSDU,;6Y'IAN
M8-H^`A^QN%YI5;>0[9@+.<6T`4XK=2ZCTS`X8;:N