UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.~~
	For the quarterly period ended	September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
			For the transition period from __________________to __________________

1-13948

(Commission file number)

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


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)

1-800-514-0186

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.10 par value	~~SWM~~MATV	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer," “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The Company had ~~31,458,255~~54,943,231 shares of common stock ~~issued and~~ outstanding as of ~~November 3, 2021.~~October 31, 2022.

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC.

TABLE OF CONTENTS


		Page
	Part I. - Financial Information
Item 1.	Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3236

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4650

Item 4.	Controls and Procedures	4650
	Part II. - Other Information
Item 1.	Legal Proceedings	4751

Item 1A.	Risk Factors	4751

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4751

Item 3.	Defaults Upon Senior Securities	4752

Item 4.	Mine Safety Disclosures	4752

Item 5.	Other Information	4752

Item 6.	Exhibits	4853

Signatures		49

~~Glossary of Terms~~		5054

EXPLANATORY NOTE

The financial statements and information set forth herein is as of and for the period ended September 30, 2022 and represent the merged company operations of SWM and Neenah and their respective subsidiaries on a consolidated basis effective as of July 6, 2022 as a result of the Merger. Because SWM was deemed the accounting acquirer under accounting principles generally accepted in the United States, the historical financial statements of SWM are presented as the historical financial statements of the consolidated company prior to the Merger. Accordingly, references to "Mativ," "the Company," "we," or "our" means SWM and its subsidiaries when referring to periods prior to the Merger, and means Mativ Holdings, Inc. when referring to the period after the Merger.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~INCOME/(LOSS)

(~~dollars~~ in millions, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Net sales $ 383.6 $ 279.3 $ 1,049.6 $ 795.0
Cost of products sold 298.4 199.1 795.5 566.2
Gross profit 85.2 80.2 254.1 228.8
Selling expense 13.2 9.0 34.2 27.3
Research and development expense 5.7 3.6 14.9 10.4
General expense 41.4 24.6 126.7 77.9
Total nonmanufacturing expenses 60.3 37.2 175.8 115.6
Restructuring and impairment expense 1.9 6.0 5.9 7.7
Operating profit 23.0 37.0 72.4 105.5
Interest expense 15.3 7.8 31.3 22.8
Other income (expense), net 3.7 (1.0) 0.8 (0.7)
Income before income taxes and income from equity affiliates 11.4 28.2 41.9 82.0
Provision for income taxes 1.5 4.8 12.4 15.5
Income from equity affiliates, net of
income taxes 2.3 1.1 6.1 2.0
Net income $ 12.2 $ 24.5 $ 35.6 $ 68.5
Net income per share - basic:
Net income per share – basic $ 0.38 $ 0.78 $ 1.13 $ 2.19
Net income per share – diluted:
Net income per share – diluted $ 0.38 $ 0.78 $ 1.12 $ 2.18
Weighted average shares outstanding:
Basic 31,046,100 30,909,700 31,022,100 30,805,300
Diluted 31,401,000 31,142,500 31,381,600 31,020,100




	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net sales	$	674.1	$	383.6	$	1,507.3	$	1,049.6
Cost of products sold	551.0		298.4		1,192.0		795.5
Gross profit	123.1		85.2		315.3		254.1

Selling expense	22.3		13.2		51.6		34.2
Research and development expense	7.7		5.7		18.3		14.9
General expense	105.2		41.4		203.5		126.7
Total nonmanufacturing expenses	135.2		60.3		273.4		175.8


Restructuring and impairment expense	1.8		1.9		17.4		5.9
Operating profit/(loss)	(13.9)		23.0		24.5		72.4
Interest expense	23.8		15.3		58.7		31.3
Other income, net	2.4		3.7		15.2		0.8
Income/(loss) before income taxes and income from equity affiliates	(35.3)		11.4		(19.0)		41.9
Income tax expense/(benefit)	(11.5)		1.5		(4.8)		12.4
Income from equity affiliates, net of income taxes	1.3		2.3		5.1		6.1


Net income/(loss)	$	(22.5)	$	12.2	$	(9.1)	$	35.6

Net income/(loss) per share:


Basic	$	(0.43)	$	0.38	$	(0.25)	$	1.13




Diluted	$	(0.43)	$	0.38	$	(0.25)	$	1.12

Weighted average shares outstanding:
Basic	52,593,900		31,046,100		38,415,900		31,022,100
Diluted	52,593,900		31,401,000		38,415,900		31,381,600

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) ~~INCOME~~

(~~dollars~~ in millions)

(Unaudited)

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Net income $ 12.2 $ 24.5 $ 35.6 $ 68.5
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments (20.2) 7.2 (20.7) 4.3
Unrealized gain (losses) on derivative instruments 1.3 — 3.3 (13.4)
Less: Reclassification adjustment for gain on derivative instruments included in net income 0.4 0.8 2.0 1.4
Net loss from postretirement benefit plans — — — (0.3)
Amortization of postretirement benefit plans' costs included in net periodic cost 0.9 0.8 3.4 2.4
Other comprehensive (loss) income (17.6) 8.8 (12.0) (5.6)
Comprehensive (loss) income $ (5.4) $ 33.3 $ 23.6 $ 62.9


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021


Net income/(loss)	$	(22.5)	$	12.2	$	(9.1)	$	35.6
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(84.1)		(20.2)		(95.2)		(20.7)

Unrealized gain on derivative instruments	19.9		1.3		50.0		3.3
Less: Reclassification adjustment for gain on derivative instruments included in net income	3.0		0.4		4.6		2.0

Amortization of postretirement benefit plans' costs included in net periodic cost	(0.2)		0.9		1.7		3.4
Other comprehensive income/(loss)	(61.4)		(17.6)		(38.9)		(12.0)
Comprehensive income/(loss)	$	(83.9)	$	(5.4)	$	(48.0)	$	23.6

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(~~dollars~~ in millions, except per share amounts)

(Unaudited)


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	73.6	$	54.7	Cash and cash equivalents	$	82.3	$	74.7
Accounts receivable, net	Accounts receivable, net	242.2		148.5		Accounts receivable, net	454.3		238.0
Inventories	Inventories	261.3		179.7		Inventories	485.4		259.5
Income taxes receivable	Income taxes receivable	17.1		6.2		Income taxes receivable	15.5		10.0

Assets held for sale						Assets held for sale	10.5		—
Other current assets	Other current assets	15.6		7.3		Other current assets	16.0		12.4
Total current assets	Total current assets	609.8		396.4		Total current assets	1,064.0		594.6

Property, plant and equipment, net	Property, plant and equipment, net	467.5		339.0		Property, plant and equipment, net	843.4		463.9

Deferred income tax benefits	Deferred income tax benefits	0.1		2.6		Deferred income tax benefits	30.7		33.9
Investment in equity affiliates	Investment in equity affiliates	65.4		59.3		Investment in equity affiliates	64.7		64.6
Goodwill	Goodwill	660.0		403.7		Goodwill	849.0		648.3
Intangible assets	Intangible assets	526.5		314.7		Intangible assets	661.2		513.9
Other assets	Other assets	90.5		69.2		Other assets	199.7		101.1
Total assets	Total assets	$	2,419.8	$	1,584.9	Total assets	$	3,712.7	$	2,420.3

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities	Current liabilities					Current liabilities
Current debt	Current debt	$	18.0	$	2.8	Current debt	$	1.8	$	3.2
Accounts payable	Accounts payable	116.7		60.5		Accounts payable	238.7		116.0
Income taxes payable	Income taxes payable	7.6		2.7		Income taxes payable	12.2		2.6

Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	104.3		100.9		Accrued expenses and other current liabilities	186.6		109.3
Total current liabilities	Total current liabilities	246.6		166.9		Total current liabilities	439.3		231.1

Long-term debt	Long-term debt	1,288.2		590.5		Long-term debt	1,826.7		1,267.1

Long-term income tax payable	Long-term income tax payable	16.6		17.7		Long-term income tax payable	13.9		16.6
Pension and other postretirement benefits	Pension and other postretirement benefits	39.5		36.5		Pension and other postretirement benefits	94.5		39.0
Deferred income tax liabilities	Deferred income tax liabilities	109.3		45.1		Deferred income tax liabilities	140.5		95.1
Other liabilities	Other liabilities	83.9		78.6		Other liabilities	64.9		89.2
Total liabilities	Total liabilities	1,784.1		935.3		Total liabilities	2,579.8		1,738.1
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.10 par value; 10,000,000 shares authorized; none issued or outstanding	Preferred stock, $0.10 par value; 10,000,000 shares authorized; none issued or outstanding	—		—		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; 31,456,984 and 31,324,745 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		3.1		3.1
Common stock, $0.10 par value; 100,000,000 shares authorized; 54,951,290 and 31,449,563 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Common stock, $0.10 par value; 100,000,000 shares authorized; 54,951,290 and 31,449,563 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	5.5		3.1
Additional paid-in-capital	Additional paid-in-capital	99.3		92.2		Additional paid-in-capital	654.5		101.7
Retained earnings	Retained earnings	657.2		666.2		Retained earnings	630.8		696.4
Accumulated other comprehensive loss, net of tax	Accumulated other comprehensive loss, net of tax	(123.9)		(111.9)		Accumulated other comprehensive loss, net of tax	(157.9)		(119.0)
Total stockholders’ equity	Total stockholders’ equity	635.7		649.6		Total stockholders’ equity	1,132.9		682.2
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,419.8	$	1,584.9	Total liabilities and stockholders’ equity	$	3,712.7	$	2,420.3

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(~~dollars~~ in millions, except per share amounts)

(Unaudited)

Common Stock Issued
Shares Amount Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Balance, June 30, 2020 31,195,009 $ 3.1 $ 87.2 $ 654.1 $ (137.0) $ 607.4
Net income — — — 24.5 — 24.5
Other comprehensive income, net of tax — — — — 8.8 8.8
Dividends declared ($0.44 per share) — — — (13.8) — (13.8)
Restricted stock issuances, net (21,932) — — — — —
Stock-based employee compensation expense — — 1.4 — — 1.4
Stock issued to directors as compensation — — 0.2 — — 0.2
Deferred compensation directors stock trust 149,469 — — — —
Purchases and retirement of common stock (771) — — — — —
Balance, September 30, 2020 31,321,775 $ 3.1 $ 88.8 $ 664.8 $ (128.2) $ 628.5
Balance, June 30, 2021 31,426,129 $ 3.1 $ 97.3 $ 658.9 $ (106.3) $ 653.0
Net income — — — 12.2 — 12.2
Other comprehensive loss, net of tax — — — — (17.6) (17.6)
Dividends declared ($0.44 per share) — — — (13.9) — (13.9)
Restricted stock issuances, net 32,549 — — — — —
Stock-based employee compensation expense — — 1.7 — — 1.7
Stock issued to directors as compensation 588 — 0.3 — — 0.3
Purchases and retirement of common stock (2,282) — — — — —
Balance, September 30, 2021 31,456,984 $ 3.1 $ 99.3 $ 657.2 $ (123.9) $ 635.7


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
	Shares	Amount								Total
Balance, June 30, 2021	31,426,129	$	3.1	$	97.3	$	658.9	$	(106.3)	$	653.0

Net income	—	—		—		12.2		—		12.2
Other comprehensive loss, net of tax	—	—		—		—		(17.6)		(17.6)
Dividends declared ($0.44 per share)	—	—		—		(13.9)		—		(13.9)
Restricted stock issuances, net	32,549	—		—		—		—		—
Stock-based employee compensation expense	—	—		1.7		—		—		1.7


Stock issued to directors as compensation	588	—		0.3		—		—		0.3

Purchases and retirement of common stock	(2,282)	—		—		—		—		—
Balance, September 30, 2021	31,456,984	$	3.1	$	99.3	$	657.2	$	(123.9)	$	635.7

Balance, June 30, 2022	31,922,911	$	3.1	$	109.2	$	678.7	$	(96.5)	$	694.5

Net loss	—	—		—		(22.5)		—		(22.5)
Other comprehensive loss, net of tax	—	—		—		—		(61.4)		(61.4)
Dividends declared ($0.40 per share)	—	—		—		(22.0)		—		(22.0)
Restricted stock issuances, net	368,123	0.1		(0.1)		—		—		—
Stock-based employee compensation expense	—	—		9.5		—		—		9.5


Stock issued to directors as compensation	4,122	—		0.3		—		—		0.3

Purchases and retirement of common stock	(158,428)	—		—		(3.4)		—		(3.4)
Issuance of shares related to Merger	22,814,562	2.3		535.6		—		—		537.9
Balance, September 30, 2022	54,951,290	$	5.5	$	654.5	$	630.8	$	(157.9)	$	1,132.9

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in millions, except per share amounts)

(Unaudited)



	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
	Shares	Amount								Total
Balance, December 31, 2020	31,324,745	$	3.1	$	92.2	$	666.2	$	(111.9)	$	649.6

Net income	—	—		—		35.6		—		35.6
Other comprehensive loss, net of tax	—	—		—		—		(12.0)		(12.0)
Dividends declared ($1.32 per share)	—	—		—		(41.5)		—		(41.5)
Restricted stock issuances, net	200,645	—		—		—		—		—
Stock-based employee compensation expense	—	—		6.3		—		—		6.3


Stock issued to directors as compensation	1,662	—		0.8		—		—		0.8

Purchases and retirement of common stock	(70,068)	—		—		(3.1)		—		(3.1)
Balance, September 30, 2021	31,456,984	$	3.1	$	99.3	$	657.2	$	(123.9)	$	635.7

Balance, December 31, 2021	31,449,563	$	3.1	$	101.7	$	696.4	$	(119.0)	$	682.2

Net loss	—	—		—		(9.1)		—		(9.1)
Other comprehensive loss, net of tax	—	—		—		—		(38.9)		(38.9)
Dividends declared ($1.28 per share)	—	—		—		(50.1)		—		(50.1)
Restricted stock issuances, net	875,149	0.1		(0.1)		—		—		—
Stock-based employee compensation expense	—	—		16.5		—		—		16.5

Stock issued to directors as compensation	66,678	—		0.8		—		—		0.8

Purchases and retirement of common stock	(254,662)	—		—		(6.4)		—		(6.4)
Issuance of shares related to Merger	22,814,562	2.3		535.6		—		—		537.9
Balance, September 30, 2022	54,951,290	$	5.5	$	654.5	$	630.8	$	(157.9)	$	1,132.9

Common Stock Issued
Shares Amount Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Balance, December 31, 2019 30,896,661 $ 3.1 $ 78.8 $ 638.4 $ (122.6) $ 597.7
Net income — — — 68.5 — 68.5
Other comprehensive loss, net of tax — — — — (5.6) (5.6)
Dividends declared ($1.32 per share) — — — (41.2) — (41.2)
Restricted stock issuances, net 299,926 — — — — —
Stock-based employee compensation expense — — 5.5 — — 5.5
Modification to director stock-based compensation plan — — 4.0 — — 4.0
Stock issued to directors as compensation 2,198 — 0.5 — — 0.5
Deferred compensation directors stock trust 149,469 — — — — —
Purchases and retirement of common stock (26,479) — — (0.9) — (0.9)
Balance, September 30, 2020 31,321,775 $ 3.1 $ 88.8 $ 664.8 $ (128.2) $ 628.5
Balance, December 31, 2020 31,324,745 $ 3.1 $ 92.2 $ 666.2 $ (111.9) $ 649.6
Net income — — — 35.6 — 35.6
Other comprehensive loss, net of tax — — — — (12.0) (12.0)
Dividends declared ($1.32 per share) — — — (41.5) — (41.5)
Restricted stock issuances, net 200,645 — — — — —
Stock-based employee compensation expense — — 6.3 — — 6.3
Stock issued to directors as compensation 1,662 — 0.8 — — 0.8
Purchases and retirement of common stock (70,068) — — (3.1) — (3.1)
Balance, September 30, 2021 31,456,984 $ 3.1 $ 99.3 $ 657.2 $ (123.9) $ 635.7

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH ~~FLOW~~FLOWS

(~~dollars~~ in millions)

(Unaudited)


		Nine Months Ended					Nine Months Ended
		September 30, 2021		September 30, 2020			September 30, 2022		September 30, 2021
Operating	Operating					Operating
Net income		$	35.6	$	68.5
Net income/(loss)						Net income/(loss)	$	(9.1)	$	35.6

Non-cash items included in net income:	Non-cash items included in net income:					Non-cash items included in net income:
Depreciation and amortization	Depreciation and amortization	70.3		52.3		Depreciation and amortization	92.3		70.3

Impairments						Impairments	13.7		—
Deferred income tax	Deferred income tax	2.4		1.5		Deferred income tax	(8.7)		2.4
Pension and other postretirement benefits	Pension and other postretirement benefits	(0.2)		2.6		Pension and other postretirement benefits	(4.7)		(0.2)
Stock-based compensation	Stock-based compensation	6.3		5.6		Stock-based compensation	16.5		6.3
Income from equity affiliates	Income from equity affiliates	(6.1)		(2.0)		Income from equity affiliates	(5.1)		(6.1)
Brazil tax assessment accruals, net		(6.1)		—
Brazil tax assessment and settlements, net						Brazil tax assessment and settlements, net	—		(6.1)

Gain on sale of assets						Gain on sale of assets	(2.9)		—

Cash dividends received from equity affiliates	Cash dividends received from equity affiliates	0.8		2.7		Cash dividends received from equity affiliates	1.1		0.8
Gain on foreign currency transactions						Gain on foreign currency transactions	(19.8)		(3.9)
Other items	Other items	(4.4)		(4.7)		Other items	1.2		(0.5)
Cash received from settlement of interest swap agreements						Cash received from settlement of interest swap agreements	23.6		—
Changes in operating working capital, net of assets acquired:	Changes in operating working capital, net of assets acquired:					Changes in operating working capital, net of assets acquired:
Accounts receivable	Accounts receivable	(30.4)		(21.9)		Accounts receivable	(36.3)		(30.4)
Inventories	Inventories	(29.6)		1.7		Inventories	(56.1)		(29.6)
Prepaid expenses	Prepaid expenses	(2.4)		0.6		Prepaid expenses	1.0		(2.4)
Accounts payable and other current liabilities	Accounts payable and other current liabilities	(0.9)		(1.5)		Accounts payable and other current liabilities	27.6		(0.9)
Accrued income taxes	Accrued income taxes	(7.8)		2.1		Accrued income taxes	(17.1)		(7.8)
Net changes in operating working capital	Net changes in operating working capital	(71.1)		(19.0)		Net changes in operating working capital	(80.9)		(71.1)

Net cash provided by operations	Net cash provided by operations	27.5		107.5		Net cash provided by operations	17.2		27.5
Investing	Investing					Investing
Capital spending	Capital spending	(23.8)		(20.7)		Capital spending	(36.5)		(23.8)
Capitalized software costs	Capitalized software costs	(1.9)		(2.8)		Capitalized software costs	(2.1)		(1.9)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(630.6)		(169.3)		Acquisitions, net of cash acquired	(462.5)		(630.6)

Cash received from settlement of cross-currency swap contracts						Cash received from settlement of cross-currency swap contracts	35.8		—
Other investing	Other investing	(2.0)		2.3		Other investing	3.7		(2.0)
Net cash used in investing	Net cash used in investing	(658.3)		(190.5)		Net cash used in investing	(461.6)		(658.3)
Financing	Financing					Financing
Cash dividends paid						Cash dividends paid	(50.1)		(41.5)

Proceeds from issuances of long-term debt						Proceeds from issuances of long-term debt	720.4		729.7
Payments on long-term debt						Payments on long-term debt	(180.6)		(19.5)
Payments on financing lease obligations						Payments on financing lease obligations	(0.4)		—
Purchases of common stock						Purchases of common stock	(6.4)		(3.1)
Payments for debt issuance costs						Payments for debt issuance costs	(22.6)		(14.6)

Net cash provided by financing						Net cash provided by financing	460.3		651.0
Effect of exchange rate changes on cash and cash equivalents						Effect of exchange rate changes on cash and cash equivalents	(8.3)		(1.3)
Increase in cash and cash equivalents						Increase in cash and cash equivalents	7.6		18.9
Cash and cash equivalents at beginning of period						Cash and cash equivalents at beginning of period	74.7		54.7
Cash and cash equivalents at end of period						Cash and cash equivalents at end of period	$	82.3	$	73.6

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH ~~FLOW~~FLOWS

(~~dollars~~ in millions)

(Unaudited)

Nine Months Ended
September 30,
2021 September 30,
2020
Cash dividends paid to SWM stockholders (41.5) (41.2)
Proceeds from issuances of long-term debt 729.7 212.7
Payments on long-term debt (19.5) (124.6)
Purchases of common stock (3.1) (0.9)
Payments for debt issuance costs (14.6) —
Net cash provided by financing 651.0 46.0
Effect of exchange rate changes on cash and cash equivalents (1.3) 0.3
Increase (decrease) in cash and cash equivalents 18.9 (36.7)
Cash and cash equivalents at beginning of period 54.7 103.0
Cash and cash equivalents at end of period $ 73.6 $ 66.3
Supplemental Cash Flow Disclosures
Cash paid for interest, net $ 27.5 $ 17.9
Cash paid for taxes, net $ 17.7 $ 11.0
Change in capital spending in accounts payable and accrued liabilities $ 4.7 $ 3.5




	Nine Months Ended
	September 30, 2022		September 30, 2021

Supplemental Cash Flow Disclosures
Cash paid for interest, net	$	48.0	$	27.5
Cash paid for taxes, net	$	16.8	$	17.7
Capital spending in accounts payable and accrued liabilities	$	8.7	$	4.7
Merger non-cash consideration	$	537.9	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. General

Nature of Business

On July 6, 2022, Schweitzer-Mauduit International, Inc. ("SWM") consummated its previously announced merger transaction involving Neenah, Inc. ("Neenah"). A wholly-owned subsidiary of SWM merged with and into Neenah (the "Merger"), with Neenah surviving the Merger as a direct and wholly-owned subsidiary of SWM. Effective as of the closing date of the Merger, SWM changed its name to Mativ Holdings, Inc. ("Mativ," "we," "our", or the "Company"),. Mativ is a global leader in specialty materials headquartered in ~~the~~Alpharetta, Georgia, United States of ~~America, is~~America. The Company offers a ~~multinational diversified producer~~wide range of ~~highly~~critical components and engineered solutions to solve customers' most complex challenges, targeting premium applications across diversified and ~~advanced materials for a variety~~growing end-markets. Combined with global manufacturing, supply chain, innovation, and material science capabilities, our broad portfolio of ~~industries. The~~technologies combines polymers, fibers, and resins to optimize the performance of customers' products across multiple stages of the value chain. Effective with the Merger, the Company ~~maintains 2 operating product line segments:~~changed the name of its two reporting segments to: Advanced Technical Materials ~~& Structures~~ ("~~AMS"~~ATM") and ~~Engineered Papers~~Fiber-Based Solutions ("~~EP"~~FBS").

~~The AMS segment offers design and manufacturing solutions~~ There was no change to the historical reporting segments or historical results for the filtration, transportation, healthcare, construction and industrial end-markets. We manufacture resin-based rolled goods such as nets, films and meltblown materials, bonding products and adhesive components, along with providing adhesives and other coating solutions and converting servicessegments. Refer to Note 16. Segment Information for additional information on our ~~customers.~~

The EP segment primarily serves the tobacco industry with production of various cigarette papers and reconstituted tobacco products ("Recon"). Traditional reconstituted tobacco leaf ("RTL") is used as a blend with virgin tobacco in cigarettes and used in the production of small cigars. Recon, as well as low ignition propensity ("LIP") cigarette paper, a specialty product with fire-safety features, are two key profit drivers, which together account for more than half of segment net sales. The EP segment also produces non-tobacco papers for premium applications, such as energy storage and industrial commodity paper grades.segments.

We conduct business in over 90100 countries and operate 3948 production locations worldwide, with offices and facilities in the ~~U.S., Canada,~~United States, United Kingdom, China, Germany, France, ~~Luxembourg,~~ Belgium, Poland, India, Brazil, ~~China,~~Canada, Spain, Italy, Mexico, Netherlands, Malaysia, ~~India~~ and ~~Poland.~~Luxembourg.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and the notes thereto have been prepared in accordance with the instructions ofon Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission ("SEC") and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America ("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.

The results of operations for the three orand nine months ended September 30, ~~2021,~~2022 are not necessarily indicative of the results to be expected for the full year. The unaudited condensed consolidated financial statements and these notes thereto included herein should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on March 1, ~~2021.~~2022.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned, majority-owned and controlled subsidiaries. The Company’s share of the net income of its 50%-owned joint ventures in China is included in the ~~condensed consolidated statements~~unaudited Condensed Consolidated Statements of ~~income~~Income/(Loss) as Income from equity affiliates, net of income taxes. 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 unaudited condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, inventory valuation, useful lives of tangible and intangible assets, ~~fair values,~~business acquisitions, equity-based compensation, derivatives, sales returns and rebates, receivables valuation, pension, postretirement and other benefits, restructuring and impairment, taxes and contingencies. Furthermore, the Company considered the continuing impact from the global economic and social disruption caused by the novel coronavirus (“COVID-19”) in estimates used in the Company’s financial statements as of and for the periods ended September 30, 2021. The Company determined changes to these estimates did not have a material impact on our assessment of recoverability of our assets, including Accounts receivable, net, Goodwill, Intangible assets or long-lived assets. There may also be long-term undetermined effects on some of our customers and suppliers, and as a result of these uncertainties, actual results could differ materially from these estimates and assumptions.

~~Recently Adopted Accounting Standards~~

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The new standard simplifies income tax accounting requirements by removing certain exceptions to the general principles in Topic 740, Income Taxes. The provisions of this ASU were adopted effective January 1, 2021 and did not have a material impact on the condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, "Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans." The new standard modifies the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans and requires the amendments to be applied on a retrospective basis for all periods presented. The provisions of this ASU were adopted effective January 1, 2021 and the required changes, are not expected to have a material impact and will be reflected in the annual financial statements for the year ended December 31, 2021.

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recently ~~Issued~~Adopted Accounting Standards

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The new standard provides optional expedients and exceptions for applying generally accepted accounting principles ~~("GAAP")~~ to contracts, hedging relationships, and other transactions affected by reference rate reform and the anticipated discontinuance of the London Interbank Offered Rate ("LIBOR") if certain criteria are met. The amendments in this ASU are effective for all entities as of March 12, 2020, through December 31, 2022. ~~The Company does not currently have any contracts that have been changed~~We adopted this ASU as of April 1, 2022 with no material impact to ~~a new reference rate but will continue to evaluate the applicability and impact of the guidance.~~our financial statements.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 2. Revenue Recognition

The Company has 2two main sources of revenue: product sales and materials conversion. The Company recognizes product sales revenues when control of a product is transferred to the customer. For the majority of product sales, transfer of control occurs when the products are shipped from one of the Company’s manufacturing facilities to the customer. The cost of delivering finished goods to the Company’s customers is recorded as a component of Cost of products sold. Those costs include the amounts paid to a third party to deliver the finished goods. Any freight costs billed to and paid by a customer are included in net sales. The Company also provides services to customers through the conversion of customer-owned raw materials into processed finished goods. In these transactions, the Company generally recognizes revenue as processing is completed.

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, which generally occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Generally, the Company considers collectability of amounts due under a contract to be probable upon inception of a sale based on an evaluation of the credit worthiness of each customer. If collectability is not considered to be probable, the Company defers recognition of revenue on satisfied performance obligations until the uncertainty is resolved. We record estimates for bad debts based on our expectations for the collectability of amounts due from customers, considering historical collection history, expectations for future activity and other discrete events as applicable.

Variable consideration, such as discounts or price concessions, is set forth in the terms of the contract at inception and is included in the assessment of the transaction price at the outset of the arrangement. The transaction price is allocated to the individual performance obligations due under the contract based on the relative stand-alone fair value of the performance obligations identified in the contract. The Company typically uses an observable price to determine the stand-alone selling price for separate performance obligations.

The Company does not typically include extended payment terms or significant financing components in its contracts with customers. Certain product sales contracts may include cash-based incentives (volume rebates or credits), which are accounted for as variable consideration. We estimate these amounts at least quarterly based on the expected forecast quantities to be provided to customers and reduce revenues recognized accordingly. Incidental items that are immaterial in the context of the contract are recognized as expense in the period incurred. The Company generally expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within selling expenses. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. As a practical expedient, the Company treats shipping and handling activities that occur after control of the good transfers as fulfillment activities, and therefore, does not account for shipping and handling costs as a separate performance obligation.

~~Following is~~

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Net sales attributed by geographic location based on the location of the Company’s direct customers were as follows (in millions):


	Three Months Ended
	September 30, 2022						September 30, 2021
	ATM		FBS		Total		ATM		FBS		Total
United States	$	219.1	$	138.1	$	357.2	$	152.3	$	40.8	$	193.1
Europe and the former Commonwealth of Independent States	121.1		49.2		170.3		60.9		42.3		103.2
Asia/Pacific (including China)	50.5		31.4		81.9		32.3		16.0		48.3
Americas (excluding U.S.)	22.3		23.4		45.7		8.1		11.8		19.9
Other foreign countries	13.1		5.9		19.0		6.5		12.6		19.1
Net sales (1)	$	426.1	$	248.0	$	674.1	$	260.1	$	123.5	$	383.6

(1) Net sales ~~disaggregated by revenue source ($ in millions). Sales and usage-based taxes are excluded from Net sales.~~

Three Months Ended
September 30, 2021 September 30, 2020
AMS EP Total AMS EP Total
Product revenues $ 254.7 $ 112.7 $ 367.4 $ 135.8 $ 126.6 $ 262.4
Materials conversion revenues 2.9 9.6 12.5 2.5 12.5 15.0
Other revenues 2.5 1.2 3.7 0.6 1.3 1.9
Total revenues (1)
$ 260.1 $ 123.5 $ 383.6 $ 138.9 $ 140.4 $ 279.3

~~(1) Revenues~~ include net hedging gains and losses for the three months ended September 30, ~~2021~~2021.


	Nine Months Ended
	September 30, 2022						September 30, 2021
	ATM		FBS		Total		ATM		FBS		Total
United States	$	545.7	$	213.8	$	759.5	$	412.1	$	116.6	$	528.7
Europe and the former Commonwealth of Independent States	250.6		151.2		401.8		134.5		139.8		274.3
Asia/Pacific (including China)	124.5		82.5		207.0		93.2		61.7		154.9
Americas (excluding U.S.)	40.0		53.0		93.0		21.6		34.0		55.6
Other foreign countries	26.3		19.7		46.0		13.7		22.4		36.1
Net sales (1)	$	987.1	$	520.2	$	1,507.3	$	675.1	$	374.5	$	1,049.6

(1) Net sales include net hedging gains and ~~2020.~~losses for the nine months ended September 30, 2021.

The ATM segment supplies customers serving generally high-growth end-markets as follows:

Industrials – substrates for tape, industrial, construction, infrastructure, performance labels, cable wrapping, abrasives, and other specialty applications.

Protective Solutions – paint protection films for transportation in aftermarket channel, interlayer lamination for ballistic resistant and security glass, high-performance graphics substrates, and emerging smart glass applications.

Filtration– advanced media for transportation applications (such as air intake, cabin air, fuel oil), reverse osmosis water filtration, industrial process air and liquid applications, air purification, and HVAC and life science/personal protective equipment.

Healthcare– advanced woundcare, consumer wellness, device fixation, and finger bandages.

Release Liners – substrates critical to adhesive separation for applications in the personal care, label, tape, industrial, graphic arts, composites, and medical categories.

1011

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nine Months Ended
September 30, 2021 September 30, 2020
AMS EP Total AMS EP Total
Product revenues $ 659.1 $ 334.8 $ 993.9 $ 379.9 $ 361.2 $ 741.1
Materials conversion revenues 8.8 36.4 45.2 11.3 35.5 46.8
Other revenues 7.2 3.3 10.5 3.4 3.7 7.1
Total revenues (1)
$ 675.1 $ 374.5 $ 1,049.6 $ 394.6 $ 400.4 $ 795.0

~~(1) Revenues include net hedging gains and losses~~Net sales as a percentage by end market for the ATM business were as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Industrials	34	%	37	%	35	%	33	%
Protective Solutions	17	%	25	%	23	%	31	%
Filtration	25	%	16	%	20	%	19	%
Healthcare	14	%	22	%	17	%	17	%
Release Liners	10	%	—	%	5	%	—	%
Net sales	100	%	100	%	100	%	100	%

The FBS segment supplies customers serving generally both growing and mature end-markets as follows:

~~nine months ended September 30, 2021~~

Packaging & Specialty Papers – sustainable premium packaging solutions, imaging and ~~2020.~~communication, home & office, consumer goods, and other applications.

Engineered Papers – combustibles and reduce risk products, primarily for the tobacco industry, alternative fibers lightweight papers, and emerging alternative solutions.

Net sales as a percentage by end market for the FBS business were as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Packaging & Specialty Papers	52	%	—	%	25	%	—	%
Engineered Papers	48	%	100	%	75	%	100	%
Net sales	100	%	100	%	100	%	100	%

Receivable Sales Programs

The Company has entered into uncommitted trade account receivable sales programs under which certain customer invoices are ~~attributed~~sold, without recourse, to a third-party financial institution in exchange for cash. The Company does not retain any interest in or continuing involvement with the ~~following geographic locations based on the location of the Company’s direct customers ($~~invoices after they are sold. The invoices are sold at face value, less a transaction fee, and are treated as a sale and accounted for as a reduction in ~~millions):~~

Three Months Ended
September 30, 2021 September 30, 2020
AMS EP Total AMS EP Total
United States $ 152.3 $ 40.8 $ 193.1 $ 103.6 $ 45.3 $ 148.9
Europe and the former Commonwealth of Independent States 60.9 42.3 103.2 9.0 40.1 49.1
Asia/Pacific (including China) 32.3 16.0 48.3 21.9 30.0 51.9
Americas (excluding US) 8.1 11.8 19.9 1.6 11.9 13.5
Other foreign countries 6.5 12.6 19.1 2.8 13.1 15.9
Total revenues (1)
$ 260.1 $ 123.5 $ 383.6 $ 138.9 $ 140.4 $ 279.3

~~(1) Revenues include net hedging gains and losses~~trade account receivables. The transaction fees were not material for the three ~~months ended September 30, 2021~~ and ~~2020.~~

Nine Months Ended
September 30, 2021 September 30, 2020
AMS EP Total AMS EP Total
United States $ 412.1 $ 116.6 $ 528.7 $ 275.7 $ 127.9 $ 403.6
Europe and the former Commonwealth of Independent States 134.5 139.8 274.3 32.7 123.4 156.1
Asia/Pacific (including China) 93.2 61.7 154.9 68.3 82.8 151.1
Americas (excluding US) 21.6 34.0 55.6 6.4 32.5 38.9
Other foreign countries 13.7 22.4 36.1 11.5 33.8 45.3
Total revenues (1)
$ 675.1 $ 374.5 $ 1,049.6 $ 394.6 $ 400.4 $ 795.0

~~(1) Revenues include net hedging gains and losses for the~~ nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Trade accounts receivable sold to financial institutions during the nine months ended September 30, 2022 were $38.1 million. Cash proceeds received from the financial institutions under the programs during the nine months ended September 30, 2022 were $37.9 million. There were no material trade accounts receivable sales for the nine months ended September 30, 2021.

Note 3. Other Comprehensive Income/(Loss) ~~Income~~

Comprehensive ~~(loss)~~ income includes Net ~~income,~~income/(loss), as well as certain items charged and credited directly to stockholders' equity, which are excluded from ~~net income.~~Net income/(loss). The Company has presented Comprehensive income/(loss) ~~income~~ in the ~~condensed consolidated statements~~unaudited Condensed Consolidated Statements of ~~comprehensive (loss) income.~~Comprehensive Income/(Loss). Reclassification adjustments of derivative instruments from Accumulated other comprehensive loss, net of tax are presented in Net ~~sales,~~sales; Other ~~(expense)~~ income, ~~net,~~net; or Interest expense in the ~~condensed consolidated statements~~unaudited Condensed Consolidated Statements of ~~income. See~~Income/(Loss). Refer to Note 11. Derivatives for additional information. Amortization of accumulated pension and other ~~post-employment~~postretirement benefit ("OPEB") liabilities are included in the computation of net periodic pension and OPEB costs, which are more fully discussed in Note 13. Postretirement and Other Benefits.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Components of Accumulated other comprehensive loss, net of tax, were as follows ~~($ in~~(in millions):

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

September 30, 2021 December 31, 2020
Accumulated pension and OPEB liability adjustments, net of income tax benefit of $11.6 million and $11.6 million at September 30, 2021 and December 31, 2020, respectively $ (17.1) $ (20.5)
Accumulated unrealized loss on derivative instruments, net of income tax benefit of $2.1 million and $2.8 million at September 30, 2021 and December 31, 2020, respectively (7.8) (13.1)
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $6.6 million and $10.1 million at September 30, 2021 and December 31, 2020, respectively (99.0) (78.3)
Accumulated other comprehensive loss $ (123.9) $ (111.9)


	September 30, 2022		December 31, 2021


Accumulated pension and OPEB liability adjustments, net of income tax benefit of $7.1 million and $8.9 million at September 30, 2022 and December 31, 2021, respectively	$	(12.7)	$	(14.4)
Accumulated unrealized gain/(loss) on derivative instruments, net of income tax benefit (expense) of $(8.3) million and $2.1 million at September 30, 2022 and December 31, 2021, respectively	52.7		(1.9)
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $7.7 million and $9.5 million at September 30, 2022 and December 31, 2021, respectively	(197.9)		(102.7)
Accumulated other comprehensive loss, net of tax	$	(157.9)	$	(119.0)

Changes in the components of Accumulated other comprehensive ~~(loss) income~~loss, net of tax, were as follows ~~($ in~~(in millions):

Three Months Ended
September 30, 2021 September 30, 2020
Pre-tax Tax Net of
Tax Pre-tax Tax Net of
Tax
Net gain (loss) on pension and OPEB liability adjustments $ 1.1 $ (0.2) $ 0.9 $ 1.1 $ (0.3) $ 0.8
Unrealized gain (loss) on derivative instruments 2.3 (0.6) 1.7 1.1 (0.3) 0.8
Unrealized (loss) gain on foreign currency translation (20.1) (0.1) (20.2) 5.5 1.7 7.2
Total $ (16.7) $ (0.9) $ (17.6) $ 7.7 $ 1.1 $ 8.8




	Three Months Ended
	September 30, 2022						September 30, 2021
	Pre-tax		Tax		Net of Tax		Pre-tax		Tax		Net of Tax
Pension and OPEB liability adjustments	$	0.7	$	(0.9)	$	(0.2)	$	1.1	$	(0.2)	$	0.9
Derivative instrument adjustments	30.1		(7.2)		22.9		2.3		(0.6)		1.7
Unrealized foreign currency adjustments	(65.8)		(18.3)		(84.1)		(20.1)		(0.1)		(20.2)
Total	$	(35.0)	$	(26.4)	$	(61.4)	$	(16.7)	$	(0.9)	$	(17.6)

Nine Months Ended
September 30, 2021 September 30, 2020
Pre-tax Tax Net of
Tax Pre-tax Tax Net of
Tax
Unrealized gain (loss) on pension and OPEB liability adjustments $ 3.4 $ — $ 3.4 $ 2.9 $ (0.8) $ 2.1
Unrealized gain (loss) on derivative instruments 6.1 (0.8) 5.3 (14.3) 2.3 (12.0)
Unrealized (loss) gain on foreign currency translation (17.3) (3.4) (20.7) 0.6 3.7 4.3
Total $ (7.8) $ (4.2) $ (12.0) $ (10.8) $ 5.2 $ (5.6)




	Nine Months Ended
	September 30, 2022						September 30, 2021
	Pre-tax		Tax		Net of Tax		Pre-tax		Tax		Net of Tax
Pension and OPEB liability adjustments	$	3.5	$	(1.8)	$	1.7	$	3.4	$	—	$	3.4
Derivative instrument adjustments	65.0		(10.4)		54.6		6.1		(0.8)		5.3
Unrealized foreign currency translation adjustments	(93.4)		(1.8)		(95.2)		(17.3)		(3.4)		(20.7)
Total	$	(24.9)	$	(14.0)	$	(38.9)	$	(7.8)	$	(4.2)	$	(12.0)

Note 4. Business Acquisitions

~~Scapa~~Neenah

On ~~April 15, 2021, SWM completed its previously announced acquisition~~March 28, 2022, the Company entered into an Agreement and Plan of ~~Scapa Group plc (“Scapa”~~Merger to combine with Neenah, Inc. ("Neenah"), a ~~UK- based~~specialty materials company incorporated in Delaware, in an all-stock merger of equals (the "Merger Agreement"), to create a global leader in specialty materials, accelerate growth and innovation, ~~design,~~as well as achieve cost synergies. The Merger was approved by the shareholders of both the Company and ~~manufacturing solutions provider for healthcare~~Neenah on June 29, 2022 and ~~industrial markets for aggregate cash consideration of $630.6 million, net of $22.7 million of Cash and cash equivalents acquired and including $568.9 million for~~was consummated on July 6, 2022. Under the purchase of all Scapa ordinary shares, $75.9 million for the repayment of Scapa debt and $8.5 million for the repayment of acquisition costs incurred by Scapa. The acquisition adds to SWM’s portfolio of precision engineered performance materials, expands the Company’s innovation, design, and formulation capabilities, and brings a variety of new coating and converting technologies to SWM. Scapa, partterms of the ~~AMS segment operates globally~~Merger Agreement, which was unanimously approved by the board of directors of both companies, Neenah merged into a directly owned subsidiary of the Company, with ~~manufacturing and sales operations in~~Neenah surviving the ~~Americas, Asia and Europe.~~Merger as a direct, wholly-owned subsidiary of Mativ.

1213

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pursuant to the Merger Agreement, each share of Neenah's common stock outstanding was exchanged for 1.358 shares of common stock in the Company. As such, the Company issued approximately 22.8 million shares of its common stock to Neenah's shareholders under the terms of the Merger Agreement. Based on the Company's closing stock price on July 5, 2022, the total value of shares issued to Neenah's shareholders was approximately $534.1 million. The ~~purchase price~~total consideration transferred to merge with Neenah was ~~funded with~~$1,056.3 million, which included the equity portion consideration of $534.1 million, repayment of Neenah debt of $504.9 million, repayment of acquisition costs incurred by Neenah of $13.5 million and the fair value of unvested stock awards allocated to the pre-merger period of $3.8 million.

The Company used the proceeds of the borrowings under the amended Credit Agreement, as defined and discussed in Note 10. ~~Debt.~~Debt, to repay existing indebtedness of Neenah and to pay other costs and expenses in connection with the Merger.

The ~~acquisition~~transaction was accounted for as a business combination with the Company being treated as the accounting acquirer in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. Under this method of accounting, the total consideration has been allocated to Neenah's assets acquired and liabilities assumed based upon fair values at the Merger date. The assets acquired and liabilities assumed were measured at ~~their~~ fair ~~values~~value as of the ~~acquisition~~Merger date primarily using Level 3 inputs.

The acquisition consideration allocation below is preliminary, pending completion of the fair value analyses of acquired assets and liabilities, including deferred taxes and the valuations of certain intangibles and personal property. The excess of the ~~acquisition~~total consideration over the ~~estimated fair values of~~net assets acquired was recorded as goodwill and has been allocated to the ~~acquired assets and assumed liabilities is assigned to goodwill.~~ATM segment. The goodwill ~~which is assigned to the AMS reportable segment, is primarily attributable to expected revenue synergies and~~recorded is not expected to be deductible for tax ~~purposes.~~purposes as it is primarily attributable to expected revenue synergies. The ~~estimated~~initial purchase price allocation ~~disclosed as of June 30, 2021 was~~below is preliminary and may be revised during the third quarter as new information was received and analyzed resulting in an increase in property, plant and equipment of $4.8 million, an increase in deferred tax liabilities of $3.1 million, and other adjustments as presented in the table below. As additional information becomes available, we may further revise the preliminary acquisition consideration allocation during the remainder of the measurement period, ~~which will~~ not to exceed ~~twelve months from~~one year, as new information is received and analyzed. Any potential adjustments could be material in relation to the ~~closing of the acquisition. Such revisions or changes may be material.~~preliminary values below.

The ~~consideration paid for Scapa, and the preliminary~~ estimated fair values of the assets acquired and liabilities assumed as of the ~~April 15, 2021, acquisition~~Merger date were as follows ~~($ in~~(in millions):

Preliminary Fair Value as of September 30, 2021 Adjustments Preliminary Fair Value as of April 15, 2021
Cash and cash equivalents $ 22.7 $ — $ 22.7
Accounts receivable 67.7 — 67.7
Inventory 60.0 0.9 60.9
Other current assets 9.7 0.1 9.8
Property, plant and equipment 156.9 (4.8) 152.1
Identifiable intangible assets 246.2 — 246.2
Other noncurrent assets 25.4 0.9 26.3
Total assets $ 588.6 $ (2.9) $ 585.7
Current debt $ 15.0 $ — $ 15.0
Accounts payable and other current liabilities $ 84.2 $ 1.7 85.9
Deferred income tax liabilities 64.6 $ (3.1) 61.5
Other noncurrent liabilities 33.2 (0.1) 33.1
Net assets acquired $ 391.6 $ (1.4) $ 390.2
Goodwill 261.7 1.4 263.1
Total consideration $ 653.3 $ — $ 653.3


	Preliminary Fair Value
Cash and cash equivalents	$	55.9
Accounts receivable	206.6
Inventory	191.8
Assets held for sale	10.7
Other current assets	16.8
Property, plant and equipment	453.6
Identifiable intangible assets	219.0
Other non-current assets	41.8
Total assets	$	1,196.2

Current debt	$	1.9
Accounts payable and other current liabilities	207.9
Long-term debt	22.8
Deferred income tax liabilities	67.7
Other non-current liabilities	82.0
Net assets acquired	$	813.9
Goodwill	242.4
Total consideration	$	1,056.3

The fair value of receivables acquired approximates the gross contractual value. The contractual amount not expected to be collected is immaterial.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Acquired inventory was comprised of finished goods, work in progress and raw materials. The fair value of finished goods was based on net realizable value adjusted for the costs of selling and manufacturing and a reasonable profit margin on selling effort and manufacturing costs. The fair value of work in progress was based on net realizable value adjusted for the costs of selling and a reasonable profit margin on selling effort. The fair value of raw materials was determined to approximate book value.

Property, plant and equipment is comprised of buildings and leasehold improvements, machinery and equipment, furniture and fixtures, computer equipment and construction in progress. The preliminary estimated fair value was

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

primarily determined using a reproduction/replacement cost approach which measures the value of an asset by estimating the cost to acquire or construct comparable assets adjusted for age and condition of the asset.

Acquired intangible assets include customer relationships, tradenames and developed technologies. Intangible assets were valued using the multi-period excess earnings and relief-from-royalty methods, both forms of the income approach which considers a forecast of future cash flows generated from the use of each asset. The following table ~~shows~~sets forth the ~~preliminary fair values assigned to~~components of identifiable intangible assets ~~($ in~~(in millions) and their estimated useful lives (in years):


		Fair Value		Weighted-Average Amortization Period (Years)		Fair Value		Weighted-Average Amortization Period (Years)
Amortizable intangible assets:	Amortizable intangible assets:				Amortizable intangible assets:
Customer relationships	Customer relationships	$	205.4	15	Customer relationships	$	182.0	14.3
Tradenames and other	Tradenames and other	7.7		10	Tradenames and other	14.7		20
Developed technology	Developed technology	33.1		7	Developed technology	22.3		7
Total amortizable intangible assets	Total amortizable intangible assets	$	246.2		Total amortizable intangible assets	$	219.0

The preliminary estimate of deferred tax effects resulting from the ~~acquisition~~Merger include the expected federal, state and foreign tax consequences associated with temporary differences between the preliminary fair values of the assets

acquired, liabilities assumed and the respective tax basis.

During the three and nine months ended September 30, ~~2021~~2022, the Company recognized direct and indirect ~~acquisition-related~~ costs ~~for~~related to the ~~Scapa acquisition~~Merger of ~~$0.0~~$32.7 million and ~~$8.7~~$46.3 million, ~~respectively.~~respectively, predominantly related to severance and termination costs resulting from the change in control, legal and other professional fees. Direct and indirect ~~acquisition-related~~merger-related costs were expensed as incurred and are primarily included in the General expense ~~line item~~ in the ~~condensed consolidated statements~~unaudited Condensed Consolidated Statements of ~~income.~~Income/(Loss).

Net sales and Net loss from Neenah included in the Company's unaudited Condensed Consolidated Statements of Income/(Loss) from the Merger date are as follows (in millions):


	July 6, 2022 - September 30, 2022
Net sales	$	289.8
Net loss	$	(5.8)

Pro Forma Financial Information

The ~~amounts~~supplemental pro forma financial information presents the combined results of ~~Net sales~~operations for the periods presented, as if the Merger had occurred on January 1, 2021. The supplemental pro forma financial information includes the following adjustments related to the Merger: amortization of intangible assets and ~~Income from Scapa included~~fair value adjustments to inventory, interest expense for the additional indebtedness incurred to complete the Merger, acquisition and severance costs, and applicable tax adjustments based on statutory rates in the ~~Company's condensed consolidated income statement from~~jurisdictions where the ~~acquisition date are as follows ($ in millions):~~adjustments occurred.

Three months ended September 30, 2021 April 15, 2021 - September 30, 2021
Net sales $ 107.1 $ 202.2
Net income (loss) $ 1.8 $ (4.2)

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The supplemental pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the Merger occurred as of January 1, 2021 (in millions):


	Three Months Ended
	September 30, 2022		September 30, 2021
Net sales	$	683.7	$	651.4
Net income	$	27.2	$	7.4


	Nine Months Ended
	September 30, 2022		September 30, 2021
Net sales	$	2,108.4	$	1,813.8
Net income (loss)	$	56.5	$	(62.9)

~~Tekra~~In 2022, the Company incurred $62.8 million of direct and indirect acquisition and integration costs. These expenses are included in General expense on the unaudited Condensed Consolidated Statements of Income/(Loss) and are reflected in pro forma net income for the three and nine months ended September 30, 2021.

Scapa

On ~~March 13, 2020, the Company~~April 15, 2021, we completed the previously announced acquisition of ~~100%~~Scapa Group plc (“Scapa”), a UK-based innovation, design, and manufacturing solutions provider for healthcare and industrial markets for aggregate cash consideration of the equity interest in Tekra, LLC and Trient, LLC, “Tekra,” pursuant to the definitive agreement signed as of February 20, 2020. Tekra is a converter of high-performance films and substrates which enhances the Company’s films capabilities. Tekra, part of the AMS segment, operates 2 manufacturing facilities located in Wisconsin.

~~The consideration transferred to acquire Tekra was $169.3~~$630.6 million, net of ~~$1.6~~$22.7 million ~~cash~~of Cash and cash equivalents acquired ~~subject~~and including $568.9 million for the purchase of all Scapa ordinary shares, $75.9 million for the repayment of Scapa debt and $8.5 million for the repayment of acquisition costs incurred by Scapa. The acquisition adds to ~~working capital adjustments that were finalized~~our portfolio of precision engineered performance materials, expands our innovation, design, and formulation capabilities, and brings a variety of new coating and converting technologies to the Company. Scapa is part of the ATM segment and operates globally with manufacturing and sales operations in ~~2020.~~ the Americas, Asia and Europe.

The purchase price was funded with borrowings ~~from our Revolving~~under the amended Credit ~~Facility (See~~Agreement, as defined and discussed in Note 10. ~~Debt).~~Debt.

The acquisition was accounted for as a business combination with the assets acquired and liabilities assumed measured at their fair values as of the acquisition date, primarily using Level 3 inputs.

The excess of the acquisition consideration over the estimated fair values of the acquired assets and assumed liabilities is assigned to goodwill. The goodwill is assigned to the ATM reporting segment and is primarily attributable to expected revenue synergies. It is not expected to be deductible for tax purposes. The estimated purchase price allocation disclosed as of ~~March 31, 2020,~~June 30, 2021 was revised during the ~~second and third quarters of 2020~~measurement period as new information was received and analyzed resulting in a decrease in ~~net intangible~~Deferred tax liabilities of $12.3 million, an increase in Property, plant and equipment of $7.7 million, an increase in Other non-current liabilities, primarily due to changes in certain tax positions of $7.0 million, a $3.0 million decrease in Other non-current assets, ~~of $3.4 million,~~ and other ~~adjustments, consisting primarily of reclassifications within working capital, leading to a net decrease~~insignificant changes, as presented in ~~total consideration of $1.8 million.~~the table below.

1416

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The consideration paid for ~~Tekra~~Scapa, and the ~~final~~ fair values of the assets acquired and liabilities assumed as of the ~~March 13, 2020~~April 15, 2021 acquisition date ~~are~~were as follows ~~($ in~~(in millions):


	Final Fair Value		Adjustments		Preliminary Fair Value
Cash and cash equivalents	$	22.7	$	—	$	22.7
Accounts receivable	67.7		—		67.7
Inventory	60.0		(0.9)		60.9
Other current assets	9.7		(0.1)		9.8
Property, plant and equipment	159.8		7.7		152.1
Identifiable intangible assets	246.2		—		246.2
Other non-current assets	23.3		(3.0)		26.3
Total assets	$	589.4	$	3.7	$	585.7

Current debt	$	15.0	$	—	$	15.0
Accounts payable and other current liabilities	83.9		(2.0)		85.9
Deferred income tax liabilities	49.2		(12.3)		61.5
Other non-current liabilities	40.1		7.0		33.1
Net assets acquired	$	401.2	$	11.0	$	390.2
Goodwill	252.1		(11.0)		263.1
Total consideration	$	653.3	$	—	$	653.3


	~~Fair Value as of March 13, 2020~~
~~Cash and cash equivalents~~	$	~~1.6~~
~~Accounts receivable~~	~~8.6~~
~~Inventory~~	~~14.2~~
~~Other current assets~~	~~0.2~~
~~Property, plant and equipment~~	~~7.3~~
~~Identifiable intangible assets~~	~~81.8~~
~~Other noncurrent assets~~	~~3.7~~
~~Total assets~~	$	~~117.4~~

~~Accounts payable~~	$	~~3.0~~
~~Other current liabilities~~	~~2.0~~
~~Other noncurrent liabilities~~	~~2.7~~
~~Net assets acquired~~	$	~~109.7~~
~~Goodwill~~	~~61.2~~
~~Total consideration~~	$	~~170.9~~

The fair value of receivables acquired approximates the gross contractual value.The contractual amount not expected to be collected is ~~immaterial.~~not material.

Acquired inventory was comprised of finished goods and raw materials.The fair value of finished goods was based on net realizable value adjusted for the costs of selling and a reasonable profit margin on selling effort.The fair value of raw materials was determined to approximate book value.

Property, plant and equipment is comprised of buildings and leasehold improvements, machinery and equipment, furniture and fixtures, computer equipment, and construction in progress. The fair value was determined using a reproduction/replacement cost approach which measures the value of an asset by estimating the cost to acquire or construct comparable assets adjusted for age and condition of the asset.

Acquired intangible assets include customer relationships, tradenames and ~~unpatented~~ developed technologies. Intangible assets were valued using the multi-period excess earnings and relief-from-royalty methods, both are forms of the income approach which considers a forecast of future cash flows generated from the use of each asset.

The following table shows the ~~final~~ fair values assigned to identifiable intangible assets ~~($ in~~(in millions):


	Fair Value		Weighted-Average Amortization Period (Years)
Amortizable intangible assets:
Customer relationships	$	205.4	15
Tradenames and other	7.7		10
Developed technology	33.1		7
Total amortizable intangible assets	$	246.2

Fair Value as of March 13, 2020 Weighted-Average Amortization Period (Years)
Amortizable intangible assets:
Customer relationships $ 63.0 15
Tradenames and other 10.8 15
Developed technology 8.0 10
Total amortizable intangible assets $ 81.8

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The deferred tax effects resulting from the acquisition include the expected federal, state, and foreign tax consequences associated with temporary differences between the fair values of the assets acquired, liabilities assumed and the respective tax basis.

During the three and nine months ended September 30, ~~2020,~~2022, the Company ~~recognized $0.0 million and $1.1 million in~~did not incur any direct and indirect acquisition-related costs for the ~~Tekra acquisition,~~Scapa acquisition. During the three and nine months ended September 30, 2021, the Company recognized zero and $8.7 million of direct and indirect acquisition-related costs, respectively.Direct and indirect acquisition-related costs were expensed as incurred and are included in ~~the~~ General expense ~~line item~~ in the ~~condensed consolidated statements~~unaudited Condensed Consolidated Statements of ~~income.~~

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~The amounts of Net sales and Net income of Tekra included in the Company's condensed consolidated income statement from the acquisition date are as follows ($ in millions):~~

Three Months Ended September 30, 2020 March 13, 2020 - September 30, 2020
Net sales $ 23.2 $ 53.7
Net income $ 0.4 $ 0.1
Income/(Loss).

Pro Forma Financial Information

The supplemental pro forma financial information presents the combined results of operations for the periods presented, as if the Scapa acquisition had occurred on January 1, ~~2020 and the Tekra acquisition had occurred on January 1, 2019 and therefore both included in the pro forma results for periods presented.~~2020. The supplemental pro forma financial information includes the following adjustments related to the Scapa acquisition: amortization of intangible assets and fair value adjustments to inventory, interest expense for the additional indebtedness incurred to complete the transaction, acquisition ~~transaction~~ and severance costs, and applicable tax adjustments based on statutory rates in the jurisdictions where the adjustments occurred. The supplemental pro forma financial information does not include Tekra net income for the period from January 1 - March 13, 2020 as preparation of this information was deemed impractical due to changes in the ownership structure of the acquired entities prior to the acquisition. For the nine months ended September 30, 2021, pro forma adjustments caused net income to increase by $10.3 million. For the three and nine months ended September 30, 2020 pro forma adjustments led to decreases in net income of $8.2 million and $35.4 million, respectively.

The supplemental pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the Scapa ~~and Tekra acquisitions~~acquisition occurred as of January 1, 2020 ~~and January 1, 2019, respectively, nor is it necessarily indicative of the of the future results of the combined company.~~

(in millions):


	~~Three~~Nine Months Ended
	September 30, ~~2020~~2021
Net sales	$	~~363.5~~1,180.2
Net income	$	~~15.0~~47.9

Nine Months Ended
September 30, 2021 September 30, 2020
Net sales $ 1,180.2 $ 1,092.0
Net income (loss)(1)
$ 47.9 $ (28.0)

~~(1)~~ Supplemental pro forma financial information includes the impact of restructuring and the impairment of goodwill and intangible assets totaling $67.5 million on Scapa net income for the nine months ended September 30, 2020.

Note 5. Net ~~Income~~Income/(Loss) Per Share

The Company uses the two-class method to calculate ~~earnings~~earnings/(loss) per share. The Company has granted restricted stock that contains non-forfeitable rights to dividends on unvested shares. Since these unvested shares are considered participating securities under the two-class method, the Company allocates ~~earnings~~earnings/(loss) 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 stock-based incentive compensation and directors’ accumulated deferred stock compensation, which may be received by the directors in the form of stock or cash. ADiluted loss per share excludes the weighted average potential common shares as their inclusion would be anti-dilutive.

1618

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table is a reconciliation of the average number of common and potential common shares outstanding used in the calculations of basic and diluted net ~~income~~income/(loss) per share ~~follows ($ in~~(in millions, shares in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020			September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Numerator (basic and diluted):	Numerator (basic and diluted):									Numerator (basic and diluted):
Net income		$	12.2	$	24.5	$	35.6	$	68.5
Net income/(loss)										Net income/(loss)	$	(22.5)	$	12.2	$	(9.1)	$	35.6
Less: Dividends paid to participating securities	Less: Dividends paid to participating securities	(0.2)		(0.1)		(0.5)		(0.5)		Less: Dividends paid to participating securities	(0.2)		(0.2)		(0.7)		(0.5)
Less: Undistributed earnings available to participating securities		—		(0.2)		—		(0.4)
Undistributed and distributed earnings available to common stockholders		$	12.0	$	24.2	$	35.1	$	67.6

Undistributed and distributed earnings/(loss) available to common stockholders										Undistributed and distributed earnings/(loss) available to common stockholders	$	(22.7)	$	12.0	$	(9.8)	$	35.1

Denominator:	Denominator:									Denominator:
Average number of common shares outstanding	Average number of common shares outstanding	31,046.1		30,909.7		31,022.1		30,805.3		Average number of common shares outstanding	52,593.9		31,046.1		38,415.9		31,022.1
Effect of dilutive stock-based compensation	Effect of dilutive stock-based compensation	354.9		232.8		359.5		214.8		Effect of dilutive stock-based compensation	—		354.9		—		359.5
Average number of common and potential common shares outstanding	Average number of common and potential common shares outstanding	31,401.0		31,142.5		31,381.6		31,020.1		Average number of common and potential common shares outstanding	52,593.9		31,401.0		38,415.9		31,381.6

Note 6. Inventories

Inventories are valued at the lower of cost (using the ~~First-In, First-Out~~first-in, first-out and weighted average methods) or net realizable value. The Company's costs included in inventory primarily include resins, pulp, chemicals, direct labor, utilities, maintenance, depreciation, finishing supplies and an allocation of certain overhead costs. Machine start-up costs or abnormal machine shutdowns are expensed in the period incurred and are not reflected in inventory. The Company reviews inventories at least quarterly to determine the necessity of write-offs for excess, obsolete or unsalable inventory. ~~The Company estimates write-offs for inventory obsolescence and shrinkage.~~ These reviews require the Company to assess customer and market demand. The Company estimates write-offs for inventory obsolescence and shrinkage.

The following ~~schedule~~table details inventories by major class ~~($ in~~(in millions):

September 30,
2021 December 31,
2020
Raw materials $ 113.8 $ 65.3
Work in process 43.4 23.2
Finished goods 95.7 83.5
Supplies and other 8.4 7.7
Total $ 261.3 $ 179.7




	September 30, 2022		December 31, 2021
Raw materials	$	183.6	$	113.4
Work in process	80.5		41.9
Finished goods	193.7		95.7
Supplies and other	27.6		8.5
Total inventories	$	485.4	$	259.5

1719

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7. Goodwill

The allocation between segments of the goodwill recorded related to the Merger has not been completed as of September 30, 2022. The changes in the carrying amount of goodwill by ~~reportable~~reporting segment ~~for the nine months ended September 30, 2021~~ were as follows ~~($ in~~(in millions):

AMS EP Total
Goodwill as of December 31, 2020 $ 398.4 $ 5.3 $ 403.7
Goodwill acquired during the period 261.7 — 261.7
Foreign currency translation adjustments (5.1) (0.3) (5.4)
Goodwill as of September 30, 2021 $ 655.0 $ 5.0 $ 660.0


	ATM		FBS		Total
Balance at December 31, 2021	$	643.4	$	4.9	$	648.3
Goodwill acquired during the period(1)	243.8		—		243.8
Foreign currency translation and other(2)	(42.4)		(0.7)		(43.1)
Balance at September 30, 2022	$	844.8	$	4.2	$	849.0

(1) $242.4 million related to the Merger and $1.4 million related to measurement period adjustments for the Scapa acquisition.

(2) During the first quarter of 2022, goodwill with a carrying amount of $2.1 million was allocated to the disposal group classified as held for sale and subsequently impaired. Goodwill was allocated to the disposal group on the basis of relative fair value, primarily utilizing Level 3 inputs which included forecasted future cash flows. We considered the planned divestiture of this business as a potential indicator that the fair value of the ATM reporting unit may be below its carrying amount and performed a qualitative impairment assessment in the first quarter of 2022. As a result of this assessment, we concluded the fair value of the reporting unit was in excess of its carrying value and therefore no additional impairment was identified or recognized.

Note 8. Intangible Assets

At September 30, 2022, the Company had $615.0 million of intangible assets in its ATM segment and $46.2 million in its FBS segment. The gross carrying amount and accumulated amortization for intangible assets ~~which are in our AMS segment~~ consisted of the following ~~($ in~~(in millions):


		September 30, 2021							September 30, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets	Amortized Intangible Assets							Amortized Intangible Assets
Customer relationships	Customer relationships	$	543.2	$	110.8	$	432.4	Customer relationships	$	692.9	$	142.9	$	550.0
Developed technology	Developed technology	74.7		18.7		56.0		Developed technology	70.1		24.2		45.9

Trade names	Trade names	19.0		2.3		16.7		Trade names	31.8		3.7		28.1
Acquired technology								Acquired technology	21.5		0.7		20.8
Non-compete agreements	Non-compete agreements	2.9		2.5		0.4		Non-compete agreements	2.9		2.7		0.2
Patents	Patents	1.5		0.6		0.9		Patents	1.9		0.7		1.2
Total	Total	$	641.3	$	134.9	$	506.4	Total	$	821.1	$	174.9	$	646.2

Unamortized Intangible Assets	Unamortized Intangible Assets							Unamortized Intangible Assets
Trade names		$	20.1	$	—	$	20.1
Trade names(1)								Trade names(1)	$	15.0	$	—	$	15.0

(1) During the first quarter of 2022, indefinite-lived trade names and developed technology with net carrying amounts of $4.2 million and $0.5 million were allocated to the disposal group classified as held for sale and subsequently impaired.

December 31, 2020
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Amortized Intangible Assets
Customer relationships $ 343.9 $ 89.7 $ 254.2
Developed technology 42.4 14.2 28.2
Trade names 11.7 1.4 10.3
Non-compete agreements 2.9 2.4 0.5
Patents 1.5 0.5 1.0
Total $ 402.4 $ 108.2 $ 294.2
Unamortized Intangible Assets
Trade names $ 20.5 $ — $ 20.5

Amortization expense of intangible assets was $11.2 million and $6.8 million for the three months ended September 30, 2021 and 2020, respectively, and $28.4 million and $18.1 million for the nine months ended September 30, 2021 and 2020, respectively. Finite-lived intangibles in the AMS segment are expensed using the straight-line

1820

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
Customer relationships	$	541.7	$	119.2	$	422.5
Developed technology	74.6		20.7		53.9

Trade names	18.9		2.7		16.2
Non-compete agreements	2.9		2.5		0.4
Patents	1.5		0.6		0.9
Total	$	639.6	$	145.7	$	493.9

Unamortized Intangible Assets
Trade names	$	20.0	$	—	$	20.0

Amortization expense of intangible assets was $14.8 million and $11.2 million for the three months ended September 30, 2022 and 2021, respectively, and $37.0 million and $28.4 million for the nine months ended September 30, 2022 and 2021, respectively. Finite-lived intangibles in the ATM segment are expensed using the straight-line amortization method. The estimated average aggregate amortization expense is ~~$44.3~~$60.2 million in each of the next five years.

Note 9. Restructuring and Impairment Activities

The Company incurred restructuring and impairment ~~expense~~expenses of $1.8 million and $1.9 million for the three months ended September 30, 2022 and 2021, respectively, and $17.4 million and $5.9 million infor the nine months ended September 30, 2022 and 2021, respectively.

In the FBS segment, there were $0.1 million of restructuring and impairment expenses for the three months ended September 30, 2022 and $1.9 million of restructuring and impairment expenses for the three months ended September 30, 2021. Restructuring and impairment expenses for the three months ended September 30, 2021 ~~and 2020, respectively, and $5.9 million and $7.1 million in the nine months ended September 30, 2021 and 2020, respectively, in the EP segment.~~

During the third quarter of 2021, we announced plans to close the Winkler, Manitoba facility in Canada. The decision was part of our ongoing manufacturing optimization efforts. The anticipated closure date is December 31, 2021.

~~As a result of this decision,~~included $0.7 million ~~of restructuring and impairment expense was recognized in the three months ended September 30, 2021~~ related to severance and other ~~accruals. In~~accruals for the ~~three months ended September 30, 2021, we also recorded~~Winkler, Manitoba facility, $0.7 million related to severance accruals at other manufacturing facilities as part of the ongoing optimization project and $0.5 million ~~of other restructuring~~ related ~~charges in Cost of products sold, including~~to the ~~write down~~Spotswood site closure. In addition, $0.5 million related to the write-down of certain inventories to net realizable value and the acceleration of depreciation of machinery and equipment due to the change in the estimated lives of these ~~assets.~~assets at the Winkler, Manitoba facility was included in Cost of products sold.

During the third quarter of 2020, we announced plans to shut down the Spotswood, New Jersey facility and shift the production of paper made there to other SWM facilities. This decision was part of our ongoing manufacturing optimization efforts and involved the co-development of a new paper production technology with one of the Company’s key customers. Production of paper at this facility ceased as of December 31, 2020.

~~As a result of this decision, $0.5 million of restructuring~~Restructuring and impairment ~~expense was recognized~~expenses in the ~~three~~FBS segment were $1.7 million and $5.9 million for the nine months ended September 30, 2022 and 2021, ~~related to the costs associated with closing this facility, maintaining the property and preparing it for sale.~~

In addition to restructuring costs relating to the Spotswood and Winkler facilities, the EP segment recognized $0.7 million and $1.8 million for the three months ended September 30, 2021 and 2020, respectively, related to severance accruals for employees at other manufacturing facilities. These restructuring charges relate to ongoing cost optimization initiatives to remain competitive within the EP segment. The cost optimization initiative project started in 2019 and is expected to be completed in 2022. The EP segment has recognized $9.2 million of restructuring charges cumulatively through September 30, 2021 related to this project.

The Company expects to record additional restructuring and impairment and restructuring related costs in the EP segment during 2021 of approximately $0.5 million relating the closing of the Winkler, Manitoba facility for accelerated depreciation, severance and retention and $0.6 million relating to the shutdown of the Spotswood, New Jersey facility, primarily associated with closing the facility and maintaining the property until it is sold. The Company does not expect to incur significant restructuring expenses related to the cost optimization initiatives in the EP segment during the remainder of 2021.

~~In the AMS segment, there were insignificant restructuring~~respectively. Restructuring and impairment expenses for the ~~three~~nine months ended September 30, ~~2021~~2022 included $1.5 million primarily related to pension benefits for the Winkler, Manitoba facility. Restructuring and ~~2020, respectively and $0.0 million and $0.5 million in~~impairment expenses for the nine months ended September 30, 2021 included $2.9 million related to the Spotswood site closure, $2.3 million related to severance accruals at other manufacturing facilities as part of the ongoing cost optimization project and ~~2020, respectively.~~$0.7 million related to pension benefits for the Winkler, Manitoba facility. In addition, $0.5 million related to the write-down of certain inventories to net realizable value and the acceleration of depreciation of machinery and equipment due to the change in the estimated lives of these assets at the Winkler, Manitoba facility was included in Cost of products sold.

~~The following table summarizes total~~During the remainder of 2022, the Company expects to record an insignificant amount of additional restructuring ~~and~~costs in the FBS segment related ~~charges for~~to the ~~three and nine months ended September 30, 2021 and 2020:~~closing of the Winkler, Manitoba facility.

1921

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Restructuring and impairment expense:
Severance $ 1.2 $ 5.7 $ 2.8 $ 7.4
Other 0.7 0.3 3.1 0.3
Total restructuring and impairment expense $ 1.9 $ 6.0 $ 5.9 $ 7.7
Other restructuring related charges - Cost of products sold
Accelerated depreciation and amortization $ 0.1 $ 1.2 $ 0.1 $ 1.2
Spare parts and inventory write-downs to estimated net realizable value $ 0.4 $ 2.0 $ 0.4 $ 2.0
Total other restructuring related charges - Cost of products sold $ 0.5 $ 3.2 $ 0.5 $ 3.2
Total restructuring costs and related charges $ 2.4 $ 9.2 $ 6.4 $ 10.9
In the ATM segment, restructuring and impairment expenses were $0.9 million and $14.9 million for the three and nine months ended September 30, 2022, respectively. Restructuring and impairment expenses for the three months ended September 30, 2022 included $0.7 million related to the closure of the Appleton, Wisconsin facility, a facility acquired through the Merger. The closure of this facility was substantially completed in September 2021 and its divestiture was planned prior to the Merger. The assets held for sale consist primarily of property, plant and equipment, which are measured at fair value as part of the purchase price allocation. Refer to Note 4. Business Acquisitions for the purchase price allocation. In addition, there was $0.2 million related to severance accruals resulting from the divestiture during the three months ended September 30, 2022 of a portion of the legacy SWM segment serving the industrials end-market.

Restructuring and impairment expenses in the ATM segment for the nine months ended September 30, 2022 was primarily due to $12.9 million of impairment of certain assets in conjunction with the divestiture of a portion of the legacy SWM ATM segment serving the industrials end-market. These assets were sold during the quarter for net proceeds of $4.6 million and a loss of $0.4 million. In addition, there was $1.1 million for the termination of a contract with an existing customer related to exclusivity in product manufacturing and $0.7 million related to the closure of the Appleton, Wisconsin facility. There were no restructuring and impairment expenses for the three and nine months ended September 30, 2021.

During the remainder of 2022, the Company expects to record additional restructuring related costs in the ATM segment of approximately $0.5 million related to the closing of the Appleton, Wisconsin facility.

Restructuring and impairment costs related to the Merger are included in corporate expenses as other unallocated items as these costs are not included in management's evaluation of the segments' performance. Unallocated restructuring expenses for the three and nine months ended September 30, 2022 included $0.8 million related to the modification of leases resulting from the Merger. There were no unallocated restructuring expenses for the three and nine months ended September 30, 2021.

The following table summarizes total restructuring and impairment expense (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Restructuring and impairment expense:
Severance	$	0.3	$	1.2	$	1.6	$	2.8
Other	0.7		0.7		2.1		3.1
Asset impairment	0.8		—		13.7		—
Total restructuring and impairment expense	$	1.8	$	1.9	$	17.4	$	5.9

Other restructuring related charges - Cost of products sold
Accelerated depreciation and amortization	$	—	$	0.1	$	—	$	0.1
Spare parts and inventory write-downs to estimated net realizable value	$	—	$	0.4	$	—	$	0.4
Other restructuring related charges - Cost of products sold	—		0.5		—		0.5

Total restructuring costs and related charges	$	1.8	$	2.4	$	17.4	$	6.4

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes changes in restructuring liabilities ~~during the periods ended September 30, 2021 and 2020.($ in~~(in millions):


		Nine Months Ended					Nine Months Ended
		September 30, 2021		September 30, 2020			September 30, 2022		September 30, 2021
Balance at beginning of year		$	7.4	$	0.5
Balance at beginning of period						Balance at beginning of period	$	6.2	$	7.4
Accruals for announced programs	Accruals for announced programs	2.8		7.7		Accruals for announced programs	0.4		2.8
Accruals assumed from Merger(1)						Accruals assumed from Merger(1)	2.3		—
Cash payments	Cash payments	(4.8)		(1.3)		Cash payments	(2.6)		(4.8)
Foreign exchange impact	Foreign exchange impact	(0.1)		—		Foreign exchange impact	(0.4)		(0.1)
Balance at end of period	Balance at end of period	$	5.3	$	6.9	Balance at end of period	$	5.9	$	5.3

(1) Accrued liabilities primarily for severance related to an optimization program at the Coldenhove, Netherlands facility and the closure of the Appleton, Wisconsin facility, both of which were acquired through the Merger.

Restructuring liabilities were classified within Accrued expenses and other current liabilities and Other liabilities in ~~each of~~ the ~~condensed consolidated balance sheets.~~unaudited Condensed Consolidated Balance Sheets.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 10. Debt

The components of total debt are summarized in the following table ~~($ in~~(in millions):


	September 30, 2022		December 31, 2021
Revolving facility - U.S. dollar borrowings	$	288.0	$	393.0

Term loan A facility	192.5		193.5

Term loan B facility	345.6		348.2
Delayed draw term loan	650.0		—
6.875% senior unsecured notes due October 1, 2026, net of discount of $6.0 million and $5.2 million at September 30, 2022 and December 31, 2021, respectively(1)	352.4		344.8
French employee profit sharing	3.4		4.1
Finance lease obligations	17.8		2.8
German loan agreement	9.7		—
Debt issuance costs and discounts	(30.9)		(16.1)
Total debt	1,828.5		1,270.3
Less: Current debt	(1.8)		(3.2)
Total long-term debt	$	1,826.7	$	1,267.1

September 30,
2021 December 31,
2020
Revolving credit facility - U.S. dollar borrowings $ 414.0 $ 50.0
Term loan A facility 194.0 195.5
Term loan B facility 349.1 —
6.875% senior unsecured notes due October 1, 2026, net of discount of $5.4 million and $6.1 million at September 30, 2021 and December 31, 2020, respectively 344.6 343.9
French employee profit sharing 3.8 5.0
Finance lease obligations 17.7 3.5
Debt issuance costs and discounts (17.0) (4.6)
Total debt 1,306.2 593.3
Less: Current debt (18.0) (2.8)
Long-term debt $ 1,288.2 $ 590.5
(1) Amount includes a $6.8 million increase in fair value due to changes in benchmark interest rates related to the senior unsecured notes. Refer to Note 11. Derivatives for additional information on our interest rate swaps designated as a fair value hedge.

Credit Facility

On September 25, 2018, the Company entered into a $700.0 million credit agreement (the “Credit Agreement”), which replaced the Company’s previous senior secured credit facilities and ~~provides~~provided for a ~~five year~~five-year $500.0 million revolving line of credit (the “Revolving Credit Facility”) and a ~~seven year~~seven-year $200.0 million bank term loan facility (the “Term Loan A Facility”). Subject to certain conditions, including the absence of a default or event of default under the Credit Agreement, the Company may request incremental loans to be extended under the Revolving Credit Facility or as additional Term Loan Facilities so long as the Company is in pro forma compliance with the financial covenants set forth in the Credit Agreement and the aggregate of such increases does not exceed $400.0 million.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On February 10, 2021 we amended our Credit Agreement to, among other things, add a new ~~seven year $350~~seven-year $350.0 million Term Loan B Facility (the “Term Loan B Facility”) and to decrease the incremental loans that may be extended at the Company’s request to ~~$250~~$250.0 million. The ~~balance under~~Credit Agreement was further amended effective February 22, 2022 to adjust the step-down schedule for the maximum net debt to EBITDA ratio.

In connection with the Merger, we amended our Credit Agreement on May 6, 2022 in order to extend the maturity of the Revolving Credit Facility and the Term Loan A Facility to May 6, 2027, and to increase the availability under the Revolving Credit Facility, subject to consummation of the Merger, to $600.0 million. Additionally, we added a $650.0 million delayed draw term loan facility (the "Delayed Draw Term Loan Facility") to be funded concurrent with the closing of the Merger.

Borrowings under the amended Term Loan A Facility ("Term Loan A Credit Facility") will bear interest, at a rate equal to either (1) a forward-looking term rate based on the Secured Overnight Financing Rate (“Term SOFR”), plus the applicable margin or (2) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as published by the Wall Street Journal as the “bank prime loan” rate, and (c) Term SOFR plus 1.0%, in each case plus the applicable margin. The applicable margin for borrowings under the Term Loan A Credit Facility is expected to range from 1.25% to 2.75% for SOFR loans and from 0.25% to 1.75% for base rate loans, in each case depending on the Company’s then current net debt to EBITDA ratio.

Borrowings under the amended Revolving Credit Facility ~~currently~~(Revolving Facility) or the Delayed Draw Term Loan facility in U.S. dollars will bear interest, at the Company’s option, at a rate equal to either ~~(i) 2.25%~~(1) a forward-looking term rate based on Term SOFR, plus the applicable margin or (2) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as published by the Wall Street Journal as the “bank prime loan” rate, and (c) one-month Term SOFR plus 1.0%, in ~~excess of LIBOR or (ii) 1.25% in excess of an alternative base rate.~~each case plus the applicable margin. Borrowings under the ~~Term Loan A~~Revolving Facility ~~currently~~in Euros will bear interest at a rate equal to the reserve-adjusted Euro interbank offered rate, or EURIBOR, plus the applicable margin. The applicable margin for borrowings under the revolving credit agreement is expected to range from 1.00% to 2.50% for SOFR loans and EURIBOR loans, and from 0.00% to 1.50% for base rate loans, in each case, depending on the Company’s option, at either (i) 2.50% in excess of LIBOR or (ii) 1.50% in excess of an alternative base rate. The Term Loan amortizes at the rate of 1.0% per year and will mature on September 25, 2025. Any borrowingsthen current net debt to EBITDA ratio.

Borrowings under the Term Loan B Facility will bear interest, at the Company's option, at either (i) 3.75% in excess of a reserve adjusted LIBOR rate (subject to a minimum floor of 0.75%) or (ii) 2.75% in excess of an alternative base rate.

Under the terms of the amended Credit Agreement, the Company is required to maintain certain financial ratios and comply with certain financial covenants, including maintaining a net debt to EBITDA ratio, as defined in the amended Credit Agreement, calculated on a trailing four fiscal quarter basis, not greater than 5.50x and an interest coverage ratio, also as defined in the amended Credit Agreement, of not less than 3.00x. The maximum allowable net debt to EBITDA ratio will decrease ~~over the course of 24 months,~~quarterly returning to 4.50x effective as of ~~June 30,~~the end of December 2023. In addition, borrowings and loans made under the amended Credit Agreement are secured by substantially all of the Company’s and the guarantors’ personal property, excluding certain customary items of collateral, and will be guaranteed by the Company’s existing and future wholly-owned direct material domestic subsidiaries and by SWM Luxembourg.

The Company was in compliance with all of its covenants under the Credit Agreement at September 30, ~~2021.~~2022.

2124

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Debt Commitment Letter

Prior to the merger, we had obtained financing commitments for (i) a $648.0 million senior 364-day unsecured bridge facility (the “Bridge Facility”) and (ii) a $500.0 million senior secured revolving credit facility pursuant to a commitment letter (the “Debt Commitment Letter”) dated as of March 28, 2022. On May 6, 2022, in conjunction with the amendment of our Credit Agreement, the Debt Commitment Letter was amended, reducing the commitments under the Bridge Facility and senior secured revolving credit facility to $50.0 million and zero, respectively. Upon consummation of the Merger, we terminated our Bridge Facility.

Indenture for 6.875% Senior Unsecured Notes Due 2026

On September 25, 2018, the Company closed a private offering of $350.0 million of 6.875% senior unsecured notes due 2026 (the “Notes”). The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended, pursuant to a purchase agreement between the Company, certain subsidiaries of the Company and J.P. Morgan Securities LLC, as representative of the initial purchasers. The Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned subsidiaries that is a borrower under or that guarantees obligations under the Credit Agreement or that guarantees certain other indebtedness, subject to certain exceptions.

The Notes were issued pursuant to an Indenture, dated as of September 25, 2018 (the “Indenture”), by and among the Company, the guarantors listed therein and Wilmington Trust, National Association, as trustee. The Indenture provides that interest on the Notes will accrue from September 25, 2018 and is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2019, and the Notes mature on October 1, 2026.

The Company may redeem some or all of the Notes at any time on or after October 1, 2021, at the redemption prices set forth in the Indenture, together with accrued and unpaid interest, if any, to, but excluding, the redemption date. Prior to October 1, 2021, the Company may redeem some or all of the Notes at a price equal to 100% of the principal amount thereof, plus a “make-whole” premium as set forth in the Indenture. The Company may redeem up to 35% of the original aggregate principal amount of the Notes on or prior to October 1, 2021 with the proceeds of certain equity offerings at a redemption price equal to 106.875% of the principal amount of the Notes. If the Company sells certain assets or consummates certain change of control transactions, the Company will be required to make an offer to repurchase the Notes, subject to certain conditions.

The Indenture contains certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to incur additional indebtedness, make certain dividends, repurchase Company stock or make other distributions, make certain investments, create liens, transfer or sell assets, merge or consolidate and enter into transactions with the Company’s affiliates. Such covenants are subject to a number of exceptions and qualifications set forth in the Indenture. The Indenture also contains certain customary events of default, including failure to make payments in respect of the principal amount of the Notes, failure to make payments of interest on the Notes when due and payable, failure to comply with certain covenants and agreements and certain events of bankruptcy or insolvency. The Company was in compliance with all of its covenants under the Indenture at September 30, ~~2021.~~2022.

Other

On May 30, 2022, Neenah entered into a project financing agreement for the construction of a melt blown machine (the "German Loan Agreement"). This debt was assumed by the Company upon consummation of the Merger. The German Loan Agreement provided €10.0 million ($10.7 million as of May 30, 2022) of construction financing which is secured by the melt blown machine. The loan matures in March 2027 and principal is repaid in equal quarterly installments beginning in June 2023. The interest rate on amounts outstanding is 1.75% and is payable quarterly.

As of September 30, ~~2021,~~2022, the average interest rate was ~~2.44%~~5.77% on outstanding Revolving ~~Credit~~ Facility borrowings, ~~2.63%~~5.88% on outstanding Term Loan A Credit Facility borrowings, ~~and 4.50%~~6.88% on outstanding Term Loan B Facility borrowings, and 5.63% on outstanding Delayed Draw Term Loan Facility borrowings. The effective rate on the 6.875% senior unsecured notes due 2026 was 7.248%. The weighted average effective interest rate on the Company's debt facilities, including the impact of interest rate hedges, was approximately ~~4.12%~~4.90% and ~~3.98%~~4.12% for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, the Company's total deferred debt issuance costs and discounts, net of accumulated amortization, were ~~$17.0~~$30.9 million and ~~$4.6~~$16.1 million, respectively. Amortization expense of $2.8 million and $1.0 million was recorded during the nine months ended September 30, 2021 and 2020, respectively, and has been included as a component of Interest expense in the accompanying condensed consolidated statements of income.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Principal Repayments

~~Following are~~The following is the expected maturities for the Company's debt obligations as of September 30, ~~2021 ($ in~~2022 (in millions):

2021 $ 15.9
2022 5.7
2023 419.2
2024 4.8
2025 190.8
Thereafter 686.8
Total $ 1,323.2


2022	$	9.8
2023	39.3
2024	39.2
2025	39.6
2026	391.8
Thereafter	1,337.2
Total	$	1,856.9

Fair Value of Debt

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair market value of the Company's 6.875% senior unsecured notes was ~~$364.2~~$312.4 million and ~~$371.0~~$365.8 million, respectively. The fair market value for the senior unsecured notes was determined using quoted market prices, which are directly observable Level 1 inputs. The fair market value of all other debt as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 approximated the respective carrying amounts as the interest rates ~~are variable and based on~~approximate current market indices.

~~Debt Issuance Costs~~

In conjunction with the amendment to our Credit Agreement on February 10, 2021, the Company capitalized approximately $14.5 million of debt issuance costs during the nine months ended September 30, 2021 which will be amortized over the term of the various facilities under the amended Credit Agreement.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 11. 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 or 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 risk when it is practical and economical to do so. The use of these contracts minimizes transactional exposure to exchange rate changes. 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 Accumulated other comprehensive loss, net of tax 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 values 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. Changes in the fair value of interest rate contracts considered cash flow hedges are reported as a component of Accumulated other comprehensive loss, net of tax and reclassified into earnings when the forecasted transaction affects earnings. Interest rate contracts are also used to hedge changes in the fair value of a portion of our senior unsecured notes attributable to changes in the benchmark interest rate. Changes in the fair value of the interest rate contracts and corresponding portion of the hedged debt are recognized in interest expense.

The Company also uses ~~cross currency~~cross-currency swap contracts to selectively hedge its exposure to foreign currency related changes in our net investments in certain foreign operations. We designate these ~~cross currency~~cross-currency swap contracts as net investment hedges. Changes in the fair value of these hedges are deferred within the foreign currency translation component of Accumulated other comprehensive ~~income~~loss, net of tax and reclassified into earnings when the foreign investment is sold or substantially liquidated.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

OnDuring the three months ended June 30, 2022, cross-currency swaps with a combined notional value of €488.8 million ($550.0 million) were terminated and a total settlement of $35.8 million was received from the counterparties. Immediately following the termination of the aforementioned swaps, the Company entered into cross-currency swaps with a combined notional value of €450.0 million ($478.2 million), maturing on April 1, 2024 and 2025 and October 1, 2026, designated as a hedge of a portion of the Company’s net investment in Euro-denominated subsidiaries. These contracts involve the periodic exchange of U.S. dollar fixed interest rate payments for fixed Euro-denominated payments over the respective contract terms, in addition to an exchange of notional amounts upon maturity. One cross-currency swap involves the periodic exchange of U.S dollar variable interest rate payments for Euro-denominated variable payments.

During 2019 and 2021, the Company entered into a series of pay-fixed, receive-variable interest rate swaps, maturing on January 31, 2027 and December 31, 2027. During March of 2022, the interest rate swaps, which had a combined notional value of $500.0 million were terminated and a total settlement of $23.6 million was received from the counterparties. The settlement amount, which represents the fair value of contracts at the time of termination, was recorded in Accumulated other comprehensive loss, net of tax and will be amortized as a component of Interest expense over the remaining term of the hedged forecasted transaction.

During March of 2022, immediately following the termination of the aforementioned interest rate swaps, the Company entered into pay-fixed, receive-variable interest rate swaps, ~~with a maturity date of~~maturing on January 31, 2027 and December 31, 2027. The ~~instruments hedge~~swaps have a ~~portion~~combined notional value of ~~the Company’s debt facility through the Credit Agreement. Under~~$500.0 million which declines over the terms of the interest rate swaps, SWM will pay a fixed amount of interest each period in an amount equal to 0.974% and 1.4135% on notional amounts of $260 million and $140 million, respectively, and receive interest payments monthly in an amount equal to the One-Month USD-LIBOR rate on the notional amount. The notional amount will reduce throughout the term of the swap as follows:

•~~June 30, 2021 - December 31, 2021 $400 million notional~~

•~~December 31, 2021 - December 31, 2024 $350 million notional~~

•~~December 31, 2024 - December 31, 2025 $300 million notional~~

•~~December 31, 2025 - December 31,2026 $200 million notional~~

•~~December 31, 2026 - December 31, 2027 $190 million notional~~

On September 11, 2019, the Company entered into a pay-fixed, receive-variable interest rate swap with a maturity date of January 31, 2027. The instrument is a hedge on a portion of the Company’s debt facility through the Credit Agreement. Under the terms of the interest rate swap, SWM will pay a fixed amount of interest each period in an amount equal to 1.724% on a notional amount of $185 million and receive interest payments monthly in an amount equal to the One-Month USD-LIBOR rate on the notional amount. The notional amount will reduce throughout the term of the swap as follows:

•~~September 13, 2019 - December 31, 2020 $185 million notional~~

•~~December 31, 2020 - December 31, 2021 $150 million notional~~

•~~December 31, 2021 - January 31, 2027 $100 million notional~~

underlying contracts. The terms of the interest rate swaps mirror the terms of the underlying debt, including timing of the payments and interest rates.

During June 2022, the Company entered into a fixed to float interest rate swap with a notional amount of $173.4 million, maturing on October 1, 2026. The swap was designated as a fair value hedge for a portion of our 6.875% senior unsecured notes due in 2026. The contract involves the periodic exchange of fixed interest rate payments for variable payments.

During September 2022, the Company entered into pay-fixed, receive-variable interest rate swaps, maturing on May 6, 2027 and April 20, 2028. The swaps have a combined notional value of $650.0 million which declines over the terms of the underlying contracts. The terms of the interest rate swaps mirror the terms of the underlying debt, including timing of the payments and interest rates.

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On October 24, 2018, the Company entered into a cross-currency swap designated as a hedge of a portion of the Company's net investment in certain Euro-denominated subsidiaries. The terms of the cross-currency swap provide for an exchange of principal on a notional amount of $75 million swapped to €65.4 million at maturity. The Company will receive from our swap counterparty U.S. dollar interest at a fixed rate of 6.875% per annum and pay to our swap counterparty Euro interest at a fixed rate of 3.6725% per annum. The cross-currency swap will mature on October 1, 2021.

On January 29, 2019, the Company entered into a cross-currency swap designated as a hedge of a portion of the Company's net investment in certain Euro-denominated subsidiaries. The terms of the cross-currency swap provide for an exchange of principal on a notional amount of $75 million swapped to €66.0 million at maturity. On September 30, 2021, the term of the cross-currency swap was extended until October 1, 2031. The Company will receive from our swap counterparty U.S. dollar interest at a fixed rate of 6.875% per annum and pay to our swap counterparty Euro interest at a fixed rate of 5.117% per annum on €66.0 million.

On September 11, 2019, the Company entered into a new pay-EUR, receive-USD cross-currency swap arrangement with a major financial institution having a maturity date of April 1, 2023. The terms of the cross-currency swap provide for an exchange of principal on a notional amount of $100 million swapped to €90.9 million at maturity. Under the terms of the new cross-currency swap, SWM will pay a fixed amount of Euro-denominated interest at a rate of 5.638% semiannually and receive USD denominated payments at a rate of 6.875% semiannually on the notional amount of the swap.

The following table presents the fair value of asset and liability derivatives and the respective ~~condensed consolidated balance sheet~~ locations on the unaudited Condensed Consolidated Balance Sheets at September 30, ~~2021 ($ in~~2022 (in millions):


		Asset Derivatives			Liability Derivatives				Asset Derivatives			Liability Derivatives
		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedges:	Derivatives designated as hedges:							Derivatives designated as hedges:
Foreign exchange contracts		Accounts receivable, net	$	2.7	Accrued expenses and other current liabilities	$	1.3
Foreign exchange contracts		Other assets	—		Other liabilities	8.8
Interest rate contracts		Accounts receivable, net	0.2		Other liabilities	3.8
Foreign exchange contracts - net investment hedge								Foreign exchange contracts - net investment hedge	Accounts receivable, net	$	4.9	Accrued expenses and other current liabilities	$	0.2
Foreign exchange contracts - net investment hedge								Foreign exchange contracts - net investment hedge	Other assets	35.9		Other liabilities	—
Interest rate contracts - cash flow hedge								Interest rate contracts - cash flow hedge	Accounts receivable, net	0.2		Accrued expenses and other current liabilities	—
Interest rate contracts - cash flow hedge								Interest rate contracts - cash flow hedge	Other assets	40.2		Other liabilities	—
Interest rate contracts - fair value hedge								Interest rate contracts - fair value hedge	Other assets	6.8
Total derivatives designated as hedges	Total derivatives designated as hedges		2.9			13.9		Total derivatives designated as hedges		$	88.0		$	0.2

Derivatives not designated as hedges:	Derivatives not designated as hedges:							Derivatives not designated as hedges:
Foreign exchange contracts	Foreign exchange contracts	Accounts receivable, net	—		Accrued expenses and other current liabilities	0.2		Foreign exchange contracts	Accounts receivable, net	0.7		Accrued expenses and other current liabilities	6.2
Total derivatives not designated as hedges	Total derivatives not designated as hedges		—			0.2		Total derivatives not designated as hedges		$	0.7		$	6.2
Total derivatives	Total derivatives		$	2.9		$	14.1	Total derivatives		$	88.7		$	6.4

The following table presents the fair value of asset and liability derivatives and the respective ~~condensed consolidated balance sheet~~ locations on the Condensed Consolidated Balance Sheets at December 31, ~~2020 ($ in~~2021 (in millions):


	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedges:
Foreign exchange contracts - net investment hedge	Accounts receivable, net	$	1.6	Accrued expenses and other current liabilities	$	—
Foreign exchange contracts - net investment hedge	Other assets	—		Other liabilities	9.8
Interest rate contracts - cash flow hedge	Accounts receivable, net	0.2		Accrued expenses and other current liabilities	—
Interest rate contracts - cash flow hedge	Other assets	3.3		Other liabilities	2.1
Total derivatives designated as hedges		$	5.1		$	11.9

Derivatives not designated as hedges:
Foreign exchange contracts	Accounts receivable, net	0.2		Accounts payable	0.6
Total derivatives not designated as hedges		$	0.2		$	0.6
Total derivatives		$	5.3		$	12.5

2528

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Asset Derivatives Liability Derivatives
Balance Sheet
Location Fair
Value Balance Sheet
Location Fair
Value
Derivatives designated as hedges:
Foreign exchange contracts Accounts receivable, net $ 0.9 Accrued expenses $ 11.0
Foreign exchange contracts Other assets — Other liabilities 12.3
Interest rate contracts Accounts receivable, net 0.3 Accrued expenses —
Interest rate contracts Other assets — Other liabilities 7.8
Total derivatives designated as hedges $ 1.2 $ 31.1
Total derivatives $ 1.2 $ 31.1
The following table presents the fair value of fixed-to-floating interest rate swaps designated as a fair value hedge of our Notes and the respective location on the unaudited Condensed Consolidated Balance Sheets at September 30, 2022 (in millions):


	Balance Sheet Location	Carrying Amount of Hedged Item		Cumulative Amount of Adjustment Included in Carrying Amount
Interest rate contracts - fair value hedge	Long-term debt	$	352.4	$	6.8

Refer to Note 10. Debt for further information on the Notes.

The following table provides the net effect that derivative instruments designated in hedging relationships had on Accumulated other comprehensive loss, net of tax and results of operations ~~($ in~~(in millions):

Derivatives Designated in Hedging Relationships Unrealized Gain (Loss) Recognized in AOCI on Derivatives, Net of Tax Location of (Loss) Gain Reclassified
from AOCI (Loss) Gain Reclassified
from AOCI
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2021 2020 2021 2020 2021 2020 2021 2020
Derivatives designated as cash flow hedge
Foreign exchange contracts $ (0.2) $ (0.3) $ (0.1) $ (6.1) Net sales $ (0.3) $ (0.9) $ (1.3) $ (2.5)
Foreign exchange contracts (0.4) — (0.5) 1.4 Other (expense) income, net (0.1) 0.1 (0.7) 1.1
Interest rate contracts 1.9 0.2 3.9 (8.8)
Derivatives designated as net investment hedge
Foreign exchange contracts 1.9 (10.0) 7.1 (3.4)
Total gain (loss) $ 3.2 $ (10.1) $ 10.4 $ (16.9) $ (0.4) $ (0.8) $ (2.0) $ (1.4)


Derivatives Designated in Hedging Relationships	Unrealized Gain/(Loss) Recognized in AOCI on Derivatives, Net of Tax								Location of Loss Reclassified from AOCI	Loss Reclassified from AOCI

	Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
	September 30,				September 30,					September 30,				September 30,
	2022		2021		2022		2021			2022		2021		2022		2021
Derivatives designated as cash flow hedge
Foreign exchange contracts	$	—	$	(0.2)	$	—	$	(0.1)	Net sales	$	—	$	(0.3)	$	—	$	(1.3)
Foreign exchange contracts	0.1		(0.4)		0.3		(0.5)		Other income, net	—		(0.1)		(0.1)		(0.7)
Interest rate contracts	19.7		1.9		47.8		3.9		Interest expense	(3.0)		—		(4.5)		—
Derivatives designated as net investment hedge
Foreign exchange contracts	0.1		1.9		43.7		7.1
Total gain/(loss)	$	19.9	$	3.2	$	91.8	$	10.4		$	(3.0)	$	(0.4)	$	(4.6)	$	(2.0)

The Company's designated derivative instruments are highly effective. As such, related to the hedge ineffectiveness or amounts excluded from hedge effectiveness testing, there were no gains or losses recognized immediately in income for the three and nine months ended September 30, 2022 and 2021, ~~or 2020,~~ other than those related to the cross-currency swap, noted below.

The Company’s ~~cross currency swaps~~net investment hedges were designated with terms based on the spot rate of the EUR. Future changes in the components related to the spot change on the notional will be recorded in OCI and remain there until the hedged subsidiaries are substantially liquidated. All coupon payments are recorded in earnings and the initial value of excluded components currently recorded in Accumulated other comprehensive loss, net of tax as an unrealized translation adjustment are amortized to interest expense over the remaining term of the swap. For the three months ended September 30, 2022 and 2021, we recognized as income $2.1 million and ~~2020, respectively,~~ $2.4 million, ~~and $1.4 million was recognized~~respectively, in ~~income~~Interest expense as derivative amounts excluded from effectiveness ~~testing as Interest expense.~~testing. For the nine months ended September 30, 2022 and 2021, we recognized as income $6.9 million and ~~2020, respectively,~~ $4.5 million, ~~and $4.9 million was recognized~~respectively, in ~~income~~Interest expense as derivative amounts excluded from effectiveness ~~testing as Interest expense.~~testing.

2629

~~SCHWEITZER-MAUDUIT INTERNATIONAL,~~MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the effect that derivative instruments not designated as cash flow hedging instruments had on ~~net income ($ in~~Net income/(loss) (in millions):


Derivatives Not Designated as Cash Flow Hedging Instruments	Derivatives Not Designated as Cash Flow Hedging Instruments	Location of Gain Recognized in Income	Amount of Gain (Loss) Recognized in Income								Derivatives Not Designated as Cash Flow Hedging Instruments	Location of Gain/(Loss) Recognized in Income	Amount of Gain/(Loss) Recognized in Income/(Loss)

			Three Months Ended				Nine Months Ended						Three Months Ended				Nine Months Ended
			September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020				September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Foreign exchange contracts	Foreign exchange contracts	Other income (loss), net	$	(0.3)	$	(0.6)	$	(0.6)	$	(0.1)	Foreign exchange contracts	Other income, net	$	0.3	$	(0.3)	$	(0.2)	$	(0.6)

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

12. Commitments and Contingencies

Litigation

Brazil

~~SWM-B~~SWM-Brazil ("SWM-B") received assessments from the tax authorities of the State of Rio de Janeiro (the "State") for unpaid Imposto sobre Circulação de Mercadorias e Serviços ("ICMS") and Fundo Estadual de Combate à Pobreza ("FECP") value-added taxes on interstate purchases of electricity. The State issued 4four sets of assessments against SWM-B ~~one~~ for periods from May 2006 - November 2007, a second for January 2008 - December 2010, a third for September 2011 - September 2013, which was replaced by a smaller assessment for January - June 2013, and a fourth for July 2013 -through December 2017 (collectively the "Electricity Assessments"). The first through fourth assessments were received in February 2008, June 2011, October 2013, and August 2018, respectively.

SWM-B challenged all Electricity Assessments in administrative proceedings before the State tax council (in the ~~first-level court~~ Junta de Revisão Fiscal “first-level administrative court” and the ~~appellate court~~ Conselho de ~~Contribuintes)~~Contribuintes “administrative appellate court”) based on Resolution 1.610/89, which defers these taxes on electricity purchased by an "electricity-intensive consumer." In 2014, a majority of the ~~Conselho de Contribuintes~~administrative appellate court sitting en banc ruled against SWM-B in each of the first and second Electricity Assessments ($~~3.4~~10.7 million ~~and $6.6 million, respectively,~~ based on the foreign currency exchange rate at September 30, ~~2021)~~2022), and SWM-B is now pursuing challenges to these assessments in the State judicial system where SWM-B obtained preliminary injunctions against enforcement of both assessments. In March 2020, the first-level judicial court ruled in favor of SWM-B in the second Electricity Assessment, a decision that is now on appeal. The third Electricity Assessment was dismissed on technical grounds ~~by the Conselho de Contribuintes~~ in ~~2018 after the State admitted the tax did not apply as it had asserted. Instead, in~~2018. In August 2018, the State filed revised fourth Electricity Assessments for a ~~revised third Electricity Assessment in the~~combined amount of $0.5 million for ICMS on electricity purchased during part of 2013, and a fourth Electricity Assessment in the amount of $7.5 million pertaining to ICMS and FECP on electricity purchased from July 2013 to December 2017.$8.8 million. SWM-B filed challenges to these 2018 assessments in the first-level administrative court on the same grounds as the older ~~cases. The Junta de Revisão Fiscal rejected SWM-B’s challenge to~~cases, receiving unfavorable rulings from the revised third Electricity Assessment, but the Conselho de Contribuintes agreed with SWM-B that the 2013 claim was time-barred. Both the Junta de Revisão Fiscal and the Conselho de Contribuintes ruled against SWM-Bcourts in ~~the fourth Electricity Assessment.~~2019. Both 2019 decisions ~~from the Conselho de Contribuintes~~ are being ~~appealed to the full bench of the Conselho de Contribuintes.~~appealed. The State issued a new regulation effective January 1, 2018 that only specific industries are “electricity-intensive consumers,” a list that excludes paper manufacturers. SWM-B contends this regulation shows that paper manufacturers were electricity-intensive consumers eligible to defer ICMS before 2018.

SWM-B cannot determine the outcome of the Electricity Assessments matters; as such, no loss has been accrued in our unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In December of 2000, SWM-B received two assessments from the tax authorities of the State for unpaid ICMS taxes on certain raw materials from January 1995 through October 1998 and from November 1998 through November 2000 (collectively, the "Raw Materials Assessments"). The Raw Materials Assessments concerned the accrual and use by SWM-B of ICMS tax credits generated from the production and sale of certain non-combustible related grades of paper sold domestically. An adverse judgement was received during 2019 and a provision of $8.6 million (based on the foreign currency exchange rate at March 31, 2021) was recorded in Other Liabilities. On April 9, 2021, SWM-B resolved the Raw Materials Assessment by paying $2.6 million (based on the foreign currency exchange rate at March 31, 2021) under a tax amnesty program which reduced the tax liability by approximately 70%. All litigation is now concluded on this matter which is fully resolved. As the result of the favorable settlement, we recognized a total benefit of $6.1 million in the first quarter of 2021, of which $4.6 million was in Interest expense and $1.6 million was in Other income, net.

Germany

In January 2015, the Company initiated patent infringement proceedings in Germany against Glatz under multiple LIP-related patents. In December 2017, the Dusseldorf Appeal Court affirmed the German District Court judgment on infringement of EP1482815 against Glatz. The Company filed an action against Glatz in the German District Court to set the amount of damages for the infringement and Glatz has filed a counterclaim. Glatz ~~has~~ filed an action in the German Patent Court to invalidate the German part of EP1482815. The German Patent Court held that some of the patent claims at issue were invalid and also that another claim at issue was valid. The Company has appealed the portion of the decision with respect to the claims held to be invalid. The German Supreme Court ~~confirmed~~held that the claims of German ~~Patent Court~~counterpart of EP1482815 relevant to the Glatz infringement action were invalid. This ruling has the effect of nullifying the infringement decision ~~on appeal.~~and injunction against Glatz and the Company’s claim for damages against Glatz. Glatz’s counterclaim against the Company is still pending and is scheduled for hearing in February, 2023. The cost, timing and outcome of intellectual property litigation can be unpredictable and thus no assurances can be given as to the outcome or impact ~~on us~~ of such litigation.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~The Company cannot determine the outcome of the patent infringement matters; as such, no loss has been accrued in our unaudited condensed consolidated financial statements.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Environmental Matters

The Company's operations are subject to various nations' federal, state and local laws, regulations and ordinances relating to environmental matters. The nature of the Company's operations exposes it to the risk of claims with respect to various environmental matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. While the Company has incurred in the past several years, and will continue to incur, capital and operating expenditures in order to comply with environmental laws and regulations, it believes that its future cost of compliance with environmental laws, regulations and ordinances, and its exposure to liability for environmental claims and its obligation to participate in the remediation and monitoring of certain hazardous waste disposal sites, will not have a material effect on its financial condition or results of operations. However, future events, such as changes in existing laws and regulations, or unknown contamination or costs of remediation of sites owned, operated or used for waste disposal by the Company (including contamination caused by prior owners and operators of such sites or other waste generators) may give rise to additional costs which could have a material effect on its financial condition or results of operations.

Employees and Labor Relations

As of September 30, 2022, approximately 25% of our U.S. workforce and 6.5% of our Non-U.S. workforce are under collective bargaining agreements. Approximately 23% of all U.S. employees and 2% of our Non-U.S. employees are under collective bargaining agreements that will expire in the next 12 months.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

General Matters

In the ordinary course of conducting business activities, the Company and its subsidiaries become involved in certain other judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured regulatory, employment, intellectual property, general and commercial liability, environmental and other matters. At this time, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial condition, results of operations or cash flows. However, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial condition, results of operations or cash flows.

Note 13. Postretirement and Other Benefits

The Company sponsors pension benefits in the United States, France, United Kingdom, Germany, Italy, Netherlands, and Canada and OPEB benefits related to postretirement healthcare and life insurance in the United States, Germany, and Canada. The Company’s ~~Canadian and Italian~~ pension benefits in Italy and ~~U.S.~~Canada and Canadian OPEB liability are not material and therefore are not included in the following disclosures.

In connection with the Merger, the Company assumed Neenah's pension and OPEB plans. In addition, Neenah has a supplemental employee retirement plan ("SERP"), which is a non-qualified defined benefit plan, and a supplemental retirement contribution plan ("SRCP"), which is a non-qualified, unfunded defined contribution plan. The Company provides benefits under the non-qualified SERP and SRCP plans to the extent necessary to fulfill the intent of its retirement plans without regard to the limitations set by the Internal Revenue Code on qualified retirement benefit plans.

Pension and OPEB Benefits

The components of net pension benefit costs for ~~U.S., French~~the employees in the United States, France, United Kingdom Germany, and ~~UK employees during the three or nine months ended September 30, 2021 and 2020~~Netherlands were as follows ~~($ in~~(in millions):


		Three Months Ended September 30,												Three Months Ended September 30,
		U.S. Pension Benefits				French Pension Benefits				UK Pension Benefits					U.S. Pension Plans						Non-U.S. Pension Plans
		2021		2020		2021		2020		2021		2020					2022		2021			2022		2021
Service cost	Service cost	$	—	$	—	$	0.5	$	0.3	$	—	$	—			Service cost	$	0.5	$	—		$	0.7	$	0.5
Interest cost	Interest cost	0.7		0.9		—		—		0.9		—				Interest cost	4.1		0.7			2.0		0.9
Expected return on plan assets	Expected return on plan assets	(1.0)		(1.2)		—		—		(1.0)		—				Expected return on plan assets	(5.0)		(1.0)			(1.9)		(1.0)

Amortizations and other	Amortizations and other	0.9		0.9		0.2		0.3		—		—				Amortizations and other	0.5		0.9			0.1		0.2
Net periodic benefit cost	Net periodic benefit cost	$	0.6	$	0.6	$	0.7	$	0.6	$	(0.1)	$	—			Net periodic benefit cost	$	0.1	$	0.6		$	0.9	$	0.6

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


		Nine Months Ended September 30,												Nine Months Ended September 30,
		U.S. Pension Benefits				French Pension Benefits				UK Pension Benefits					U.S. Pension Plans						Non-U.S. Pension Plans
		2021		2020		2021		2020		2021		2020					2022		2021			2022		2021
Service cost	Service cost	$	—	$	—	$	1.2	$	0.9	$	—	$	—			Service cost	$	0.5	$	—		$	1.4	$	1.2
Interest cost	Interest cost	2.1		2.8		0.1		0.1		1.7		—				Interest cost	5.7		2.1			3.2		1.8
Expected return on plan assets	Expected return on plan assets	(3.0)		(3.7)		—		—		(1.9)		—				Expected return on plan assets	(7.0)		(3.0)			(3.2)		(1.9)

Amortizations and other	Amortizations and other	2.7		2.5		0.7		0.7		—		—				Amortizations and other	1.3		2.7			0.4		0.7
Net periodic benefit cost	Net periodic benefit cost	$	1.8	$	1.6	$	2.0	$	1.7	$	(0.2)	$	—			Net periodic benefit cost	$	0.5	$	1.8		$	1.8	$	1.8

The components of net periodic benefit cost other than the service cost component are included in Other ~~(expense)~~ income, net in the ~~condensed consolidated statements~~unaudited Condensed Consolidated Statements of ~~income. During~~Income/(Loss).

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 14. Equity-Based Compensation

Restricted Stock Plan Service Based Shares

The 2015 Long-Term Incentive Plan (“LTIP”) provided for any unvested service awards to immediately vest on occurrence of a qualifying Change in Control event (“CIC event”) upon which the ~~fiscal year ending December 31, 2021,~~awardee is either terminated by the Company ~~expects~~or the employee voluntarily resigns from the Company for good reason as defined in the LTIP within 24 months of the CIC event (“CIC Qualifying Termination”). As the Merger was a qualifying CIC event, the unvested service awards of employees that met the criteria of CIC Qualifying Termination immediately vested on such CIC Qualifying Termination date. The total fair value of such accelerated service awards of $2.1 million was expensed during the three months ended September 30, 2022 when the awards fully vested upon the termination of the employees and is included in General expense in the unaudited Condensed Consolidated Statements of Income/(Loss).

Restricted Stock Plan Performance Based Shares

On the Merger date, the Company modified the 2022 and 2021 performance share awards issued under the LTIP to ~~recognize approximately $3.6~~remove the performance and market conditions for continuing employees, effectively converting the awards to service-only modified awards that cliff vest upon the original date of lapse of restrictions defined in the LTIP. The fair value of the continuing employee awards of $0.6 million will be recognized on a straight-line basis over the remaining service period, less any cost previously recognized on these performance share awards.

The performance share awards of ~~amortization~~CIC Qualifying Termination employees were also modified to accelerate vesting and to set the number of shares underlying these awards at 100% of the target level defined in ~~Accumulated other comprehensive loss~~the LTIP rather than at the pro-rata target level based on service period completed as of the Merger date. The fair value as of the Merger date of $2.5 million was expensed during the three and nine months ended September 30, 2022 when the awards fully vested upon the termination of the employees and is included in General expense in the unaudited Condensed Consolidated Statements of Income/(Loss).

Stock compensation expense related to ~~its U.S. pension~~the modified performance share awards was $2.5 million during the three and ~~OPEB plans~~nine months ended September 30, 2022 and was recognized in General expense.

Acquired Equity-Based Compensation Awards

As provided in the Merger Agreement, all stock options (“Options”), stock appreciation rights ("SARs"), restricted stock units (“RSUs”) and performance share units (“PSUs”) granted pursuant to Neenah’s 2018 Omnibus Stock and Incentive Compensation Plan (“2018 Plan”) that were outstanding immediately prior to the Merger were generally automatically converted into Options, SARs, RSUs and RSUs, respectively, of the Company's common stock at the exchange ratio and otherwise generally on the same terms and conditions (including vesting exercisability and/or settlement requirements) as applied to such awards.

At the closing of the Merger, the Options and SARs had fully vested and are payable to the grantees. Accordingly, there is no ongoing compensation expense related to the Options.

The RSUs generally vest over a three-year term as follows: 33.3% on each of the first, second and third anniversaries of the grant date, except for RSUs issued as retirement and special grant awards, which vest over a one-year term on the first anniversary of the grant date. Vesting is contingent upon continued employment or service. The unvested portion of a grantee’s RSU will be immediately forfeited and cancelled if the grantee ceases employment or service, except for retirement awards which vest on a pro rata basis according to the proportion of days employed during the vesting period of one year. At the Merger date, the Company assumed 180,149 unvested Neenah RSUs, converted at the exchange ratio, with a total fair value of $4.2 million.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In accordance with the terms of the PSU award agreements, the change in control eliminated the performance condition and market condition; as such, only the three-year service condition remains. At the Merger date, the Company assumed 292,032 unvested PSUs, converted at the exchange ratio, with a total fair value of $6.8 million automatically converted to RSUs of the Company. PSUs unvested and converted RSUs will be accounted for the same as the RSUs described above and be recognized over a weighted-average period of approximately ~~$1.0~~2 years.

Stock compensation expense related to the acquired awards was $1.9 million ~~for its French pension plans.~~during the three and nine months ended September 30, 2022 and was recognized in General expense.

Note ~~14.~~15. Income Taxes

For interim financial reporting, the Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision in accordance with ASC No. 740-270 "Accounting for Income Taxes in Interim Periods." These interim estimates are subject to variation due to several factors, including the ability of the Company to accurately forecast pre-tax and taxable income and loss by jurisdiction, changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Jurisdictions with a projected loss for the year or an actual year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of including these jurisdictions on the quarterly effective tax rate calculations could result in a higher or lower effective tax rate during a quarter, based upon the mix and timing of actual earnings versus annual projections.

~~As a result of~~Prior to the Tax Cuts and Jobs Act of 2017, the Company asserted that substantially all of the undistributed earnings of its foreign subsidiaries were considered indefinitely reinvested and accordingly, no deferred taxes were provided. Due to the Tax Act, the Company has significant previously taxed earnings and profits from its foreign subsidiaries, as a result of transition tax, that it is generally able to ~~repatriate~~be repatriated free of U.S. federal ~~tax, due to transition tax and global intangible low taxed income (“GILTI”) treatment. Further, to the extent that any untaxed~~tax. In addition, future earnings ~~and profits are distributed from~~of foreign subsidiaries ~~such dividends should~~are generally expected to be able to be repatriated free of U.S. federal income tax because these earnings were taxed in the U.S. under the GILTI regime or would be eligible for a 100% dividends received deduction. As a result of the Company’s treasury policy to simplify and expediate the intercompany cash flows to SWM US, as evidenced by the implementation of the Cash Pool, and in light of the Company’s demonstrated goal of driving growth though inorganic/acquisitional means, the Company has decided to no longer assert indefinite reinvestment with respect to earnings generated by foreign subsidiaries prior to January 1, 2018. Therefore, the Company does not intend to assert indefinite reinvestment onof its foreign subsidiaries to the extent of each CFC’s earnings ~~generated after December 31, 2017. The~~and profits and to the extent of any foreign partnership’s U.S. tax capital accounts. As a result, the Company ~~provides~~has provided for ~~deferred~~ non-U.S. withholding taxes, U.S. federal tax related to currency movement on previously-taxed earnings and profits, and U.S. state taxes on ~~hypothetical repatriation of earnings generated after December 31, 2017.~~unremitted earnings.

All unrecognized tax positions could impact the Company's effective tax rate if recognized. With respect to penalties and interest incurred from income tax assessments or related to unrecognized tax benefits, the Company’s policy is to classify penalties as provision for income taxes and interest as interest expense in its ~~condensed consolidated statement~~unaudited Condensed Consolidated Statements of ~~income.~~Income/(Loss). There were no material income tax penalties or interest accrued during the three orand nine months ended September 30, ~~2021~~2022 or ~~2020.~~2021.

The Company's effective tax rate from continuing operations was ~~13.2%~~32.6% and ~~17.0%~~13.2% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~decrease~~increase was ~~materially~~primarily due to ~~favorable~~significant one-time items related to the Merger in the three months ended September 30, 2022, as well as an unfavorable mix of earnings by ~~jurisdiction and discrete items.~~jurisdiction. The Company's effective tax rate from continuing operations was ~~29.6%~~25.3% and ~~18.9%~~29.6% for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~increase~~decrease was ~~materially~~primarily due to unfavorable discrete items in 2021, partially offset by unfavorable mix of earnings ~~by jurisdiction and discrete items.~~in 2022.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note ~~15.~~16. Segment Information

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~The Company's 2 operating product line segments are also~~Prior to the ~~Company's reportable~~completion of the Merger, we operated in two reporting segments: Advanced Materials & Structures and Engineered Papers. Effective with the Merger, the Company reassessed its reporting segments. Management concluded that it has two operating product line segments that are also the reporting segments for financial reporting purposes: Advanced Technical Materials and Fiber-Based Solutions. ATM is comprised of the legacy SWM Advanced Materials & Structures segment and FBS is comprised of the legacy Engineered Papers segment. As such, there were no changes to the historical results of these segments. The ~~AMS~~merged Neenah segments have been allocated to ATM and FBS based on performance, market focus, technologies, and reporting structure.

The ATM segment ~~designs~~provides solutions that filter and ~~produces resin-based rolled goods such as nets, films, tapes~~purify air and meltblown materials, typically through an extrusion process or other non-woven technologies across the filtration, transportation, healthcare, construction, and industrial end-markets, and it provides converting andliquids, supports adhesive and ~~other coating services related to~~protective applications, advances healing and wellness, and solves some of ~~these products. AMS~~material science’s most demanding performance needs across a number of categories. The FBS segment ~~consists of~~leverages the ~~operations of~~company’s extensive natural fiber capabilities to provide specialty solutions for various ~~acquisitions. The EP segment primarily produces various cigarette papers~~end-uses, including sustainable packaging, imaging and ~~Recon for sale to cigarette manufacturers. The EP segment also includes non-tobacco paper for battery separators, printing~~communications, home and ~~writing, foodservice packaging~~office, consumer goods, and ~~furniture laminates.~~

~~Information about Net Sales and Operating Profit~~other applications.

The accounting policies of ~~these~~the reporting segments are the same as those described in Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The Company primarily evaluates segment performance and allocates resources based on operating profit. ~~Expense amounts~~General corporate expenses that do not ~~associated with~~directly support the operations of the business segments are ~~referred to as~~ unallocated expenses.

($ in millions) Net Sales
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
AMS $ 260.1 67.8 % $ 138.9 49.7 % $ 675.1 64.3 % $ 394.6 49.6 %
EP 123.5 32.2 140.4 50.3 374.5 35.7 400.4 50.4
Total Consolidated $ 383.6 100.0 % $ 279.3 100.0 % $ 1,049.6 100.0 % $ 795.0 100.0 %

($ in millions) Operating Profit
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
AMS $ 15.9 69.1 % $ 18.5 50.0 % $ 56.1 77.5 % $ 45.3 42.9 %
EP 24.0 104.4 28.2 76.2 78.1 107.9 93.3 88.4
Unallocated (16.9) (73.5) (9.7) (26.2) (61.8) (85.4) (33.1) (31.3)
Total Consolidated $ 23.0 100.0 % $ 37.0 100.0 % $ 72.4 100.0 % $ 105.5 100.0 %
Assets are managed on a total company basis and are therefore not disclosed at the segment level.

Net sales and operating profit by segments were (in millions):


	Net Sales


	Three Months Ended								Nine Months Ended
	September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
ATM	$	426.1	63.2	%	$	260.1	67.8	%	$	987.1	65.5	%	$	675.1	64.3	%
FBS	248.0		36.8	%	123.5		32.2	%	520.2		34.5	%	374.5		35.7	%
Total Consolidated	$	674.1	100.0	%	$	383.6	100.0	%	$	1,507.3	100.0	%	$	1,049.6	100.0	%


	Operating Profit/Loss


	Three Months Ended								Nine Months Ended
	September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
ATM	$	31.5	N.M.		$	15.9	69.1	%	$	71.2	N.M.		$	56.1	77.5	%
FBS	27.8		N.M.		24.0		104.4	%	75.9		N.M.		78.1		107.9	%
Unallocated	(73.2)		N.M.		(16.9)		(73.5)	%	(122.6)		N.M.		(61.8)		(85.4)	%
Total Consolidated	$	(13.9)	100.0	%	$	23.0	100.0	%	$	24.5	100.0	%	$	72.4	100.0	%

N.M. - Not meaningful

3135

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition and results of operations. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and related notes and the selected financial data included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The discussion of our financial condition and results of operations includes various forward-looking statements about our markets, the demand for our products, our future prospects and other matters. These statements are based on certain assumptions and estimates that we consider reasonable. For information about risks and exposures relating to us and our business, you should read the section entitled "Risk Factors" in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020 and~~2021, the ~~sections~~section entitled "Forward-Looking Statements" at the end of this Item 2.2 and the section entitled “Risk Factors” at Part II, Item 1A hereof. Unless the context indicates otherwise, references to ~~"SWM,~~"Mativ," "we," "us," "our," the "Company" or similar terms include ~~Schweitzer-Mauduit International,~~Mativ Holdings, Inc. and our consolidated subsidiaries.

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our financial statements with an understanding of our recent performance, our financial condition and our prospects.

~~COVID-19 Pandemic~~Merger

~~We continue~~On July 6, 2022, the Company completed its previously announced merger with Neenah under the terms of an Agreement and Plan of Merger ("Merger Agreement"), pursuant to ~~monitor the impact~~which a wholly-owned subsidiary merged with and into Neenah, with Neenah surviving as a direct and wholly-owned subsidiary of the ~~COVID-19 pandemic (including its variant strains) on all aspects~~Company. Pursuant to the Merger Agreement, each share of ~~our business. At present, all~~Neenah common stock outstanding was exchanged for 1.358 shares of ~~our facilities remain operational. Furthermore, there have been only isolated and temporary customer shutdowns, and~~common stock in the Company. As a result of the Merger, the Company ~~is maintaining active dialogue with all key customers and suppliers regarding supply chain and production planning. Further, we are not expected~~issued approximately 22.8 million shares of its common stock to ~~have further shutdowns unless local governments mandate temporary closure or there are additional health and safety concerns beyond~~Neenah shareholders under the ~~current circumstances.~~terms of the Merger Agreement. Based on our closing stock price on July 5, 2022, the total value of shares issued to Neenah shareholders was approximately $534.1 million.

~~In general, our business~~Upon completion of the Merger, the Company changed its name to Mativ Holdings, Inc. Shares of the Company's common stock commenced trading on the New York Stock Exchange under the ticker symbol "MATV" as of market open on July 6, 2022. The Company's previous ticker symbol was ~~resilient~~"SWM". Refer to Note 4. Business Acquisitions in the ~~face of sales volatility and limited visibility during~~notes to the ~~early stages of~~unaudited condensed consolidated financial statements for further information related to the pandemic in 2020, while those areas that were most negatively affected, such as transportation and construction, began improving during the fourth quarter of 2020 and continued to perform well during 2021. Year-to-date double-digit sales growth in AMS, excluding the benefit of acquisitions, demonstrates the strength of the demand recovery. However, increased global economic activity and high demand across many industries has caused significant input cost inflation and strained supply chains, which have negatively impacted profitability (more detailed discussion below throughout MD&A).Merger.

~~Given~~Prior to the ~~recent financial~~completion of the Merger, we operated in two reporting segments: Advanced Materials & Structures and Engineered Papers. Effective with the Merger, the reporting segments are: Advanced Technical Materials and Fiber-Based Solutions. ATM and FBS is comprised of the legacy SWM Advanced Materials & Structures segment and FBS is comprised of the legacy Engineered Papers segment. As such, there were no changes to the historical results ~~we believe the Company’s operating cash flows~~of these segments. The merged Neenah segments have been allocated to ATM and ~~available liquidity are ample~~FBS based on performance, market focus, technologies, and reporting structure. Refer to ~~support operations and financial obligations. The Company also continues to actively assess the credit worthiness of its customers~~Note 16. Segments in the ~~context of~~notes to the ~~potential business disruptions from COVID-19 but has not yet seen evidence of a material change to its ability to collect accounts receivable balances.~~unaudited condensed consolidated financial statements for further information on our segments.

~~Senior management is meeting regularly to address all aspects~~This MD&A discusses the financial condition and results of operations of the ~~pandemic, including employee safety, continuity~~Company as of ~~business operations, sales~~ and ~~profit impacts directly or indirectly related to~~for the pandemic, and potential governmental and third-party responses to the pandemic. Further details about the risks and impacts discussed in the section below can be found in the forward-looking statements.period ended September 30, 2022, which includes Neenah.

During the three month period ending September 30, 2022, the Company became aware of a cyber attack that had been recently made against certain systems within the Company’s network environment. The attack temporarily affected operations and caused delays in execution of sales transactions at some locations. In addition, the Company incurred financial costs to investigate and remediate the incident, some of which are expected to be mitigated by insurance. During the incident, the attackers accessed and exfiltrated Company data, including some personally identifying information of certain Company employees. The Company believes it has contained the incident, which only affected certain systems, and it has restored operations and notified affected individuals. The Company has put in place remediation measures designed to help prevent future similar attacks, and has proactively undertaken to implement certain other enhancements to its security system.

Liquidity & Debt ~~Overview.~~Overview ~~The~~

As of September 30, 2022, the Company ~~currently has $1,306.2~~had $1,828.5 million of total debt, ~~$73.6~~$82.3 million of cash, and undrawn capacity on its ~~$500.0~~$600.0 million revolving line of credit facility (the "Revolving ~~Credit~~ Facility") of ~~$81.2 million at the end of the third quarter of 2021.~~$307.2 million. Per the terms of the Company's ~~$700.0 million~~amended credit agreement (the ~~"Credit~~"Amended Credit Agreement"), net leverage was ~~4.8x~~4.2x at the end of the third quarter, versus a current maximum covenant ratio of ~~5.5x.~~5.50x. The Company’s nearest debt maturity is ~~the Revolving Credit Facility~~our 6.875% senior unsecured notes which isare due in ~~2023. Please refer~~2026. Refer to ~~liquidity~~"Liquidity and ~~capital resources~~Capital Resources" section for additional detail.

SUMMARY


	Three Months Ended								Nine Months Ended
	September 30,				Percent of Net Sales				September 30,				Percent of Net Sales
(in millions, except per share amounts)	2022		2021		2022		2021		2022		2021		2022		2021
Net sales	$	674.1	$	383.6	100.0	%	100.0	%	$	1,507.3	$	1,049.6	100.0	%	100.0	%
Gross profit	123.1		85.2		18.3	%	22.2	%	315.3		254.1		20.9	%	24.2	%
Restructuring & impairment expense	1.8		1.9		0.3	%	0.5	%	17.4		5.9		1.2	%	0.6	%
Operating profit/(loss)	(13.9)		23.0		(2.1)	%	6.0	%	24.5		72.4		1.6	%	6.9	%
Interest expense	23.8		15.3		3.5	%	4.0	%	58.7		31.3		3.9	%	3.0	%


Net income/(loss)	$	(22.5)	$	12.2	(3.3)	%	3.2	%	$	(9.1)	$	35.6	(0.6)	%	3.4	%


Diluted earnings/(loss) per share	$	(0.43)	$	0.38					$	(0.25)	$	1.12
Cash provided by operations	$	(0.8)	$	7.7					$	17.2	$	27.5
Capital spending	$	18.7	$	7.5					$	36.5	$	23.8

~~SUMMARY~~

($ in millions, except per share amounts) Three Months Ended Nine Months Ended
September 30, Percent of Net Sales September 30, Percent of Net Sales
2021 2020 2021 2020 2021 2020 2021 2020
Net sales $ 383.6 $ 279.3 100.0 % 100.0 % $ 1,049.6 $ 795.0 100.0 % 100.0 %
Gross profit 85.2 80.2 22.2 28.7 254.1 228.8 24.2 28.8
Restructuring & impairment expense 1.9 6.0 0.5 2.1 5.9 7.7 0.6 1.0
Operating profit 23.0 37.0 6.0 13.2 72.4 105.5 6.9 13.3
Interest expense 15.3 7.8 4.0 2.8 31.3 22.8 3.0 2.9
Net income $ 12.2 $ 24.5 3.2 % 8.8 % $ 35.6 $ 68.5 3.4 % 8.6 %
Diluted earnings per share $ 0.38 $ 0.78 $ 1.12 $ 2.18
Cash provided by operations $ 7.7 $ 58.2 $ 27.5 $ 107.5
Capital spending $ 7.5 $ 5.8 $ 23.8 $ 20.7

3337

RESULTS OF OPERATIONS

Three Months Ended September 30, ~~2021~~2022 Compared with the Three Months Ended September 30, ~~2020~~2021

Net Sales

~~($ in millions)~~

Three Months Ended
September 30, 2021 September 30, 2020 Change Percent Change
Advanced Materials & Structures $ 260.1 $ 138.9 $ 121.2 87.3 %
Engineered Papers 123.5 140.4 (16.9) (12.0)
Total $ 383.6 $ 279.3 $ 104.3 37.3 %

~~Net sales were $383.6 million in the three months ended September 30, 2021 compared with $279.3 million in the prior-year period.~~ The ~~increase in~~following table presents net sales ~~consisted of the following ($ in millions):~~

Amount Percent
Incremental net sales from Scapa $ 107.1 38.3 %
Changes in volume, product mix and selling prices (excluding Scapa) (5.5) (2.0)
Changes due to net foreign currency impacts 2.5 0.9
Changes due to royalties 0.2 0.1
Total $ 104.3 37.3 %

~~AMS~~by segment ~~net sales were $260.1 million~~ for the three months ended September 30, 2022 and 2021 compared to $138.9 million during the prior-year period. The increase of $121.2 million or 87.3% included the benefit from the Scapa acquisition (completed April 15, 2021). Scapa net sales were $107.1 million for the three months ended September 30, 2021. The increase in organic sales reflected continued rapid growth in transportation sales, specifically automotive paint protection films, as they continued to rebound sharply from negative COVID-19 impacts that began early in 2020, and broad strength across our filtration portfolio, particularly water and process filtration products. Transportation and filtration sales each grew approximately 25%. Construction sales, led by erosion control and turf products, and industrial sales, led by digital printing products, also increased. Healthcare sales (excluding Scapa) declined as certain products that saw short-term COVID-related demand spikes in prior year quarters, such as facemask materials, started to normalize. While total sales increased, sales performance was negatively impacted by tight labor markets, which constrained production of certain product lines.(in millions):


	Three Months Ended
	September 30, 2022		September 30, 2021		Change		Percent Change
Advanced Technical Materials	$	426.1	$	260.1	$	166.0	63.8	%
Fiber-Based Solutions	248.0		123.5		124.5		100.8	%
Total	$	674.1	$	383.6	$	290.5	75.7	%

~~EP segment net sales during the three months ended September 30, 2021 of $123.5 million decreased by $16.9 million, or 12.0%, versus net~~Net sales of $140.4 million in the prior-year quarter. The decrease in net sales was primarily the result of 10% volume decrease, unfavorable price/mix of 3%, slightly offset by a 1% currency benefit. The volume decline was attributable to lower tobacco-related papers, including LIP, as certain customers resumed more normalized order patterns compared to the third quarter of 2020 when they increased inventory levels to help avoid potential supply chain disruptions from COVID-19. Continued growth in HnB products partially offset the decrease within the tobacco business.

~~Gross Profit~~

~~($ in millions)~~

Three Months Ended Percent Change Percent of Net Sales
September 30, 2021 September 30, 2020 Change 2021 2020
Net sales $ 383.6 $ 279.3 $ 104.3 37.3 % 100.0 % 100.0 %
Cost of products sold 298.4 199.1 99.3 49.9 77.8 71.3
Gross profit $ 85.2 $ 80.2 $ 5.0 6.2 % 22.2 % 28.7 %

~~Gross profit increased by $5.0~~$674.1 million during the three months ended September 30, ~~2021~~2022 increased $290.5 million or 75.7%, compared to ~~$85.2 million versus~~ the prior-year ~~period~~quarter. ATM segment net sales of ~~$80.2 million.~~

~~AMS gross profit increased by $14.1~~$426.1 million primarily due to the incremental benefit of the acquired Scapa business and strong organic sales growth. These factors were offset by higher input costs, primarily of polypropylene resin, as well as higher energy and freight costs resulting from economic inflation and supply chain challenges, which were not fully offset by pricing actions. The margin percentage decline was primarily attributable to these cost increases and supply chain challenges, as well as limited supplies of specialty resins used in the growing transportation films business, which is typically a positive contributor to margins.

In the EP segment, gross profit decreased by $8.9 million, resulting from a combination of the LIP volume decline and associated negative mix impacts. The decrease was also driven by significantly higher wood pulp input costs, increases in energy costs and freight costs. Foreign currency movements also negatively impacted gross profit by $1.9 million. Prior year gross profit included $3.2 million other restructuring related charges in Cost of goods sold associated with the plant shutdown of Spotswood, NJ facility.

~~Nonmanufacturing Expenses~~

~~($ in millions)~~

Three Months Ended Percent Change Percent of Net Sales
September 30, 2021 September 30, 2020 Change 2021 2020
Selling expense $ 13.2 $ 9.0 $ 4.2 46.7 % 3.4 % 3.2 %
Research expense 5.7 3.6 2.1 58.3 1.5 1.3
General expense 41.4 24.6 16.8 68.3 10.8 8.9
Nonmanufacturing expenses $ 60.3 $ 37.2 $ 23.1 62.1 % 15.7 % 13.3 %

~~Nonmanufacturing expenses in~~during the three months ended September 30, ~~2021~~2022 increased ~~by $23.1~~$166.0 million, or 63.8%, compared to ~~$60.3 million from $37.2 million in~~ the prior-year ~~period.~~quarter. Sales reflected the addition of the Neenah operations, organic sales growth primarily from price increases across the product lines, and negative currency impacts. The strongest sales gains in ATM were in release liners, protective solutions, and filtration. The Company has implemented price increases across the segment in response to higher input costs.

FBS segment net sales of $248.0 million during the three months ended September 30, 2022 increased $124.5 million, or 100.8%, compared to the prior-year quarter. Sales reflected the addition of the Neenah operations, organic sales growth primarily from price increases across the product lines, and negative currency impacts. The strongest sales gains in FBS were in packaging and specialty papers products. The Company has implemented price increases across the segment in response to higher input costs.

Gross Profit

The following table presents gross profit for the three months ended September 30, 2022 and 2021 (in millions):


	Three Months Ended						Percent Change		Percent of Net Sales
	September 30, 2022		September 30, 2021		Change				2022		2021
Net sales	$	674.1	$	383.6	$	290.5	75.7	%	100.0	%	100.0	%
Cost of products sold	551.0		298.4		252.6		84.7	%	81.7	%	77.8	%
Gross profit	$	123.1	$	85.2	$	37.9	44.5	%	18.3	%	22.2	%

Gross profit of $123.1 million during the three months ended September 30, 2022 increased $37.9 million, or 44.5%, compared to the prior-year quarter. The increase ~~included $3.3~~in gross profit reflected the addition of the Neenah operations, organic sales growth, as well as price increases more than offsetting higher input costs, including pulps and fibers, resins, and energy.

Nonmanufacturing Expenses

The following table presents nonmanufacturing expenses for the three months ended September 30, 2022 and 2021 (in millions):


	Three Months Ended						Percent Change		Percent of Net Sales
	September 30, 2022		September 30, 2021		Change				2022		2021
Selling expense	$	22.3	$	13.2	$	9.1	68.9	%	3.3	%	3.4	%
Research expense	7.7		5.7		2.0		35.1	%	1.1	%	1.5	%
General expense	105.2		41.4		63.8		154.1	%	15.6	%	10.8	%
Nonmanufacturing expenses	$	135.2	$	60.3	$	74.9	124.2	%	20.0	%	15.7	%

Nonmanufacturing expenses of $135.2 million ~~of transaction~~during the three months ended September 30, 2022 increased $74.9 million, or 124.2%, compared to the prior-year quarter. The increase is primarily due to direct and indirect merger acquisition and integration costs ~~associated with the Scapa acquisition and~~of $47.2 million, the addition of ~~ongoing SG&A costs from~~Neenah's general expenses, an increase in amortization expenses related to Neenah's intangible assets, and $6.1 million to resolve the ~~acquired Scapa operations.~~cybersecurity incident.

Restructuring and Impairment Expense

~~($ in~~

The following table presents restructuring and impairment expense for the three months ended September 30, 2022 and 2021 (in millions):


		Three Months Ended							Percent of Net Sales						Three Months Ended									Percent of Net Sales
		September 30, 2021		September 30, 2020		Change		2021			2020		September 30, 2022				September 30, 2021			Change			2022	2021

Engineered Papers		$	1.9	$	5.9	$	(4.0)		1.5	%		4.2	%
Advanced Technical Materials														Advanced Technical Materials	$	0.9		$	—		$	0.9		0.2	%	—	%
Fiber-Based Solutions														Fiber-Based Solutions	0.1			1.9			(1.8)			—	%	1.5	%
Unallocated expenses	Unallocated expenses	—		0.1		(0.1)			—			—		Unallocated expenses	0.8			—			0.8
Total	Total	$	1.9	$	6.0	$	(4.1)		0.5	%		2.1	%	Total	$	1.8		$	1.9		$	(0.1)		0.3	%	0.5	%

The Company incurred total restructuring and impairment ~~expense~~expenses of ~~$1.9~~$1.8 million and ~~$6.0~~$1.9 million in the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. In the ~~2021 period,~~current-year quarter, restructuring ~~expense~~expenses in the EPATM segment ~~included $0.5~~were due to $0.7 million related to the ~~shut-down of the Spotswood, New Jersey facility as well as $0.7 million severance-related restructuring expenses associated with the~~ closure of the ~~Winkler~~Appleton, Wisconsin facility, a facility acquired through the Merger. The closure of this facility was substantially completed in ~~Canada, discussed~~September 2021 and planned for divestiture prior to being acquired. The assets held for sale consist primarily of property, plant and equipment, which are measured at fair value as part of the purchase price allocation. Refer to Note 4. Business Acquisitions in ~~Note 9. Restructuring of~~ the notes to the unaudited condensed consolidated financial ~~statements.~~statements for the purchase price allocation. In addition, there was $0.2 million related to severance accruals resulting from the divestiture during the three months ended September 30, 2022 of a portion of the legacy SWM segment serving the industrials end-market. In the prior-year quarter, there were no restructuring expenses in the ATM segment.

In the ~~2021 period~~prior-year quarter, restructuring expenses in the EPFBS segment ~~also recognized~~included $0.7 million of severance-related restructuring expenses associated with the Winkler, Manitoba facility, $0.7 million of restructuring expenses primarily related to severance accruals ~~at our manufacturing operations in France.~~

In the comparable 2020 period, restructuring expense in the EP segment included $4.2 million relating to severance and other accruals as a result of the decision to shut down the Spotswood, New Jersey facility and $1.8 million of restructuring expenses primarily related to severance accrualsfor employees at our manufacturing operations in France, and ~~Poland.~~$0.5 million related to the closure of the Spotswood, New Jersey facility, which was sold in December 2021.

~~Operating Profit~~

($Restructuring and impairment costs related to the Merger are included in ~~millions)~~

Three Months Ended Percent Change Return on Net Sales
September 30, 2021 September 30, 2020 Change 2021 2020
Advanced Materials & Structures $ 15.9 $ 18.5 $ (2.6) (14.1) % 6.1 % 13.3 %
Engineered Papers 24.0 28.2 (4.2) (14.9) 19.4 20.1
Unallocated expenses (16.9) (9.7) (7.2) 74.2
Total $ 23.0 $ 37.0 $ (14.0) (37.8) % 6.0 % 13.2 %

~~Operating profit was $23.0 million~~corporate expenses as other unallocated items as these costs are not included in management's evaluation of the segments' performance. Unallocated restructuring expenses for the three months ended September 30, ~~2021 compared with $37.0~~2022 included $0.8 million ~~during~~related to the ~~prior-year period.~~modification of leases resulting from the Merger. There were no unallocated restructuring expenses in the prior year quarter.

Operating Profit/(Loss)

The ~~AMS segment's~~following table presents operating ~~profit in~~profit/(loss) by segment for the three months ended September 30, 2022 and 2021 was $15.9 million compared to $18.5 million in the prior-year period. The decrease of $2.6 million, or 14.1%, was driven by $4.8 million higher purchase accounting expenses associated with Scapa acquisition, partially offset by strong organic sales growth and the incremental benefit of the acquired Scapa business. The profit margin percentage decline was primarily attributable to higher raw material costs and higher energy and freight costs. The impact of inflationary and supply chain pressures were not fully offset by pricing actions taken during the quarter.(in millions):


	Three Months Ended						Percent Change		Return on Net Sales
	September 30, 2022		September 30, 2021		Change				2022		2021
Advanced Technical Materials	$	31.5	$	15.9	$	15.6	98.1	%	7.4	%	6.1	%
Fiber-Based Solutions	27.8		24.0		3.8		15.8	%	11.2	%	19.4	%
Unallocated expenses	(73.2)		(16.9)		(56.3)		333.1	%
Total	$	(13.9)	$	23.0	$	(36.9)	(160.4)	%	(2.1)	%	6.0	%

The EP segment's operating profit in the three months ended September 30, 2021 was $24.0 million, a decrease of $4.2 million, or 14.9%, from $28.2 million in the prior-year period. The decrease was primarily driven by lower sales in high-margin LIP products and significant wood pulp cost increases. Further, the Company incurred ~~higher energy costs, particularly in Brazil and France, and higher freight costs. These decreases were partially offset by a total~~an operating loss of $6.8 million lower restructuring expenses and other costs primarily related to Spotswood plant shutdown. Unfavorable foreign currency movements resulted in a $2.0 million negative impact on operating profit as well.

Unallocated expenses in the three months ended September 30, 2021 were $16.9 million compared to $9.7 million in the prior-year period, an increase of $7.2 million, or 74.2%, primarily due to Scapa acquisition costs of $3.3 million, and an incremental $2.5 million of costs incurred within Scapa for shared services such as finance, HR, and IT, which were reported in the Company's segment financials as unallocated expenses. The remainder of the increase was driven by higher third-party consulting fees for finance and legal as well as higher IT expenses to support the growth of the business.

~~Non-Operating Expenses~~

Interest expense was $15.3 million in the three months ended September 30, 2021, an increase from $7.8 million in the prior-year period. The increase was primarily due to higher average debt balances as a result of the Scapa acquisition which closed in April 2021.

~~Other income, net, was $3.7~~$13.9 million during the three months ended September 30, ~~2021,~~2022, largely related to significant unallocated expenses related to the Merger, compared to ~~an Other expense~~operating profit of ~~$1.0~~$23.0 million in ~~prior year~~the prior-year quarter.

In the ATM segment, operating profit of $31.5 million during the three months ended September 30, 2022 increased $15.6 million, or 98.1%, compared to the prior-year period. In the FBS segment, operating profit of $27.8 million during the three months ended September 30, 2022 increased $3.8 million, or 15.8%, compared to the prior-year quarter. The ~~2021 period included $1.8~~increase in both segments reflects the addition of Neenah operations and the benefit of price increases more than offsetting higher input costs, partially offset by higher intangible asset amortization expenses associated with the Merger.

Unallocated expenses of $73.2 million ~~net currency gains as~~during the three months ended September 30, 2022 increased $56.3 million, or 333.1%, compared to ~~a $1.1 million net currency loss in~~ the ~~prior~~prior- year ~~quarter. The remainder increase was~~quarter primarily due to an increase in merger and integration related costs related to the Merger, the addition of Neenah's unallocated expenses, as well as expenses to resolve the cybersecurity incident.

Non-Operating Expense/(Income)

Interest expense of $23.8 million during the three months ended September 30, 2022 increased $8.5 million, or 55.6%, compared to the prior-year quarter. The increase was due to the merger and related incremental expense of assuming Neenah's debt, as well as higher ~~sales of carbon dioxide credits in France.~~interest rates on floating rate debt compared to the prior year.

Income Taxes

A ~~$1.5~~$11.5 million ~~provision for~~ income ~~taxes~~tax benefit in the three months ended September 30, ~~2021~~2022 resulted in an effective tax rate of ~~13.2%~~32.6% compared with ~~17.0%~~13.2% in the prior-year quarter. The ~~decrease~~increase was ~~materially~~primarily due to ~~favorable~~significant one-time items related to the Merger, as well as unfavorable mix of earnings by ~~jurisdiction and discrete items.~~jurisdiction.

Income from Equity Affiliates

Income from equity affiliates, which primarily reflects the results of operations of ~~CTM and CTS,~~our joint ventures in China, was ~~$2.3~~$1.3 million induring the three months ended September 30, ~~2021~~2022 compared ~~with income of $1.1~~to $2.3 million during the prior-year ~~period~~quarter. The decrease is due to ~~volume growth.~~higher input costs.

Net ~~Income~~Income/(Loss) and ~~Income~~Net Income/(Loss) per Share

Net ~~income in~~loss during the three months ended September 30, ~~2021~~2022 was $22.5 million, or $0.43 per diluted share, compared with net income of $12.2 million, or $0.38 per diluted share, ~~compared with $24.5 million, or $0.78 per diluted share,~~ during the prior-year ~~period.~~quarter.

3740

Nine Months Ended September 30, ~~2021~~2022 Compared with the Nine Months Ended September 30, ~~2020~~2021

Net Sales

~~($ in millions)~~

Nine Months Ended
September 30, 2021 September 30, 2020 Change Percent Change
Advanced Materials & Structures $ 675.1 $ 394.6 $ 280.5 71.1 %
Engineered Papers 374.5 400.4 (25.9) (6.5)
Total $ 1,049.6 $ 795.0 $ 254.6 32.0 %

~~Net sales were $1,049.6 million in the nine months ended September 30, 2021 compared with $795.0 million in the prior-year period.~~ The ~~increase in~~following table presents net sales ~~consisted of the following ($ in millions):~~

Amount Percent
Incremental net sales from Scapa $ 202.2 25.4 %
Changes in volume, product mix and selling prices (excluding Scapa) 33.7 4.2
Changes due to net foreign currency impacts 18.7 2.4 %
Changes due to royalties — —
Total $ 254.6 32.0 %

~~AMS~~by segment ~~net sales were $675.1 million~~ for the nine months ended September 30, 2022 and 2021 compared to $394.6 million during the prior-year period. The increase of $280.5 million, or 71.1%, included the benefit from the Scapa acquisition of $202.2 million (completed April 15, 2021) and Tekra acquisition (completed March 13, 2020). The increase in organic sales was driven by strong double digit gains in filtration, transportation, and construction end-markets with growth across product lines including water, process, and air filtration materials, automotive paint protection films, and erosion/sediment control construction products. Healthcare sales declined due to certain products that benefited from COVID-19 related demand in the prior year, such as facemask materials. Industrial sales declined mostly in lower-margin product lines. While total sales increased, sales performance was negatively impacted by tight labor markets, which constrained production of certain product lines.(in millions):


	Nine Months Ended
	September 30, 2022		September 30, 2021		Change		Percent Change
Advanced Technical Materials	$	987.1	$	675.1	$	312.0	46.2	%
Fiber-Based Solutions	520.2		374.5		145.7		38.9	%
Total	$	1,507.3	$	1,049.6	$	457.7	43.6	%

~~EP segment net sales during the nine months ended September 30, 2021 of $374.5 million decreased by $25.9 million versus net~~Net sales of $400.4 million in the prior-year period. The decrease in net sales was primarily the result of a 5% volume decline, and unfavorable price/mix impacts of 5%, which were partially offset by a 4% currency benefits mainly related to the Euro. The volume decline was primarily attributable to lower tobacco-related papers, including LIP, as certain customers resumed more normalized order patterns compared to 2020.~~Growth in HnB products offset declines within the tobacco business. Non-tobacco paper volumes declined slightly.~~

~~Gross Profit~~

~~($ in millions)~~

Nine Months Ended Percent Change Percent of Net Sales
September 30, 2021 September 30, 2020 Change 2021 2020
Net sales $ 1,049.6 $ 795.0 $ 254.6 32.0 % 100.0 % 100.0 %
Cost of products sold 795.5 566.2 229.3 40.5 75.8 71.2
Gross profit $ 254.1 $ 228.8 $ 25.3 11.1 % 24.2 % 28.8 %

~~Gross profit increased by $25.3~~$1,507.3 million during the nine months ended September 30, ~~2021~~2022 increased by $457.7 million, or 43.6%, compared to ~~$254.1 million versus~~ the prior-year ~~period~~period. ATM segment net sales of ~~$228.8 million.~~$987.1 million during the nine months ended September 30, 2022 increased $312.0 million, or 46.2%, compared to the prior year period. Sales reflected the addition of the Neenah operations, organic sales growth primarily from price increases across the product lines, and negative currency impacts. The strongest sales gains in ATM were in release liners, protective solutions, filtration, and industrials.

~~AMS gross profit~~FBS segment net sales of $520.2 million during the nine months ended September 30, 2022 increased ~~by $43.3~~$145.7 million, ~~primarily due~~or 38.9% compared to the ~~incremental benefit~~prior-year period. Sales reflected the addition of the ~~acquired Scapa and Tekra businesses and strong~~Neenah operations, organic sales growth ~~in transportation, filtration, and construction end-markets, partially offset by higher raw material costs,~~ primarily ~~of polypropylene resin, which had not yet been offset by selling~~from price increases across the product lines, and negative currency impacts. The strongest sales gain in FBS were in packaging and specialty papers. The Company had implemented price increases across the segment in response to higher input costs.

Gross Profit

The following table presents gross profit for the nine months ended September 30, 2022 and 2021 (in millions):


	Nine Months Ended						Percent Change		Percent of Net Sales
	September 30, 2022		September 30, 2021		Change				2022		2021
Net sales	$	1,507.3	$	1,049.6	$	457.7	43.6	%	100.0	%	100.0	%

Cost of products sold	1,192.0		795.5		396.5		49.8	%	79.1	%	75.8	%
Gross profit	$	315.3	$	254.1	$	61.2	24.1	%	20.9	%	24.2	%

Gross profit of $315.3 million during the nine months ended September 30, 2022 increased $61.2 million, or 24.1%, compared to the prior-year period. The increase in gross profit reflected the addition of the Neenah operations, organic growth, as well as price increases more than offsetting higher input costs, including pulps and fibers, resins, and energy. In addition, the Company ~~has implemented. Other inflationary factors such as~~incurred higher ~~energy~~restructuring and ~~freight~~impairment costs ~~also~~compared to the prior year period.

3841

negatively affected the gross margin. In addition, the limited supply of certain specialty resins used to manufacture transportation films, has constrained growth of this product line, which is typically a positive contributor to margins.Nonmanufacturing Expenses

In the EP segment, gross profit decreased by $17.7 million, primarily due to LIP volume decline and associated negative mix impact, significantly higher wood pulp costs, and increases in energy and freight costs. Year-to-date profits were also impacted by inefficiencies in the first half of 2021 related to the Spotswood transition. Currency movements resulted in a $5.3 million benefit to gross profit.

~~Nonmanufacturing Expenses~~

~~($ in millions)~~

Nine Months Ended Percent Change Percent of Net Sales
September 30, 2021 September 30, 2020 Change 2021 2020
Selling expense $ 34.2 $ 27.3 $ 6.9 25.3 % 3.3 % 3.4 %
Research expense 14.9 10.4 4.5 43.3 1.4 1.3
General expense 126.7 77.9 48.8 62.6 12.1 9.8
Nonmanufacturing expenses $ 175.8 $ 115.6 $ 60.2 52.1 % 16.8 % 14.5 %

~~Nonmanufacturing~~The following table presents nonmanufacturing expenses infor the nine months ended September 30, 2022 and 2021 (in millions):


	Nine Months Ended						Percent Change		Percent of Net Sales
	September 30, 2022		September 30, 2021		Change				2022		2021
Selling expense	$	51.6	$	34.2	$	17.4	50.9	%	3.4	%	3.3	%
Research expense	18.3		14.9		3.4		22.8	%	1.2	%	1.4	%
General expense	203.5		126.7		76.8		60.6	%	13.5	%	12.1	%
Nonmanufacturing expenses	$	273.4	$	175.8	$	97.6	55.5	%	18.1	%	16.8	%

Nonmanufacturing expenses of $273.4 million during the nine months ended September 30, 2022 increased by ~~$60.2~~$97.6 million, or 55.5%, compared to ~~$175.8 million from $115.6 million in~~ the prior-year period. The increase ~~included $19.0 million of transaction~~is primarily due to direct and indirect merger acquisition and integration costs ~~associated with the Scapa acquisition and~~of $64.1 million, the addition of ~~ongoing SG&A costs from the acquired Scapa operations.~~Neenah's general expenses, an increase in amortization expenses related to Neenah's intangible assets, and higher restructuring and impairment costs.

Restructuring and Impairment Expense

~~($ in~~

The following table presents restructuring and impairment expense by segment for the nine months ended September 30, 2022 and 2021 (in millions):


		Nine Months Ended							Percent of Net Sales						Nine Months Ended									Percent of Net Sales
		September 30, 2021		September 30, 2020		Change		2021			2020		September 30, 2022				September 30, 2021			Change			2022	2021
Advanced Materials & Structures		$	—	$	0.5	$	(0.5)		—	%		0.1	%
Engineered Papers		5.9		7.1		(1.2)			1.6			1.8
Advanced Technical Materials														Advanced Technical Materials	$	14.9		$	—		$	14.9		1.5	%	—	%
Fiber-Based Solutions														Fiber-Based Solutions	1.7			5.9			(4.2)			0.3	%	1.6	%
Unallocated expenses	Unallocated expenses	—		0.1		(0.1)			—			—		Unallocated expenses	0.8			—			0.8
Total	Total	$	5.9	$	7.7	$	(1.8)		0.6	%		1.0	%	Total	$	17.4		$	5.9		$	11.5		1.2	%	0.6	%

The Company incurred total restructuring and impairment expense of ~~$5.9~~$17.4 million in the nine months ended September 30, ~~2021~~2022 compared with ~~$7.7~~$5.9 million in the ~~nine months ended September 30, 2020.~~prior-year period. In the ~~2021 period,~~ATM segment, the Company recognized $12.9 million of restructuring ~~expense included $3.5 million~~and impairment expenses in the ~~EP segment relating~~current-year period primarily related to ~~severance and other accruals as~~the write-down of certain assets in conjunction with the divestiture of a ~~result~~portion of the ~~decision~~legacy SWM ATM segment serving the industrials end-market. These assets were sold during the quarter for net proceeds of $4.6 million and a loss of $0.4 million. In addition, there was $1.1 million for the termination of a contract with an existing customer related to ~~shut down~~exclusivity in product manufacturing and $0.7 million related to the ~~Spotswood, New Jersey facility~~closure of the Appleton, Wisconsin facility. No restructuring and ~~Winkler, Canada facility.~~impairment expenses were recognized in the prior-year period.

In the ~~2021~~current-year period, ~~the EP segment also recognized $2.4 million of~~ restructuring expenses in the FBS segment included $1.5 million primarily related to pension benefits for the Winkler, Manitoba facility. In the prior-year period, restructuring expenses included $2.9 million related to the Spotswood site closure, $2.3 million related to severance accruals at ~~our~~other manufacturing ~~operations in France.~~facilities as part of the ongoing cost optimization project and $0.7 million related to pension benefits for the Winkler, Manitoba facility. In addition, $0.5 million related to the ~~comparable 2020 period,~~write-down of certain inventories to net realizable value and the ~~restructuring expense included $4.2 million~~acceleration of depreciation of machinery and equipment due to the change in the ~~EP segment as a result~~estimated lives of these assets at the ~~decision to shut down the Spotswood, New Jersey~~Winkler, Manitoba facility ~~and $2.9 million~~was included in ~~severance accruals for employees at our manufacturing operations in France and Poland.~~

~~In the AMS segment, the Company recognized no restructuring and impairment expense in the 2021 period versus $0.5 million in the 2020 period related to severance accruals as a result~~Cost of ~~department realignments.~~

products sold.

3942

Operating Profit

~~($ in millions)~~

Nine Months Ended Percent Change Return on Net Sales
September 30, 2021 September 30, 2020 Change 2021 2020
Advanced Materials & Structures $ 56.1 $ 45.3 $ 10.8 23.8 % 8.3 % 11.5 %
Engineered Papers 78.1 93.3 (15.2) (16.3) 20.9 23.3
Unallocated expenses (61.8) (33.1) (28.7) (86.7)
Total $ 72.4 $ 105.5 $ (33.1) (31.4) % 6.9 % 13.3 %

~~Operating~~The following table presents operating profit ~~was $72.4 million in~~by segment for the nine months ended September 30, 2022 and 2021 ~~compared with $105.5~~(in millions):


	Nine Months Ended						Percent Change		Return on Net Sales
	September 30, 2022		September 30, 2021		Change				2022		2021
Advanced Technical Materials	$	71.2	$	56.1	$	15.1	26.9	%	7.2	%	8.3	%
Fiber-Based Solutions	75.9		78.1		(2.2)		(2.8)	%	14.6	%	20.9	%
Unallocated expenses	(122.6)		(61.8)		(60.8)		98.4	%
Total	$	24.5	$	72.4	$	(47.9)	(66.2)	%	1.6	%	6.9	%

Operating profit of $24.5 million during ~~the prior-year period.~~

~~The AMS segment's operating profit in~~ the nine months ended September 30, ~~2021 was $56.1~~2022 decreased $47.9 million, or 66.2%, compared to ~~$45.3 million in~~ the prior-year ~~period. The increase~~period, reflecting significant unallocated expenses related to the Merger.

In the ATM segment, operating profit of ~~$10.8~~$71.2 million ~~or 23.8%, primarily reflected strong organic sales growth and the incremental operating profits of the acquired Scapa business. The margin declined to 8.3% in~~during the nine months ended September 30, ~~2021~~2022 increased $15.1 million, or 26.9%, compared to ~~11.5% in~~ the prior-year period. ~~The decline was attributable to a combination~~In the FBS segment, operating profit of factors including inflation pressure and supply chain challenges which resulted in higher raw material, energy and freight costs. In addition, the limited supply of certain specialty resins for used to manufacture transportation films, has constrained growth of this product line, which is typically a positive contributor to margins. Purchase accounting expenses in$75.9 million, during the nine months ended September 30, ~~2021 were also $12.8~~2022 decreased $2.2 million, or 2.8%, compared to the prior-year period. In both segments, operating profit reflects the addition of the Neenah operations and the benefit of price increases more than offsetting higher ~~than prior-year period as a result of Scapa acquisition.~~input costs, partially offset by higher intangible asset amortization expenses associated with the Merger.

~~The EP segment's operating profit in~~Unallocated expenses of $122.6 million during the nine months ended September 30, ~~2021 was $78.1 million, a decrease of $15.2~~2022 increased $60.8 million, or ~~16.3%, from $93.3 million in~~98.4% compared to the prior-year ~~period. The decrease in operating profit and margin was~~period primarily due to an increase in merger and integration costs related to the ~~LIP volume decline~~Merger, the addition of Neenah's unallocated expenses, higher restructuring and ~~associated negative mix impact, as well as significantly higher wood pulp~~impairment costs, and ~~increases in energy and freight as discussed above. These decreases were partially offset by a total of $4.5 million lower restructuring~~ expenses ~~and other costs primarily~~ related to ~~Spotswood plant shut-down. Currency movements resulted in a $4.1 million benefit to operating profit.~~the cybersecurity incident.

~~Unallocated expenses in~~Non-Operating Expenses/(Income)

Interest expense of $58.7 million during the nine months ended September 30, ~~2021 were $61.8 million compared to $33.1 million in the prior-year period, an increase of $28.7~~2022 increased $27.4 million, or ~~86.7%~~87.5%, ~~primarily due~~compared to $19.0 million transaction and integration costs related to the Scapa acquisition, and $4.1 million of costs incurred within Scapa as shared services such as finance, HR, and IT, which were reported in the Company's segment financials as unallocated expenses. Higher deferred compensation expenses and higher HR, IT, and finance organizational investments to support growth of the business also contributed to the increase.

~~Non-Operating Expenses~~

~~Interest expense was $31.3 million in the nine months ended September 30, 2021, an increase from $22.8 million in~~ the prior-year period. Excluding a benefit of $4.5 million prior year expense reversal related to the favorable settlement of Brazil tax assessments as discussed in Note 12. Commitments and Contingencies of the notes to the unaudited condensed consolidated financial statements, ~~the~~ interest expense increased ~~$13.0~~$22.9 million mainly due ~~mainly~~ to ~~higher average~~incremental debt ~~balances as a result~~and Bridge Facility expense related to the Merger, the incremental expense of assuming Neenah's debt, incremental debt from the Scapa acquisition ~~which closed~~(closed in April ~~2021.~~2021), and higher average interest rates.

Other income, net of $15.2 million during the nine months ended September 30, 2022, increased $14.4 million compared to the prior-year period. The current year included $7.3 million of sales of carbon dioxide credits in France, $3.7 million of foreign currency gains (net of derivatives activity) and $2.9 million gain on sale of equipment at the Winkler facility. Other income, net was $0.8 million during the nine months ended September 30, 2021, ~~mainly reflecting~~primarily due to a $1.6 million favorable Brazil tax assessment settlement, $4.0 million of income related to the sale of carbon dioxide credits in France as well as gains from sales of equipment at the Spotswood facility, offset by $6.9 million of realized foreign currency loss related to the timing of the Scapa acquisition cash settlement. ~~During the nine months ended September 30, 2020, Other expense was $0.7 million.~~

Income Taxes

A ~~$12.4~~$4.8 million ~~provision for~~ income ~~taxes~~tax benefit in the nine months ended September 30, ~~2021~~2022 resulted in an effective tax rate of ~~29.6%~~25.3% compared with ~~18.9%~~29.6% in the prior-year period. The increase was ~~materially~~primarily due to significant one-time items related to the Merger, as well as unfavorable mix of earnings by jurisdiction, ~~and~~partially offset by favorable discrete tax items.

Income from Equity Affiliates

Income from equity affiliates was $5.1 million during the nine months ended September 30, 2022 compared to $6.1 million during the prior-year period. Higher sales volume in the current year was offset by higher input costs.

~~Income from Equity Affiliates~~Net Income/(Loss) and Net Income/(Loss) per Share

~~Income from equity affiliates was $6.1 million in~~Net loss during the nine months ended September 30, ~~2021 compared with income of $2.0 million during the prior-year period, due to increased volumes.~~

~~Net Income and Income per Share~~

~~Net income in the nine months ended September 30, 2021~~2022 was ~~$35.6~~$9.1 million, or ~~$1.12~~$0.25 per diluted share, compared with ~~$68.5~~net income of $35.6 million, or ~~$2.18~~$1.12 per diluted share, during the prior-year period.

4144

LIQUIDITY AND CAPITAL RESOURCES

A major factor in our liquidity and capital resource planning is our generation of cash flow from operations, which is sensitive to changes in the mix of products sold, ~~sales~~ volume and ~~selling prices~~pricing of our products, as well as changes in our production volumes, costs ~~foreign currency exchange rates~~ and working capital. Our liquidity is supplemented by funds available under our ~~Credit Agreement~~Revolving Facility with a syndicate of banks that is used as either operating conditions or strategic opportunities warrant.

Cash Requirements

As of September 30, ~~2021, $50.2~~2022, $71.7 million of the Company's ~~$73.6~~$82.3 million of cash and cash equivalents was held by foreign subsidiaries. We believe that our sources of liquidity and capital, including cash on-hand, cash generated from operations and our existing credit facilities, will be sufficient to finance our continued ~~operations. We believe our cash and the proceeds from our revolving credit facility will be sufficient to fund~~operations, our current and long-term growth ~~plan.~~plan, and dividend payments.

Cash Provided by ~~Operations~~Operating Activities

Net cash provided by ~~operations~~operating activities was ~~$27.5~~$17.2 million induring the nine months ended September 30, ~~2021~~2022 compared ~~with $107.5~~to $27.5 million induring the prior-year period. ~~The decrease was primarily related to~~Results reflect unfavorable year-over-year movements in working capital related ~~cash flows as well as cash costs related to advisory fees, transaction expenses, and integration costs all relating~~ to the ~~Scapa acquisition.~~growth in receivables (higher sales) and inventories (higher cost inventories due to rising input costs), partially offset by cash received from the settlement of interest rate swaps.

Working Capital

As of September 30, ~~2021,~~2022, the Company had net working capital of ~~$381.2~~$626.5 million, including cash and cash equivalents of ~~$73.6~~$82.3 million, compared ~~with~~to net working capital of ~~$232.3~~$366.7 million, including cash and cash equivalents of ~~$54.7~~$74.7 million as of December 31, ~~2020.~~2021. These changes primarily reflect the additional working capital balances added as part of the Merger, timing of payments and collections, as well as increased raw material prices and timing of shipments.

InDuring the nine months ended September 30, ~~2021,~~2022, net changes in operating working capital used cash of $80.9 million, an increase from $71.1 million ~~up from $19.0 million in~~during the ~~prior year~~prior-year period. The increased outflows reflect higher receivables related to ~~strong~~ sales growth in ~~AMS,~~both FBS and ATM and higher costs of inventories on hand related to significantly higher ~~raw material prices.~~input costs.

Cash Used ~~for~~in Investing Activities

Cash used ~~for~~in investing activities during the nine months ended September 30, ~~2021~~2022 was ~~$658.3~~$461.6 million, compared to ~~$190.5~~cash used of $658.3 million during the prior-year period. Cash used in investing activities in the ~~prior year.~~current year reflects Merger consideration of $518.5 relating to the repayment on Neenah’s outstanding debt (see additional discussion below in “Cash Provided by Financing Activities”) and acquisition related costs incurred by Neenah, partially offset by $55.9 million cash acquired. Refer to Note 4. Business Acquisitions in the notes to the unaudited condensed consolidated financial statements for further discussion of the total consideration transferred to merge with Neenah. In addition, capital spending was $36.5 million. The ~~change~~cash used in investing activities was partially offset by $35.8 million received from settlement of cross-currency swap contracts.

In the prior-year period, the cash used in investing activities primarily reflects the net $630.6 million consideration used to acquire Scapa ~~versus $169.3 million for Tekra in prior year. Capital~~and capital spending ~~and capitalized software totaled $25.7 million in the nine months ended September 30, 2021, up $2.2 million from the prior-year period.~~of $23.8 million.

Cash Provided by Financing Activities

Cash provided by financing activities during the nine months ended September 30, 2022 was $460.3 million, compared to cash provided of $651.0 million during the prior-year period. During the nine months ended September 30, ~~2021,~~2022, financing activities primarily consisted of ~~$729.7~~$720.4 million of proceeds from borrowings under the ~~revolving credit facility primarily to fund the Scapa acquisition including $350 million under the~~Delayed Draw Term Loan B Facility and ~~$364.0~~revolving line of credit, the "Revolving Credit Facility". The proceeds from the Delayed Draw Term Loan was used to repay Neenah's outstanding debt of $504.9 million ~~incremental borrowings~~upon consummation of ~~revolver loans, $41.5~~the Merger. Refer to Note 4. Business Acquisitions in the notes to the unaudited condensed consolidated financial statements for further discussion of the total Merger consideration. The proceeds was partially offset by $180.6 million of payments on our long-term debt, which includes a pay down of $100.0 million on our Revolving Facility, $50.1 million in cash paid for dividends declared to ~~SWM~~the Company's stockholders, ~~$19.5~~and $22.6 million of payments ~~on long-term debt, $14.6 million payment~~ for debt issuance costs associated with the amendment of our Credit Agreement and the Bridge Facility, as discussed in Note 10. Debt of the notes to the unaudited condensed consolidated financial ~~statements, and share repurchases of $3.1 million.~~statements.

InDuring the prior-year period, financing activities primarily consisted of ~~$212.7~~$729.7 million ~~net~~of proceeds from borrowings under the Revolving Credit Facility primarily to fund the ~~Tekra~~Scapa acquisition, ~~$41.2~~$41.5 million in cash paid for dividends declared to ~~SWM~~the Company's stockholders, ~~$124.6~~$19.5 million of payments on our long-term debt, $14.6 million of payments for debt issuance costs associated with the amendment of our Credit Agreement, and share repurchases of ~~$0.9~~$3.1 million.

The Company presently believes that the sources of liquidity discussed above are sufficient to meet its anticipated funding needs for the foreseeable future.

Non-Cash Consideration

The total consideration transferred to merge with Neenah included non-cash consideration of $537.9 million disclosed in the unaudited condensed consolidated statements of cash flows. The non-cash consideration comprised of $534.1 million in common stock in the Company issued to Neenah shareholders and $3.8 million in fair value of unvested stock awards allocated to the pre-merger period.

Dividend Payments

We have declared and paid cash dividends on our common stock every fiscal quarter since the second quarter of 1996. On November ~~3, 2021,~~9, 2022, we announced a cash dividend of ~~$0.44~~$0.40 per share payable on December ~~17, 2021~~16, 2022 to stockholders of record as of November ~~26, 2021.~~25, 2022. The covenants contained in our Indenture and Credit Agreement require that we maintain certain financial ratios as disclosed in Note 10. Debt of the notes to the unaudited condensed consolidated financial statements, none of which under normal business conditions we would expect to materially limit our ability to pay such dividends. We plan to continue to assess our dividend policy in light of our capital allocation strategy, cash generation, debt levels and ongoing requirements for cash to fund operations and to pursue possible strategic opportunities.

Debt Instruments and Related Covenants

Debt Instruments
($ in millions)
Nine Months Ended
September 30, 2021 September 30, 2020
Proceeds from issuances of long-term debt $ 729.7 $ 212.7
Payments on long-term debt (19.5) (124.6)
Net proceeds from borrowings $ 710.2 $ 88.1

The following table presents activity related to our debt instruments for the nine months ended September 30, 2022 and 2021 (in millions):




	Nine Months Ended
	September 30, 2022		September 30, 2021

Proceeds from issuances of long-term debt	$	720.4	$	729.7
Payments on long-term debt	(180.6)		(19.5)
Net proceeds from borrowings	$	539.8	$	710.2

Net proceeds from borrowings were ~~$710.2~~$539.8 million during the nine months ended September 30, ~~2021.~~ 2022, compared to net proceeds of $710.2 million during the prior-year period.

On February 10, 2021 we amended our Credit Agreement to, among other things, add a new seven year Term Loan B facility, which provides for additional capacity of ~~$350~~$350.0 million (the "Term Loan B Facility"). ~~See~~The Credit Agreement was further amended effective February 22, 2022 to adjust the step-down schedule for the maximum net debt to EBITDA ratio. Refer to Note 10. Debt of the notes to unaudited condensed consolidated financial statements for additional information about the Term Loan B Facility. ~~Other than potential borrowings~~

On May 6, 2022, we amended our Credit Agreement to replace the existing Term Loan A Facility with a new $193.0 million term loan facility, replace the Revolving Credit Facility with a new $600.0 million Revolving Facility, and add a $650.0 million delayed draw term loan facility (the "Delayed Draw Term Loan Facility"). Availability under the ~~Term Loan B~~Revolving Facility was limited to $500.0 million until the ~~Company does not expect to incur any significant additional borrowings during 2021.~~Merger was consummated.

Unused borrowing capacity under the Credit Agreement was ~~$81.2~~$307.2 million as of September 30, ~~2021.~~2022. We also had availability under our bank overdraft facilities of ~~$6.2~~$1.6 million as of September 30, ~~2021.~~2022.

We had obtained financing commitments for a $648.0 million senior 364-day unsecured bridge facility and $500.0 million senior secured revolving credit facility in conjunction with the proposed Merger. On May 6, 2022, the Debt Commitment Letter was amended, reducing the Bridge Facility and senior secured revolving credit facility to $50.0 million and zero, respectively.

On July 5, 2022, in connection with the consummation of the Merger, the Company borrowed $650.0 million under the Delayed Draw Term Loan Facility. The funds were used to repay all of Neenah's outstanding debt of $445.9 million under its term loan B facility and $59.0 million under its global secured revolving credit facility, as well as pay down $100.0 million of our Revolving Facility. In addition, we terminated the Bridge Facility. Refer to Note 10. Debt of the notes to unaudited condensed consolidated financial statements for further information related to the Delayed Draw Term Loan Facility. In addition, upon consummation of the Merger, we assumed Neenah's project financing agreement for the construction of a melt blown machine (the "German Loan Agreement"). The German Loan Agreement provided €10.0 million ($10.7 million as of May 30, 2022) of construction financing which is secured by the melt blown machine. Refer to Note 10. Debt for further information related to the German Loan Agreement.

The Company was in compliance with all of its covenants under the Indenture and Credit Agreement at September 30, ~~2021.~~2022. With the current level of borrowing and forecasted results, we expect to remain in compliance with financial covenants under the Credit Agreement.

Our total debt to capital ratios, as calculated under the Amended Credit Agreement, at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~67.3%~~61.7% and ~~47.7%~~65.1%, respectively.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported. There have been no material changes in our critical accounting policies and estimates since December 31, 2021.

For further information about our critical accounting policies, please see the discussion of critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2021 in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates.”

Off-Balance Sheet Arrangements

As of ~~March 31, 2021,~~September 30, 2022, we did not have any significant off-balance sheet arrangements, as defined in Item

303(a)(4)(ii) of SEC Regulation S-K.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "ACT") that are subject to the safe harbor created by ~~that~~the Act and other legal protections. Forward-looking statements include, without limitation, those regarding the incurrence of additional debt and expected maturities of the Company’s debt obligations, the adequacy of our sources of liquidity and capital, acquisition integration and growth prospects (including international growth), the cost and timing of our restructuring actions, the impact of ongoing litigation matters and environmental claims, the amount of capital spending and/or common stock repurchases, future cash flows, purchase accounting impacts, impacts and timing of our ongoing operational excellence and other cost-reduction and cost-optimization initiatives, the impact of the COVID-19 pandemic on our

operations, profitability, and cash flow, the expected benefits and accretion of the Neenah merger and Scapa acquisition and integration and other statements generally identified by words such as "believe," "expect," "intend," "guidance," "plan," "forecast," "potential," "anticipate," "confident," "project," "appear," "future," "should," "likely," "could," "may," "will," "typically" and similar words. These forward-looking statements are prospective in nature and not based on historical facts, but rather on current expectations and on numerous assumptions regarding the business strategies and the environment in which the Company’s business shall operate in the future and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that may cause actual results to differ materially from our expectations as of the date of this report. These risks include, among other things, those set forth in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, the Risk Factors set forth in the section entitled "Risk Factors" at Part II - Item 1A hereof, as well as the following factors:

•Risks associated with pandemics and other public health emergencies, including the continued impact of, and the governmental and third party response to, the COVID-19 pandemic and its variant ~~strains (including any proposed new regulation concerning mandatory COVID-19 vaccination of employees);~~strains;

•Changes in sales or production volumes, pricing and/or manufacturing costs of ~~Recon~~paper, specialty packaging, combustible products ~~cigarette paper~~for the tobacco industry (including conventional papers and certain reduced-risk products) and hemp-based fibers for LIP cigarettes), including any change by our customers in their tobacco and tobacco-related blends for their cigarettes, their target inventory levels and/or the overall demand for their products, new technologies such as e-cigarettes, inventory adjustments and rebalancingsemerging alternative solutions in our EPFBS segment.Additionally, competition and changes in ~~AMS~~ATM end-market products due to changing customer demands;

•~~Changes in the Chinese economy, including relating to the demand for reconstituted tobacco, premium cigarettes and netting and due to impact of tariffs;~~

•Risks associated with the implementation of our strategic growth initiatives, including diversification, and the Company's understanding of, and entry into, new industries and technologies;

•Changes in the source and intensity of competition in our commercial segments;

•Our ability to attract and retain key ~~personnel;~~personnel, including as a result of the Merger, labor shortages, labor strikes, stoppages or other disruptions;

•Weather conditions, including potential impacts, if any, from climate change, known and unknown, ~~seasonality factors that affect the demand for virgin tobacco leaf~~ and natural disasters or unusual weather events;

•Seasonal or cyclical market and industry fluctuations which may result in reduced net sales and operating profits during certain periods;

•~~Increases~~Changes in raw material and energy availability, increases in commodity prices and lack of availability of such commodities, including energy, ~~wood pulp~~fibers, chemicals, and resins, which could impact the sales and profitability of our products;

•Adverse changes in the ~~oil, gas, automotive,~~filtration, release liners, protective solutions, construction and infrastructure and ~~mining~~healthcare sectors impacting key ~~AMS~~ATM segment customers;

•Increases in operating costs due to inflation and continuing increases in the inflation rate or otherwise, such as labor expense, compensation and benefits costs;

•~~Employee retention and labor shortages;~~

•Changes in employment, wage and hour laws and regulations in the U.S., France and elsewhere, including the loi de Securisation de l'emploi in France, unionization ~~rule~~rules and regulations by the National Labor Relations Board in the U.S., equal pay initiatives, additional anti-discrimination rules or tests and different interpretations of exemptions from overtime laws;

•~~Labor strikes, stoppages, disruptions or other disruptions at our facilities;~~

•The impact of tariffs, and the imposition of any future additional tariffs and other trade barriers, and the effects of retaliatory trade measures;

•Existing and future governmental regulation and the enforcement thereof ~~for example relating to the tobacco industry, taxation~~that may materially restrict or adversely affect how we conduct business and ~~the environment (including the impact thereof on~~ our ~~Chinese joint ventures);~~financials results;

•New reports as to the effect of smoking on human health or the ~~environment;~~environment, and/or the willingness of distributors and retailers to sell combustible products based on health or other social concerns;

•Changes in general economic, financial and credit conditions in the U.S., Europe, China and elsewhere, including the impact thereof on currency exchange rates (including any weakening of the Euro and Real) and on interest ~~rates and the effects of the ongoing discussions between the U.K. and European Union to determine the terms of the U.K.'s withdrawal from the European Union;~~rates;

•~~Changes in the method pursuant to which LIBOR rates are determined and the~~The phasing out of USD LIBOR rates after ~~2023;~~2023 and the replacement with SOFR;

•Changes in the manner in which we finance our debt and future capital needs, including potential acquisitions;

•The success of, and costs associated with, our current or future restructuring initiatives, including the granting of any needed governmental approvals and the occurrence of work stoppages or other labor disruptions;

•Changes in the discount rates, revenue growth, cash flow growth rates or other assumptions used by the Company in its assessment for impairment of assets and adverse economic conditions or other factors that would result in significant impairment charges;

•Supply chain disruptions, including the failure of one or more material suppliers, including energy, resin, fiber, and ~~pulp~~chemical suppliers, to supply materials as needed to maintain our product plans and cost structure;

•International conflicts and disputes, such as the ongoing conflict between Russia and Ukraine, which restrict our ability to supply products into affected regions, due to the corresponding effects on demand, the application of international sanctions, or practical consequences on transportation, banking transactions, and other commercial activities in troubled regions;

•Compliance with the FCPA and other anti-corruption laws or trade control laws, as well as other laws governing our operations;

•The pace and extent of further international adoption of LIP cigarette standards and the nature of standards so adopted;

•Risks associated with our 50%-owned, non-U.S. joint ventures relating to control and decision-making, compliance, accounting standards, transparency and customer relations, among others;

•A failure in our risk management and/or currency or interest rate swaps and hedging programs, including the failures of any insurance company or counterparty;

•The number, type, outcomes (by judgment or settlement) and costs of legal, tax, regulatory or administrative proceedings, litigation and/or amnesty programs, including those in Brazil, France and Germany;

•The outcome and cost of the LIP-related intellectual property ~~infringement and validity~~ litigation against Glatz in ~~Europe and the Glatz's German Patent Court invalidation proceedings;~~Europe;

•Risks associated with our technological advantages in our intellectual property and the likelihood that our current technological advantages are unable to continue indefinitely;

•Risks associated with acquisitions, ~~or other~~dispositions, strategic transactions ~~including acquired liabilities~~ and restrictions, retaining customers from businesses acquired, achieving any expected results or synergies from acquired businesses, complying with new regulatory frameworks, difficulties in integrating acquired businesses or implementing strategic transactions generally and risks associated with international acquisition transactions, including in countries where we do not currently have a material presence;

•Risks associated with dispositions, including post-closing claims being made against us, disruption to our other businesses during a sale process or thereafter, credit risks associated with any buyer of such disposed assets and our ability to collect funds due from any such buyer;

•~~Risks associated with our~~ global asset realignment initiatives including: changes in tax law, treaties, interpretations, or regulatory determinations; audits made by applicable regulatory authorities and/or our auditor; and our ability to operate our business in a manner consistent with the regulatory requirements for such realignment;

•~~Increased taxation on tobacco-related products;~~of Mativ;

•Costs and timing of implementation of any upgrades or changes to our information technology systems;

•Failure by us to comply with any privacy or data security laws or to protect against theft of customer, employee and corporate sensitive information;

•The impact of cybersecurity risks related to breaches of security pertaining to sensitive Company, customer, or vendor information, as well as breaches in the technology that manages operations and other business processes;

•Increased scrutiny from stakeholders related to environmental, social and governance ("ESG") matters, particularly our sales of combustible products business within the tobacco industry which represents approximately 15% of the Company's net sales for the three months ended September 30, 2022, as well as our ability to achieve our broader ESG goals and objectives;

•Changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities;

•Changes in construction and infrastructure spending and its impact on demand for certain products;

•Potential loss of consumer awareness and demand for acquired companies’ products if it is decided to rebrand those products under the Company’s legacy brand names;

•Failing to fully realize anticipated cost savings and other anticipated benefits of the Merger when expected or at all;

•Business disruptions from the Merger that will harm the Company's business, including current plans and operations;

•Potential adverse reactions or changes to business relationships resulting from the Merger, including as it relates to the Company's ability to successfully renew existing client contracts on favorable terms or at all and obtain new clients;

•The substantial indebtedness Mativ has incurred and assumed in connection with the Merger and the need to generate sufficient cash flows to service and repay such debt;

•The possibility that Mativ may be unable to successfully integrate Neenah's operations with those of Mativ and achieve expected synergies and operating efficiencies within the expected time-frames or at all;

•Uncertainty as to the long-term value of the common stock of Mativ, including the dilution caused by Mativ’s issuance of additional shares of its common stock in connection with the Merger; and

•Other factors described elsewhere in this document and from time to time in documents that we file with the SEC.

All forward-looking statements made in this document are qualified by these cautionary statements. Forward-looking statements herein are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance unless expressed as such and should only be viewed as historical data.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risk exposure at September 30, ~~2021~~2022 is consistent with, and not materially different than, the market risk and discussion of exposure presented under the caption “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We currently have in place systems relating to disclosure controls and procedures designed to ensure the timely recording, processing, summarizing and reporting of information required to be disclosed in periodic reports under the Securities Exchange Act of 1934, as amended. These disclosure controls and procedures include those designed to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions about required disclosure. Upon completing our review and evaluation of the effectiveness of our disclosure controls and procedures as of September 30, ~~2021,~~2022, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective as of September 30, ~~2021.~~2022.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting were identified as having occurred in the fiscal quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the second quarter of 2021, the Company completed the acquisition of Scapa. As permitted by SEC staff interpretive guidance that an assessment of a recently acquired business may be omitted from the scope of evaluation in the year of acquisition, management excluded Scapa from its interim evaluation of internal control over financial reporting.

4650

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various legal proceedings and disputes. ~~See~~Refer to Note 20. Commitments and Contingencies of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and Note 12. Commitments and Contingencies of the notes to the unaudited condensed consolidated financial statements included in this report. Except as may have been referenced elsewhere in this report, there have been no material developments with regard to these matters.

Item 1A. Risk Factors

AsIn addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed below and in Part I, "Item 1A, "Risk Factors" of ~~September 30, 2021, there were no material changes~~our most recent Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. The risks described below and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The following supplements the risk factors ~~previously~~ disclosed in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~

2021. The risks and uncertainties relating to the Merger are discussed in Part II, Item 1A, "Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The following table indicates the cost of and number of shares of the Company's common stock it repurchased during ~~2021:~~2022:

Issuer Purchases of Equity Securities
Period Total
Number of
Shares
Purchased Average
Price
Paid per
Share Total Number of Shares
Purchased as Part of
Publicly Announced
Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs
(# shares) ($ in millions) ($ in millions)
January 1 - March 31, 2021 66,729 $ 45.83 — — —
April 1 - June 30, 2021 1,057 46.40 — — —
July 1-31, 2021 14 38.79
August 1-31, 2021 — — — — —
September 1-30, 2021 2,268 35.73 — — —
Total Year-to-Date 2021 70,068 $ 45.51 — $ — —


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs			Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs
				(# of shares)	(in millions)		(in millions)
January 1 - March 31, 2022	94,847	$	30.96	—	$	—	$	—
April 1 - June 30, 2022	1,387	27.50		—	—		—
July 1 - 31, 2022	24,857	21.31		—	—		—
August 1 - 31, 2022	132,290	21.69		—	—		—
September 1 - 30, 2022	1,281	22.61		—	—		—
Total Year-to-Date 2022	254,662	$	25.14	—	$	—	$	—

Transactions represent the purchase of vested restricted shares from employees to satisfy minimum tax withholding requirements upon vesting of stock-based awards. Refer to Note 14. Equity-Based Compensation of the notes to the unaudited condensed consolidated financial statements.

From time to time, the Company uses corporate 10b5-1 plans to allow for share repurchases to be made at predetermined stock price levels, without restricting such repurchases to specific windows of time. Any future common stock repurchases will be dependent upon various factors, including the Company's stock price, strategic opportunities and cash availability.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

4752

Item 6. Exhibits


Exhibit Number						Exhibit
3.1						Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 10-Q for the quarter ended September 30, 2009).
3.2						~~Amended and Restated Bylaws~~Certificate of Amendment to the Certificate of Incorporation of the Company (filed on August 21, 1995), effective as of July 6, 2022 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on ~~February 22, 2019)~~July 6, 2022).
3.3						Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on July 6, 2022).
10.1						Transition Services Agreement, by and between Jeffrey Kramer and the Company, dated as of July 6, 2022 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 6, 2022).
10.2						Performance Share Unit Award Agreement (2015 Long-Term Incentive Plan) (filed herewith)
10.3						Separation, Waiver and Release Agreement, by and between Tracey Peacock and the Company, dated as of July 6, 2022 (filed herewith)
31.1						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
31.2						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
32						Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted 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, ~~2021,~~2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the condensed consolidated statements of ~~income,~~income/(loss), (ii) the condensed consolidated statements of comprehensive ~~income~~ income/(loss), (iii) the condensed consolidated balance sheets, (iv) the condensed consolidated statements of changes in stockholders' equity, (v) the condensed consolidated statements of cash flow, and (vi) notes to condensed consolidated financial statements.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in ~~Exhibit101)~~Exhibit 101).

4853

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~Schweitzer-Mauduit International,~~Mativ Holdings, Inc.

(Registrant)

By:

/s/ Julie Schertell

Julie Schertell
President and Chief Executive Officer
(duly authorized officer and principal executive officer)

November 9, 2022

By:

/s/ Andrew Wamser

Andrew Wamser
Executive Vice President and
Chief Financial Officer
(duly authorized officer and principal financial officer)

November ~~3, 2021~~

~~By:~~

~~/s/ Michael Schmit~~

Michael Schmit
Corporate Controller and
Chief Accounting Officer
(principal accounting officer)

~~November 3, 2021~~9, 2022

4954

~~GLOSSARY OF TERMS~~

~~The following are definitions of certain terms that may be used in this Quarterly Report on Form 10-Q filing:~~

•~~"Total debt to capital ratio"~~ ~~is total debt divided by the sum of total debt and total stockholders' equity.~~

•~~"Reconstituted tobacco"~~ is produced in two 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.

•~~"Reverse osmosis"~~ ~~is a water purification technology that uses a semipermeable membrane to remove larger particles from drinking water.~~

•~~"Tobacco paper"~~ includes cigarette paper which wraps the column of tobacco within a cigarette and has varying properties such as basis weight, porosity, opacity, tensile strength, texture and burn rate, as well as plug wrap paper which wraps the outer layer of a cigarette filter and is used to hold the filter materials in a cylindrical form, and tipping paper which joins the filter element to the tobacco-filled column of the cigarette and is both printable and glueable at high speeds.


	Common Stock Issued
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
Balance, June 30, 2020	31,195,009	$	3.1	$	87.2	$	654.1	$	(137.0)	$	607.4

Net income	—	—		—		24.5		—		24.5
Other comprehensive income, net of tax	—	—		—		—		8.8		8.8
Dividends declared ($0.44 per share)	—	—		—		(13.8)		—		(13.8)
Restricted stock issuances, net	(21,932)	—		—		—		—		—
Stock-based employee compensation expense	—	—		1.4		—		—		1.4


Stock issued to directors as compensation	—	—		0.2		—		—		0.2
Deferred compensation directors stock trust	149,469	—		—		—		—
Purchases and retirement of common stock	(771)	—		—		—		—		—
Balance, September 30, 2020	31,321,775	$	3.1	$	88.8	$	664.8	$	(128.2)	$	628.5

Balance, June 30, 2021	31,426,129	$	3.1	$	97.3	$	658.9	$	(106.3)	$	653.0

Net income	—	—		—		12.2		—		12.2
Other comprehensive loss, net of tax	—	—		—		—		(17.6)		(17.6)
Dividends declared ($0.44 per share)	—	—		—		(13.9)		—		(13.9)
Restricted stock issuances, net	32,549	—		—		—		—		—
Stock-based employee compensation expense	—	—		1.7		—		—		1.7


Stock issued to directors as compensation	588	—		0.3		—		—		0.3

Purchases and retirement of common stock	(2,282)	—		—		—		—		—
Balance, September 30, 2021	31,456,984	$	3.1	$	99.3	$	657.2	$	(123.9)	$	635.7


	September 30, 2021		December 31, 2020


Accumulated pension and OPEB liability adjustments, net of income tax benefit of $11.6 million and $11.6 million at September 30, 2021 and December 31, 2020, respectively	$	(17.1)	$	(20.5)
Accumulated unrealized loss on derivative instruments, net of income tax benefit of $2.1 million and $2.8 million at September 30, 2021 and December 31, 2020, respectively	(7.8)		(13.1)
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $6.6 million and $10.1 million at September 30, 2021 and December 31, 2020, respectively	(99.0)		(78.3)
Accumulated other comprehensive loss	$	(123.9)	$	(111.9)


	Preliminary Fair Value as of September 30, 2021		Adjustments		Preliminary Fair Value as of April 15, 2021
Cash and cash equivalents	$	22.7	$	—	$	22.7
Accounts receivable	67.7		—		67.7
Inventory	60.0		0.9		60.9
Other current assets	9.7		0.1		9.8
Property, plant and equipment	156.9		(4.8)		152.1
Identifiable intangible assets	246.2		—		246.2
Other noncurrent assets	25.4		0.9		26.3
Total assets	$	588.6	$	(2.9)	$	585.7

Current debt	$	15.0	$	—	$	15.0
Accounts payable and other current liabilities	$	84.2	$	1.7	85.9
Deferred income tax liabilities	64.6		$	(3.1)	61.5
Other noncurrent liabilities	33.2		(0.1)		33.1
Net assets acquired	$	391.6	$	(1.4)	$	390.2
Goodwill	261.7		1.4		263.1
Total consideration	$	653.3	$	—	$	653.3


	Three months ended September 30, 2021		April 15, 2021 - September 30, 2021
Net sales	$	107.1	$	202.2
Net income (loss)	$	1.8	$	(4.2)


	Fair Value as of March 13, 2020		Weighted-Average Amortization Period (Years)
Amortizable intangible assets:
Customer relationships	$	63.0	15
Tradenames and other	10.8		15
Developed technology	8.0		10
Total amortizable intangible assets	$	81.8


	Three Months Ended September 30, 2020		March 13, 2020 - September 30, 2020
Net sales	$	23.2	$	53.7
Net income	$	0.4	$	0.1


	AMS		EP		Total
Goodwill as of December 31, 2020	$	398.4	$	5.3	$	403.7
Goodwill acquired during the period	261.7		—		261.7
Foreign currency translation adjustments	(5.1)		(0.3)		(5.4)
Goodwill as of September 30, 2021	$	655.0	$	5.0	$	660.0


	September 30, 2021		December 31, 2020
Revolving credit facility - U.S. dollar borrowings	$	414.0	$	50.0

Term loan A facility	194.0		195.5

Term loan B facility	349.1		—
6.875% senior unsecured notes due October 1, 2026, net of discount of $5.4 million and $6.1 million at September 30, 2021 and December 31, 2020, respectively	344.6		343.9
French employee profit sharing	3.8		5.0
Finance lease obligations	17.7		3.5

Debt issuance costs and discounts	(17.0)		(4.6)
Total debt	1,306.2		593.3
Less: Current debt	(18.0)		(2.8)
Long-term debt	$	1,288.2	$	590.5


Derivatives Designated in Hedging Relationships	Unrealized Gain (Loss) Recognized in AOCI on Derivatives, Net of Tax								Location of (Loss) Gain Reclassified from AOCI	(Loss) Gain Reclassified from AOCI

	Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
	September 30,				September 30,					September 30,				September 30,
	2021		2020		2021		2020			2021		2020		2021		2020
Derivatives designated as cash flow hedge
Foreign exchange contracts	$	(0.2)	$	(0.3)	$	(0.1)	$	(6.1)	Net sales	$	(0.3)	$	(0.9)	$	(1.3)	$	(2.5)
Foreign exchange contracts	(0.4)		—		(0.5)		1.4		Other (expense) income, net	(0.1)		0.1		(0.7)		1.1
Interest rate contracts	1.9		0.2		3.9		(8.8)
Derivatives designated as net investment hedge
Foreign exchange contracts	1.9		(10.0)		7.1		(3.4)
Total gain (loss)	$	3.2	$	(10.1)	$	10.4	$	(16.9)		$	(0.4)	$	(0.8)	$	(2.0)	$	(1.4)


($ in millions)	Net Sales


	Three Months Ended								Nine Months Ended
	September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
AMS	$	260.1	67.8	%	$	138.9	49.7	%	$	675.1	64.3	%	$	394.6	49.6	%
EP	123.5		32.2		140.4		50.3		374.5		35.7		400.4		50.4
Total Consolidated	$	383.6	100.0	%	$	279.3	100.0	%	$	1,049.6	100.0	%	$	795.0	100.0	%


	Amount		Percent

Incremental net sales from Scapa	$	107.1	38.3	%
Changes in volume, product mix and selling prices (excluding Scapa)	(5.5)		(2.0)
Changes due to net foreign currency impacts	2.5		0.9
Changes due to royalties	0.2		0.1
Total	$	104.3	37.3	%




Debt Instruments ($ in millions)	Nine Months Ended
	September 30, 2021		September 30, 2020

Proceeds from issuances of long-term debt	$	729.7	$	212.7
Payments on long-term debt	(19.5)		(124.6)
Net proceeds from borrowings	$	710.2	$	88.1