UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒
	For the quarterly period ended	~~September 30, 2022~~March 31, 2023


☐			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)

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	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 ~~54,943,231~~54,842,300 shares of common stock outstanding as of ~~October 31, 2022.~~May 5, 2023.

MATIV HOLDINGS, INC.

TABLE OF CONTENTS


		Page
	Part I. - Financial Information
Item 1.	Financial Statements	21

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3629

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5038

Item 4.	Controls and Procedures	5038
	Part II. - Other Information
Item 1.	Legal Proceedings	5139

Item 1A.	Risk Factors	5139

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5139

Item 3.	Defaults Upon Senior Securities	5239

Item 4.	Mine Safety Disclosures	5240

Item 5.	Other Information	5240

Item 6.	Exhibits	5341

Signatures		5442

~~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

MATIV HOLDINGS, INC. AND SUBSIDIARIES

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

(in millions, except per share amounts)

(Unaudited)

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




	Three Months Ended March 31,
		2023		2022
Net sales		$	679.0	$	406.8
Cost of products sold		570.0		314.2
Gross profit		109.0		92.6

Selling expense		23.9		14.3
Research and development expense		9.1		5.2
General expense		65.9		49.3
Total nonmanufacturing expenses		98.9		68.8


Restructuring and impairment expense		0.8		13.2
Operating profit		9.3		10.6
Interest expense		26.5		14.5
Other income, net		7.0		5.5
Income (loss) before income taxes and income from equity affiliates		(10.2)		1.6
Income tax expense (benefit)		(2.4)		2.1
Income from equity affiliates, net of income taxes		0.1		2.1


Net income (loss)		(7.7)		1.6
Dividends paid to Common Stockholders		(0.1)		(0.2)

Net income (loss) attributable to Common Stockholders		$	(7.8)	$	1.4

Net income (loss) per share:


Basic		$	(0.14)	$	0.05




Diluted		$	(0.14)	$	0.05

Weighted average shares outstanding:
Basic		54,483,000		31,158,000
Diluted		54,483,000		31,413,700

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

MATIV HOLDINGS, INC. AND SUBSIDIARIES

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

(in millions)

(Unaudited)

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


	Three Months Ended March 31,
		2023		2022


Net income (loss)		$	(7.7)	$	1.6
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		18.4		8.7


Unrealized gain (loss) on derivative instruments		(17.2)		21.6
Less: Reclassification adjustment for gain on derivative instruments included in net income (loss)		5.8		1.1


Amortization of postretirement benefit plans' costs included in net periodic cost		0.5		(0.7)
Other comprehensive income		7.5		30.7
Comprehensive income (loss)		$	(0.2)	$	32.3

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

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

(Unaudited)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets
Cash and cash equivalents	Cash and cash equivalents	$	82.3	$	74.7	Cash and cash equivalents	$	97.0	$	124.4
Accounts receivable, net	Accounts receivable, net	454.3		238.0		Accounts receivable, net	304.2		266.8
Inventories		485.4		259.5
Inventories, net						Inventories, net	544.4		534.9
Income taxes receivable	Income taxes receivable	15.5		10.0		Income taxes receivable	20.8		19.7

Assets held for sale		10.5		—

Other current assets	Other current assets	16.0		12.4		Other current assets	38.8		28.9
Total current assets	Total current assets	1,064.0		594.6		Total current assets	1,005.2		974.7
Property, plant and equipment, net	Property, plant and equipment, net	843.4		463.9		Property, plant and equipment, net	872.4		874.9

Finance lease right-of-use assets						Finance lease right-of-use assets	17.2		17.4
Operating lease right-of-use assets						Operating lease right-of-use assets	33.7		35.8
Deferred income tax benefits	Deferred income tax benefits	30.7		33.9		Deferred income tax benefits	35.0		34.4
Investment in equity affiliates	Investment in equity affiliates	64.7		64.6		Investment in equity affiliates	59.8		59.1
Goodwill	Goodwill	849.0		648.3		Goodwill	871.0		847.2
Intangible assets		661.2		513.9
Intangible assets, net						Intangible assets, net	674.9		710.3
Other assets	Other assets	199.7		101.1		Other assets	105.6		115.4
Total assets	Total assets	$	3,712.7	$	2,420.3	Total assets	$	3,674.8	$	3,669.2
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current debt	Current debt	$	1.8	$	3.2	Current debt	$	35.1	$	34.6
Finance lease liabilities						Finance lease liabilities	0.9		0.9
Operating lease liabilities						Operating lease liabilities	8.9		9.3
Accounts payable	Accounts payable	238.7		116.0		Accounts payable	253.5		225.7
Income taxes payable	Income taxes payable	12.2		2.6		Income taxes payable	15.6		11.4

Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	186.6		109.3		Accrued expenses and other current liabilities	154.5		184.2
Total current liabilities	Total current liabilities	439.3		231.1		Total current liabilities	468.5		466.1
Long-term debt	Long-term debt	1,826.7		1,267.1		Long-term debt	1,697.9		1,659.3

Finance lease liabilities, noncurrent						Finance lease liabilities, noncurrent	17.8		17.6
Operating lease liabilities, noncurrent						Operating lease liabilities, noncurrent	27.3		29.7
Long-term income tax payable	Long-term income tax payable	13.9		16.6		Long-term income tax payable	14.6		14.6
Pension and other postretirement benefits	Pension and other postretirement benefits	94.5		39.0		Pension and other postretirement benefits	79.8		81.6
Deferred income tax liabilities	Deferred income tax liabilities	140.5		95.1		Deferred income tax liabilities	158.3		172.2
Other liabilities	Other liabilities	64.9		89.2		Other liabilities	51.3		48.8
Total liabilities	Total liabilities	2,579.8		1,738.1		Total liabilities	2,515.5		2,489.9
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; 54,951,290 and 31,449,563 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		5.5		3.1
Common stock, $0.10 par value; 100,000,000 shares authorized; 54,919,923 and 54,929,973 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, $0.10 par value; 100,000,000 shares authorized; 54,919,923 and 54,929,973 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	5.5		5.5
Additional paid-in-capital	Additional paid-in-capital	654.5		101.7		Additional paid-in-capital	662.4		658.5
Retained earnings	Retained earnings	630.8		696.4		Retained earnings	579.3		610.7
Accumulated other comprehensive loss, net of tax	Accumulated other comprehensive loss, net of tax	(157.9)		(119.0)		Accumulated other comprehensive loss, net of tax	(87.9)		(95.4)
Total stockholders’ equity	Total stockholders’ equity	1,132.9		682.2		Total stockholders’ equity	1,159.3		1,179.3
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,712.7	$	2,420.3	Total liabilities and stockholders’ equity	$	3,674.8	$	3,669.2

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

Net income	—	—		—		1.6		—		1.6
Other comprehensive income, net of tax	—	—		—		—		30.7		30.7
Dividends paid ($0.44 per share)	—	—		—		(13.9)		—		(13.9)
Restricted stock issuances, net	350,154	—		—		—		—		—
Stock-based employee compensation expense	—	—		3.4		—		—		3.4


Stock issued to directors as compensation	794	—		0.3		—		—		0.3

Purchases and retirement of common stock	(94,847)	—		—		(2.9)		—		(2.9)
Balance, March 31, 2022	31,705,664	$	3.1	$	105.4	$	681.2	$	(88.3)	$	701.4

Balance, December 31, 2022	54,929,973	$	5.5	$	658.5	$	610.7	$	(95.4)	$	1,179.3

Net loss	—	—		—		(7.7)		—		(7.7)
Other comprehensive income, net of tax	—	—		—		—		7.5		7.5
Dividends paid ($0.40 per share)	—	—		—		(22.4)		—		(22.4)
Restricted stock issuances, net	40,164	—		—		—		—		—
Stock options exercised	813	—		0.1		—		—		0.1
Stock-based employee compensation expense	—	—		3.7		—		—		3.7

Stock issued to directors as compensation	—	—		0.1		—		—		0.1
Deferred compensation directors stock trust	3,408	—		—		—		—		—
Purchases and retirement of common stock	(54,435)	—		—		(1.3)		—		(1.3)

Balance, March 31, 2023	54,919,923	$	5.5	$	662.4	$	579.3	$	(87.9)	$	1,159.3

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~~CASH FLOWS

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

(Unaudited)

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.~~


	Three Months Ended March 31,
	2023		2022
Operating
Net income (loss)	$	(7.7)	$	1.6


Non-cash items included in net income (loss):
Depreciation and amortization	42.0		23.9
Amortization of deferred issuance costs	1.8		1.2
Impairments	—		12.9
Deferred income tax	(7.1)		(6.4)
Pension and other postretirement benefits	(3.7)		(1.9)
Stock-based compensation	3.7		3.4
Income from equity affiliates	(0.1)		(2.1)






Loss (gain) on foreign currency transactions	2.4		(3.6)
Other non-cash items	—		(2.2)
Cash received from settlement of interest swap agreements	—		23.6
Changes in operating working capital, net of assets acquired:
Accounts receivable	(37.7)		(42.8)
Inventories	(8.1)		(16.8)
Prepaid expenses	(10.0)		(6.8)
Accounts payable and other current liabilities	3.3		16.1
Accrued income taxes	0.5		4.9
Net changes in operating working capital	(52.0)		(45.4)



Net cash provided by (used in) operations	(20.7)		5.0
Investing
Capital spending	(19.1)		(8.7)
Capitalized software costs	(0.1)		(0.9)



Other investing	(0.2)		—
Net cash used in investing	(19.4)		(9.6)
Financing
Cash dividends paid	(22.0)		(13.9)

Proceeds from long-term debt	55.0		20.0
Payments on long-term debt	(19.5)		(14.4)
Payments for debt issuance costs	—		(2.2)
Payments on financing lease obligations	(0.2)		(0.2)
Purchases of common stock	(1.3)		(2.9)
Other financing	(0.3)		—


Net cash provided by (used in) financing	11.7		(13.6)
Effect of exchange rate changes on cash and cash equivalents	1.0		(0.4)
Decrease in cash and cash equivalents	(27.4)		(18.6)
Cash and cash equivalents at beginning of period	124.4		74.7
Cash and cash equivalents at end of period	$	97.0	$	56.1

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY~~CASH FLOWS

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

(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


	Three Months Ended March 31,
	2023		2022
Supplemental Cash Flow Disclosures
Cash paid for interest, net	$	25.6	$	7.6
Cash paid for taxes, net	$	2.3	$	3.4
Capital spending in accounts payable and accrued liabilities	$	7.6	$	5.3

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

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in millions)~~

~~(Unaudited)~~

Nine Months Ended
September 30,
2022 September 30,
2021
Operating
Net income/(loss) $ (9.1) $ 35.6
Non-cash items included in net income:
Depreciation and amortization 92.3 70.3
Impairments 13.7 —
Deferred income tax (8.7) 2.4
Pension and other postretirement benefits (4.7) (0.2)
Stock-based compensation 16.5 6.3
Income from equity affiliates (5.1) (6.1)
Brazil tax assessment and settlements, net — (6.1)
Gain on sale of assets (2.9) —
Cash dividends received from equity affiliates 1.1 0.8
Gain on foreign currency transactions (19.8) (3.9)
Other items 1.2 (0.5)
Cash received from settlement of interest swap agreements 23.6 —
Changes in operating working capital, net of assets acquired:
Accounts receivable (36.3) (30.4)
Inventories (56.1) (29.6)
Prepaid expenses 1.0 (2.4)
Accounts payable and other current liabilities 27.6 (0.9)
Accrued income taxes (17.1) (7.8)
Net changes in operating working capital (80.9) (71.1)
Net cash provided by operations 17.2 27.5
Investing
Capital spending (36.5) (23.8)
Capitalized software costs (2.1) (1.9)
Acquisitions, net of cash acquired (462.5) (630.6)
Cash received from settlement of cross-currency swap contracts 35.8 —
Other investing 3.7 (2.0)
Net cash used in investing (461.6) (658.3)
Financing
Cash dividends paid (50.1) (41.5)
Proceeds from issuances of long-term debt 720.4 729.7
Payments on long-term debt (180.6) (19.5)
Payments on financing lease obligations (0.4) —
Purchases of common stock (6.4) (3.1)
Payments for debt issuance costs (22.6) (14.6)
Net cash provided by financing 460.3 651.0
Effect of exchange rate changes on cash and cash equivalents (8.3) (1.3)
Increase in cash and cash equivalents 7.6 18.9
Cash and cash equivalents at beginning of period 74.7 54.7
Cash and cash equivalents at end of period $ 82.3 $ 73.6

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in millions)~~

~~(Unaudited)~~

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",~~"our," or the "Company"). Mativ is a global leader in specialty materials headquartered in Alpharetta, Georgia, United States of America. The Company offers a wide range of critical components and engineered solutions to solve customers' most complex challenges, targeting premium applications across diversified and growing ~~end-markets.~~end markets. Combined with global manufacturing, supply chain, innovation, and material science capabilities, our broad portfolio of 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 changed the name of its two reporting segments to: Advanced Technical Materials ("ATM") and Fiber-Based Solutions ("FBS"). There was no change to the historical reporting segments or historical results for the segments. Refer to Note ~~16.~~15. Segment Information for additional information on our segments.

We conduct business in ~~over~~approximately 100 countries and operate 4847 production locations worldwide, with offices and facilities in the United States, United Kingdom, China, Germany, France, Belgium, Poland, India, Brazil, Canada, Spain, Italy, Mexico, Netherlands, Malaysia, and Luxembourg.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and the notes thereto have been prepared in accordance with the instructions on Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission ("SEC") and do not include all 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 ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 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, ~~2021,~~2022, as filed with the SEC on March 1, ~~2022.~~2023.

Reclassifications

Certain prior year amounts on the unaudited Condensed Consolidated Statements of Cash Flows have been reclassified to conform to the current year presentation for comparative purposes. Prior year's classification of certain end markets in the legacy SWM Advanced Materials & Structures segment have been reclassified to conform to the current year presentation of ATM's end markets for comparative purposes.

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 unaudited Condensed Consolidated Statements of ~~Income/~~Income (Loss) as Income from equity affiliates, net of income taxes. Intercompany balances and transactions have been eliminated.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 at the date of the financial statements and the revenues and expenses ~~and related disclosures of contingent assets and liabilities in~~during the reporting period. Actual results could differ significantly from these estimates. The significant estimates underlying our unaudited condensed consolidated financial statements ~~and accompanying notes. Estimates~~include, but are ~~used for, but~~ not limited to, inventory valuation, useful lives of tangible and intangible assets, business acquisitions, equity-based compensation, derivatives, ~~sales returns and rebates,~~ receivables valuation, pension, postretirement and other benefits, ~~restructuring and impairment,~~ taxes and contingencies.

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Recently Adopted Accounting Standards

In March 2020, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("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. WeIn December 2022, FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848", which extended the final sunset date from December 31, 2022 to December 31, 2024. The provisions of ASU 2020-04 and ASU 2022-06 were adopted ~~this ASU as of~~effective April 1, 2022 ~~with no~~and December 21, 2022, respectively, and did not have a material impact ~~to our~~on the unaudited condensed consolidated financial statements.

Note 2. Revenue Recognition

The Company ~~has two 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~~Control is transferred when the products are shipped from one of the Company’s manufacturing facilities to the customer. Any freight costs billed to and paid by a customer are included in Net sales. The cost ~~of delivering~~the Company pays to deliver finished goods to ~~the Company’s~~our customers is recorded as a component of Cost of products sold. ~~Those~~These 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,~~collections, 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.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.~~Selling expense. 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.

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Net sales are attributed byto the following geographic ~~location based on the location~~locations 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 include net hedging gains and losses for the three months ended September 30, 2021.~~


		Nine Months Ended													Three Months Ended March 31,
		September 30, 2022						September 30, 2021							2023						2022
		ATM		FBS		Total		ATM		FBS		Total			ATM		FBS		Total		ATM		FBS		Total
United States	United States	$	545.7	$	213.8	$	759.5	$	412.1	$	116.6	$	528.7	United States	$	207.7	$	132.1	$	339.8	$	152.0	$	38.6	$	190.6
Europe and the former Commonwealth of Independent States	Europe and the former Commonwealth of Independent States	250.6		151.2		401.8		134.5		139.8		274.3		Europe and the former Commonwealth of Independent States	151.2		54.6		205.8		64.1		51.0		115.1
Asia/Pacific (including China)		124.5		82.5		207.0		93.2		61.7		154.9
Asia-Pacific														Asia-Pacific	46.0		27.2		73.2		35.4		24.9		60.3
Americas (excluding U.S.)	Americas (excluding U.S.)	40.0		53.0		93.0		21.6		34.0		55.6		Americas (excluding U.S.)	18.9		22.3		41.2		14.2		12.7		26.9
Other foreign countries	Other foreign countries	26.3		19.7		46.0		13.7		22.4		36.1		Other foreign countries	10.5		8.5		19.0		7.2		6.7		13.9
Net sales ~~(1)~~	Net sales ~~(1)~~	$	987.1	$	520.2	$	1,507.3	$	675.1	$	374.5	$	1,049.6	Net sales ~~(1)~~	$	434.3	$	244.7	$	679.0	$	272.9	$	133.9	$	406.8

~~(1) Net sales include net hedging gains~~

ATM is comprised of the legacy SWM Advanced Materials & Structures segment and ~~losses~~FBS is comprised of the legacy Engineered Papers segment. As such, there were no changes to the historical results of these segments. Refer to Note 15. Segment Information for ~~the nine months ended September 30, 2021.~~additional information on our segments.

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

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

Protective ~~Solutions~~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,~~wound care, consumer wellness, device fixation, and finger bandages.

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

119

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


		Three Months Ended				Nine Months Ended					Three Months Ended March 31,
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021				2023		2022
Industrials	Industrials	34	%	37	%	35	%	33	%	Industrials		33	%	36	%
Protective Solutions		17	%	25	%	23	%	31	%
Protective solutions										Protective solutions		15	%	31	%
Filtration	Filtration	25	%	16	%	20	%	19	%	Filtration		26	%	17	%
Healthcare	Healthcare	14	%	22	%	17	%	17	%	Healthcare		15	%	16	%
Release Liners		10	%	—	%	5	%	—	%
Release liners										Release liners		11	%	—	%
Net sales	Net sales	100	%	100	%	100	%	100	%	Net sales		100	%	100	%

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

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

Engineered ~~Papers~~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 %


	Three Months Ended March 31,
		2023		2022
Packaging and specialty papers		47	%	—	%
Engineered papers		53	%	100	%
Net sales		100	%	100	%

~~Receivable~~Transfer of Receivables

On December 23, 2022, the Company entered into an accounts receivables sales agreement (the "Receivables Sales ~~Programs~~Agreement") to sell certain trade receivables arising from revenue transactions of the Company's U.S. subsidiaries on a revolving basis. The maximum funding commitment of the Receivables Sales Agreement is $175.0 million. The agreement has an initial term of three years and can be renewed.

In connection with the Receivables Sales Agreement, the Company formed a separate bankruptcy-remote special purpose entity (“SPE”), which is a wholly owned and controlled subsidiary. The Company continuously transfers receivables to the SPE and the SPE transfers ownership and control of certain receivables that meet certain qualifying conditions to a third-party financial institution in exchange for cash. Certain receivables are held by the SPE and are pledged to secure the collectability of the sold receivables. The amount of receivables pledged as collateral as of March 31, 2023 and December 31, 2022 was $62.2 million and $94.2 million, respectively. The SPE incurs fees due to the third-party financial institution related to accounts receivable sales transactions.

The Company has ~~entered into~~continuing involvement with the receivables transferred by the SPE to the third-party financial institution by providing collection services.

The Company also participates in uncommitted trade ~~account~~accounts receivable sales programs ("Reverse Receivables Programs") under which certain ~~customer invoices~~trade receivables are 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 invoices after they are sold. The invoices are sold at face value, less a transaction ~~fee,~~fee.

The Company accounts for transactions under the Receivables Sales Agreement and Reverse Receivables Programs as sales of financial assets, with the associated receivables derecognized from the Company’s unaudited Condensed Consolidated Balance Sheets. Total fees related to the Receivables Sales Agreement and Reverse Receivables

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Programs are considered to be a loss on the sale of financial assets and are ~~treated as a sale and accounted for as a reduction~~primarily recorded within Other income, net in ~~trade account receivables. The transaction~~the unaudited Condensed Consolidated Statements of Income (Loss). Total fees were ~~not material~~immaterial for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023. Continuous cash activity related to the Receivables Sales Agreement and ~~2021.~~Reverse Receivables Programs is reflected in cash from operating activities in the unaudited Condensed Consolidated Statements of Cash Flows.

~~Trade accounts receivable sold to financial institutions during~~The following table summarizes the ~~nine months ended September 30, 2022 were $38.1 million. Cash proceeds received from the financial institutions~~activity under the ~~programs during the nine months ended September 30, 2022 were $37.9 million.~~ Receivables Sales Agreement and Reverse Receivables Programs (in millions):


	Three Months Ended
	March 31, 2023
Trade accounts receivable sold to financial institutions	$	312.1
Cash proceeds from financial institutions	308.8

There were no material trade accounts receivable sales for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

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

Comprehensive income (loss) includes Net ~~income/~~income (loss), as well as ~~certain~~ items charged and credited directly to stockholders' equity, which are excluded from Net ~~income/~~income (loss). The Company has presented Comprehensive ~~income/~~income (loss) in the unaudited Condensed Consolidated Statements of Comprehensive ~~Income/~~Income (Loss). Reclassification adjustments of derivative instruments from Accumulated other comprehensive loss, net of tax are presented in Net sales; Other income, net; or Interest expense in the unaudited Condensed Consolidated Statements of ~~Income/~~Income (Loss). Refer to Note 11. Derivatives for additional information. Amortization of accumulated pension and other 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 millions):

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)


	March 31, 2023		December 31, 2022


Accumulated pension and OPEB liability adjustments, net of income tax benefit of $1.8 million and $2.5 million at March 31, 2023 and December 31, 2022, respectively	$	(10.4)	$	(10.9)
Accumulated unrealized gain on derivative instruments, net of income tax benefit of $10.2 million and $12.9 million at March 31, 2023 and December 31, 2022, respectively	33.0		44.4
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $15.6 million and $17.0 million at March 31, 2023 and December 31, 2022, respectively	(110.5)		(128.9)
Accumulated other comprehensive loss, net of tax	$	(87.9)	$	(95.4)

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


		Three Months Ended													Three Months Ended March 31,
		September 30, 2022						September 30, 2021							2023						2022
		Pre-tax		Tax		Net of Tax		Pre-tax		Tax		Net of Tax			Pre-tax		Tax		Net of Tax		Pre-tax		Tax		Net of Tax
Pension and OPEB liability adjustments	Pension and OPEB liability adjustments	$	0.7	$	(0.9)	$	(0.2)	$	1.1	$	(0.2)	$	0.9	Pension and OPEB liability adjustments	$	1.2	$	(0.7)	$	0.5	$	1.3	$	(2.0)	$	(0.7)
Derivative instrument adjustments	Derivative instrument adjustments	30.1		(7.2)		22.9		2.3		(0.6)		1.7		Derivative instrument adjustments	(14.1)		2.7		(11.4)		22.4		0.3		22.7
Unrealized foreign currency adjustments		(65.8)		(18.3)		(84.1)		(20.1)		(0.1)		(20.2)
Unrealized foreign currency translation adjustments														Unrealized foreign currency translation adjustments	19.8		(1.4)		18.4		6.1		2.6		8.7
Total	Total	$	(35.0)	$	(26.4)	$	(61.4)	$	(16.7)	$	(0.9)	$	(17.6)	Total	$	6.9	$	0.6	$	7.5	$	29.8	$	0.9	$	30.7

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)

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4. Business Acquisitions

Neenah

On March 28, 2022, the Company entered into an Agreement and Plan of Merger to combine with Neenah, ~~Inc. ("Neenah"),~~ a 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, as well as achieve cost synergies. The Merger was approved by the shareholders of both the Company and Neenah on June 29, 2022 and was consummated on July 6, 2022. Under the terms of the 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 Neenah surviving the Merger as a direct, wholly-owned subsidiary of Mativ.

~~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 total consideration transferred to merge with Neenah was $1,056.3 million, which included the equity portion consideration of $534.1 million, repayment of ~~Neenah~~Neenah's 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,~~ to repay existing indebtedness of Neenah and to pay other costs and expenses in connection with the Merger.

The 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 fair value as of the Merger date primarily using Level 3 inputs. The excess of the total consideration over the net assets acquired was recorded as goodwill and has been allocated to the ATM segment. The goodwill recorded is not expected to be deductible for tax purposes as it is primarily attributable to expected revenue and cost synergies. The ~~initial~~estimated purchase price allocation disclosed as of September 30, 2022 was revised during the remeasurement period as new information was received and analyzed resulting in increases in Intangible assets, net of $18.6 million, Deferred income tax liabilities of $18.6 million, Property, plant and equipment, net of $8.5 million, Inventories, net of $2.7 million, as well as decreases in Goodwill of $11.5 million, Accounts receivable, net of $8.2 million, Accounts payable and other current liabilities of $8.7 million and other immaterial changes, as presented in the table below. The amounts below isrepresent the current preliminary fair value estimates. As additional information becomes available and as additional analyses and final allocations are completed, we may ~~be revised~~further revise the preliminary acquisition consideration allocation during the remainder of the measurement period, which will not to exceed ~~one year, as new information is received and analyzed. Any potential adjustments could~~twelve months from the closing of the acquisition. Such revisions or changes may be ~~material in relation to the preliminary values below.~~material.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The ~~estimated~~preliminary fair values of the assets acquired and liabilities assumed as of the Merger date were as follows (in millions):


	~~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~~


	Preliminary Allocation as of March 31, 2023		Adjustments		Preliminary Allocation as of July 6, 2022
Cash and cash equivalents	$	55.9	$	—	$	55.9
Accounts receivable, net	198.4		(8.2)		206.6
Inventory, net	194.5		2.7		191.8

Other current assets	27.8		0.3		27.5
Property, plant and equipment, net	462.1		8.5		453.6
Intangible assets, net	237.6		18.6		219.0
Other assets	42.0		0.2		41.8
Total assets	$	1,218.3	$	22.1	$	1,196.2

Current debt	$	1.9	$	—	$	1.9
Accounts payable and other current liabilities	199.2		(8.7)		207.9
Long-term debt	22.8		—		22.8
Deferred income tax liabilities	86.3		18.6		67.7
Other liabilities	82.7		0.7		82.0
Net assets acquired	$	825.4	$	11.5	$	813.9
Goodwill	230.9		(11.5)		242.4
Total consideration	$	1,056.3	$	—	$	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~~process 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 land, buildings and leasehold improvements, machinery and equipment, furniture and fixtures, computer equipment and construction in progress. The preliminary estimated fair value was 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~~trade names 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.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table sets forth the components of identifiable intangible assets (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	$	182.0	14.3	Customer relationships	$	203.0	14.3
Tradenames and other		14.7		20
Trade names					Trade names	14.4		20
Developed technology	Developed technology	22.3		7	Developed technology	20.2		7
Total amortizable intangible assets	Total amortizable intangible assets	$	219.0		Total amortizable intangible assets	$	237.6

The preliminary estimate of deferred tax effects resulting from the 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, 2022, the Company recognized direct and indirect costs related to the Merger of $32.7 million and $46.3 million, respectively, predominantly related to severance and termination costs resulting from the change in control, legal and other professional fees. Direct and indirect merger-related costs were expensed as incurred and are primarily included in the General expense in the unaudited Condensed Consolidated Statements of Income/(Loss).

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

Pro Forma Financial Information (Unaudited)

The unaudited supplemental pro forma financial information presents the combined results of operations for the periods presented, as if the Merger had occurred on January 1, 2021. The unaudited supplemental pro forma financial information includes the following adjustments related to the Merger: amortization of intangible assets and 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 jurisdictions where the adjustments occurred.

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The unaudited 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)

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 April 15, 2021, we completed the previously announced acquisition of Scapa Group plc (“Scapa”), a UK-based innovation, design, and manufacturing solutions provider for healthcare 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 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 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 the Americas, Asia and Europe.

~~The purchase price was funded with borrowings under the amended Credit Agreement, as defined and discussed in Note 10. 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 June 30, 2021 was revised during the measurement period as new information was received and analyzed resulting in a decrease in 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, and other insignificant changes, as presented in the table below.

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~The consideration paid for Scapa, and the fair values of the assets acquired and liabilities assumed as of the April 15, 2021 acquisition date were as follows (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

~~The fair value of receivables acquired approximates the gross contractual value. The contractual amount not expected to be collected is 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 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 fair values assigned to identifiable intangible assets (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

~~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, 2022, the Company did not incur any direct and indirect acquisition-related costs for the 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 General expense in the unaudited Condensed Consolidated Statements of 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. 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 and severance costs, and applicable tax adjustments based on statutory rates in the jurisdictions where the adjustments occurred.

The supplemental pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the Scapa acquisition occurred as of January 1, 2020 (in millions):

~~Nine~~Three Months Ended March 31,

~~September 30, 2021~~2022

Net sales

~~1,180.2~~691.6

Net income

~~47.9~~ (2.3)

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

The Company uses the two-class method to calculate ~~earnings/(loss)~~earnings 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.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. ~~Diluted loss per share excludes the weighted average potential common shares as their inclusion would be anti-dilutive.~~

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~The following table is a~~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 millions, shares in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended March 31,
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021				2023		2022
Numerator (basic and diluted):	Numerator (basic and diluted):									Numerator (basic and diluted):
Net income/(loss)		$	(22.5)	$	12.2	$	(9.1)	$	35.6
Net income (loss)										Net income (loss)		$	(7.7)	$	1.6
Less: Dividends paid to participating securities	Less: Dividends paid to participating securities	(0.2)		(0.2)		(0.7)		(0.5)		Less: Dividends paid to participating securities		(0.1)		(0.2)

Undistributed and distributed earnings/(loss) available to common stockholders		$	(22.7)	$	12.0	$	(9.8)	$	35.1
Distributed earnings (loss) available to participating securities										Distributed earnings (loss) available to participating securities		$	(7.8)	$	1.4

Denominator:	Denominator:									Denominator:
Average number of common shares outstanding	Average number of common shares outstanding	52,593.9		31,046.1		38,415.9		31,022.1		Average number of common shares outstanding		54,483.0		31,158.0
Effect of dilutive stock-based compensation(1)	Effect of dilutive stock-based compensation(1)	—		354.9		—		359.5		Effect of dilutive stock-based compensation(1)		—		255.7
Average number of common and potential common shares outstanding	Average number of common and potential common shares outstanding	52,593.9		31,401.0		38,415.9		31,381.6		Average number of common and potential common shares outstanding		54,483.0		31,413.7

(1)Diluted loss per share excludes the weighted average potential common shares for the three months ended March 31, 2023 as their inclusion would be anti-dilutive.

Note 6. Inventories, Net

Inventories, net are valued at the lower of cost (using the 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 based on its judgment of future realization. These reviews require the Company to assess customer and market demand. ~~The Company estimates write-offs for~~During the three months ended March 31, 2023, there were no material inventory ~~obsolescence and shrinkage.~~write-offs.

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	183.6	$	113.4	Raw materials	$	203.5	$	206.0
Work in process	Work in process	80.5		41.9		Work in process	88.1		80.5
Finished goods	Finished goods	193.7		95.7		Finished goods	231.8		223.9
Supplies and other	Supplies and other	27.6		8.5		Supplies and other	21.0		24.5
Total inventories	Total inventories	$	485.4	$	259.5	Total inventories	$	544.4	$	534.9

1915

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 reporting segment were as follows (in millions):

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


	ATM		FBS		Total
Balance at December 31, 2022	$	842.6	$	4.6	$	847.2
Goodwill acquired during the period(1)	16.5		—		16.5
Foreign currency translation	7.2		0.1		7.3
Balance at March 31, 2023	$	866.3	$	4.7	$	871.0

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

~~(2) During~~

Accumulated impairment loss for the ~~first quarter~~FBS segment was $2.7 million as of ~~2022, goodwill with a carrying amount of $2.1 million was allocated to the disposal group classified as held for sale~~March 31, 2023 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 ofDecember 31, 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,~~March 31, 2023 and December 31, 2022, the Company had ~~$615.0~~$633.1 million and $652.5 million of intangible assets in its ATM segment and ~~$46.2~~$41.8 million and $57.8 million in its FBS ~~segment.~~segment, respectively. The gross carrying amount and accumulated amortization for intangible assets consisted of the following (in millions):


		September 30, 2022					March 31, 2023
		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	$	692.9	$	142.9			$	550.0	Customer relationships	$	739.6	$	171.4	$	568.2
Developed technology	Developed technology	70.1		24.2				45.9		Developed technology	71.4		28.3		43.1

Trade names	Trade names	31.8		3.7				28.1		Trade names	33.1		4.9		28.2
Acquired technology	Acquired technology	21.5		0.7				20.8		Acquired technology	20.7		2.2		18.5
Non-compete agreements	Non-compete agreements	2.9		2.7				0.2		Non-compete agreements	2.9		2.7		0.2
Patents	Patents	1.9		0.7				1.2		Patents	1.9		0.8		1.1
Total		$	821.1	$	174.9			$	646.2
Total(1)										Total(1)	$	869.6	$	210.3	$	659.3

Unamortized Intangible Assets	Unamortized Intangible Assets					Unamortized Intangible Assets
Trade names(1)		$	15.0	$	—			$	15.0
Trade names										Trade names	$	15.6	$	—	$	15.6

(1) Includes a decrease of $25.3 million related to measurement period adjustments for the Merger recognized during the three months ended March 31, 2023.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
Customer relationships	$	754.8	$	159.4	$	595.4
Developed technology	71.2		26.5		44.7
Trade names	35.8		4.4		31.4
Acquired technology	23.5		1.6		21.9
Non-compete agreements	2.9		2.7		0.2
Patents	1.9		0.7		1.2
Total	$	890.1	$	195.3	$	694.8

Unamortized Intangible Assets
Trade names(1)	$	15.5	$	—	$	15.5

(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.

~~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~~$14.5 million and ~~$11.2~~$11.1 million for the three months ended ~~September 30,~~March 31, 2023 and 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 $60.2 million in each of the next five years.~~

Note 9. Restructuring and Impairment Activities

The Company incurred restructuring and impairment expenses of ~~$1.8~~$0.8 million and ~~$1.9~~$13.2 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $17.4 million and $5.9 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

~~In the FBS segment, there were $0.1 million of restructuring~~ Restructuring and impairment expenses ~~for~~were primarily incurred in the ~~three months ended September 30, 2022 and $1.9 million of restructuring and impairment expenses for the three months ended September 30, 2021.~~ATM segment. Restructuring and impairment expenses for the three months ended ~~September 30, 2021 included~~March 31, 2023 were $0.7 million related to severance and other accruals for the 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 related to the 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 at the Winkler, Manitoba facility was included in Cost of products sold.~~

Restructuring and impairment expenses in the FBS segment were $1.7 million and $5.9 million for the nine months ended September 30, 2022 and 2021, respectively. Restructuring and impairment expenses for the nine months ended September 30, 2022 included $1.5 million primarily related to pension benefits for the Winkler, Manitoba facility. Restructuring and 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 $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.

~~During the remainder of 2022, the Company expects to record an insignificant amount of additional restructuring costs in the FBS segment related to the closing of the Winkler, Manitoba facility.~~

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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~~$0.5 million related to the closure of the Appleton, Wisconsin ~~facility, a facility acquired through the Merger.~~facility. 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~~equipment. These assets were 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~~The Company has recognized $1.7 million of restructuring charges cumulatively through March 31, 2023 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.

this project. During the remainder of ~~2022,~~2023, the Company expects to record additional restructuring related costs in the ATM segment of approximately ~~$0.5~~$1.5 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,~~March 31, 2022 ~~included $0.8 million~~were primarily related to the ~~modification~~$12.9 million impairment of ~~leases resulting from~~certain assets in conjunction with the ~~Merger. There~~planned divestiture of a portion of the legacy SWM ATM segment serving the industrials end market. These assets were ~~no unallocated restructuring expenses~~sold during the third quarter of 2022 for ~~the three~~net proceeds of $4.6 million 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
a loss of $0.4 million.

2217

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	Three Months Ended March 31,
		2023		2022
Restructuring and impairment expense:
Severance		$	0.1	$	0.2
Asset impairment		—		12.9
Other		0.7		0.1
Total restructuring and impairment expense		$	0.8	$	13.2
Other restructuring related charges - Cost of products sold
Accelerated depreciation and amortization		$	0.3	$	—


Other restructuring related charges - General expense
Accelerated depreciation and amortization		0.2		—
Total restructuring and impairment expense and other restructuring related charges		$	1.3	$	13.2

The following table summarizes changes in restructuring liabilities (in millions):

Nine Months Ended
September 30, 2022 September 30, 2021
Balance at beginning of period $ 6.2 $ 7.4
Accruals for announced programs 0.4 2.8
Accruals assumed from Merger(1)
2.3 —
Cash payments (2.6) (4.8)
Foreign exchange impact (0.4) (0.1)
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.


	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	4.9	$	6.2


Cash payments	(0.5)		(1.4)
Foreign exchange impact	0.1		(0.1)
Balance at end of period	$	4.5	$	4.7

Restructuring liabilities were classified within Accrued expenses and other current liabilities and Other liabilities in the unaudited Condensed Consolidated Balance Sheets.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10. Debt

~~The components~~Total debt, net of ~~total~~ debt ~~are~~issuance costs, is summarized in the following table (in millions):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Revolving facility - U.S. dollar borrowings	Revolving facility - U.S. dollar borrowings	$	288.0	$	393.0	Revolving facility - U.S. dollar borrowings	$	236.0	$	191.0

Term loan A facility	Term loan A facility	192.5		193.5		Term loan A facility	191.5		192.0

Term loan B facility	Term loan B facility	345.6		348.2		Term loan B facility	343.9		344.8
Delayed draw term loan	Delayed draw term loan	650.0		—		Delayed draw term loan	633.8		641.9
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
6.875% Senior unsecured notes due October 1, 2026, net of discount of $4.0 million and $4.3 million at March 31, 2023 and December 31, 2022, respectively(1)						6.875% Senior unsecured notes due October 1, 2026, net of discount of $4.0 million and $4.3 million at March 31, 2023 and December 31, 2022, respectively(1)	341.0		339.0
French employee profit sharing	French employee profit sharing	3.4		4.1		French employee profit sharing	3.0		3.0
Finance lease obligations		17.8		2.8
German loan agreement	German loan agreement	9.7		—		German loan agreement	10.9		10.7
Debt issuance costs and discounts		(30.9)		(16.1)
Other						Other	0.6		0.9
Debt issuance costs						Debt issuance costs	(27.7)		(29.4)
Total debt	Total debt	1,828.5		1,270.3		Total debt	1,733.0		1,693.9
Less: Current debt	Less: Current debt	(1.8)		(3.2)		Less: Current debt	(35.1)		(34.6)
Total long-term debt	Total long-term debt	$	1,826.7	$	1,267.1	Total long-term debt	$	1,697.9	$	1,659.3

(1) Amount includes a ~~$6.8~~$5.0 million ~~increase~~and $6.7 million decrease in fair value as of March 31, 2023 and December 31, 2022, respectively, 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 ~~provided~~provides for a five-year $500.0 million revolving line of credit (the “Revolving Credit Facility”) and a 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, wethe Company amended ~~our~~its Credit Agreement to, among other things, add a new 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 $250.0 million. The amended 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~~On May 6, 2022, the Company further amended its Credit Agreement 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, wethe Company added a $650.0 million delayed draw term loan facility (the "Delayed Draw Term Loan Facility") ~~to be funded concurrent with~~, which the ~~closing of the Merger.~~

OnCompany borrowed 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.Merger. The Delayed Draw Term Loan Facility matures on May 6, 2027.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 ~~(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 (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 each case plus the applicable margin. Borrowings under the Revolving Facility 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 then 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~~5.25x 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 quarterly returning to 4.50x effective as ~~of 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 amended Credit Agreement at ~~September 30, 2022.~~

~~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.31, 2023.

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,~~a third-party financial institution, 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 amended 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,~~a third-party financial institution, 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. 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.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, 2022.~~March 31, 2023.

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~~$10.7 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, 2022,~~March 31, 2023, the average interest rate was ~~5.77%~~7.21% on outstanding Revolving Facility borrowings, ~~5.88%~~7.28% on outstanding Term Loan A Credit Facility borrowings, ~~6.88%~~8.63% on outstanding Term Loan B Facility borrowings, and ~~5.63%~~7.03% 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 ~~4.90%~~5.63% and ~~4.12%~~4.45% for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively.~~

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~As of September 30, 2022, and December 31, 2021, the Company's total deferred debt issuance costs and discounts, net of accumulated amortization, were $30.9 million and $16.1 million,~~ respectively.

Principal Repayments

The following is the expected maturities for the Company's debt obligations as of ~~September 30, 2022~~March 31, 2023 (in millions):


2022		$	9.8
2023	2023	39.3		2023	$	31.4
2024	2024	39.2		2024	41.3
2025	2025	39.6		2025	41.4
2026	2026	391.8		2026	382.4
2027				2027	937.0
Thereafter	Thereafter	1,337.2		Thereafter	327.3
Total	Total	$	1,856.9	Total	$	1,760.8

Fair Value of Debt

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the fair market value of the Company's 6.875% senior unsecured notes was ~~$312.4~~$322.9 million and ~~$365.8~~$308.4 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, 2022~~March 31, 2023 and December 31, ~~2021~~2022 approximated the respective carrying amounts as the interest rates approximate current market indices.

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.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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~~Net income (loss) 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~~Interest expense.

The Company also uses 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 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 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)~~

During the ~~three months ended June 30,~~second quarter of 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~~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, maturing on January 31, 2027 and December 31, 2027. The swaps have a combined notional value of $500.0 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.

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.

2722

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations ~~on the unaudited Condensed Consolidated Balance Sheets~~ at ~~September 30, 2022~~March 31, 2023 (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 - 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	Accounts receivable, net	$	4.0	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	—		Foreign exchange contracts - net investment hedge	Other assets	—		Other liabilities	10.2
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	Accounts receivable, net	0.5		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 - cash flow hedge	Other assets	25.4		Other liabilities	—
Interest rate contracts - fair value hedge	Interest rate contracts - fair value hedge	Other assets	6.8					Interest rate contracts - fair value hedge				Other liabilities	5.0
Total derivatives designated as hedges	Total derivatives designated as hedges		$	88.0		$	0.2	Total derivatives designated as hedges		$	29.9		$	15.4

Derivatives not designated as hedges:	Derivatives not designated as hedges:							Derivatives not designated as hedges:
Foreign exchange contracts	Foreign exchange contracts	Accounts receivable, net	0.7		Accrued expenses and other current liabilities	6.2		Foreign exchange contracts	Accounts receivable, net	0.3		Accrued expenses and other current liabilities	0.2
Total derivatives not designated as hedges	Total derivatives not designated as hedges		$	0.7		$	6.2	Total derivatives not designated as hedges		$	0.3		$	0.2
Total derivatives	Total derivatives		$	88.7		$	6.4	Total derivatives		$	30.2		$	15.6

The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations ~~on the Condensed Consolidated Balance Sheets~~ at December 31, ~~2021~~2022 (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


	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	$	2.4	Accrued expenses and other current liabilities	$	0.2
Foreign exchange contracts - net investment hedge	Other assets	1.1		Other liabilities	4.7
Interest rate contracts - cash flow hedge	Accounts receivable, net	0.6		Accrued expenses and other current liabilities	—
Interest rate contracts - cash flow hedge	Other assets	38.1		Other liabilities	—
Interest rate contracts - fair value hedge				Other liabilities	6.7
Total derivatives designated as hedges		$	42.2		$	11.6

Derivatives not designated as hedges:
Foreign exchange contracts	Accounts receivable, net	2.7		Accrued expenses and other current liabilities	2.1
Total derivatives not designated as hedges		$	2.7		$	2.1
Total derivatives		$	44.9		$	13.7

2823

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 balance sheet location ~~on the unaudited Condensed Consolidated Balance Sheets~~ at ~~September 30, 2022~~March 31, 2023 (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


	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	$	341.0	$	(5.0)

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 millions):


Derivatives Designated in Hedging Relationships	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								Derivatives Designated in Hedging Relationships		Unrealized Gain (Loss) Recognized in AOCL on Derivatives, Net of Tax				Location of Loss Reclassified from AOCL		Loss Reclassified from AOCL
																				Three Months Ended March 31,						Three Months Ended March 31,
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended						2023		2022				2023		2022
Derivatives designated as cash flow hedge																			Derivatives designated as cash flow hedge
		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	Foreign exchange contracts	0.1		(0.4)		0.3		(0.5)		Other income, net	—		(0.1)		(0.1)		(0.7)		Foreign exchange contracts		$	—	$	(0.1)	Other income, net		$	—	$	(0.1)
Interest rate contracts	Interest rate contracts	19.7		1.9		47.8		3.9		Interest expense	(3.0)		—		(4.5)		—		Interest rate contracts		(17.2)		21.7		Interest expense		(5.8)		(1.0)
Derivatives designated as net investment hedge	Derivatives designated as net investment hedge																		Derivatives designated as net investment hedge
Foreign exchange contracts	Foreign exchange contracts	0.1		1.9		43.7		7.1											Foreign exchange contracts		(5.6)		13.6
Total gain/(loss)	Total gain/(loss)	$	19.9	$	3.2	$	91.8	$	10.4		$	(3.0)	$	(0.4)	$	(4.6)	$	(2.0)	Total gain/(loss)		$	(22.8)	$	35.2			$	(5.8)	$	(1.1)

The Company's designated derivative instruments are highly effective. As such, there were no gains or losses recognized immediately in income 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,~~March 31, 2023 and 2022, ~~and 2021,~~ other than those related to the cross-currency ~~swap,~~swaps, noted below.

The Company’s 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~~as a component of Accumulated other comprehensive loss, net of tax 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~~Interest expense over the remaining term of the swap. For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, we~~the Company recognized as income ~~$2.1~~$2.5 million and $2.4 million, respectively, in Interest expense as derivative amounts excluded from effectiveness testing. For the nine months ended September 30, 2022 and 2021, we recognized as income $6.9 million and $4.5$2.6 million, respectively, in Interest expense as derivative amounts excluded from effectiveness testing.

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


Derivatives Not Designated as Cash Flow Hedging Instruments	Location of Loss Recognized		Amount of Loss Recognized
		Three Months Ended March 31,
			2023		2022
Foreign exchange contracts	Other income, net		$	—	$	(1.1)

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/(loss) (in millions):~~

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
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Foreign exchange contracts Other income, net $ 0.3 $ (0.3) $ (0.2) $ (0.6)

Note 12. Commitments and Contingencies

Litigation

Brazil

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 four sets of assessments against SWM-B for periods from May 2006 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 Junta de Revisão Fiscal “first-level administrative court” and the Conselho de 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 administrative appellate court sitting en banc ruled against SWM-B in each of the first and second Electricity Assessments ($~~10.7~~11.5 million based on the foreign currency exchange rate at ~~September 30, 2022)~~March 31, 2023), 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 in 2018. In August 2018, the State filed revised fourth Electricity Assessments for a combined amount of ~~$8.8~~$9.5 million. SWM-B filed challenges to these 2018 assessments in the first-level administrative court on the same grounds as the older cases, receiving unfavorable rulings from the courts in 2019. Both 2019 decisions are being 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.

As SWM-B cannot determine the outcome of the Electricity Assessments ~~matters; as such,~~matters, 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~~low ignition propensity ("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 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 held that the claims of German counterpart of EP1482815 relevant to the Glatz infringement action were invalid. This ruling has the effect of nullifying the infringement decision 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~~a first instance decision in ~~February,~~May 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 of such litigation.

~~The~~ As the Company cannot determine the outcome of the patent infringement ~~matters; as such,~~matters, no loss has been accrued in our unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

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,~~March 31, 2023, approximately ~~25%~~26% of ~~our~~the Company's U.S. workforce and ~~6.5%~~14% of ~~our~~its Non-U.S. workforce are under collective bargaining agreements. Approximately ~~23%~~2% of all U.S. employees and 2%6% of ~~our~~ Non-U.S. employees are under collective bargaining agreements that will expire in the next 12 months.

~~MATIV HOLDINGS, INC. AND SUBSIDIARIES~~For the Non-U.S. workforce, union membership is voluntary and does not need to be disclosed to the Company under local laws. As a result, the number of employees covered by the collective bargaining agreements in some countries cannot be determined.

~~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 a number of different defined contribution retirement plans, alternative retirement plans and/or defined benefit pension ~~benefits~~plans across its operations. Defined benefit pension plans are sponsored in the United States, France, United Kingdom, Germany, Italy, Netherlands, and Canada and OPEB benefits related to postretirement healthcare and life insurance are sponsored in the United States, Germany, and Canada. ~~The Company’s pension~~In the prior year quarter ended March 31, 2022, the Company's Canadian postretirement benefits ~~in Italy~~liability and ~~Canada and Canadian~~U.S. OPEB liability ~~are not material~~were immaterial and therefore ~~are~~ not included in ~~the following~~these disclosures.

In connection with the Merger, the Company assumed Neenah's defined benefit pension and OPEB ~~plans.~~plans, as well as sponsorship of the defined contribution retirement plan. 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.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pension and ~~OPEB~~Other Benefits

The components of net pension ~~benefit costs for~~cost (benefit) during the ~~employees in the United States, France, United Kingdom Germany,~~three months ended March 31, 2023 and ~~Netherlands~~2022 were as follows (in millions):

Three Months Ended September 30,
U.S. Pension Plans Non-U.S. Pension Plans
2022 2021 2022 2021
Service cost $ 0.5 $ — $ 0.7 $ 0.5
Interest cost 4.1 0.7 2.0 0.9
Expected return on plan assets (5.0) (1.0) (1.9) (1.0)
Amortizations and other 0.5 0.9 0.1 0.2
Net periodic benefit cost $ 0.1 $ 0.6 $ 0.9 $ 0.6


																	Pension Benefits								Other Postretirement Plans
		Nine Months Ended September 30,					U.S.			Non-U.S.				U.S.	Non-U.S.
		U.S. Pension Plans				Non-U.S. Pension Plans					Three Months Ended March 31,
		2022		2021				2022				2021					2023		2022		2023		2022		2023
Service cost	Service cost	$	0.5	$	—			$	1.4			$	1.2			Service cost	$	0.4	$	—	$	0.5	$	0.4	$	—	$	0.3
Interest cost	Interest cost	5.7		2.1				3.2				1.8				Interest cost	4.4		0.8		2.3		0.6		0.3		—
Expected return on plan assets	Expected return on plan assets	(7.0)		(3.0)				(3.2)				(1.9)				Expected return on plan assets	(5.5)		(1.0)		(1.1)		(0.6)		—		—

Amortizations and other	Amortizations and other	1.3		2.7				0.4				0.7				Amortizations and other	—		0.4		0.1		0.1		—		—
Net periodic benefit cost		$	0.5	$	1.8			$	1.8			$	1.8
Net pension cost (benefit)																Net pension cost (benefit)	$	(0.7)	$	0.2	$	1.8	$	0.5	$	0.3	$	0.3

The components of net ~~periodic benefit~~pension cost (benefit) other than the service cost component are included in Other income, net in the unaudited Condensed Consolidated Statements of ~~Income/~~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 awardee is either terminated by the Company 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~~Company's cost under the ~~LTIP to remove the performance~~qualified defined contribution plan was $4.0 million 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$2.5 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 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 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~~March 31, 2023 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 the modified performance share awards was $2.5 million during the three and 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 2 years.

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

Note ~~15.~~14. 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~~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.

Prior to the passage of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), 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 is generally able to be repatriated free of ~~U.S.~~U. S. federal tax. In addition, future earnings of foreign subsidiaries 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~~its intercompany cash flows, ~~to SWM US,~~ as evidenced by the ~~implementation~~use of ~~the Cash Pool,~~cash pooling, and in light of the Company’s demonstrated goal of driving growth though inorganic/acquisitional means, the Company ~~has decided to no longer~~does not 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 of its foreign subsidiaries~~ to the extent of each ~~CFC’s~~controlled foreign corporation's earnings and profits and to the extent of any foreign partnership’s U.S. tax capital accounts. As a result, the Company has provided for non-U.S. withholding taxes, U.S. federal tax related to currency movement on ~~previously-taxed~~previously taxed earnings and profits, and U.S. state taxes on unremitted earnings.

All unrecognized tax positions could impact the Company's effective tax rate if recognized. There have been no material changes to the Company’s unrecognized tax positions for the three months ended March 31, 2023. 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 unaudited Condensed Consolidated Statements of ~~Income/~~Income (Loss). There were no material income tax penalties or interest accrued during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 or ~~2021.~~

The Company's effective tax rate from continuing operations was 32.6% and 13.2% for the three months ended September 30, 2022 and 2021, respectively. The increase was primarily due to 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. The Company's effective tax rate from continuing operations was 25.3% and 29.6% for the nine months ended September 30, 2022 and 2021, respectively. The decrease was primarily due to unfavorable discrete items in 2021, partially offset by unfavorable mix of earnings in 2022.

3427

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company's effective tax rate from continuing operations was 23.5% and 131.3% for the three months ended March 31, 2023 and 2022, respectively. The decrease was materially due to favorable mix of earnings in the current period and prior year discrete tax adjustments.

Note ~~16.~~15. Segment Information

Prior to the 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 merged Neenah segments have been allocated to ATM and FBS based on performance, market focus, technologies, and reporting structure.

The ATM segment provides solutions that filter and purify air and liquids, supports adhesive and protective applications, advances healing and wellness, and solves some of material science’s most demanding performance needs across a number of categories. The FBS segment leverages the company’s extensive natural fiber capabilities to provide specialty solutions for various end-uses, including sustainable packaging, imaging and communications, home and office, consumer goods, and other applications.

The accounting policies of 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, ~~2021.~~ 2022.

Information about Net Sales and Operating Profit

The Company primarily evaluates segment performance and allocates resources based on operating profit. General corporate expenses that do not directly support the operations of the business segments are unallocated expenses. 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																				Net Sales

		Three Months Ended								Nine Months Ended									Three Months Ended March 31,
		September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021						2023	2022
ATM	ATM	$	426.1	63.2	%	$	260.1	67.8	%	$	987.1	65.5	%	$	675.1	64.3	%	ATM				$	434.3	$	272.9
FBS	FBS	248.0		36.8	%	123.5		32.2	%	520.2		34.5	%	374.5		35.7	%	FBS				244.7		133.9
Total Consolidated	Total Consolidated	$	674.1	100.0	%	$	383.6	100.0	%	$	1,507.3	100.0	%	$	1,049.6	100.0	%	Total Consolidated				$	679.0	$	406.8


		Operating Profit/Loss																				Operating Profit

		Three Months Ended								Nine Months Ended									Three Months Ended March 31,
		September 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021						2023	2022
ATM	ATM	$	31.5	N.M.		$	15.9	69.1	%	$	71.2	N.M.		$	56.1	77.5	%	ATM				$	37.6	$	10.3
FBS	FBS	27.8		N.M.		24.0		104.4	%	75.9		N.M.		78.1		107.9	%	FBS				6.2		25.7
Unallocated	Unallocated	(73.2)		N.M.		(16.9)		(73.5)	%	(122.6)		N.M.		(61.8)		(85.4)	%	Unallocated				(34.5)		(25.4)
Total Consolidated	Total Consolidated	$	(13.9)	100.0	%	$	23.0	100.0	%	$	24.5	100.0	%	$	72.4	100.0	%	Total Consolidated				$	9.3	$	10.6

~~N.M. - Not meaningful~~

3528

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, ~~2021.~~2022. The discussion of our financial condition and results of operations includes various forward-looking statements about our markets, the demand for our products and our future ~~prospects and other matters.~~prospects. 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, ~~2021,~~2022, the section entitled "Forward-Looking Statements" at the end of this Item 2 and the section entitled “Risk Factors” at Part II, Item 1A hereof. Unless the context indicates otherwise, references to "Mativ," "we," "us," "our," the "Company" or similar terms include 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.

Merger

On July 6, 2022, the Company completed its previously announced merger with Neenah, Inc. ("Neenah") under the terms of an Agreement and Plan of Merger, ~~("Merger Agreement"),~~ pursuant to which a wholly-owned subsidiary merged with and into Neenah (the "Merger"), with Neenah surviving as a direct and wholly-owned subsidiary of the Company. Pursuant to the Merger Agreement, each share of Neenah common stock outstanding was exchanged for 1.358 shares of common stock in the Company. As a result of the Merger, the Company issued approximately 22.8 million shares of its common stock to Neenah shareholders under the 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.

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 "SWM". Refer to Note 4. Business Acquisitions in the notes to the unaudited condensed consolidated financial statements for further information related to the Merger.

Prior to the 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 ("ATM") and Fiber-Based ~~Solutions.~~Solutions ("FBS"). 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 of these segments. The merged Neenah segments have been allocated to ATM and FBS based on performance, market focus, technologies, and reporting structure. Refer to Note ~~16.~~15. Segments in the notes to the unaudited condensed consolidated financial statements for further information on our segments.

This MD&A discusses the financial condition and results of operations of the Company as of and for the period ended ~~September 30, 2022,~~March 31, 2023, 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

As of ~~September 30, 2022,~~March 31, 2023, the Company had ~~$1,828.5~~$1,733.0 million of total debt, ~~$82.3~~$97.0 million of cash, and undrawn capacity on its $600.0 million revolving line of credit facility (the "Revolving Facility") of ~~$307.2~~$359.0 million. Per the terms of the Company's amended credit agreement (the "Amended Credit Agreement"), net leverage was ~~4.2x~~4.1x at the end of the ~~third~~first quarter, versus a current maximum covenant ratio of ~~5.50x.~~5.25x. The Company’s nearest debt maturity is our 6.875% senior unsecured notes which are due in 2026. Refer to "Liquidity and Capital Resources" section for additional detail.

SUMMARY


		Three Months Ended								Nine Months Ended									Three Months Ended March 31,
		September 30,				Percent of Net Sales				September 30,				Percent of Net Sales						Percent of Net Sales
(in millions, except per share amounts)	(in millions, except per share amounts)	2022		2021		2022		2021		2022		2021		2022		2021		(in millions, except per share amounts)		2023		2022		2023		2022
Net sales	Net sales	$	674.1	$	383.6	100.0	%	100.0	%	$	1,507.3	$	1,049.6	100.0	%	100.0	%	Net sales		$	679.0	$	406.8	100.0	%	100.0	%
Gross profit	Gross profit	123.1		85.2		18.3	%	22.2	%	315.3		254.1		20.9	%	24.2	%	Gross profit		109.0		92.6		16.1	%	22.8	%
Restructuring & impairment expense	Restructuring & impairment expense	1.8		1.9		0.3	%	0.5	%	17.4		5.9		1.2	%	0.6	%	Restructuring & impairment expense		0.8		13.2		0.1	%	3.2	%
Operating profit/(loss)		(13.9)		23.0		(2.1)	%	6.0	%	24.5		72.4		1.6	%	6.9	%
Operating profit																		Operating profit		9.3		10.6		1.4	%	2.6	%
Interest expense	Interest expense	23.8		15.3		3.5	%	4.0	%	58.7		31.3		3.9	%	3.0	%	Interest expense		26.5		14.5		3.9	%	3.6	%

Net income/(loss)		$	(22.5)	$	12.2	(3.3)	%	3.2	%	$	(9.1)	$	35.6	(0.6)	%	3.4	%
Net income (loss)																		Net income (loss)		$	(7.7)	$	1.6	(1.1)	%	0.4	%

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
Diluted earnings (loss) per share																		Diluted earnings (loss) per share		$	(0.14)	$	0.05
Cash provided by (used in) operations																		Cash provided by (used in) operations		$	(20.7)	$	5.0
Capital spending	Capital spending	$	18.7	$	7.5					$	36.5	$	23.8					Capital spending		$	19.1	$	8.7

3730

RESULTS OF OPERATIONS

~~Three Months EndedSeptember 30, 2022 Compared with~~Comparison of the Three Months Ended ~~September 30, 2021~~March 31, 2023 and 2022

Net Sales

The following table presents net sales by segment ~~for the three months ended September 30, 2022 and 2021~~ (in millions):


		Three Months Ended									Three Months Ended March 31,
		September 30, 2022		September 30, 2021		Change		Percent Change			2023		2022		Change		Percent Change
Advanced Technical Materials	Advanced Technical Materials	$	426.1	$	260.1	$	166.0	63.8	%	Advanced Technical Materials	$	434.3	$	272.9	$	161.4	59.1	%
Fiber-Based Solutions	Fiber-Based Solutions	248.0		123.5		124.5		100.8	%	Fiber-Based Solutions	244.7		133.9		110.8		82.7	%
Total	Total	$	674.1	$	383.6	$	290.5	75.7	%	Total	$	679.0	$	406.8	$	272.2	66.9	%

Net sales of ~~$674.1~~$679.0 million during the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$290.5~~$272.2 million, or ~~75.7%~~66.9%, compared to the ~~prior-year quarter.~~prior year period. ATM segment net sales of ~~$426.1~~$434.3 million during the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$166.0~~$161.4 million, or ~~63.8%~~59.1%, compared to the ~~prior-year quarter. Sales reflected the~~prior year period. ATM sales growth was due to addition of the Neenah ~~operations, organic sales growth primarily from price~~operations. Price increases across the product lines, in response to higher input costs were offset by volume declines and negative currency impacts. The decreased volume was caused by customer de-stocking trends and a weakening macro environment. 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.~~liners.

FBS segment net sales of ~~$248.0~~$244.7 million during the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$124.5~~$110.8 million, or ~~100.8%~~82.7%, compared to the ~~prior-year quarter. Sales reflected~~prior year period. FBS sales growth was due to the addition of the Neenah ~~operations, organic sales growth primarily from~~operations. Consistent with trends in ATM, price increases across the FBS 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.~~costs were offset by volume declines and negative currency impacts.

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							Three Months Ended March 31,												Percent Change				Percent of Net Sales
		September 30, 2022		September 30, 2021		Change				2022				2021			2023				2022				Change								2023				2022
Net sales	Net sales	$	674.1	$	383.6	$	290.5			75.7	%			100.0	%			100.0	%	Net sales	$	679.0			$	406.8			$	272.2			66.9	%			100.0	%			100.0	%

Cost of products sold	Cost of products sold	551.0		298.4		252.6		84.7	%			81.7	%			77.8	%	Cost of products sold	570.0				314.2				255.8				81.4	%			83.9	%			77.2	%
Gross profit	Gross profit	$	123.1	$	85.2	$	37.9	44.5	%			18.3	%			22.2	%	Gross profit	$	109.0			$	92.6			$	16.4			17.7	%			16.1	%			22.8	%

Gross profit of ~~$123.1~~$109.0 million during the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$37.9~~$16.4 million, or ~~44.5%~~17.7%, compared to the ~~prior-year quarter.~~prior year period. The increase in gross profit reflected the addition of the Neenah ~~operations, organic sales growth, as well as~~operations. While price increases more than ~~offsetting~~offset higher input costs ~~including pulps~~across both segments, lower volume and ~~fibers, resins,~~mix impacts, manufacturing inefficiencies and ~~energy.~~operational disruptions negatively impacted results. FBS operations in France were impacted by nationwide labor strikes related to recently passed retirement benefits legislation, resulting in lost sales and inefficiencies at several sites. Furthermore, the Company is addressing production performance across several sites, primarily in FBS, which have been impacted by high manufacturing labor turnover and resulted in less efficient operations and reduced profitability. Profitability in both segments was also impacted by staffing levels of manufacturing labor relative to volumes.

3831

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							Three Months Ended March 31,												Percent Change				Percent of Net Sales
		September 30, 2022		September 30, 2021		Change				2022				2021			2023				2022				Change								2023				2022
Selling expense	Selling expense	$	22.3	$	13.2	$	9.1			68.9	%			3.3	%			3.4	%	Selling expense	$	23.9			$	14.3			$	9.6			67.1	%			3.5	%			3.5	%
Research expense		7.7		5.7		2.0		35.1	%			1.1	%			1.5	%
Research and development expense																		Research and development expense	9.1				5.2				3.9				75.0	%			1.3	%			1.3	%
General expense	General expense	105.2		41.4		63.8		154.1	%			15.6	%			10.8	%	General expense	65.9				49.3				16.6				33.7	%			9.7	%			12.1	%
Nonmanufacturing expenses	Nonmanufacturing expenses	$	135.2	$	60.3	$	74.9	124.2	%			20.0	%			15.7	%	Nonmanufacturing expenses	$	98.9			$	68.8			$	30.1			43.8	%			14.5	%			16.9	%

Nonmanufacturing expenses of ~~$135.2~~$98.9 million during the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$74.9~~by $30.1 million, or ~~124.2%~~43.8%, compared to the ~~prior-year quarter.~~prior year period. The increase is primarily due to ~~direct and indirect merger acquisition and integration costs of $47.2 million,~~ the addition of Neenah's ~~general~~nonmanufacturing expenses which includes an increase in amortization expenses related to Neenah's intangible assets, and ~~$6.1~~$10.4 million ~~to resolve the cybersecurity incident.~~

~~Restructuring and Impairment Expense~~

~~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
September 30, 2022 September 30, 2021 Change 2022 2021
Advanced Technical Materials $ 0.9 $ — $ 0.9 0.2 % — %
Fiber-Based Solutions 0.1 1.9 (1.8) — % 1.5 %
Unallocated expenses 0.8 — 0.8
Total $ 1.8 $ 1.9 $ (0.1) 0.3 % 0.5 %

~~The Company incurred total restructuring and impairment expenses~~ of ~~$1.8 million and $1.9 million in the three months ended September 30, 2022 and 2021, respectively. In the current-year quarter, restructuring expenses in the ATM segment were due to $0.7 million~~integration related ~~to the closure~~expenses. These factors more than offset cost synergy savings as a result of the ~~Appleton, Wisconsin facility, a facility acquired through the~~ Merger. The closure of this facility was substantially completed in 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 the notes to the unaudited condensed consolidated financial 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 prior-year quarter, restructuring expenses in the FBS segment 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 for employees at our manufacturing operations in France, and $0.5 million related to the closure of the Spotswood, New Jersey facility, which was sold in December 2021.

~~Operating Profit/(Loss)~~

~~The following table presents operating profit/(loss) by segment for the three months ended September 30, 2022 and 2021 (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 Company incurred an operating loss of $13.9 million during the three months ended September 30, 2022, largely related to significant unallocated expenses related to the Merger, compared to operating profit of $23.0 million in 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 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 during the three months ended September 30, 2022 increased $56.3 million, or 333.1%, compared to the prior- year 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 interest rates on floating rate debt compared to the prior year.

~~Income Taxes~~

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

~~Income from Equity Affiliates~~

Income from equity affiliates, which primarily reflects the results of operations of our joint ventures in China, was $1.3 million during the three months ended September 30, 2022 compared to $2.3 million during the prior-year quarter. The decrease is due to higher input costs.

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

Net loss during the three months ended September 30, 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, during the prior-year quarter.

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

~~Net Sales~~

~~The following table presents net sales by segment for the nine months ended September 30, 2022 and 2021 (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 %

Net sales of $1,507.3 million during the nine months ended September 30, 2022 increased by $457.7 million, or 43.6%, compared to the prior-year period. ATM segment net sales of $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.

FBS segment net sales of $520.2 million during the nine months ended September 30, 2022 increased $145.7 million, or 38.9% 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 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 incurred higher restructuring and impairment costs compared to the prior year period.

~~Nonmanufacturing Expenses~~

~~The following table presents nonmanufacturing expenses 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
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 $97.6 million, or 55.5%, compared to the prior-year period. The increase is primarily due to direct and indirect merger acquisition and integration costs of $64.1 million, the addition of 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

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						Three Months Ended March 31,									Percent of Net Sales
		September 30, 2022		September 30, 2021		Change		2022			2021		2023				2022			Change			2023	2022
Advanced Technical Materials	Advanced Technical Materials	$	14.9	$	—	$	14.9		1.5	%		—	%	Advanced Technical Materials	$	0.7		$	12.9		$	(12.2)		0.2	%	4.7	%
Fiber-Based Solutions	Fiber-Based Solutions	1.7		5.9		(4.2)			0.3	%		1.6	%	Fiber-Based Solutions	0.1			0.3			(0.2)			—	%	0.2	%
Unallocated expenses		0.8		—		0.8

Total	Total	$	17.4	$	5.9	$	11.5		1.2	%		0.6	%	Total	$	0.8		$	13.2		$	(12.4)		0.1	%	3.2	%

The Company incurred total restructuring and impairment expense of ~~$17.4~~$0.8 million in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared with ~~$5.9~~$13.2 million in the ~~prior-year~~prior year period. In the ~~ATM segment, the Company recognized $12.9 million of~~prior year period, restructuring and impairment ~~expenses~~expense in the ~~current-year period primarily~~ATM segment was related to ~~the write-down~~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. No restructuring and impairment expenses were recognized in the prior-year period.end market.

In the current-year period, 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 other manufacturing 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 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.

Operating Profit

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


		Nine Months Ended						Percent Change				Return on Net Sales							Three Months Ended March 31,												Percent Change				Return on Net Sales
		September 30, 2022		September 30, 2021		Change				2022				2021			2023				2022				Change								2023				2022
Advanced Technical Materials	Advanced Technical Materials	$	71.2	$	56.1	$	15.1			26.9	%			7.2	%			8.3	%	Advanced Technical Materials	$	37.6			$	10.3			$	27.3			265.0	%			8.7	%			3.8	%
Fiber-Based Solutions	Fiber-Based Solutions	75.9		78.1		(2.2)		(2.8)	%			14.6	%			20.9	%	Fiber-Based Solutions	6.2				25.7				(19.5)				(75.9)	%			2.5	%			19.2	%
Unallocated expenses	Unallocated expenses	(122.6)		(61.8)		(60.8)		98.4	%									Unallocated expenses	(34.5)				(25.4)				9.1				35.8	%
Total	Total	$	24.5	$	72.4	$	(47.9)	(66.2)	%			1.6	%			6.9	%	Total	$	9.3			$	10.6			$	(1.3)			(12.3)	%			1.4	%			2.6	%

Operating profit of ~~$24.5~~$9.3 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 decreased ~~$47.9~~$1.3 million, or ~~66.2%~~12.3%, compared to the ~~prior-year period, reflecting significant unallocated expenses related to the Merger.~~prior year period.

In the ATM segment, operating profit of ~~$71.2~~$37.6 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$15.1~~$27.3 million, or ~~26.9%~~265.0%, compared to the ~~prior-year~~prior year period. In the FBS segment, operating profit of ~~$75.9~~$6.2 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 decreased ~~$2.2~~$19.5 million, or ~~2.8%~~75.9%, compared to the ~~prior-year~~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 input costs, ~~partially~~which were offset by ~~higher~~declining volumes across most products. The decline in FBS operating profits was largely driven by the above-referenced labor strikes in France and manufacturing inefficiencies at several sites, as well as intangible asset amortization expenses associated with the Merger.

Unallocated expenses of ~~$122.6~~$34.5 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$60.8~~$9.1 million, or ~~98.4%~~35.8% compared to the ~~prior-year~~prior year period primarily due to ~~an increase in merger and integration costs related to the Merger,~~ the addition of Neenah's unallocated expenses ~~higher restructuring~~ and ~~impairment~~integration related costs, ~~and expenses related to the cybersecurity incident.~~which more than offset cost synergy savings.

~~Non-Operating Expenses/(Income)~~Interest Expense

Interest expense of ~~$58.7~~$26.5 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 increased ~~$27.4~~$12.0 million, or ~~87.5%~~82.8%, compared to 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, interestperiod. Interest expense increased ~~$22.9 million mainly~~primarily due to incremental debt ~~and Bridge Facility expense~~ related to the Merger, the incremental expense of assuming Neenah's debt, ~~incremental debt from the Scapa acquisition (closed in April 2021),~~ and higher average interest rates.

Other Income, Net

Other income, net of ~~$15.2~~$7.0 million during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023 increased ~~$14.4~~$1.5 million, or 27.3% compared to the ~~prior-year~~prior year period. ~~The current year included $7.3 million~~Income during both periods was primarily driven by gains on asset sales, the most significant 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, primarily due to a $1.6 million favorable Brazil tax assessment settlement, $4.0 million of incomewhich were 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.~~

Income Taxes

A ~~$4.8~~$2.4 million income tax benefit in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 resulted in an effective tax rate of ~~25.3%~~23.5% compared with ~~29.6%~~131.3% in the ~~prior-year~~prior year period. The ~~increase~~decrease was ~~primarily~~materially due to ~~significant one-time items related to the Merger, as well as unfavorable~~favorable mix of earnings ~~by jurisdiction, partially offset by favorable~~in the current period and prior year discrete one-time tax ~~items.~~adjustments.

Income from Equity Affiliates

Income from equity affiliates was ~~$5.1~~$0.1 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$6.1~~$2.1 million during the ~~prior-year~~prior year period. ~~Higher~~The decrease was due to lower sales volume in the current year ~~was offset by higher input costs.~~compared to the prior year period.

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

Net loss during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$9.1~~$7.7 million, or ~~$0.25~~$0.14 per diluted share, compared ~~with~~to net income of ~~$35.6~~$1.6 million, or ~~$1.12~~$0.05 per diluted share, during the ~~prior-year~~prior year period.

4433

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, volume and pricing of our products, as well as changes in our production volumes, costs and working capital. Our liquidity is supplemented by funds available under our Revolving Facility with a syndicate of banks that is used as either operating conditions or strategic opportunities warrant.

Cash Requirements

As of ~~September 30, 2022, $71.7~~March 31, 2023, $68.8 million of the Company's ~~$82.3~~$97.0 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, our current and long-term growth plan, and dividend payments.

Cash Provided by (Used in) Operating Activities

Net cash ~~provided by~~used in operating activities was ~~$17.2~~$20.7 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$27.5~~net cash provided of $5.0 million during the ~~prior-year~~prior year period. Results during the three months ended March 31, 2023 reflect unfavorable ~~year-over-year~~ movements in working capital related tocash flows associated with the growth in receivables ~~(higher sales)~~due to increased sales and ~~inventories (higher~~higher cost inventories due to ~~rising~~higher input ~~costs), partially offset by cash received from the settlement of interest rate swaps.~~costs.

Working Capital

As of ~~September 30, 2022,~~March 31, 2023, the Company had net working capital of ~~$626.5~~$572.7 million, including cash and cash equivalents of ~~$82.3~~$97.0 million, compared to net working capital of ~~$366.7~~$544.1 million, including cash and cash equivalents of ~~$74.7~~$124.4 million as of December 31, ~~2021. These changes primarily~~2022. Results 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.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net changes in operating working capital ~~used~~resulted in a cash outflow of ~~$80.9~~$52.0 million, an increase from ~~$71.1~~$45.4 million of outflows during the ~~prior-year~~prior year period. The ~~increased outflows reflect higher receivables related to sales growth~~Company typically has seasonally lower cash flows in ~~both FBS and ATM and higher costs~~the first half of ~~inventories on hand related to significantly higher input costs.~~the year, with seasonally stronger cash flows in the second half of the year.

Cash Used in Investing Activities

Cash used in investing activities during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$461.6~~$19.4 million, compared to cash used of ~~$658.3~~$9.6 million during the ~~prior-year period. Cash used in investing activities in~~prior year period, which were mainly attributable to capital spending, and reflected the 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 discussionaddition of the total consideration transferred to merge with Neenah. In addition, capital spending was $36.5 million. The cash used in investing activities was partially offset by $35.8 million received from settlement of cross-currency swap contracts.Neenah operations.

~~In the prior-year period, the cash used in investing activities primarily reflects the net $630.6 million consideration used to acquire Scapa and capital spending of $23.8 million.~~

Cash Provided by (Used in) Financing Activities

Cash provided by financing activities during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$460.3~~$11.7 million, compared to cash ~~provided~~used of ~~$651.0~~$13.6 million during the ~~prior-year~~prior year period. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, financing activities primarily consisted of ~~$720.4~~$55.0 million of borrowings under the revolving credit facility, $22.0 million of dividends paid to the Company's stockholders, and payments on our long-term debt of $19.5 million.

During the prior year period, financing activities primarily consisted of $20.0 million of proceeds from borrowings under the ~~Delayed Draw Term Loan Facility and~~ revolving ~~line of~~ credit facility primarily to fund the "Revolving Credit Facility". The proceeds from the Delayed Draw Term Loan was used to repay Neenah's outstanding debt of $504.9 million upon consummation of 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 $180.6Scapa acquisition, $14.4 million of payments on our long-term debt, ~~which includes a pay down of $100.0 million on our Revolving Facility, $50.1~~and $13.9 million in cash paid for dividends declared to the Company's stockholders, and $22.6 million of payments 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.

During the prior-year period, financing activities primarily consisted of $729.7 million of proceeds from borrowings under the Revolving Credit Facility primarily to fund the Scapa acquisition, $41.5 million in cash paid for dividends declared to the Company's stockholders, $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 $3.1 million.stockholders.

The Company presently believes ~~that~~ the sources of liquidity discussed above are sufficient to meet ~~its~~our 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 9, 2022,~~May 10, 2023, we announced a cash dividend of $0.40 per share payable on ~~December 16, 2022~~June 23, 2023 to stockholders of record as of ~~November 25, 2022.~~May 26, 2023. The covenants contained in our Indenture and amended 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~~will continue to assess our dividend policy in light of our ~~capital allocation~~overall strategy, cash generation, debt levels and ongoing requirements for cash to fund operations and to pursue possible strategic opportunities.

Debt Instruments and Related Covenants

The following table presents activity related to our debt instruments for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in millions):


		Nine Months Ended				Three Months Ended March 31,
		September 30, 2022		September 30, 2021				2023		2022

Proceeds from issuances of long-term debt		$	720.4	$	729.7
Proceeds from long-term debt							Proceeds from long-term debt	$	55.0	$	20.0
Payments on long-term debt	Payments on long-term debt	(180.6)		(19.5)			Payments on long-term debt	(19.5)		(14.4)
Changes in current debt							Changes in current debt	(0.2)		—
Net proceeds from borrowings	Net proceeds from borrowings	$	539.8	$	710.2		Net proceeds from borrowings	$	35.3	$	5.6

Net proceeds from borrowings were ~~$539.8~~$35.3 million during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to net proceeds of ~~$710.2~~$5.6 million during the ~~prior-year~~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 $350.0 million (the "Term Loan B Facility"). 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.

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 Revolving Facility was limited to $500.0 million until the Merger was consummated.

Unused borrowing capacity under the amended Credit Agreement was ~~$307.2~~$359.0 million as of ~~September 30, 2022.~~March 31, 2023. We also had availability under our bank overdraft facilities and lines of ~~$1.6~~credit of $2.0 million as of ~~September 30, 2022.~~March 31, 2023.

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 amended Credit Agreement at ~~September 30, 2022.~~March 31, 2023. With the current level of borrowing and forecasted results, we expect to remain in compliance with financial covenants under the amended Credit Agreement.

Our total debt to capital ratios, as calculated under the ~~Amended~~amended Credit Agreement, at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were ~~61.7%~~59.9% and ~~65.1%~~59.0%, respectively.

Critical Accounting Policies and Estimates

The preparation of our unaudited condensed 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.~~2022.

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~~2022 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 ~~September 30, 2022,~~March 31, 2023, 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~~

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"~~"Act") that are subject to the safe harbor created by 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~~any lingering 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, ~~2021,~~2022, 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;~~

•Changes in sales or production volumes, pricing and/or manufacturing costs of paper, specialty packaging, combustible products for the tobacco industry (including conventional papers and certain reduced-risk products) and hemp-based fibers for emerging alternative solutions in our FBS segment. Additionally, competition and changes in ATM end-market products due to changing customer demands;

•~~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;

•Risks associated with acquisitions, dispositions, strategic transactions and global asset realignment initiatives of Mativ;

•Adverse changes in the filtration, release liners, protective solutions, industrials and healthcare sectors impacting key ATM segment customers;

•Changes in the source and intensity of competition in our commercial end-markets: filtration, protective solutions, release liners, healthcare, and industrials for ATM, and packaging and specialty papers and engineered papers (tobacco and alternatives) for FBS;

•Adverse changes in sales or production volumes, pricing and/or manufacturing costs in our ATM or FBS operating segments;

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

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

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

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

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

•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;

•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;

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

•~~Weather~~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;

•Changes in general economic, financial and credit conditions in the U.S., Europe, China and elsewhere, including ~~potential impacts, if~~the impact thereof on currency exchange rates (including any ~~from climate change, known~~weakening of the Euro and ~~unknown,~~Real) and ~~natural disasters or unusual weather events;~~on interest rates;

•~~Seasonal~~ The phasing out of USD LIBOR rates after 2023 and the replacement with SOFR;

•A failure in our risk management and/or ~~cyclical market~~currency or interest rate swaps and ~~industry fluctuations which may result in reduced net sales and operating profits during certain periods;~~hedging programs, including the failures of any insurance company or counterparty;

•Changes in ~~raw material~~the manner in which we finance our debt and ~~energy availability, increases in commodity prices and lack of availability of such commodities,~~future capital needs, including ~~energy, fibers, chemicals, and resins, which could impact the sales and profitability of our products;~~potential acquisitions;

•~~Adverse changes~~Changes in tax rates, the ~~filtration, release liners, protective solutions, construction and infrastructure and healthcare sectors impacting key ATM segment customers;~~adoption of new U.S. or international tax legislation or exposure to additional tax liabilities;

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

•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 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;

•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 that may materially restrict or adversely affect how we conduct business and our ~~financials~~financial results;

•~~New reports as to the effect of smoking on human health or the 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~~Weather 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;~~

•~~The phasing out of USD LIBOR rates after 2023 and the replacement with SOFR;~~

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

•~~Supply chain disruptions, including the failure of one~~impacts, if any, from climate change, known and unknown, and natural disasters or ~~more material suppliers, including energy, resin, fiber, and chemical suppliers, to supply materials as needed to maintain our product plans and cost structure;~~unusual weather events;

•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~~continued evolution of COVID-19, or new public health crises that may arise in the future, could have adverse and ~~extent of further international adoption of LIP cigarette standards~~disparate impacts on the Company, our employees 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;~~customers;

•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;

•Increased scrutiny from stakeholders related to environmental, social and governance ("ESG") matters, particularly our sales of combustible products business within the tobacco industry which represented approximately 17% of the Company's net sales for the three months ended March 31, 2023, as well as our ability to achieve our broader ESG goals and objectives;

•The outcome and cost of the LIP-related intellectual property litigation against Glatz in 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, dispositions, strategic transactions and global asset realignment initiatives 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;~~

•~~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;~~

•~~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, 2022~~March 31, 2023 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, ~~2021.~~2022.

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, 2022,~~March 31, 2023, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective as of ~~September 30, 2022.~~March 31, 2023.

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, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5038

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various legal proceedings and disputes. 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, ~~2021~~2022 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

In 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 our ~~most recent~~ Annual Report on Form 10-K for the fiscal year ended December 31, 2022, 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 disclosed in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 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~~our Common Stock we have repurchased during ~~2022:~~2023 and the remaining amount of share repurchases currently authorized by our Board of Directors as of March 31, 2023:

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 — $ — $ —


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 - 31, 2023	29,491	22.51		—	—		—
February 1 - 28, 2023	24,944	26.59		—	—		—
March 1 - 31, 2023	—	—		—	—		—
Total Year-to-Date 2023	54,435	$	24.37	—	$	—	$	—

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 of our Common Stock, strategic opportunities, strategic outlook, and cash availability. From time-to-time, certain of our officers and directors may sell shares pursuant to personal 10b5-1 plans.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

5240

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						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 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~~Andrew Wamser and the Company, dated as of ~~July 6, 2022 (filed herewith)~~April 3, 2023.
*10.2						Form of P erformance Share Unit Award Agreement (2015 Long-Term Incentive Plan).
*10.3						Form of Restricted Stock Unit Award Agreement (2015 Long-Term Incentive Plan).
*10.4						Amended and Restated Deferred Compensation Plan No. 2 dated as of January 1, 2023.
*10.5						Amended and Restated Deferred Compensation Plan No. 2 for Non-Employee Directors dated as of January 1, 2023.
*21.1						Subsidiaries of the Company.
*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, 2022,~~March 31, 2023, 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 Exhibit 101).

* Filed herewith

5341

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.

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~~May 10, 2023

By:

/s/ ~~Andrew Wamser~~Greg Weitzel

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

~~November 9, 2022~~May 10, 2023

5442


	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)


	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


	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


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
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Foreign exchange contracts	Other income, net	$	0.3	$	(0.3)	$	(0.2)	$	(0.6)


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

Amortizations and other	0.5		0.9			0.1		0.2
Net periodic benefit cost	$	0.1	$	0.6		$	0.9	$	0.6

~~July 6, 2022 - September 30, 2022~~Three Months Ended

March 31, 2023

~~289.8~~287.8

Net ~~loss~~income

~~(5.8)~~2.9