Delaware | 62-1612879 |
(State or other jurisdiction of incorporation) | (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 May 6, 2015, of Schweitzer-Mauduit International, Inc., announcing earnings for the quarter ended March 31, 2015. |
99.1 | Press Release, dated May 6, 2015, of Schweitzer-Mauduit International, Inc., announcing earnings for the quarter ended March 31, 2015. |
• | First quarter Net Sales of $188.0 million decreased 8.2% versus the prior year quarter, but are estimated to have increased 0.5% absent adverse currency impacts, as diversification activities continue to stabilize top-line results; Excluding the late-2014 strategic acquisitions, first quarter Net Sales would have decreased 11.6% |
• | First quarter Net Income from Continuing Operations was $18.8 million, down from $23.2 million in the prior year quarter; first quarter Adjusted Net Income from Continuing Operations (see non-GAAP reconciliations) was $22.5 million, down from $26.1 million in the prior year quarter |
• | First quarter Net Income from Continuing Operations per Diluted Share was $0.61 versus $0.75 in the prior year quarter; first quarter Adjusted Diluted Earnings Per Share from Continuing Operations (see non-GAAP reconciliations) was $0.74, including an approximately $0.08 negative translation impact from currency movements, versus $0.84 in the prior year quarter |
• | First quarter 2015 results were in line with the Company's expectations relative to achieving full year guidance of $3.50 of Adjusted Diluted Earnings Per Share from Continuing Operations, which includes approximately $0.20 of negative translational currency impacts |
• | Reconstituted Tobacco segment sales volumes increased 6.3% versus the prior year quarter; including the new Chinese RTL JV, total SWM Recon sales volumes increased 19.2% |
• | Paper segment sales volumes decreased 1.8% versus the prior year quarter; a weaker Euro, unfavorable mix of products sold, and lower average selling prices for LIP drove a 15.7% segment Net Sales decline |
• | Filtration segment Net Sales increased 27.8% versus the prior year quarter, and increased 5.5% excluding the $7.1 million in Net Sales from the two late-2014 strategic acquisitions; the effect of the transactions was slightly accretive during the first quarter |
• | First quarter Filtration segment investment activities, including the integrations of the newly acquired assets and final preparations for commercial launch of DelStar Poland, combined with significant new Operational Excellence project initiatives, are expected to drive increasing segment profitability throughout 2015 |
• | Changes in sales or production volumes, pricing or manufacturing costs of reconstituted tobacco products, cigarette paper (including for lower ignition propensity cigarettes), filtration-related products due to changing customer demands (including any change by our customers in their tobacco and tobacco-related blends for their cigarettes, their target inventory levels and/or the overall demand for their products), new technologies such as e-cigarettes, inventory adjustments and rebalancings, competition or otherwise; |
• | 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, seasonality factors that affect the demand for virgin tobacco leaf and natural disasters or unusual weather events; |
• | Increases in commodity prices and lack of availability of such commodities, including energy, wood pulp and resins, could impact the 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; |
• | Regulatory or enforcement initiatives by regulatory agencies, including the U.S. Food and Drug Administration or other regulatory agencies, relating to regulation of cigars and cigar components or otherwise; |
• | New reports as to the effect of smoking on human health or the environment; |
• | Changes in general economic, financial and credit conditions in the U.S., Europe 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 and the occurrence of work stoppages or other labor disruptions; |
• | Changes in the discount rates, revenue growth, cash flow growth rates or other assumptions used by the Company in its assessment for impairment of assets and adverse economic conditions or other factors that would result in significant impairment charges; |
• | The failure of one or more material suppliers, including energy, resin and pulp suppliers, to supply materials as needed to maintain our product plans and cost structure; |
• | International conflicts and disputes (for example, relating to Russia and to the Ukraine), including their impact on our sales and the adoption of new LIP regulations; |
• | The pace and extent of further international adoption of LIP cigarette standards and the nature of standards so adopted; |
• | Risks associated with our 50%-owned, non-U.S. joint ventures relating to control and decision-making, compliance, transparency and customer relations, among others; |
• | A failure in our risk management and/or currency or interest rate swaps and hedging programs, including the failures of any insurance company or counterparty; |
• | Increase in interest rates or the manner in which we finance our debt and future capital needs; |
• | 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; |
• | The outcome and cost of LIP intellectual property litigation in Germany and the European Patent Office opposition proceedings; |
• | 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 and restrictions, retaining customers from businesses acquired, achieving any expected results or synergies from acquired businesses, complying with new regulatory frameworks, difficulties in integrating acquired businesses or implementing strategic transactions generally and risks associated with international acquisition transactions, including in countries where we do not currently have a material presence; |
• | Risks associated with dispositions, including post-closing claims being made against us, disruption to our other businesses during a sale process or thereafter, credit risks associated with any buyer of such disposed assets and our ability to collect funds due from any such buyer; |
• | Risks associated with our global asset realignment initiatives, including: changes in law, treaties, interpretations, or regulatory determinations; audits made by applicable regulatory authorities and our auditor; and our ability to operate our business in a manner consistent with the regulatory requirements for such realignment; |
• | Increased taxation on tobacco-related products; |
• | Costs and timing of implementation of any upgrades to our information technology systems; |
• | Failure by us to comply with any privacy or data security laws or to protect against theft of customer, employee and corporate sensitive information; and |
• | Other factors described elsewhere in this document and from time to time in documents that we file with the SEC. |
Net Sales | ||||||||||
Three Months Ended March 31, | ||||||||||
2015 | 2014 | % Change | ||||||||
Paper | $ | 108.6 | $ | 128.8 | (15.7 | )% | ||||
Reconstituted Tobacco | 38.9 | 44.2 | (12.0 | ) | ||||||
Filtration | 40.5 | 31.7 | 27.8 | |||||||
Total Consolidated | $ | 188.0 | $ | 204.7 | (8.2 | )% |
Operating Profit (Loss) | |||||||||||||
Three Months Ended March 31, | |||||||||||||
Return on Net Sales | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
Paper | $ | 16.1 | $ | 22.5 | 14.8 | % | 17.5 | % | |||||
Reconstituted Tobacco | 10.9 | 16.2 | 28.0 | 36.7 | |||||||||
Filtration | 2.6 | 0.4 | 6.4 | 1.3 | |||||||||
Unallocated | (7.1 | ) | (6.0 | ) | |||||||||
Total Consolidated | $ | 22.5 | $ | 33.1 | 12.0 | % | 16.2 | % |
Restructuring Expenses and Purchase Accounting Adjustments | |||||||
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Paper | $ | — | $ | — | |||
Reconstituted Tobacco | 3.8 | 0.1 | |||||
Filtration | 1.5 | 4.1 | |||||
Unallocated | 0.2 | — | |||||
Total Consolidated | $ | 5.5 | $ | 4.2 |
Adjusted Operating Profit (Loss) from Continuing Operations* | |||||||||||||
Three Months Ended March 31, | |||||||||||||
Return on Net Sales | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
Paper | $ | 16.1 | $ | 22.5 | 14.8 | % | 17.5 | % | |||||
Reconstituted Tobacco | 14.7 | 16.3 | 37.8 | 36.9 | |||||||||
Filtration | 4.1 | 4.5 | 10.1 | 14.2 | |||||||||
Unallocated | (6.9 | ) | (6.0 | ) | |||||||||
Total Consolidated | $ | 28.0 | $ | 37.3 | 14.9 | % | 18.2 | % |
Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Operating profit (loss) from continuing operations | $ | 22.5 | $ | 33.1 | |||
Plus: Restructuring expense | 4.0 | 0.1 | |||||
Plus: Purchase accounting adjustments | 1.5 | 4.1 | |||||
Adjusted Operating Profit from Continuing Operations | $ | 28.0 | $ | 37.3 | |||
Net income (loss) from continuing operations | $ | 18.8 | $ | 23.2 | |||
Plus: Restructuring expense, net of tax | 2.7 | 0.1 | |||||
Plus: Purchase accounting adjustments, net of tax | 1.0 | 2.5 | |||||
Plus: CTS start-up expenses | — | 0.3 | |||||
Adjusted Net Income from Continuing Operations | $ | 22.5 | $ | 26.1 | |||
Net income (loss) per share - diluted | $ | 0.61 | $ | 0.75 | |||
Plus: (Loss) Income per share from discontinued operations | — | — | |||||
Income (Loss) from continuing operations per diluted share | 0.61 | 0.75 | |||||
Plus: Restructuring expense per share | 0.09 | — | |||||
Plus: Purchase accounting adjustments per share | 0.04 | 0.08 | |||||
Plus: CTS start-up expenses per share | — | 0.01 | |||||
Adjusted Diluted Earnings Per Share from Continuing Operations | $ | 0.74 | $ | 0.84 | |||
Net income (loss) from continuing operations | $ | 18.8 | $ | 23.2 | |||
Plus: Interest expense | 1.7 | 1.5 | |||||
Plus: Income tax provision | 5.5 | 9.8 | |||||
Plus: Depreciation & amortization | 9.7 | 13.1 | |||||
Plus: Restructuring expense | 4.0 | 0.1 | |||||
Plus: CTS start-up expenses | — | 0.3 | |||||
Adjusted EBITDA from Continuing Operations | $ | 39.7 | $ | 48.0 | |||
Cash provided by operating activities of continuing operations | $ | 11.2 | $ | 18.6 | |||
Less: Capital spending | (5.2 | ) | (8.1 | ) | |||
Less: Capitalized software costs | (0.2 | ) | (0.1 | ) | |||
Free Cash Flow from Continuing Operations | $ | 5.8 | $ | 10.4 | |||
March 31, 2015 | December 31, 2014 | ||||||
Total Debt | $ | 442.8 | $ | 440.1 | |||
Less: Cash | 267.3 | 290.3 | |||||
Net Debt | $ | 175.5 | $ | 149.8 |
2015 GUIDANCE FROM CONTINUING OPERATIONS | |||
2015E | |||
2015E Diluted Earnings Per Share from Continuing Operations | $ | 3.17 | |
Plus: Restructuring expense per share | 0.23 | ||
Plus: Purchase accounting intangible asset amortization per share | 0.09 | ||
Plus: Purchase accounting inventory step-up amortization per share | 0.01 | ||
2015E Adjusted Diluted Earnings Per Share from Continuing Operations | $ | 3.50 |
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