EXHIBIT 99.2
PRESS RELEASE
Contact: Bill Foust Paul Roberts
770-569-4203 770-569-4277
SCHWEITZER-MAUDUIT ANNOUNCES THIRD QUARTER 2003 RESULTS
AND QUARTERLY DIVIDEND
NET INCOME OF $10.5 MILLION AND DILUTED EARNINGS PER SHARE OF $.70
Alpharetta, GA, October 30, 2003.
SUMMARY OF RESULTS
(Amounts in Millions, Except Per Share Amounts)
<Table>
<Caption>
2003 2002
---------------------- ----------------------
Third Quarter YTD Third Quarter YTD
Net Sales $ 142.1 $ 419.5 $ 132.7 $ 380.6
Operating Profit $ 15.2 $ 38.1 $ 15.3 $ 45.4
Net Income $ 10.5 $ 24.1 $ 8.7 $ 25.6
Earnings Per Share - Diluted $ .70 $ 1.60 $ .57 $ 1.68
Average Shares - Diluted 15.1 15.1 15.2 15.2
</Table>
Schweitzer-Mauduit International, Inc. (NYSE:SWM) today reported that third
quarter net income was $10.5 million compared with net income of $8.7 million in
the third quarter of 2002, an increase of 21 percent. Diluted earnings per share
were $.70 compared with diluted earnings per share of $.57 in the prior-year
quarter, a 23 percent increase.
THIRD QUARTER 2003 RESULTS
Wayne H. Deitrich, Chairman of the Board and Chief Executive Officer, said that,
"Schweitzer-Mauduit's operating profit for the third quarter of 2003 was
essentially at the prior-year level. Operating results were unfavorably impacted
by increases in wood pulp, purchased energy and labor expenses and nonrecurring
items in cost of products sold. These negative factors were largely offset by
increased sales and production volumes, higher average selling prices and the
absence of strike-related costs incurred during the prior-year quarter. A lower
effective income tax rate and a decline in interest expense, partially offset by
lower other income, contributed to the year-over-year improvement in diluted
earnings per share."
- more -
Net sales were $142.1 million for the quarter compared with $132.7 million in
the same period a year ago, an increase of 7 percent. The improvement in net
sales was the result of changes in currency exchange rates which contributed
$8.8 million of the net sales gain and higher average selling prices that
increased net sales by $2.0 million. Changes in sales volumes had an unfavorable
impact on the net sales comparison of $1.4 million. The favorable impact of
changes in currency exchange rates reflected the stronger euro and Brazilian
real compared with the U.S. dollar.
Total sales volumes increased by 1 percent for the quarter compared with the
third quarter of 2002. Sales volumes in the United States improved by 3 percent,
primarily attributable to increased sales of commercial and industrial papers.
Sales volumes in France improved by less than 1 percent, as a result of gains in
the sale of tobacco-related papers. Sales volumes for the Brazilian business
declined by 4 percent, with a decrease in the sales of tobacco-related papers.
Operating profit was $15.2 million for the quarter, down $100,000 from the $15.3
million operating profit for the third quarter of 2002.
The average per ton list price of northern bleached softwood kraft pulp in the
United States was $550 per metric ton in the third quarter of 2003 compared with
$510 per metric ton in the third quarter of 2002. The increase in per ton wood
pulp costs increased the Company's operating expenses by $1.3 million compared
with the prior-year quarter. Purchased energy costs increased by $600,000
compared with the third quarter of 2002, with higher energy costs experienced in
each of our business units related primarily to higher natural gas and fuel oil
costs.
During the third quarter of 2003, pre-operating expenses totaling $500,000 were
incurred related to the new reconstituted tobacco leaf production line in
France. In addition, the U.S. business incurred $800,000 in costs related to the
removal of decommissioned underground storage tanks. During the third quarter of
2002, the Company incurred an unfavorable pre-tax impact of approximately $2
million related to a strike of its hourly employees at its Spotswood, New Jersey
paper mill.
Nonmanufacturing expenses were $100,000 higher than in the prior-year quarter,
as increased selling expenses in France were largely offset by a decline in
research and general expenses.
Operating profit in Brazil declined by $1.2 million compared with the third
quarter of 2002, attributable to lower production and sales volumes and higher
wood pulp, purchased energy and material expenses, partially offset by higher
average selling prices. Operating profit for the French businesses was $300,000
more than in the prior-year quarter as a result of increased production and
sales volumes, higher average selling prices and improved mill operations,
largely offset by increased wood pulp, purchased energy and labor expenses and
pre-operating expenses related to the new reconstituted tobacco leaf production
line. Operating profit for the United States was $400,000 higher than in the
third quarter of 2002, as a result of increased sales volumes, lower
nonmanufacturing expenses and the absence of the prior-year strike-related
costs. These positive factors in the United States were partially offset by
increased wood pulp, purchased energy and labor expenses and underground storage
tank removal costs.
Interest expense was $500,000 less than the prior-year quarter as a result of
lower interest rates and interest capitalized to capital projects. Other income
was $500,000 unfavorable compared with the third quarter of 2002, primarily
attributable to a decline in foreign currency gains.
- more -
The effective income tax rate was 22.7 percent for the quarter, compared with
34.2 percent in the third quarter of 2002. The current quarter's effective
income tax rate was lower primarily due to a reduction in valuation allowances
on deferred income tax assets resulting largely from changes in estimates of the
Company's ability to utilize foreign tax credits in the United States. These
changes were the result of implementing certain U.S. tax elections, including
the conversion from Last-In, First-Out (LIFO) to First-In, First-Out (FIFO)
inventory valuation for tax purposes. The Company's ongoing effective income tax
rate is expected to be approximately 30 percent in the fourth quarter of 2003
and in 2004.
YEAR-TO-DATE RESULTS
During the first nine months of 2003, net sales were $419.5 million, a 10
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 $30.5 million. Total sales volumes increased by 2 percent compared with the
prior year, contributing $5.0 million to the net sales improvement. Sales
volumes for the French businesses increased by 3 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 $3.4 million
during the first three quarters of 2003.
Operating profit for the first nine months of 2003 totaled $38.1 million, a $7.3
million, or 16 percent, decrease from $45.4 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. In
addition, pre-operating expenses totaling $1.2 million related to the new
reconstituted tobacco leaf production line in France were incurred in 2003, as
well as $800,000 in costs related to the removal of underground storage tanks in
the United States. These unfavorable factors were partially offset by the
impacts of increased sales volumes, higher average selling prices and the
absence of approximately $3 million in strike-related costs incurred during the
prior year. Interest expense was $1.3 million lower during the first nine months
of 2003 compared with the prior-year period. Other income was $2.1 million
unfavorable compared with the prior year as a result of foreign currency losses
and lower interest income. The effective income tax rate was 23.4 percent for
the first nine months of 2003 compared with 34.2 percent for the prior-year
period.
Year-to-date net income in 2003 was $24.1 million compared with net income of
$25.6 million in the first nine months of 2002. Diluted earnings per share were
$1.60 for the first nine months of 2003 compared with $1.68 for the prior-year
first nine months.
CASH FLOW ITEMS AND QUARTERLY DIVIDEND
Capital spending was $34.2 million during the third quarter of 2003 compared
with $9.2 million during the prior-year quarter. Year-to-date 2003 capital
spending was $61.2 million, compared with $17.3 million for the first nine
months of 2002. Capital spending for the new reconstituted tobacco leaf
production line in France totaled $28.2 million during the third quarter of 2003
and $45.2 million year-to-date. Capital spending for this project totaled $4.3
million during the first nine months of 2002, with $3.9 million of the spending
occurring during the third quarter.
During the third 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 has
been accelerated and start-up is expected to occur during the fourth quarter of
2003. Capital spending for the new reconstituted tobacco leaf
- more -
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 of 2003, 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. Capital spending of $500,000 has been incurred to-date related to these
two projects.
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.
Earlier this month, Schweitzer-Mauduit announced that an agreement has been
finalized whereby one of its subsidiaries will acquire a specialty paper
manufacturer located in Indonesia for a purchase price of $8.5 million, subject
to working capital adjustments. The transaction is subject to governmental
approvals and is expected to close within the next 90 days.
During the third quarter of 2003, Schweitzer-Mauduit did not repurchase any
shares of its common stock. During the first nine months of the year, 221,700
shares of the Company's common stock were repurchased at a total cost of $5.1
million.
Schweitzer-Mauduit also announced a quarterly common stock dividend of $.15 per
share. The dividend will be payable on December 15, 2003 to stockholders of
record on November 17, 2003.
BUSINESS COMMENTS
Mr. Deitrich added, "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, the acquisition in
Indonesia and anticipated increased sales of reduced ignition propensity
cigarette paper are expected to benefit 2004 and subsequent periods. We still
expect diluted earnings per share for 2003 to be in the range of $2.05 to $2.15.
We also anticipate diluted earnings per share for 2004 to increase by at least
10 percent compared with the range of earnings projected for 2003, largely
driven by the benefits of the new reconstituted tobacco leaf production
capacity.
"We continue to face various cost pressures, although we were able to
successfully offset increased costs during the third quarter. Higher wood pulp,
purchased energy, labor rate, pension and insurance expenses continue to be
incurred by our businesses. With the start-up of the new reconstituted tobacco
leaf production capacity during 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 during the quarter. Per ton wood pulp costs are expected to be
somewhat higher in the fourth quarter than in the third quarter of the year.
"The Company did not have significant production or sales of reduced ignition
propensity cigarette paper during the third quarter as cigarette manufacturers
have not yet finalized their plans for the use of these products. During the
quarter, the State of New York announced new proposed fire safety standards for
cigarettes. The comment period for these proposed standards
- more -
is scheduled to end in early November. These proposed standards call for
implementation 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 quarters of 2004. We continue our efforts to
support our customers' plans and requirements for cigarette papers used to meet
these anticipated fire safety standards for cigarettes."
Schweitzer-Mauduit will hold a conference call to review third quarter 2003
results with investors and analysts at 10:30 a.m. eastern time on Thursday,
October 30, 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 3,400 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,
pre-operating and start-up costs, banded and print banded cigarette paper sales
volumes, the Indonesian acquisition, benefits of the new reconstituted tobacco
leaf production capacity, 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.
- more -
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
Unaudited 2003 2002 Change
- ------------------------------------------------------------------------------------------------------------------------
Net Sales $ 142.1 $ 132.7 + 7.1 %
Cost of products sold 114.8 105.4 + 8.9
-------------- --------------
Gross Profit 27.3 27.3 --
Selling expense 5.5 4.9 + 12.2
Research expense 1.7 2.0 - 15.0
General expense 4.9 5.1 - 3.9
-------------- --------------
Operating Profit 15.2 15.3 - 0.7
Interest expense 0.3 0.8 - 62.5
Other income, net 0.5 1.0 - 50.0
-------------- --------------
Income Before Income Taxes and
Minority Interest 15.4 15.5 - 0.6
Provision for income taxes (See Note 1) 3.5 5.3 - 34.0
-------------- --------------
Income Before Minority Interest 11.9 10.2 + 16.7
Minority interest in earnings of subsidiaries 1.4 1.5 - 6.7
-------------- --------------
Net Income $ 10.5 $ 8.7 + 20.7 %
============== ==============
Net Income Per Share:
Basic $ 0.71 $ 0.58 + 22.4 %
============== ==============
Diluted $ 0.70 $ 0.57 + 22.8 %
============== ==============
Dividends Declared Per Share $ 0.15 $ 0.15
============== ==============
Average Common Shares Outstanding:
Basic 14,688,100 14,879,500
============== ==============
Diluted, including Common Share Equivalents 15,080,600 15,196,600
============== ==============
</Table>
See Note to Unaudited Financial Summaries
- more -
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
Unaudited 2003 2002 Change
- ---------------------------------------------------------------------------------------------------------------------
Net Sales $ 419.5 $ 380.6 + 10.2 %
Cost of products sold 341.9 298.9 + 14.4
-------------- --------------
Gross Profit 77.6 81.7 - 5.0
Selling expense 16.6 14.8 + 12.2
Research expense 5.9 5.5 + 7.3
General expense 17.0 16.0 + 6.3
-------------- --------------
Operating Profit 38.1 45.4 - 16.1
Interest expense 1.6 2.9 - 44.8
Other income, net (0.2) 1.9 N.M.
-------------- --------------
Income Before Income Taxes and
Minority Interest 36.3 44.4 - 18.2
Provision for income taxes (See Note 1) 8.5 15.2 - 44.1
-------------- --------------
Income Before Minority Interest 27.8 29.2 - 4.8
Minority interest in earnings of subsidiaries 3.7 3.6 + 2.8
-------------- --------------
Net Income $ 24.1 $ 25.6 - 5.9 %
============== ==============
Net Income Per Share:
Basic $ 1.63 $ 1.72 - 5.2 %
============== ==============
Diluted $ 1.60 $ 1.68 - 4.8 %
============== ==============
Dividends Declared Per Share $ 0.45 $ 0.45
============== ==============
Average Common Shares Outstanding:
Basic 14,752,200 14,840,400
============== ==============
Diluted, including Common Share Equivalents 15,107,100 15,228,100
============== ==============
</Table>
N.M. - Not Meaningful
See Note to Unaudited Financial Summaries
- more -
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. $ IN MILLIONS)
<Table>
<Caption>
September 30, December 31,
Unaudited 2003 2002
- -----------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 7.5 $ 15.3
Accounts receivable 84.5 69.4
Inventories 78.0 74.1
Other current assets 9.8 7.5
Net property, plant and equipment 369.3 307.3
Deferred charges and other assets 23.9 17.6
-------- --------
Total Assets $ 573.0 $ 491.2
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Short-term debt and current
portion of long-term debt $ 25.8 $ 9.9
Other current liabilities 129.3 108.1
Long-term debt 54.8 37.4
Noncurrent deferred income tax liabilities 23.8 17.0
Noncurrent deferred revenue 44.2 48.0
Noncurrent pension and other postretirement benefits 42.8 47.3
Other noncurrent liabilities 15.3 12.6
Minority interest 7.9 13.4
Stockholders' equity 229.1 197.5
-------- --------
Total Liabilities and Stockholders' Equity $ 573.0 $ 491.2
======== ========
</Table>
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(U.S. $ IN MILLIONS)
<Table>
<Caption>
Unaudited 2003 2002
- ---------------------------------------------------------------------------------------------------------
Net income $ 24.1 $ 25.6
Depreciation and amortization 22.2 19.8
Amortization of deferred revenue (4.1) (4.2)
Deferred income tax provision 1.3 6.5
Minority interest in earnings of subsidiaries 3.7 3.6
Other items (3.8) (2.3)
Net changes in operating working capital 1.3 (3.6)
-------- --------
Cash Provided by Operations 44.7 45.4
-------- --------
Capital spending (61.2) (17.3)
Capitalized software costs (2.9) (0.8)
Other investing 2.7 (4.7)
-------- --------
Cash Used for Investing (61.4) (22.8)
-------- --------
Cash dividends paid to SWM stockholders (6.7) (6.7)
Cash dividends paid to minority owners (10.4) --
Purchases of treasury stock (5.1) --
Changes in debt 30.7 (51.9)
Other financing 0.4 1.8
-------- --------
Cash Provided by (Used for) Financing 8.9 (56.8)
-------- --------
Decrease in Cash and Cash Equivalents $ (7.8) $ (34.2)
======== ========
</Table>
See Note to Unaudited Financial Summaries
- more -
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.
In the third quarter of 2003, the Company recorded adjustments to
deferred income tax valuation allowances recorded against deferred tax
assets. These adjustments were largely a result of changes in estimates
of the Company's ability to utilize foreign tax credits in the United
States. These changes were the result of implementing certain U.S. tax
elections, including the conversion from Last-In, First-Out (LIFO) to
First-In, First-Out (FIFO) inventory valuation for tax purposes. These
adjustments reduced the provision for income taxes, benefiting third
quarter net income by $1.0 million, or $.07 per share.
###