UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to........

Commission file number 1-13948
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 62-1612879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

100 NORTH POINT CENTER EAST, SUITE 600 30202-8246
ALPHARETTA, GEORGIA (Zip Code)
(Address of principal executive offices)

(Registrant's telephone number, including area code): 1-800-514-0186

Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS:
- --------------------
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
-----------------------------------------

Common stock, par value $.10 per share New York Stock Exchange, Inc.
(together with associated preferred stock
purchase rights)

Securities registered pursuant to Section 12(g) of the Act:
None

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 X No .
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]

As of December 31, 1996, 16,052,621 shares of the Corporation's common stock,
par value $.10 per share, together with preferred stock purchase rights
associated therewith, were outstanding, and the aggregate market value of the
common stock on such date (based on the closing price of these shares on the New
York Stock Exchange) held by non-affiliates was approximately $508 million.

(Continued)

FACING SHEET
(Continued)

DOCUMENTS INCORPORATED BY REFERENCE

Schweitzer-Mauduit International, Inc.'s 1996 Annual Report to Stockholders and
1997 Proxy Statement, filed with the Commission dated March 19, 1997, contain
much of the information required in this Form 10-K, and portions of those
documents are incorporated by reference herein from the applicable sections
thereof. The following chart identifies the sections of this Form 10-K which
incorporate by reference portions of the Company's 1996 Annual Report to
Stockholders and 1997 Proxy Statement. The Items of this Form 10-K, where
applicable, specify which portions of such documents are incorporated by
reference. The portions of such documents that are not incorporated by reference
shall not be deemed to be filed with the Commission as part of this Form 10-K.

DOCUMENT OF WHICH PORTIONS ITEMS OF THIS FORM 10-K
ARE INCORPORATED BY REFERENCE IN WHICH INCORPORATED
- ----------------------------- -----------------------

1996 Annual Report to Stockholders (for Part I
the year ended December 31, 1996)
Item 1. Business

Item 3. Legal Proceedings

Part II

Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations

Item 8. Financial Statements and Supplementary Data

Part IV

Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K

1997 Proxy Statement Part III

Item 10. Directors and Executive Officers of the
Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial
Owners and Management

Item 13. Certain Relationships and Related
Transactions

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
TABLE OF CONTENTS

PART I.

Item 1. BUSINESS.............................................................. 4

Item 2. PROPERTIES............................................................ 10

Item 3. LEGAL PROCEEDINGS..................................................... 12

Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.............................................. 15

PART II.

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS.................................. 16

Item 6. SELECTED FINANCIAL DATA............................................... 16

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................... 16

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................... 16

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........................... 16

PART III.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................... 17

Item 11. EXECUTIVE COMPENSATION................................................ 17

Item 12. SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................... 17

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................ 17

PART IV.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.............................................. 18

SIGNATURES............................................................ 19

INDEX TO EXHIBITS..................................................... 20

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PART I

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ITEM 1. BUSINESS

BACKGROUND

Schweitzer-Mauduit International, Inc. ("SWM" or the "Company") was incorporated
in Delaware on August 21, 1995 as a wholly-owned subsidiary of Kimberly-Clark
Corporation ("Kimberly-Clark") for the purpose of effectuating the tax-free
spin-off of Kimberly-Clark's U.S., French and Canadian business operations that
manufacture and sell tobacco-related papers and other specialty paper products
(the "Businesses"). Pursuant to a distribution agreement dated October 23, 1995,
Kimberly-Clark agreed to distribute in the form of a dividend to its
stockholders all of the common stock of SWM and on November 30, 1995, each
Kimberly-Clark stockholder of record on November 13, 1995 received one share of
SWM common stock for every ten shares of Kimberly-Clark common stock held on the
date of record (the "Distribution"). As a result of the Distribution, SWM became
an independent public company.

Financial information about foreign and domestic operations, contained under the
caption "Management's Discussion and Analysis - Results of Operations" and in
Note 15 to Consolidated Financial Statements contained in the 1996 Annual Report
to Stockholders, are incorporated in this Item 1 by reference.

DESCRIPTION OF THE BUSINESS

GENERAL. The Company manufactures and sells paper and reconstituted tobacco
products to the tobacco industry as well as specialized paper products for use
in other applications. Tobacco industry products, which comprised 94 percent of
the Company's 1996 net sales, include cigarette, tipping and plug wrap papers
used to wrap various parts of a cigarette ("Cigarette Papers"), reconstituted
tobacco wrappers and binders for cigars, and reconstituted tobacco leaf for use
as filler in cigarettes and cigars. These products are sold directly to the
major tobacco companies or their designated converters in North America, Western
Europe, China, and elsewhere.

Non-tobacco industry products accounted for six to seven percent of the
Company's net sales in 1996, 1995 and 1994. These products included drinking
straw wrap, lightweight printing papers, tea bag, coffee and other filter
papers, battery separator paper and other specialized papers primarily for the
North American and Western European markets. These products are generally sold
directly to converters and other end-users. In 1996, the Company phased out its
production of tea bag and coffee filter papers to focus on its core market
growth opportunities.

PRODUCTS. Each of the three principal types of paper used in cigarettes -
cigarette, tipping and plug wrap papers - serves a distinct purpose in the
function of a cigarette.

Cigarette paper wraps the column of tobacco in a cigarette. Certain properties
of cigarette paper, such as basis weight, porosity, opacity, tensile strength,
texture and whiteness must be closely controlled to tight tolerances. Many of
these characteristics are critical to meet runnability standards of the
high-speed cigarette machines utilized by premium cigarette manufacturers.

Plug wrap paper forms the outer layer of a cigarette filter and is used to hold
the filter materials in a cylindrical form. Conventional plug wrap is
manufactured on flat wire paper machines using wood pulp. Porous plug wrap, a
highly porous paper, is manufactured on inclined wire paper machines from "long
fibers", such as abaca and wood pulp. Porosity ranges from a typical level of
less than 100 Coresta on conventional plug wrap to 35,000 Coresta on high
porosity papers. High porosity plug wrap is sold under the registered trademark
POROWRAP(R) and is used on filter ventilated cigarettes. High porosity papers
can also be used for such specialty products as battery separator paper.

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Tipping paper, produced in white or buff color, joins the cigarette's filter
element to the tobacco section of the cigarette. The ability to produce tipping
paper which is both printable and glueable at high speeds is critical to
producing a cigarette with a distinctive finished appearance.

Reconstituted tobacco is used by manufacturers of cigarettes, cigars and other
tobacco products primarily as a filler that is blended with virgin tobacco in
order to utilize otherwise wasted parts of the tobacco leaf. The Company
currently produces reconstituted tobacco in two forms: leaf in France and
wrapper and binder in the U.S. The Company exited the reconstituted tobacco leaf
product line in the U.S. at the beginning of the second quarter of 1996. (See
"Markets and Customers" below.) The Company's decision to exit the U.S.
reconstituted tobacco leaf business did not impact its U.S. wrapper and binder
business, its reconstituted tobacco leaf business in France, or the Company's
commitment to reconstituted tobacco worldwide.

MARKETS AND CUSTOMERS. The Company's U.S. business primarily supplies customers
in North America, but also has substantial sales in South America and Japan. The
customer base for the U.S. operations consists of most of the major, and many of
the smaller, cigarette manufacturers in North America, several cigar
manufacturers and approximately 70 manufacturers in 35 countries outside North
America. The Company's French operations rely predominantly on worldwide
exports, primarily to Western Europe and China, and, in lesser but substantial
amounts, to Asia other than China, Africa, the Middle East, Eastern Europe, and
Australia. The customer base for the French operations consists of a diverse
group of approximately 180 customers in over 80 countries. Customers of both
units include international tobacco companies, regional tobacco manufacturers
and government monopolies.

Between the U.S. and France, Philip Morris accounts for approximately 36
percent of the Company's net sales.

Philip Morris and B.A.T. Industries PLC ("B.A.T."), including its U.S.
subsidiary Brown & Williamson Tobacco Corporation ("Brown & Williamson"), are
the Company's two largest customers of Cigarette Papers.

The Company's French operations are the largest exporter of cigarette paper to
China with an estimated 40 percent share of that country's cigarette paper
imports.

LTR Industries, S.A. ("LTRI") is a 72-percent owned subsidiary of the Company
which manufactures reconstituted tobacco leaf in France. LTRI's three largest
customers for reconstituted tobacco leaf are Philip Morris, SEITA (a 28 percent
stockholder of LTRI), and Rothmans Companies in Europe, each representing 10
percent or more of LTRI's sales volumes.

In the second half of 1995, the Company learned that it would lose its two
largest reconstituted tobacco leaf customers in the U.S., Brown & Williamson and
Lorillard, Inc. ("Lorillard"). Brown & Williamson elected to utilize idle
internal reconstituted tobacco leaf capacity, which it obtained in B.A.T.'s
acquisition of American Tobacco Company. Lorillard advised the Company that it
would phase out its purchases of reconstituted tobacco leaf from the Company due
to its concern that the Company could not afford to continue producing
reconstituted tobacco leaf in the U.S. in the absence of the Brown & Williamson
volumes. The loss of Lorillard and Brown & Williamson as customers reduced
utilization of the Company's reconstituted tobacco leaf capacity in the U.S.
from approximately 70 percent to an unacceptable level. As a result, in December
1995, the Company made the decision to exit the U.S. reconstituted tobacco leaf
business and ceased operations early in the second quarter of 1996. (See
discussion regarding the financial impact of this decision under the caption
"Management's Discussion and Analysis - Results of Operations" appearing in the
Company's 1996 Annual Report to Stockholders.)

PHILIP MORRIS SUPPLY AGREEMENT. In 1991 and 1992, Philip Morris decided to form
strategic supply arrangements with some of its U.S. suppliers. With respect to
Cigarette Papers, the Company's U.S. unit was chosen to be the single source of
supply to Philip Morris's U.S. operations. The initial five year term of the
governing supply agreement (the "Supply Agreement") would have ended on December
31, 1997, but, as

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part of the assignment of the Supply Agreement from Kimberly-Clark to SWM,
Philip Morris and SWM agreed to extend the initial term of the contract until
December 31, 1998. The contract automatically renews for successive terms of
three years each unless either party gives notice of non-renewal 24 months
before the end of the then current term. On December 20, 1996, the Company
announced that Philip Morris and the Company agreed to extend the initial term
of the Supply Agreement for an additional six months until June 30, 1999,
thereby extending the December 31, 1996 deadline for notice of non-renewal to
June 30, 1997. The extension is intended to allow both parties additional time
to reach agreement on changes to the Supply Agreement which will make it
acceptable to both parties. The Company has no reason to believe that an
acceptable agreement will not be negotiated; however, the Company can provide no
assurances that the Supply Agreement will be so renewed. While the Company has
no reason to believe that it would lose Philip Morris as a customer in the U.S.,
such loss would have a material adverse effect on the Company.

EMPLOYEE AND LABOR RELATIONS. As of December 31, 1996, the Company had
approximately 2,400 regular full-time active employees of whom approximately 785
hourly employees and 305 salaried employees were located in the U.S. and Canada,
and approximately 790 hourly employees and 520 salaried employees were located
in France.

North American Operations - Hourly employees at the Lee, Massachusetts,
Spotswood, New Jersey and Ancram, New York mills are represented by locals of
the United Paperworkers International Union. The current five-year collective
bargaining agreements expire at the Spotswood mill on June 15, 1997, at the Lee
mills on August 1, 1997, and at the Ancram mill on September 30, 1998. There
have been no strikes or work stoppages at any of these locations for
approximately 17 years and the Company believes employee and union relations are
positive.

The Company's fiber operations in Canada are non-union. The Company believes
that employee relations are positive.

French Operations - Hourly employees at the Company's mills in Quimperle,
Malaucene, and Spay, France are union represented. During 1996, the Company
entered into new collective bargaining agreements at Quimperle and Malaucene
which expire on December 31, 1997. During February 1997, a new collective
bargaining agreement was entered into at Spay which expires on February 24,
1998. Over the years, there have been intermittent work stoppages lasting from a
few hours to several days. The Company believes that, overall, employee
relations are positive and comparable to similar French manufacturing
operations.

RAW MATERIALS. Wood pulp is the primary fiber used by the Company. The Company
consumed approximately 65,000 and 68,000 metric tons of wood pulp in 1996 and
1995, respectively, all of which was purchased. The Company also uses other
cellulose fibers, the most significant of which are in the form of flax fiber
and tobacco stems and scraps, as the primary raw materials for the Company's
paper and reconstituted tobacco products. While tobacco stems and scraps are
generally the property of the cigarette manufacturer for whom the reconstitution
is contracted, the Company does purchase some tobacco materials for use in the
production of reconstituted tobacco leaf and wrapper and binder products.

Flax straw is purchased and subsequently processed into flax tow at
Company-owned processing facilities in Canada and France. The flax tow is then
converted into flax pulp at pulping facilities in the U.S. and France. Flax tow
and flax pulp are also purchased externally but these purchases only represent
approximately 20 percent of the flax pulp currently consumed by the Company.

Certain specialty papers are manufactured with other cellulose fibers such as
abaca and sisal fibers and small amounts of secondary and recycled fibers. The
Company purchases all of these secondary and recycled fibers.

To ensure an adequate supply of wood pulp at competitive prices, the Company and
Kimberly-Clark agreed that Kimberly-Clark will, for a fee, make available to the
Company its pulp sourcing services. The Company continues to utilize these
services.

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The Company believes that the fibers identified above and the remaining raw
materials purchased by the Company are readily available from several sources
and that the loss of a single supplier would not have a material adverse effect
on the Company's ability to procure needed raw materials.

COMPETITION. The Company is the leading producer of Cigarette Papers in the
world. It also is the leading independent producer of reconstituted tobacco leaf
for use in cigarettes. The Company does not sell its products directly to
consumers or advertise its products in consumer media. The specialized nature of
these tobacco-related papers requires research and development capability to
develop them and special papermaking equipment and skills to meet exacting
customer specifications. These factors have limited the number of competitors in
each of the tobacco-related paper categories discussed separately below.

Cigarette Paper - Management believes that the Company has an estimated 56
percent share of the U.S. and Canadian cigarette paper markets. The Ecusta
division of P.H. Glatfelter Company ("Ecusta") is the Company's major competitor
in the sale of cigarette paper in the U.S. and Canada. European suppliers, such
as Miquel y Costas & Miquel S.A., a Spanish corporation ("Miquel y Costas"),
also compete in this market but, to-date, have achieved no more than an
estimated 10 percent market share. The Company's U.S. operations are in the
process of expanding their efforts related to sales of cigarette paper to Asia
and Latin America. Management believes that the bases of cigarette paper
competition are price, consistent quality, level of technical service, and
performance requirements of the customer's cigarette making equipment.

The principal competitors of the Company's French cigarette paper operations are
Wattens, Schoeller & Hoesch GmbH ("Schoeller & Hoesch"), Robert Fletcher
(Greenfield) Limited, Miquel y Costas, and Julius Glatz GmbH. Papeteries de
Mauduit, S.A. ("PdM"), an indirect wholly-owned subsidiary of the Company in
France, sells approximately 70 percent of its products (cigarette paper and
porous and conventional plug wrap) in Western Europe and China. Management
believes that the bases of competition for PdM's products are the same as for
the Company's U.S. operations.

Plug Wrap Paper - Management believes that the Company's U.S. operations have a
75 percent share of the North American plug wrap market. The remaining 25
percent is shared by four competitors: Ecusta, Miquel y Costas, Wattens and
Schoeller & Hoesch. The Company's French operations hold an estimated 56 percent
of the Western European high porosity plug wrap market. Schoeller & Hoesch is
the Company's principal competitor in that market.

Management believes that the primary basis of competition for high porosity plug
wrap is technical capability with price being a secondary consideration. On the
other hand, conventional plug wrap entails less technical capability with the
result that price and quality are the primary bases of competition.

Tipping Paper - Management believes that the Company's U.S. operations have an
estimated 58 percent share of the U.S. and Canadian markets for base tipping
paper which is subsequently printed by converters. Its principal competitors in
North America are Ecusta and Tervakoski Oy, a Finnish exporter. Management
believes that the bases for competition are consistent quality, price and, most
importantly, the ability to meet the runnability and printability requirements
of converting equipment and high-speed cigarette making machines.

Papeteries de Malaucene S.A. ("PdMal"), another of the Company's indirect
wholly-owned French subsidiaries, operates a tipping paper mill in Malaucene,
France, and is among the largest converted tipping paper producers in Europe.
PdMal produces printed and unprinted, and laser and electrostatically perforated
tipping papers. The Company's principal European competitors are Tann-Papier
GmbH (Austria), Benkert GmbH (Germany) and Miquel y Costas. Management believes
that the bases of competition for perforated tipping paper in Europe are
perforation technology, consistent quality and price.

Reconstituted Tobacco - LTRI is the leading independent producer of
reconstituted tobacco leaf. Management believes that the basis of competition in
this market is primarily quality, with price being a

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much less important factor. However, sales volumes are influenced by worldwide
virgin tobacco prices (lower prices of virgin tobacco may result in lower
reconstituted tobacco sales volumes).

LTRI's principal competitors are (i) B.V. Deli-HTL Tabak Maatschappiji B.V., an
independent producer which operates in Holland, (ii) Elets, an affiliate of R.J.
Reynolds Tobacco Company which operates in the Commonwealth of Independent
States, and (iii) cigarette companies such as Philip Morris, R.J. Reynolds and
Brown & Williamson, which produce reconstituted tobacco leaf primarily for
internal use.

The Company exited the reconstituted tobacco leaf business in the U.S. at the
beginning of the second quarter of 1996 (see "Markets and Customers"), where its
operations had previously produced an estimated 10-15 percent of the
reconstituted tobacco used in U.S. cigarette production. The remaining 85-90
percent had been produced internally by U.S. cigarette companies for use in U.S.
produced cigarettes and for export to their overseas affiliates. After the
Company's exit of this business in the U.S., virtually all of the reconstituted
tobacco used in U.S. cigarette production is being produced by U.S. cigarette
companies.

Management estimates that 85-90 percent of cigar wrapper and binder used in the
U.S. market is produced internally by domestic cigar manufacturers. The
Company's Ancram Mill and Nuway Microflake Partnership, a cast process
manufacturer, produce the balance.

Other Products - As noted above, the Company also produces wrapping paper for
drinking straws, filter papers, as well as papers for lightweight printing,
business forms and battery separators. Management believes that price is the
primary basis of competition for drinking straw wrap and filter papers
(collectively, "Filler Papers"), while consistent quality and customer service
are believed to be the primary competitive factors for battery separator and
business forms papers. The Company does not possess a significant market share
in any of the above segments, except for drinking straw wrap, where management
estimates the Company holds between 30 and 50 percent of the U.S. market, and
battery separator papers, where it holds approximately 20 percent of the
worldwide market. The Company continues, to the extent feasible, to convert its
production of less profitable Filler Papers to more profitable niche
applications.

RESEARCH AND DEVELOPMENT; PATENTS AND TRADEMARKS. The Company has research and
laboratory facilities in Spay, France and Alpharetta, Georgia and employs 45
research personnel. The Company is dedicated to developing Cigarette Papers and
reconstituted tobacco product innovations and improvements to meet the needs of
individual customers. The development of new components for tobacco products is
the primary focus of the Company's research and development function, which is
working on several development projects for its major customers. The Company's
U.S. and French operations spent in the aggregate on product research and
development $6.4 million in 1994, $4.5 million in 1995 and $6.0 million in 1996.
Research expenses were lower in 1995 due to an increased amount of machine time
and other trial expenses shared with customers. The actual staffing for research
activity was comparable to the level in the other periods.

The Company believes that its research and product development capabilities are
unsurpassed in the industry and have played an important role in establishing
the Company's reputation for high quality, superior products. The Company's
commitment to research and development has enabled the Company, for example, to
(i) produce high-performance papers designed to run on the high-speed
manufacturing machines of its customers, (ii) produce papers to exacting
specifications with very high uniformity, (iii) produce cigarette paper with
extremely low basis weights, and (iv) have an acceptance rate by its customers
in excess of 99 percent. The Company also believes it is in the forefront of the
manufacturing process, having invested heavily in modern technology, including
laser technology and modern paper slitting equipment. The Company believes that
its commitment to research and development, coupled with its investment in new
technology, has positioned the Company to take advantage of growth opportunities
abroad where the demand for American-style premium cigarettes continues to
increase.

As of December 31, 1996, the Company owned approximately 76 patents and had
pending 39 patent applications covering a variety of Cigarette Papers,
reconstituted tobacco leaf and cigar wrapper and binder

products and processes in the United States, Western Europe and several other
countries. The Company believes that such patents, together with its papermaking
know-how and technical sales support, have been instrumental in establishing it
as the leading worldwide supplier of Cigarette Papers, reconstituted tobacco
leaf and reconstituted wrapper and binder made by the papermaking process.

Management believes that the Company's POROWRAP(R) trademark, the "PdM" logo and
the Papeteries de Mauduit and Schweitzer trade names also have been significant
contributors to the marketing of the Company's products.

BACKLOG; SEASONALITY. The Company has historically enjoyed a steady flow of
orders. Its mills typically receive and ship orders within a 30-day period,
except in the case of reconstituted tobacco leaf where orders are generally
placed well in advance of delivery. The Company plans its manufacturing
schedules and raw material purchases based on its evaluation of customer
forecasts and current market conditions.

The U.S. business does not calculate or maintain records of order backlogs.
Philip Morris, its largest customer, provides forecasts of future demand, but
actual orders for cigarette paper are typically placed two weeks in advance of
shipment. Approximately 5 percent of the U.S. sales are on a consignment basis.

The French business unit does maintain records of order backlogs. For Cigarette
Papers, the order backlog was approximately $24.2 million and $11.7 million on
December 31, 1996 and December 31, 1995, respectively. This represented between
40 and 50 days of Cigarette Paper sales in 1996 and between 20 and 25 days of
Cigarette Paper sales in 1995. The French unit's reconstituted tobacco leaf
business operates under a number of annual supply agreements. The order backlog
for reconstituted tobacco leaf was approximately $33.0 million and $24.6 million
on December 31, 1996 and December 31, 1995, respectively.

Sales of the Company's products are not subject to seasonal fluctuations, except
in the U.S. where customer shutdowns of one to two weeks in duration typically
occur in July and December.

SALES AND DISTRIBUTION. Essentially all of the Company's tobacco-related
products are sold through the Company's marketing, sales and customer service
organizations directly to cigarette manufacturers or their designated
converters, and to cigar manufacturers, except in China where sales are
generally made to trading companies for resale to cigarette producers. Most of
the Company's non-tobacco related products are also sold on a direct basis.

ENVIRONMENTAL MATTERS. Capital expenditures for environmental controls to meet
legal requirements and otherwise relating to the protection of the environment
at the Company's facilities in the United States and France are estimated to be
$2 million in 1997 and $5 million to $10 million in 1998. These estimates
include amounts associated with the first phase of the proposed Cluster Rules.
The 1998 estimate includes amounts previously planned for earlier periods but
which have been postponed in order to ensure compliance with final governmental
regulations, once issued, and to take advantage of emerging enhanced
technologies. These expenditures have been anticipated for several years and are
not expected to have a material effect on the Company's total capital
expenditures, consolidated earnings or competitive position; however, these
estimates could be modified as a result of changes in the Company's plans,
changes in legal requirements or other factors.

RISKS FOR FOREIGN OPERATIONS. In addition to its U.S. operations, the Company
has manufacturing facilities in France and Canada. Products made in France or in
the U.S. are marketed in more than 80 countries. Because these countries are so
numerous, it is not feasible to generally characterize the risks involved. Such
risks vary from country to country and include such factors as tariffs, trade
restrictions, changes in currency value, economic conditions, and international
relations. See "Management's Discussion and Analysis - Factors That May Affect
Future Results" appearing in the Company's 1996 Annual Report to Stockholders.

INSURANCE. The Company maintains coverage for most insurable risks that are
incident to its operations.

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PART I

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ITEM 2. PROPERTIES

The Company operates six paper mills (which include two fiber pulping
operations) in the U.S. and France. The Company also operates flax fiber
processing operations in France and Canada. The Company owns each of these
facilities except for a flax tow storage facility in Killarney, Manitoba, which
is leased. The Company maintains administrative and sales offices in Alpharetta,
Georgia and in Quimperle and Paris, France. The Company's world headquarters are
also located in Alpharetta. All of these offices are leased except for the
Quimperle office, which is owned by PdM.

Management believes that each of these facilities is well-maintained, suitable
for conducting the Company's operations and business, and adequately insured.

The mills are operating at or close to capacity, except for the reconstituted
tobacco leaf operations in France and the wrapper and binder operations in the
U.S. On December 1, 1995, the Company's Board of Directors took action to
approve capital spending of $24 million to install a new paper machine at the
Quimperle, France mill which will increase the capacity for production of long
fiber products, such as highly porous plug wrap papers, alkaline battery
separators, and liners for vacuum cleaner bags. This new paper machine began
operation during March 1997. The output of LTRI's reconstituted tobacco leaf
operations could be materially increased by operating the second machine to a
greater extent.

The following are the locations of the Company's principal facilities as of the
date hereof:

Location Equipment/Office Space Products/Function
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Lee Mills 4 Paper Machines (plus one idle) Base Tipping and Specialty Papers,
Lee, Massachusetts Pulping Equipment Plug Wrap Paper
(4 mill sites)

Spotswood Mill 6 Paper Machines Cigarette Paper, Plug Wrap Paper
Spotswood, New Jersey 1 Reconstituted Tobacco Leaf
Machine (mothballed in 1996)
Pulping Equipment

Ancram Mill 1 Paper Machine Reconstituted Tobacco Wrapper and Binder,
Ancram, New York 1 Reconstituted Tobacco Porous Plug Wrap and Specialty Papers
Wrapper and Binder Machine

Fiber Operations 5 Movable Fiber Mills Flax Fiber Processing
Manitoba, Canada

Alpharetta, Georgia Leased Office Space Company World Headquarters,
Administration, Sales and
Research & Development
- U.S. Operations

Papeteries de Mauduit Mill 11 Paper Machines * Cigarette Paper, Plug Wrap Paper and
Quimperle, France Pulping Equipment Long Fiber Specialties

Quimperle, France Owned Office Space Administrative Offices for
French Operations

Papeteries de Malaucene Mill 1 Paper Machine Tipping and Specialty Papers
Malaucene, France 3 Printing Presses
11 Laser Perforating Lines

LTR Industries 2 Reconstituted Tobacco Leaf Reconstituted Tobacco Leaf, Flax Fiber
Spay, France Machines Processing, Research & Development
1 Fiber Mill

Paris, France Leased Office Space Administrative and Sales Offices
for French Operations

* Includes the new paper machine which began operation during March 1997.

11
12

PART I

- --------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS

The following is a brief description of potentially material legal proceedings
to which the Company or any of its subsidiaries is a party, or of which any of
their properties is subject:

LITIGATION

On January 31, 1997, James E. McCune on behalf of himself and other "nicotine
dependent" West Virginia cigarette smokers filed, in the Circuit Court of
Kanawha County, West Virginia, a purported class action against several tobacco
companies, industry trade associations and consultants, tobacco wholesalers and
cigarette component manufacturers, including Kimberly-Clark, seeking equitable
relief and compensatory and punitive damages in an unspecified amount for mental
suffering and physical injuries allegedly sustained as a result of having smoked
cigarettes. Under the terms of the Distribution, the Company assumed liability
for and agreed to indemnify Kimberly-Clark in litigation arising out of the
operations of the Businesses, including this case. The nine-count complaint sets
forth several theories of liability, including intentional and negligent
misrepresentation, negligence, product liability, breach of warranty and
conspiracy. Among other things, the complaint alleges that nicotine is an
addictive substance, that the tobacco companies, by using reconstituted tobacco,
are able to control the precise amount of nicotine in their cigarettes and that
LTR Industries, a French subsidiary of the Company, specializes in the
reconstitution process to help the tobacco companies control nicotine levels. As
a component supplier, the Company believes that it has meritorious defenses to
this case, but due to the uncertainties of litigation, the Company cannot
predict its outcome. The Company is unable to make a meaningful estimate of the
amount or range of loss which could result from an unfavorable outcome of this
action. This case will be vigorously defended.

Also, the Company is involved in certain other legal actions and claims arising
in the ordinary course of business. Management believes that such litigation and
claims will be resolved without a material effect on the Company's financial
statements.

ENVIRONMENTAL MATTERS

The Company's operations are subject to federal, state and local laws,
regulations and ordinances relating to various environmental matters. The nature
of the Company's operations expose it to the risk of claims with respect to
environmental matters and there can be no assurance that material costs or
liabilities will not be incurred in connection with such claims. Based on the
Company's experience to date, the Company believes that its future cost of
compliance with environmental laws, regulations and ordinances, and its exposure
to liability for environmental claims, will not have a material adverse effect
on the Company's financial condition or results of operations. However, future
events, such as changes in existing laws and regulations, or unknown
contamination 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 adverse effect on the Company's financial condition or results of
operations.

Kimberly-Clark was named a potentially responsible party ("PRP") under the
provisions of the U.S. Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), or analogous state statutes, at two waste disposal
sites utilized by the Company's Spotswood mill and one site used by the
Company's former Mt. Holly Springs, Pennsylvania mill. Under the terms of the
Transfer and Assumption Agreement between Kimberly-Clark and the Company (the
"Transfer Agreement"), the Company assumed all liabilities associated with each
of the following matters:

- In August 1992, the Spotswood mill received an information request from
the New Jersey Department of Environmental Protection and Energy
("NJDEPE"), now known as the New Jersey Department of

Environmental Protection ("NJDEP"), with respect to the Jones Industrial
Service Landfill. Neither Kimberly-Clark nor the Company have any internal
records indicating that the mill used the site. However, the Spotswood mill
received routing sheets completed by a nonhazardous waste disposal
transporter used by the mill which indicate that the transporter may have
sent three loads of Spotswood mill waste to the site in September 1980. The
NJDEP issued a draft Record of Decision ("ROD") in June 1995 which
evaluated remedial alternatives. The draft ROD included a NJDEP list of
PRPs, but Kimberly-Clark was not named on the list. Although the amount of
the Company's liability, if any, cannot yet be determined, the Company does
not believe that it will be material.

- On February 6, 1991, the NJDEPE identified Kimberly-Clark as a PRP under
the provisions of the New Jersey Spill Compensation and Control Act for
remediation of the Global Sanitary Landfill waste disposal site located in
Old Bridge Township, New Jersey based on the Spotswood mill's disposal of
waste at such site. The United States Environmental Protection Agency
("EPA") has designated the disposal site as a state-led site under CERCLA
with the NJDEP acting as lead agency. In May 1991, Kimberly-Clark signed a
PRP agreement and paid an administrative assessment. In August 1993, a
consent decree was executed by the State of New Jersey and the PRPs
pursuant to which Kimberly-Clark agreed to pay $0.6 million for its share
of Phase I cleanup costs. This amount has been reflected in the Company's
financial statements. In December 1996, NJDEP issued a proposed remedial
action plan for Phase II cleanup costs. Although the Spotswood mill's share
of Phase II cleanup costs cannot yet be determined, the Company does not
believe its liability will be material.

- In April 1995, Kimberly-Clark received a letter from the Industrial
Solvents and Chemical Company ("ISCC") Site PRP Steering Committee stating
that it had been identified by the Pennsylvania Department of Environmental
Protection as a generator of waste at a nine acre site in Newberry
Township, York County, Pennsylvania. The PRP group believes that the
Company's former Mt. Holly Springs, Pennsylvania facility sent 825 gallons
of waste to the ISCC site. The PRP group has determined that the waste
allegedly sent by the Company represents 0.0185 percent of the total amount
of waste sent to the ISCC site and, therefore, has assigned to the Company
a 0.0185 percent share of the response costs. The PRP Steering Committee
has committed to incur up to $13.5 million in interim response costs and
expects future remedial costs to range from an additional $20 million to
$30 million. The Company does not believe its liability will be material.

The Company also assumed responsibility to administer a consent order between
Kimberly-Clark and the Massachusetts Department of Environmental Protection
("MDEP") governing the post-closure care of the Willow Hill Landfill in Lee,
Massachusetts. The Company is obligated to maintain the integrity of the cover
and sample groundwater monitoring wells, in addition to other long-term
maintenance responsibilities for this former non-hazardous waste disposal
facility. Under the terms of a consent order signed on January 24, 1997 with
MDEP resulting from a Comprehensive Site Assessment and a Corrective Action
Alternative Assessment ("CAAA") submitted by the Company to MDEP, the Company
has until September 10, 1997 to correct a gas migration problem by means of a
passive gas venting system, as the Company recommended in its CAAA, at a cost of
$0.1 million. If the passive venting system does not bring the site into
compliance by September 10, 1997, the Company must submit to MDEP, no later than
December 1, 1997, a revised compliance plan which employs technologies other
than passive gas venting. If the site is not in full compliance by February 10,
1998, the Company must then implement, subject to MDEP's possible modification,
the compliance plan which it would have submitted. The cost of such a plan could
range from $0.3 million to $1.5 million in addition to an estimated $0.1 million
for annual operating expenses.

The Company, under the Transfer Agreement, became owner of and assumed
responsibility from Kimberly-Clark Corporation for the Valley Mill Landfill site
in Lee, Massachusetts. The landfill was operated by the Company from 1968 to
1969 and was capped in 1970. On December 23, 1996 the Company received a Notice
of Responsibility ("Notice") from MDEP under Section 21E of the Massachusetts
Oil and Material Release Prevention and Response Act stating that an
electro-magnetic survey ("Survey") performed by a contractor of EPA at the site
indicated that buried metallic objects may

13
14

be present in the subsurface. The Survey was conducted following an anonymous
call to MDEP alleging the site contains buried metal drums. The Company will
respond to the Notice and will investigate the information reported in the
Survey. Based on information currently available, the Company believes the
Survey only indicates the presence of crushed drums disposed of at the site in
1968 and 1969 and previously reported to MDEP. Although the Company can give no
assurances as to the ultimate cost of addressing this matter, the Company does
not believe such costs will be material.

Some or all of the Company's U.S. facilities may be subject to revised air
emissions and wastewater discharge standards under rules commonly known as the
"Cluster Rules". The first phase of the Cluster Rules, proposed by the EPA in
1993, would affect only wastewater discharges from the Ancram and Lee mills and
would require compliance by late 1999. The Spotswood mill discharges its
effluent to a publicly-owned treatment works. Although the EPA originally
indicated that the proposed rules would be finalized in 1996, final rules have
not yet been issued. The estimated capital expenditures for compliance at the
Ancram and Lee mills is between $6 million and $9 million in the aggregate.
However, due to uncertainty concerning applicable requirements under the final
Cluster Rules, the Company can give no assurance that this estimate will
accurately reflect the actual cost of compliance.

In addition, the later phases of the Cluster Rules (and/or Title III of the
Clean Air Act Amendments of 1990) may further regulate air emissions and
wastewater discharges from the Spotswood mill and require the Company to install
additional air pollution controls at its other U.S. facilities sometime after
the year 2000. Potential capital expenditures to comply with this subsequent
phase of the Cluster Rules and/or Title III of the Clean Air Act Amendments
cannot be estimated until after the EPA proposes applicable requirements, if
any.

The Company incurs spending necessary to meet legal requirements and otherwise
relating to the protection of the environment at the Company's facilities in the
United States and France, including the aforementioned estimated capital
spending through 1998 associated with the first phase of the proposed Cluster
Rules. For these purposes, the Company incurred total capital expenditures of
$2.5 million in 1996, and anticipates that it will incur approximately $2
million in capital expenditures in 1997 and approximately $5 million to $10
million in 1998. The major projects included in these estimates include
upgrading wastewater treatment facilities at various locations and installation
of equipment to treat volatile organic compound emissions in France.
Approximately $3 million of the total environmental capital spending estimates
for 1997 and 1998 relates to projects anticipated as necessary to comply with
the wastewater discharge requirements of the proposed Cluster Rules. The balance
of expenditures required for compliance with the initial phase of the Cluster
Rules is expected to occur in 1999. The foregoing capital expenditures are not
expected to reduce the Company's ability to invest in capacity expansion,
quality improvements, capital replacements, productivity improvements, or cost
containment projects, and are not expected to have a material adverse effect on
the Company's financial condition or results of operations.

PART I

- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the stockholders of the Company during
the fourth quarter of 1996.

EXECUTIVE OFFICERS OF THE REGISTRANT

The names and ages of the executive officers of the Company as of March 4, 1997,
together with certain biographical information, are as follows:

NAME POSITION
------------------------------------- ---------------------

Wayne H. Deitrich .......................... Chief Executive Officer

Jean-Pierre Le Hetet ....................... President - French Operations

N. Daniel Whitfield ........................ President - U.S. Operations

Paul C. Roberts ............................ Chief Financial Officer and Treasurer

William J. Sharkey ......................... General Counsel and Secretary

Wayne L. Grunewald ......................... Controller

MR. WAYNE H. DEITRICH, 53, has served as Chief Executive Officer of the Company
since August 1995 and was elected Chairman of the Board of Directors immediately
after the spin-off of the Company from Kimberly-Clark. From June 1995 through
August 1995, Mr. Deitrich served as President - Specialty Products Sector of
Kimberly-Clark. From 1993 through May 1995, Mr. Deitrich was the President -
Paper and Specialty Products Sector of Kimberly-Clark, and from 1992 to 1993, he
was President - Paper Sector of Kimberly-Clark. From 1988 through 1992, Mr.
Deitrich served as the President of Neenah Paper, a business unit of
Kimberly-Clark.

MR. JEAN-PIERRE LE HETET, 53, has served as President - French Operations of the
Company since August 1995 and was elected to the Board of Directors immediately
after the spin-off of the Company from Kimberly-Clark. From 1991 through August
1995, Mr. Le Hetet was the President of Specialty Products, France, a business
unit of Kimberly-Clark. Prior to that time, Mr. Le Hetet served as General
Manager of Specialty Products, France.

MR. N. DANIEL WHITFIELD, 49, has served as President - U.S. Operations of the
Company since August 1995. From May 1995 through August 1995, Mr. Whitfield
served as President - Specialty Products U.S. of Kimberly-Clark. From 1991
through April 1995, he was Director - Business Planning and Analysis, Pulp and
Paper Sector of Kimberly-Clark. From 1989 through 1990, Mr. Whitfield was
Director - Operations Analysis and Control, Household Products Sector of
Kimberly-Clark.

MR. PAUL C. ROBERTS, 48, has served as Chief Financial Officer and Treasurer of
the Company since August 1995. From June 1995 through August 1995, he served as
Chief Financial Officer - Specialty Products Sector of Kimberly-Clark. From
January 1995 through May 1995, he was Director - Corporate Strategic Analysis of
Kimberly-Clark, and from 1988 through 1994, Mr. Roberts was Director -
Operations Analysis and Control, Pulp and Paper Sector of Kimberly-Clark.

MR. WILLIAM J. SHARKEY, 65, has served as General Counsel and Secretary of
the Company since August 1995. Prior to that time, Mr. Sharkey was Senior
Counsel for Kimberly-Clark.

MR. WAYNE L. GRUNEWALD, 45, has served as Controller of the Company since August
1995. From July 1995 through August 1995, he served as Controller - Specialty
Products Sector of Kimberly-Clark. From December 1989 through June 1995, he was
Controller - U.S. Pulp and Newsprint, a business unit of Kimberly-Clark.

15
16

PART II

- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

PRINCIPAL MARKET

Since the Distribution of the Company's Common Stock by Kimberly-Clark on
November 30, 1995, the Common Stock has been traded on the New York Stock
Exchange ("NYSE") under the trading symbol "SWM".

APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK

As of March 4, 1997, there were 9,702 stockholders of record of the Company's
Common Stock. This number does not include shares held in "nominee" or "street"
name.

STOCK PRICE AND DIVIDEND INFORMATION

The dividend and market price data included in Note 17 to Consolidated Financial
Statements contained in the 1996 Annual Report to Stockholders is incorporated
in this Item 5 by reference.

- --------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA

The information set forth under the caption "Selected Financial Data" contained
in the 1996 Annual Report to Stockholders is incorporated in this Item 6 by
reference.

- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The information set forth under the caption "Management's Discussion and
Analysis" contained in the 1996 Annual Report to Stockholders is incorporated in
this Item 7 by reference.

- --------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and related notes thereto of the Company and its
consolidated subsidiaries, the independent auditors' report thereon, and
management's letter regarding responsibility for financial reporting, contained
in the 1996 Annual Report to Stockholders, are incorporated in this Item 8 by
reference.

- --------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The section of the Company's Proxy Statement dated March 19, 1997 (the "1997
Proxy Statement") captioned "Certain Information Regarding Directors and
Nominees" under "Proposal 1. Election of Directors" identifies members of the
board of directors of the Company and nominees, and is incorporated in this Item
10 by reference.

See also "Executive Officers of the Registrant" appearing in Part I hereof.

- --------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION

The information in the section of the 1997 Proxy Statement captioned "Executive
Compensation" under "Proposal 1. Election of Directors" is incorporated in this
Item 11 by reference.

- --------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information in the sections of the 1997 Proxy Statement captioned "Security
Ownership of Management" and "Security Ownership of Certain Beneficial Holders"
under "Proposal 1. Election of Directors" is incorporated in this Item 12 by
reference.

- --------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information in the section captioned "Certain Transactions and Business
Relationships" under "Proposal 1. Election of Directors" of the 1997 Proxy
Statement is incorporated in this Item 13 by reference.

17
18

PART IV

- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report.

(1) Financial Statements:

The Consolidated Balance Sheets as of December 31, 1996
and 1995, the related statements of Consolidated Income
and Consolidated Cash Flow for the years ended December
31, 1996, 1995 and 1994, the related Notes thereto, and
the Independent Auditors' Report of Deloitte & Touche
LLP thereon are incorporated in Part II, Item 8 of this
Form 10-K by reference to the financial statements
contained in the 1996 Annual Report to Stockholders.

(2) Financial Statement Schedules:

Schedules have been omitted because they were not
applicable or because the required information has been
included in the financial statements or notes thereto.

(3) Exhibits:

See the Index to Exhibits that appears at the end of
this document and which is incorporated by reference
herein.

(b) Reports on Form 8-K

(i) The Company filed a Current Report on Form 8-K dated
December 20, 1996, which reported the six month
extension of the fine papers Supply Agreement between
the Company and Philip Morris - U.S.

18
19

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

By: /s/ WAYNE H. DEITRICH
----------------------------------
Wayne H. Deitrich
Chairman of the Board and
Chief Executive Officer
Dated: March 19, 1997 (principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

NAME POSITION DATE
---- -------- ----

/s/WAYNE H. DEITRICH Chairman of the Board and March 19, 1997
- ------------------------------------------------- Chief Executive Officer
Wayne H. Deitrich (principal executive officer)

/s/PAUL C. ROBERTS Chief Financial Officer March 19, 1997
- ------------------------------------------------- and Treasurer
Paul C. Roberts (principal financial officer)

/s/WAYNE L. GRUNEWALD Controller March 19, 1997
- ------------------------------------------------- (principal accounting officer)
Wayne L. Grunewald

* Director March 19, 1997
- -------------------------------------------------
Claire L. Arnold

* Director March 19, 1997
- -------------------------------------------------
K.C. Caldabaugh

* Director March 19, 1997
- -------------------------------------------------
Laurent G. Chambaz

* Director March 19, 1997
- -------------------------------------------------
Richard D. Jackson

* Director March 19, 1997
- -------------------------------------------------
Leonard J. Kujawa

* Director March 19, 1997
- -------------------------------------------------
Jean-Pierre Le Hetet

* Director March 19, 1997
- -------------------------------------------------
Larry B. Stillman

*By: /s/WILLIAM J. SHARKEY March 19, 1997
- -------------------------------------------------
William J. Sharkey
Attorney-In-Fact

19
20

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------

2.1 Distribution Agreement (incorporated by reference to Exhibit 2.1 to Form 10/A Amendment 2,
dated October 27, 1995).

3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Form 10, dated
September 12, 1995).

3.2 By-Laws, as amended on and through February 27, 1996 (incorporated by reference to Exhibit
3.2 to the Company's Form 10-K for the year ended December 31, 1995).

4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Form 10/A
Amendment 2, dated October 27, 1995).

4.2 Rights Agreement (incorporated by reference to Exhibit 4.2 to Form 10/A Amendment 2, dated
October 27, 1995).

10.1 Transfer, Contribution and Assumption Agreement (incorporated by reference to Exhibit 10.1 to
Form 10/A Amendment 2, dated October 27, 1995).

10.2 Corporate Services Agreement (incorporated by reference to Exhibit 10.2 to Form 10/A
Amendment 2, dated October 27, 1995).

10.3 Employee Matters Agreement (incorporated by reference to Exhibit 10.3 to Form 10/A Amendment
2, dated October 27, 1995).

10.4 Tax Sharing Agreement (incorporated by reference to Exhibit 10.4 to Form 10/A Amendment 2,
dated October 27, 1995).

10.5 Outside Directors' Stock Plan (incorporated by reference to Exhibit 10.5 to Form 10/A
Amendment 2, dated October 27, 1995).

10.6.1 Annual Incentive Plan as Amended and Restated (incorporated by reference to Exhibit 10.6 to
the Company's Form 10-K for the year ended December 31, 1995).

10.6.2* Amendments to the Annual Incentive Plan dated December 5, 1996.

10.7.1 Equity Participation Plan (incorporated by reference to Exhibit 10.7 to Form 10/A Amendment
2, dated October 27, 1995).

10.7.2 First Amendment to Equity Participation Plan
(incorporated by reference to Exhibit 10.7.2 to the
Company's Form 10-K for the year ended December 31,
1995).

10.8.1 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.8 to Form 10/A Amendment 2,
dated October 27, 1995).

10.8.2 First Amendment to Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.7.2 to the
Company's Form 10-K for the year ended December 31,
1995).

10.8.3* Amendment to Long-Term Incentive Plan dated December 5, 1996.

20
21

INDEX TO EXHIBITS (Continued)
- --------------------------------------------------------------------------------

EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------

10.9.1 Philip Morris Supply Agreement+ (incorporated by reference to Exhibit 10.9.1 to Form 10/A Amendment 2,
dated October 27, 1995).

10.9.2 Amendment No. 1 to Philip Morris Supply Agreement (incorporated by reference to Exhibit
10.9.2 to Form 10, dated September 12, 1995).

10.9.3* Amendment No. 2 to Philip Morris Supply Agreement+.

10.10.1 Supplemental Benefit Plan (incorporated by reference to Exhibit 10.10 to Form 10/A Amendment
2, dated October 27, 1995).

10.10.2 First Amendment to Supplemental Benefit Plan
(incorporated by reference to Exhibit 10.10.2 to the
Company's Form 10-K for the year ended December 31,
1995).

10.11* Amended and Restated Executive Severance Plan as of February 27, 1997.

10.12.1 Credit Agreement dated as of November 27, 1995, between
the Company, as Borrower and Guarantor, SMF, as
Borrower, PdM Industries, as Borrower, the Banks named
therein and Societe Generale, as Agent (the "Credit
Agreement") (incorporated by reference to Exhibit 4 to
the Company's Form 10-Q dated December 13, 1995).

10.12.2* Amendment No. 1 to Credit Agreement.

11.1 The following statement is filed as an exhibit to Part II of this Form 10-K:

The net income per common share computation included in
the Selected Financial Data and the Consolidated
Statements of Income in the Company's 1996 Annual
Report to Stockholders incorporated by reference in
Part II, Item 6 and Item 8, respectively, of this Form
10-K are based on the average number of shares of
common stock outstanding. The only "common stock
equivalents" or other potentially dilutive securities
or agreements (as defined in Accounting Principles
Board Opinion No. 15) which were contained in the
Company's capital structure during the periods
presented were options outstanding under the Company's
Equity Participation Plan.

Alternative computations of "primary" and "fully
diluted" net income per common share amounts for 1996
and 1995 assume the exercise of outstanding stock
options using the "treasury stock method". There is no
significant difference between net income per common
share presented in the Company's 1996 Annual Report to
Stockholders and net income per common share calculated
on a "primary" and "fully diluted" basis.

13.1* Portions of the Schweitzer-Mauduit International, Inc. 1996 Annual Report to Stockholders
incorporated by reference in this Form 10-K.

21.1* Subsidiaries of the Company.

23.1* Independent Auditors' Consent.

21
22

INDEX TO EXHIBITS (Continued)
- --------------------------------------------------------------------------------

EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------

24.1* Powers of Attorney.

27.1* Financial Data Schedule (for SEC use only).

- ---------------

* Filed herewith.

+ Exhibit has been redacted pursuant to a Confidentiality Request under Rule

24(b)-2 of the Securities Exchange Act of 1934.