EXHIBIT 99.2
PRESS RELEASE
Contact: Bill Foust Paul Roberts
770-569-4203 770-569-4277
SCHWEITZER-MAUDUIT ANNOUNCES SECOND QUARTER 2003 RESULTS
AND QUARTERLY DIVIDEND
NET INCOME OF $7.1 MILLION AND DILUTED EARNINGS PER SHARE OF $.47
Alpharetta, GA, July 31, 2003.
SUMMARY OF RESULTS
(Amounts in Millions, Except Per Share Amounts)
2003 2002
------------------------- --------------------------
Second Quarter YTD Second Quarter YTD
Net Sales $141.7 $277.4 $125.5 $247.9
Operating Profit $ 10.8 $ 22.9 $ 14.9 $ 30.1
Net Income $ 7.1 $ 13.6 $ 8.3 $ 16.9
Earnings Per Share - Diluted $ .47 $ .90 $ .54 $ 1.11
Average Shares - Diluted 15.0 15.1 15.4 15.2
Schweitzer-Mauduit International, Inc. (NYSE:SWM) today reported that second
quarter net income was $7.1 million compared with net income of $8.3 million in
the second quarter of 2002, a decline of 14 percent. Diluted earnings per share
were $.47 compared with diluted earnings per share of $.54 in the prior-year
quarter, a 13 percent decrease.
SECOND QUARTER 2003 RESULTS
Wayne H. Deitrich, Chairman of the Board and Chief Executive Officer, said that,
"Schweitzer-Mauduit's financial results for the second quarter of 2003 were
unfavorably impacted by increases in wood pulp, purchased energy, labor and
nonmanufacturing expenses. In addition, unfavorable changes in currency exchange
rates lowered operating profit and contributed to an unfavorable impact in other
income. Operating results were also unfavorably impacted by work stoppages in
France, primarily to demonstrate hourly employees' sympathy with general strikes
over the national pension issues in that country. These negative factors were
partially offset by increased sales and production volumes in France, higher
average selling prices and a lower effective income tax rate."
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Net sales were $141.7 million for the quarter compared with $125.5 million in
the same period a year ago, an increase of 13 percent. The improvement in net
sales was the result of changes in currency exchange rates which contributed
$11.5 million of the net sales gain, increased sales volumes which added $3.0
million to the net sales comparison and higher average selling prices that
increased net sales by $1.7 million. The favorable impact of changes in currency
exchange rates reflected the stronger euro compared with the U.S. dollar,
partially offset by the weaker Brazilian real.
Total sales volumes increased by 2 percent for the quarter compared with the
second quarter of 2002. Sales volumes in France improved by 3 percent, with
gains in all major grades of tobacco-related papers and in reconstituted tobacco
leaf products. Sales volumes in the United States improved by 2 percent,
primarily attributable to increased sales of commercial and industrial papers.
Sales volumes for the Brazilian business declined by 4 percent, with a decrease
in the sales of tobacco-related papers.
Operating profit was $10.8 million for the quarter, down $4.1 million or 28
percent from the $14.9 million operating profit for the second quarter of 2002.
The average per ton list price of northern bleached softwood kraft pulp in the
United States was $580 per metric ton in the second quarter of 2003 compared
with $480 per metric ton in the second quarter of 2002. The increase in per ton
wood pulp costs increased the Company's operating expenses by $2.4 million
compared with the prior-year quarter. Purchased energy costs increased by $1.1
million compared with the second quarter of 2002, with higher energy costs
experienced in each of our business units related primarily to higher natural
gas and fuel oil costs.
The work stoppages in France had an unfavorable impact of approximately $1.4
million on second quarter operating profit. During the second quarter of 2002,
the Company incurred an unfavorable pre-tax impact of approximately $1 million
related to a strike of its hourly employees at its Spotswood, New Jersey paper
mill.
Nonmanufacturing expenses were $1.8 million higher than in the prior-year
quarter, primarily attributable to an unfavorable translation impact on expenses
in the French businesses related to the stronger euro versus the U. S. dollar
and inflationary cost increases.
Operating profit for the French businesses was $1.8 million less than in the
prior-year quarter as a result of increased wood pulp, purchased energy and
labor expenses, the labor stoppages in France, nonmanufacturing costs and
currency exchange rate changes. These unfavorable factors were partially offset
by increased production and sales volumes and higher average selling prices.
Operating profit in Brazil declined by $1.3 million compared with the second
quarter of 2002, attributable to lower production and sales volumes and higher
wood pulp, purchased energy and nonmanufacturing costs, partially offset by
higher average selling prices. Operating profit for the United States was $0.9
million lower than in the second quarter of 2002, with increased wood pulp,
purchased energy and labor expenses, while average selling prices were
approximately at the prior-year level. Operating profit for the United States
was unfavorably impacted by approximately $1 million in the second quarter of
2002 related to the Spotswood mill strike.
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Other income was $1.4 million unfavorable compared with the prior-year quarter,
primarily attributable to foreign currency losses related to the impact of
changes in the euro and the Brazilian real versus the U.S. dollar on non-local
currency denominated assets and liabilities in foreign subsidiaries of the
Company. Including the net impacts on operating profit, interest expense, other
income, minority interest and income taxes, currency exchange rates had a total
unfavorable impact on the second quarter 2003 financial results of approximately
$.10 per share compared with the second quarter of 2002.
The effective income tax rate was 12.0 percent for the quarter, compared with
34.3 percent in the second quarter of 2002. The current-year effective income
tax rate was lowered by a net reduction in valuation allowances related to
deferred income tax assets due to the final settlement in the second quarter of
prior-period tax audit assessments in the Company's French operations and
changes in estimates of its U.S. income tax situation. This net reduction in
valuation allowances reduced the provision for income taxes and increased net
income by $1.7 million, or $.11 per share, in the quarter. Excluding this
reduction in valuation allowances, the effective income tax rate for the quarter
would have been 30.4 percent.
YEAR-TO-DATE RESULTS
Net sales were $277.4 million for the first six months of 2003, a 12 percent
increase compared with 2002. Changes in currency exchange rates, primarily
related to a stronger euro versus the U.S. dollar, increased net sales by $21.7
million. Total sales volumes increased by 2 percent compared with the prior
year, contributing $6.4 million to the net sales improvement. Sales volumes for
the French businesses increased by 4 percent, U.S. sales volumes increased by 2
percent and sales volumes for the Brazilian business declined by 3 percent.
Higher average selling prices increased net sales by $1.4 million during the
first half of 2003.
Operating profit for the first six months of 2003 totaled $22.9 million, a $7.2
million, or 24 percent, decrease from $30.1 million in the comparable prior-year
period. Year-to-date operating profit in 2003 was unfavorably affected by
increased wood pulp, purchased energy, labor and nonmanufacturing expenses.
These unfavorable factors were partially offset by the impacts of increased
sales volumes and higher average selling prices. Other income was $1.6 million
unfavorable during the first six months of 2003 compared with the prior-year
period as a result of foreign currency losses. The effective income tax rate was
23.9 percent for the first six months of 2003 compared with 34.3 percent for the
prior-year period. Excluding the second quarter net reduction in valuation
allowances, the effective income tax rate for the first six months of 2003 would
have been 32.1 percent.
Year-to-date net income in 2003 was $13.6 million compared with net income of
$16.9 million in the first half of 2002. Diluted earnings per share were $0.90
for the first six months of 2003 compared with $1.11 for the prior-year first
six months.
CASH FLOW ITEMS AND QUARTERLY DIVIDEND
Capital spending was $15.6 million during the second quarter of 2003 compared
with $5.2 million during the prior-year quarter. Year-to-date 2003 capital
spending was $27.0 million, compared with $8.1 million for the first six months
of 2002. Capital spending for the new reconstituted tobacco leaf production line
in France totaled $10.2 million during the second quarter of 2003 and $17.0
million during the first half of the year.
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During the second quarter of 2003, excellent progress continued on the project
to install the new reconstituted tobacco leaf production line at the LTR
Industries S.A. mill in Spay, France. In response to market requirements, this
project is being accelerated and start-up is anticipated during the fourth
quarter of 2003. Capital spending for the new reconstituted tobacco leaf
production line is projected to total approximately $60 million in 2003, with a
total capital cost of this project of approximately $70 million.
During the second quarter, the Company's new cigarette paper manufacturing
strategy was announced. In support of this strategy, $10.5 million of capital
will be spent to rebuild an idle cigarette paper machine and supporting
equipment at Schweitzer-Mauduit do Brasil and $4.3 million of capital spending
will be incurred to rebuild a cigarette paper machine at the Company's Spotswood
paper mill. These capital projects will be completed by the end of 2004. The
paper machine rebuilds will result in improved product quality and machine
productivity and will facilitate the Company's global sourcing of cigarette
paper.
Including capital spending necessary to implement the new cigarette paper
manufacturing strategy and to install the new reconstituted tobacco leaf
production line, the Company's capital spending is expected to be approximately
$90 million in 2003 and $35 million in 2004.
During the second quarter of 2003, Schweitzer-Mauduit repurchased 107,600 shares
of its common stock for $2.4 million. During the first six months of 2003,
221,700 shares of the Company's common stock were repurchased at a total cost of
$5.1 million. The Company is currently reviewing its share repurchase and
dividend strategies in light of the recently reduced individual income tax rates
on U.S. corporate dividends.
Schweitzer-Mauduit also announced a quarterly stock dividend of $.15 per share.
The dividend will be payable on September 15, 2003 to stockholders of record on
August 18, 2003.
BUSINESS COMMENTS
Mr. Deitrich added, "Continuing cost pressures contributed to the decline in
operating results during the second quarter. Higher wood pulp, purchased energy,
labor rate, pension and insurance expenses were incurred by our businesses. We
typically experience a lag in our ability to recover such cost increases.
"The Company did not have significant production or sales of reduced ignition
propensity cigarette paper during the second quarter as cigarette manufacturers
have not yet finalized their plans for the use of this product. On June 30,
2003, the State of New York filed a Notice of Continuation to delay action on
reduced ignition propensity cigarettes for up to six months. We understand that
the New York Secretary of State is working to file a Notice of Rule Change as
quickly as possible to finalize fire safety standards for cigarettes. These
standards will be implemented 180 days after they are issued. Our expectation is
that this may result in increased sales of reduced ignition propensity cigarette
papers beginning in the second or third quarter of 2004. We continue our efforts
to support our customers' plans and requirements for banded and print banded
cigarette papers used to meet these anticipated fire safety standards for
cigarettes.
"The Company's financial results for the second half of 2003 are expected to
improve compared with the Company's first half performance. Per ton wood pulp
costs are expected to be lower in the third quarter than in the second quarter
of the year. The work stoppages experienced in France during the second quarter
are not expected to reoccur. Selective price increases are being implemented in
the third quarter and improved mill operations are expected. With the start-up
of
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the new reconstituted tobacco leaf capacity now planned for the fourth quarter,
the additional profit contribution projected from added reconstituted tobacco
leaf sales volumes in that quarter is expected to more than offset anticipated
pre-operating and start-up costs to be incurred in the second half of the year.
However, several cost pressures are expected to continue during the second half
of 2003, compared with the comparable prior-year period. Accordingly, we are now
expecting diluted earnings per share for 2003 to be in the range of $2.05 to
$2.15.
"We continue to consider 2003 a transition year for Schweitzer-Mauduit. The
increase in reconstituted tobacco leaf production capacity, the new cigarette
paper manufacturing strategy and increased sales of reduced ignition propensity
cigarette paper are expected to benefit 2004 and subsequent periods."
Schweitzer-Mauduit will hold a conference call to review second quarter 2003
results with investors and analysts at 10:30 a.m. eastern time on Thursday, July
31, 2003. The conference call will be simultaneously broadcast over the World
Wide Web at www.schweitzer-mauduit.com. To listen to the call, please go to the
Web site at least fifteen minutes prior to the call to register and to download
and install any necessary audio software. For those unable to listen to the live
broadcast, a replay will be available on the Web site shortly after the call.
Schweitzer-Mauduit International, Inc. is a diversified producer of premium
specialty papers and the world's largest supplier of fine papers to the tobacco
industry. It also manufactures specialty papers for use in alkaline batteries,
vacuum cleaner bags, overlay products, business forms and printing and packaging
applications. Schweitzer-Mauduit and its subsidiaries conduct business in over
90 countries and employ 3,300 people worldwide, with operations in the United
States, France, Brazil and Canada. For further information, please visit the
Company's Web site at www.schweitzer-mauduit.com.
Certain comments contained in this news release concerning the business outlook
and anticipated financial and operating results of the Company constitute
"forward-looking statements," generally identified by phrases such as the
Company "expects" or "anticipates" or words of similar effect, within the
meaning of the Private Securities Litigation Reform Act of 1995 and are subject
to the safe harbor created by that Act. The forward-looking statements are based
on information currently available to the Company and are based upon
management's expectations and beliefs concerning future events and factors
impacting the Company, including sales and production volumes, selling prices,
mill operations, downtime and start-up costs, banded and print banded cigarette
paper sales volumes, pulp, energy, pension and insurance expenses and capital
spending. There can be no assurances that such factors or future events will
occur as anticipated or that the Company's results will be as estimated. Many
factors outside the control of the Company could also impact the realization of
such estimates. Such factors are discussed in more detail in the Company's
latest filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended December 31, 2002.
Except as required by federal securities laws, the Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, changed circumstances or any
other reasons, after the date of this news release.
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SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
(U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Unaudited 2003 2002 Change
- -----------------------------------------------------------------------------------------------------
Net Sales $ 141.7 $ 125.5 + 12.9%
Cost of products sold 116.8 98.3 + 18.8
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Gross Profit 24.9 27.2 - 8.5
Selling expense 5.7 5.1 + 11.8
Research expense 2.2 1.6 + 37.5
General expense 6.2 5.6 + 10.7
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Operating Profit 10.8 14.9 - 27.5
Interest expense 0.6 1.0 - 40.0
Other income, net (1.0) 0.4 N.M.
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Income Before Income Taxes and
Minority Interest 9.2 14.3 - 35.7
Provision for income taxes (See Note 1) 1.1 4.9 - 77.6
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Income Before Minority Interest 8.1 9.4 - 13.8
Minority interest in earnings of subsidiaries 1.0 1.1 - 9.1
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Net Income $ 7.1 $ 8.3 - 14.5%
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Net Income Per Share:
Basic $ 0.48 $ 0.56 - 14.3%
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Diluted $ 0.47 $ 0.54 - 13.0%
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Dividends Declared Per Share $ 0.15 $ 0.15
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Average Common Shares Outstanding:
Basic 14,721,300 14,850,200
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Diluted, including Common Share Equivalents 15,035,500 15,357,500
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N.M. - Not Meaningful
See Note to Unaudited Financial Summaries
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SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
(U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Unaudited 2003 2002 Change
- -------------------------------------------------------------------------------------------------------
Net Sales $ 277.4 $ 247.9 + 11.9%
Cost of products sold 227.1 193.5 + 17.4
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Gross Profit 50.3 54.4 - 7.5
Selling expense 11.1 9.9 + 12.1
Research expense 4.2 3.5 + 20.0
General expense 12.1 10.9 + 11.0
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Operating Profit 22.9 30.1 - 23.9
Interest expense 1.3 2.1 - 38.1
Other income, net (0.7) 0.9 N.M.
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Income Before Income Taxes and
Minority Interest 20.9 28.9 - 27.7
Provision for income taxes (See Note 1) 5.0 9.9 - 49.5
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Income Before Minority Interest 15.9 19.0 - 16.3
Minority interest in earnings of subsidiaries 2.3 2.1 + 9.5
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Net Income $ 13.6 $ 16.9 - 19.5%
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Net Income Per Share:
Basic $ 0.92 $ 1.14 - 19.3%
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Diluted $ 0.90 $ 1.11 - 18.9%
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Dividends Declared Per Share $ 0.30 $ 0.30
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Average Common Shares Outstanding:
Basic 14,784,500 14,820,500
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Diluted, including Common Share Equivalents 15,115,800 15,243,500
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N.M. - Not Meaningful
See Note to Unaudited Financial Summaries
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SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. $ IN MILLIONS)
June 30, December 31,
Unaudited 2003 2002
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ASSETS
Cash and cash equivalents $ 6.7 $ 15.3
Accounts receivable 83.0 69.4
Inventories 75.3 74.1
Other current assets 12.4 7.5
Net property, plant and equipment 339.3 307.3
Deferred charges and other assets 20.4 17.6
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Total Assets $ 537.1 $ 491.2
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LIABILITIES & STOCKHOLDERS' EQUITY
Short-term debt and current
portion of long-term debt $ 19.7 $ 9.9
Other current liabilities 113.4 108.1
Long-term debt 52.8 37.4
Noncurrent deferred income tax liabilities 21.2 17.0
Noncurrent deferred revenue 45.3 48.0
Noncurrent pension and other postretirement benefits 45.2 47.3
Other noncurrent liabilities 13.8 12.6
Minority interest 6.4 13.4
Stockholders' equity 219.3 197.5
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Total Liabilities and Stockholders' Equity $ 537.1 $ 491.2
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SCHWEITZER-MAUDUIT INTERNATIONAL, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30,
(U.S. $ IN MILLIONS)
Unaudited 2003 2002
- ------------------------------------------------------------------------------
Net income $ 13.6 $ 16.9
Depreciation and amortization 14.6 13.0
Amortization of deferred revenue (2.8) (2.7)
Deferred income tax provision 0.9 5.5
Minority interest in earnings of subsidiaries 2.3 2.1
Other items (1.5) 1.3
Net changes in operating working capital (13.7) (22.6)
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Cash Provided by Operations 13.4 13.5
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Capital spending (27.0) (8.1)
Capitalized software costs (1.7) (0.6)
Other investing 3.3 (1.0)
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Cash Used for Investing (25.4) (9.7)
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Cash dividends paid to SWM stockholders (4.5) (4.5)
Cash dividends paid to minority owners (10.4) --
Purchases of treasury stock (5.1) --
Changes in debt 23.1 (46.2)
Other financing 0.3 1.8
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Cash Provided by (Used for) Financing 3.4 (48.9)
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Decrease in Cash and Cash Equivalents $ (8.6) $ (45.1)
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See Note to Unaudited Financial Summaries
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SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
NOTE TO UNAUDITED FINANCIAL SUMMARIES
(1) In the second quarter of 2003, the Company recorded adjustments to
deferred income tax valuation allowances recorded against deferred tax
assets. These adjustments were recorded as a result of changes in the
Company's expectations as to the realization of such assets due to the
final settlement in the second quarter of prior-period tax audit
assessments in the Company's French operations and changes in estimates of
its U.S. income tax situation. The net of these adjustments reduced the
provision for income taxes, benefiting second quarter net income by $1.7
million, or $.11 per share.
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