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) |
Item 2.02 | Results of Operations and Financial Condition |
99.1 | Press Release, dated November 5, 2014, of Schweitzer-Mauduit International, Inc., announcing earnings for the quarter ended September 30, 2014. |
99.1 | Press Release, dated November 5, 2014, of Schweitzer-Mauduit International, Inc., announcing earnings for the quarter ended September 30, 2014. |
• | Third quarter Net Sales of $204.3 million, including DelStar, increased 10.3% versus the prior-year quarter |
• | Third quarter Net Income from Continuing Operations was $23.1 million, down from $29.6 million in the prior-year quarter; Adjusted Net Income from Continuing Operations (see non-GAAP reconciliations), which excludes restructuring expenses, non-cash purchase accounting adjustments from the DelStar acquisition, and CTS start-up expenses, was $28.3 million, down from $30.0 million in the prior-year quarter |
• | Third quarter Net Income from Continuing Operations per Diluted Share was $0.76 versus $0.93 in the prior-year quarter; Adjusted Diluted Earnings Per Share from Continuing Operations (see non-GAAP reconciliations) was $0.94, versus $0.95 in the prior-year quarter |
• | Paper segment sales volumes increased 4.8% versus the prior-year quarter, driven by strong double-digit growth in non-tobacco products and a more moderate decline in tobacco paper compared to the first half of 2014 |
• | Lower Ignition Propensity, or LIP, cigarette paper sales volumes (included in the Paper segment) decreased 5.7% versus the prior-year quarter, due in part to accelerated sales volumes in the second quarter of 2014 |
• | Reconstituted Tobacco segment sales volumes decreased 23.8% versus the prior-year quarter, due in part to continued customer inventory destocking and blend reformulations |
• | Filtration segment (DelStar) financial results were generally in line with expectations; end-market demand remains robust across filtration, medical, and industrial products |
• | Two key growth projects, the CTS mill in China and DelStar's international expansion, remained on track to begin profit contributions in 2015 |
• | Restructuring actions taken in Paper segment to reduce costs and right-size capacity |
• | Changes in sales or production volumes, pricing or manufacturing costs of reconstituted tobacco products and cigarette paper for lower ignition propensity cigarettes due to changing customer demands, new technologies such as e-cigarettes, competition or otherwise; |
• | Risks associated with the implementation of our strategic growth initiatives, including diversification, and the Company’s understanding of, and entry into, new industries and technologies; |
• | Changes in the source and intensity of competition in our market segments; |
• | Our ability to attract and retain key personnel, due to our prior restructuring actions, the tobacco industry in which we operate or otherwise; |
• | Weather conditions, including potential impacts, if any, from climate change, known and unknown, seasonal factors, that affect the demand for virgin tobacco leaf and natural disasters or unusual weather events; |
• | Increases in commodity prices and lack of availability of such commodities, including energy, wood pulp and resins could impact the profitability of our products; |
• | Increases in operating costs due to inflation or otherwise, such as labor expense, compensation and benefits costs, including costs related to the comprehensive health care reform law enacted in 2010; |
• | Employee retention and labor shortages; |
• | Changes in employment, wage and hour laws and regulations in the U.S. and France, including loi de Securisation de l'emploi, equal pay initiatives, additional anti-discrimination rules or tests and different interpretations of exemptions from overtime laws; |
• | New regulatory initiatives by the U.S. Food and Drug Administration or other regulatory agencies, including the proposed regulation of cigars and cigar components; |
• | New reports as to the effect of smoking on human health; |
• | Changes in general economic, financial and credit conditions in the U.S., Europe and elsewhere, including the impact thereof on currency (including any weakening of the euro) and interest rates; |
• | Existing and future governmental regulation and the enforcement thereof, including regulation relating to the tobacco industry, taxation and the environment; |
• | The success of, and costs associated with, current or future restructuring initiatives, including the granting of any needed governmental approvals; |
• | Changes in the discount rates, revenue growth, cash flow growth rates or other assumptions used by the Company in its assessment for impairment of assets and adverse economic conditions or other factors that would result in significant impairment charges; |
• | The failure of one or more material suppliers, including energy, resin and pulp suppliers, to supply raw materials as needed to maintain our product plans and cost structure; |
• | International conflicts and disputes, including their impact on the adoption of new LIP regulations; |
• | Risks associated with our 50%-owned, non-U.S. joint ventures relating to control and decision-making, compliance, transparency and customer relations, among others; |
• | A failure of any insurance company or counterparties to our currency or interest rate swaps and hedges; |
• | The number, type, outcomes (by judgment or settlement) and costs of legal, tax, regulatory or administrative proceedings and/or amnesty programs, including those in Brazil and before the European Patent Office; |
• | Labor activities, including strikes or other disruptions, at our facilities and the impact of new regulations or changes in existing regulations and procedures by the National Labor Relations Board or other U.S. and non-U.S. authorities; |
• | Risks associated with acquisitions or other strategic transactions, including acquired liabilities, retaining customers from businesses acquired, achieving any expected results or synergies from acquired businesses, difficulties in integrating acquired businesses or implementing strategic transactions generally and risks associated with international acquisition transactions, including in countries where we do not currently have a material presence; |
• | Risks associated with dispositions, including post-closing claims being made against us, disruption to our other businesses during a sale process or thereafter, credit risks associated with any buyer of such disposed assets and our ability to collect funds due from any such buyer; |
• | Risks associated with our global asset realignment initiatives, including changes in law, treaties, interpretations or regulatory determinations and audits made by applicable regulatory authorities or our ability to operate our business in a manner consistent with the regulatory requirements for such realignment; |
• | Increased taxation on tobacco products; |
• | Costs and timing of implementation of any upgrades to our information technology systems; |
• | Failure by us to comply with any privacy or data security laws or to protect against theft of customer and corporate sensitive information; and |
• | Other factors described in this document and from time to time in documents that we file with the SEC. |
Net Sales | |||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Paper | $ | 130.7 | $ | 136.4 | (4.2 | )% | $ | 384.6 | $ | 413.1 | (6.9 | )% | |||||||||
Reconstituted Tobacco | 40.3 | 48.9 | (17.6 | ) | 130.9 | 163.2 | (19.8 | ) | |||||||||||||
Filtration | 33.3 | — | N.M. | 97.1 | — | N.M. | |||||||||||||||
Total Consolidated | $ | 204.3 | $ | 185.3 | 10.3 | % | $ | 612.6 | $ | 576.3 | 6.3 | % |
Operating Profit (Loss) | |||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
Return on Net Sales | Return on Net Sales | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Paper | $ | 16.0 | $ | 28.7 | 12.2 | % | 21.0 | % | $ | 60.1 | $ | 80.0 | 15.6 | % | 19.4 | % | |||||||||||
Reconstituted Tobacco | 11.1 | 18.6 | 27.5 | 38.0 | 39.0 | 62.1 | 29.8 | 38.1 | |||||||||||||||||||
Filtration | 3.6 | — | 10.8 | N.A. | 7.9 | — | 8.1 | N.A. | |||||||||||||||||||
Unallocated | (5.5 | ) | (5.5 | ) | (18.2 | ) | (16.5 | ) | |||||||||||||||||||
Total Consolidated | $ | 25.2 | $ | 41.8 | 12.3 | % | 22.6 | % | $ | 88.8 | $ | 125.6 | 14.5 | % | 21.8 | % |
Restructuring Expenses and Purchase Accounting Adjustments | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Paper | $ | 2.5 | $ | 0.2 | $ | 2.5 | $ | 1.7 | |||||||
Reconstituted Tobacco | 0.8 | 0.1 | 4.1 | 0.9 | |||||||||||
Filtration | 0.8 | — | 5.7 | — | |||||||||||
Unallocated | — | 0.3 | — | 0.3 | |||||||||||
Total Consolidated | $ | 4.1 | $ | 0.6 | $ | 12.3 | $ | 2.9 |
Adjusted Operating Profit (Loss) from Continuing Operations* | |||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
Return on Net Sales | Return on Net Sales | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Paper | $ | 18.5 | $ | 28.9 | 14.2 | % | 21.2 | % | $ | 62.6 | $ | 81.7 | 16.3 | % | 19.8 | % | |||||||||||
Reconstituted Tobacco | 11.9 | 18.7 | 29.5 | 38.2 | 43.1 | 63.0 | 32.9 | 38.6 | |||||||||||||||||||
Filtration | 4.4 | — | 13.2 | N.A. | 13.6 | — | 14.0 | N.A. | |||||||||||||||||||
Unallocated | (5.5 | ) | (5.2 | ) | (18.2 | ) | (16.2 | ) | |||||||||||||||||||
Total Consolidated | $ | 29.3 | $ | 42.4 | 14.3 | % | 22.9 | % | $ | 101.1 | $ | 128.5 | 16.5 | % | 22.3 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Operating profit from continuing operations | $ | 25.2 | $ | 41.8 | $ | 88.8 | $ | 125.6 | |||||||
Plus: Restructuring expense | 3.3 | 0.6 | 6.6 | 2.9 | |||||||||||
Plus: Purchase accounting adjustments | 0.8 | — | 5.7 | — | |||||||||||
Adjusted Operating Profit from Continuing Operations | $ | 29.3 | $ | 42.4 | $ | 101.1 | $ | 128.5 | |||||||
Net income from continuing operations | $ | 23.1 | $ | 29.6 | $ | 71.3 | $ | 89.7 | |||||||
Plus: Restructuring expense, net of tax | 2.5 | 0.4 | 4.6 | 2.0 | |||||||||||
Plus: Purchase accounting adjustments, net of tax | 0.6 | — | 3.6 | — | |||||||||||
Plus: CTS start-up expenses | 2.1 | — | 3.1 | — | |||||||||||
Adjusted Net Income from Continuing Operations | $ | 28.3 | $ | 30.0 | $ | 82.6 | $ | 91.7 | |||||||
Net income per share - diluted | $ | 0.76 | $ | 0.92 | $ | 2.32 | $ | 2.72 | |||||||
Plus: Loss per share from discontinued operations | — | 0.01 | — | 0.12 | |||||||||||
Income from continuing operations per diluted share | 0.76 | 0.93 | 2.32 | 2.84 | |||||||||||
Plus: Restructuring expense per share | 0.08 | 0.02 | 0.15 | 0.07 | |||||||||||
Plus: Purchase accounting adjustments per share | 0.03 | — | 0.12 | ||||||||||||
Plus: CTS start-up expenses per share | 0.07 | — | 0.10 | — | |||||||||||
Adjusted Diluted Earnings Per Share from Continuing Operations | $ | 0.94 | $ | 0.95 | $ | 2.69 | $ | 2.91 | |||||||
Net income from continuing operations | $ | 23.1 | $ | 29.6 | $ | 71.3 | $ | 89.7 | |||||||
Plus: Interest expense | 1.8 | 0.6 | 5.4 | 2.0 | |||||||||||
Plus: Income tax provision | 2.3 | 13.8 | 18.6 | 40.0 | |||||||||||
Plus: Depreciation & amortization | 11.3 | 8.9 | 34.9 | 27.0 | |||||||||||
Plus: Restructuring expense | 3.3 | 0.6 | 6.6 | 2.9 | |||||||||||
Plus: CTS start-up expenses | 2.1 | — | 3.1 | — | |||||||||||
Adjusted EBITDA from Continuing Operations | $ | 43.9 | $ | 53.5 | $ | 139.9 | $ | 161.6 | |||||||
Cash provided by operating activities of continuing operations | $ | 34.6 | $ | 40.5 | $ | 91.1 | $ | 121.2 | |||||||
Less: Capital spending | (11.1 | ) | (11.0 | ) | (26.2 | ) | (20.2 | ) | |||||||
Less: Capitalized software costs | (0.3 | ) | (0.3 | ) | (0.5 | ) | (0.4 | ) | |||||||
Free Cash Flow from Continuing Operations | $ | 23.2 | $ | 29.2 | $ | 64.4 | $ | 100.6 | |||||||
September 30, 2014 | December 31, 2013 | ||||||||||||||
Total Debt | $ | 446.8 | $ | 385.4 | |||||||||||
Less: Cash | 286.0 | 272.0 | |||||||||||||
Net Debt | $ | 160.8 | $ | 113.4 | |||||||||||
2014 GUIDANCE FROM CONTINUING OPERATIONS | |||
2014E | |||
2014E Diluted Earnings Per Share from Continuing Operations | $ | 3.08 | |
Plus: Restructuring expense per share | 0.07 | ||
Plus: Purchase accounting intangible asset amortization per share | 0.06 | ||
Plus: Purchase accounting inventory step-up amortization per share | 0.07 | ||
Plus: CTS start-up expenses per share | 0.12 | ||
2014E Adjusted Diluted Earnings Per Share from Continuing Operations | $ | 3.40 |
/J&G#QQ^T=HNB_%C7"@7(=XO"\O@'09"Q&TVQP55B M#_3C_P`&>7[)I^#?_!.?Q?\`M':UIX@\3_M7_%75=8T>[N8<^9\,?A2TG@30 MO+<;=R2>)_\`A/9`.-S$C?LEKX+_::_9K_;)T+3?L^B?'+X M=:K\)/&]S9*K(/'?PCU636]%U6=E;_6^)_`OC5;>,!74+X# ^(ND_&7P1;. C_M(>#W$`DO MAIW@8NGCQ$11O0+\.-9\9RME \6?`#QU/=78T_2[7_A(-)37_``5J&JL^Z-EC^(/@[P^&C9@P69VW MKP0`?7/_``>'?M,GXM_\%+_"WP*TV\AN-`_99^"WAGPY>6UO -R^(`-L8&!_G._MJ?&3Q'^W! M_P`%`_VA_B]I%O<:UK_[0_[1GBIO`MF"4>[T[Q#XR?P_X!T;(P6*>'5T'044 M85E`W'M7^S=^QY\!M%_97_9:_9Z_9QT**VBL/@M\)/`GP[*VCHXO=3\/Z#I& MD:WJZD#*^?KJZK,X;=_K>I`4``_FH_X//_\`E\'_\`L\;P)_ZK'XO5_-?_ M`,&=?_*72^_[-;^,G_IZ\`5_2A_P>?\`_*,'X/\`_9XW@3_U6/Q>K^:__@SK M_P"4NE]_V:W\9/\`T]>`*`+O_!T;_P`$D3^Q!^TXW[6OP5\--;?LQ?M3>(-2 MU#5+;2M/VZ7\+_CK-)-K?C+P@"$\K1/#WBT";Q5X)$1C596\4>$8$2'PS&)_ MUC_X-&?^"MRZWI5Q_P`$N?CGXF635O#]I?\`B[]DK5M6O)6%[I2I-KOCCX/A M)MT*R^'G#^+O!R#:[0'Q9&NX6UN@_L8_;;_8^^$W[=G[,7Q8_9:^,^E_;?!' MQ1\-MI4>I):I+JG@_P`3CY_!WC+1`^(CKOA+Q"8?$-N9/+Q*JQR.(G.[_&]^ M//P<_:/_`."5/[ (PV5 M\3Q./Y8_^#=7_@DQ<_\`!2[]L;2_$OQ1T&YNOV3/V<;S2O&/QHEO(&&F>-_$ M`E\WP7\'@HC7 )Z_+K7-;_`&J?^"HW[:KZOJ3: MA\7/VG_VK_BM8VEK;65O]BTZ_P#$6N-#'H^DZ5&CR1Z!X6\*:$L<,*D)%X2\ M(:+\\SQP.:_U]_\`@EU_P3X^&W_!,_\`8S^&?[,7@);/4-9T6VE\2?%+QM!9 M/8WWQ%^+FO(!XT\82B2*&0JVR+PWX3C9/]'\(:#X=M0TB0F1@#^('_@] V_\GC?L8_\`9L7B;_U9^O5]^?\` M!D+_`,F[?MW_`/9:_@]_ZAGB"@#^YFBBB@`HHHH`*_E/_P""Q7_!S'\&O^"; MWQM\&_LX_!'P;H7[37Q2\/>)=.O?VB;(^)VT_P`.?"_P.N\W7@S1M:T3S4D^ M,LL4Y\BRFCEA\'+;J/&:R7,L5M%_5A7\N/\`P5M_X-C?V8_^"AGBK7/CW\&] M?LOV8?VG]>(O?%_B#2_#DFI_"?XJ:F7A9M8\=>"XI8Y=$\1M&NQO%7A-XI9B MTTOC*T\63.C``^KOV0?^#C?_`()0?M<:)H_V+]ICP]\`O'VHJBWWPO\`VC63 MX6>(--U(H!_92>(M<;_A6NONQ(W'PQXSN