<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
OR
[ ] 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)
<TABLE>
<S> <C>
DELAWARE 62-1612879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
100 NORTH POINT CENTER EAST
SUITE 600
ALPHARETTA, GEORGIA
30022-8246
(Address of principal executive offices)
(Zip Code)
1-800-514-0186
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
As of September 30, 2000, 14,964,971 shares of the Corporation's common stock,
par value $.10 per share, together with preferred stock purchase rights
associated therewith, were outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales ........................................ $ 126.8 $ 125.5 $ 366.5 $ 373.8
Cost of products sold ....................... 102.3 98.3 298.1 292.5
--------- --------- --------- ---------
Gross Profit ..................................... 24.5 27.2 68.4 81.3
Selling expense ............................. 4.4 4.7 13.5 13.9
Research expense ............................ 1.6 1.6 4.8 5.0
General expense ............................. 4.2 4.7 13.3 14.6
--------- --------- --------- ---------
Operating Profit ................................ 14.3 16.2 36.8 47.8
Interest expense ............................ (1.6) (1.4) (4.7) (4.3)
Other income, net ........................... 0.5 -- 2.6 1.9
--------- --------- --------- ---------
Income Before Income Taxes and Minority Interest . 13.2 14.8 34.7 45.4
Provision for income taxes .................. 4.2 5.8 10.6 17.5
--------- --------- --------- ---------
Income Before Minority Interest .................. 9.0 9.0 24.1 27.9
Minority interest in earnings of subsidiaries 1.0 1.4 2.9 4.1
--------- --------- --------- ---------
Net Income ....................................... $ 8.0 $ 7.6 $ 21.2 $ 23.8
========= ========= ========= =========
Net Income per Common Share:
Basic ....................................... $ .53 $ .48 $ 1.38 $ 1.50
========= ========= ========= =========
Diluted ..................................... $ .53 $ .48 $ 1.38 $ 1.50
========= ========= ========= =========
Cash Dividends Declared per Common Share ......... $ .15 $ .15 $ .45 $ .45
========= ========= ========= =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
2
<PAGE> 3
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
--------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents ............................................................ $ 12.8 $ 15.1
Accounts receivable .................................................................. 80.6 72.1
Inventories .......................................................................... 61.3 62.9
Current income tax refunds receivable ................................................ 3.4 2.2
Deferred income tax benefits ......................................................... 3.9 4.1
Prepaid expenses ..................................................................... 2.6 2.8
-------- --------
Total Current Assets ............................................................. 164.6 159.2
-------- --------
Gross Property ........................................................................... 435.6 451.9
Less accumulated depreciation ........................................................ 202.3 199.8
-------- --------
Net Property ..................................................................... 233.3 252.1
-------- --------
Noncurrent Deferred Income Tax Benefits ................................................... 1.2 6.9
-------- --------
Deferred Charges and Other Assets ......................................................... 17.0 18.4
-------- --------
Total Assets .............................................................................. $ 416.1 $ 436.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt .................................................... $ 3.4 $ 3.2
Other short-term debt ................................................................ 1.5 8.8
Accounts payable ..................................................................... 39.8 46.3
Accrued expenses ..................................................................... 56.6 49.1
-------- --------
Total Current Liabilities ........................................................ 101.3 107.4
-------- --------
Long-Term Debt ............................................................................ 94.5 100.9
-------- --------
Deferred Income Taxes ..................................................................... 12.9 13.1
-------- --------
Other Noncurrent Liabilities .............................................................. 28.3 23.9
-------- --------
Minority Interest ......................................................................... 4.5 7.1
-------- --------
Contingencies (See Notes 5 and 6)
Stockholders' Equity
Preferred Stock -$.10 par value - 10,000,000 shares authorized, none issued .......... -- --
Common Stock -$.10 par value - 100,000,000 shares authorized,
16,078,733 shares issued at both September 30, 2000 and December 31, 1999 ....... l.6 1.6
Additional paid-in capital ........................................................... 60.5 60.7
Common stock in treasury, at cost - 1,113,762 and 441,845 shares at September 30, 2000
and December 31, 1999, respectively .............................................. (17.4) (8.0)
Retained earnings .................................................................... 171.0 156.7
Unearned compensation ................................................................ (0.3) --
Accumulated other comprehensive income (loss) -
Unrealized foreign currency translation adjustments ................................ (40.8) (26.8)
-------- --------
Total Stockholders' Equity ....................................................... 174.6 184.2
-------- --------
Total Liabilities and Stockholders' Equity ................................................ $ 416.1 $ 436.6
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
3
<PAGE> 4
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
<TABLE>
<CAPTION>
ADDI- ACCUMULATED
COMMON STOCK ISSUED TREASURY STOCK TIONAL UNEARNED OTHER COM-
------------------- ------------------ PAID-IN RETAINED COMPEN- PREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SATION INCOME (LOSS) TOTAL
-------- ------ --------- ------ ------- -------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 .............. 16,078,733 $1.6 154,668 $ (3.8) $ 60.7 $134.8 $ 3.7 $197.0
Net income for the nine months
ended September 30, 1999 ........... 23.8 23.8
Adjustments to unrealized foreign
currency translation ............... (27.8) (27.8)
------
Comprehensive loss ...................... (4.0)
Dividends declared ($0.45 per share) .... (7.2) (7.2)
Purchases of treasury stock ............. 226,400 (3.4) (3.4)
Stock issued to directors as compensation -- -- (5,143) 0.1 -- -- -- 0.1
---------- ---- --------- ------ ------ ------ ------ ------
BALANCE, SEPTEMBER 30, 1999 ............. 16,078,733 1.6 375,925 (7.1) 60.7 151.4 (24.1) 182.5
Net income for the three months
ended December 31, 1999 ............ 7.6 7.6
Adjustments to unrealized foreign
currency translation ............... (2.7) (2.7)
------
Comprehensive income .................... 4.9
Dividends declared ($0.15 per share) .... (2.3) (2.3)
Purchases of treasury stock ............. 67,950 (0.9) (0.9)
Stock issued to directors as compensation -- -- (2,030) -- -- -- -- --
---------- ---- --------- ------ ------ ------ ------ ------
BALANCE, DECEMBER 31, 1999 .............. 16,078,733 1.6 441,845 (8.0) 60.7 156.7 (26.8) 184.2
Net income for the nine months
ended September 30, 2000 ........... 21.2 21.2
Adjustments to unrealized foreign
currency translation ............... (14.0) (14.0)
------
Comprehensive income .................... 7.2
Dividends declared ($0.45 per share) .... (6.9) (6.9)
Purchases of treasury stock ............. 706,200 (10.1) (10.1)
Restricted stock issuances .............. (30,000) 0.6 (0.2) $(0.4) --
Amortization of unearned compensation ... 0.1 0.1
Stock issued to directors as compensation -- -- (4,283) 0.1 -- -- -- -- 0.1
---------- ---- --------- ------ ------ ------ ----- ------ ------
BALANCE, SEPTEMBER 30, 2000 ............. 16,078,733 $1.6 1,113,762 $(17.4) $ 60.5 $171.0 $(0.3) $(40.8) $174.6
========== ==== ========= ====== ====== ====== ===== ====== ======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
4
<PAGE> 5
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
U.S. $ IN MILLIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------
2000 1999
------- -------
<S> <C> <C>
Operations
Net income .................................. $ 21.2 $ 23.8
Depreciation and amortization ............... 16.7 16.5
Deferred income tax provision ............... 4.8 7.2
Minority interest in earnings of subsidiaries 2.9 4.1
Other ....................................... 4.6 (0.7)
Changes in operating working capital ........ (6.9) (11.4)
------- -------
Cash Provided by Operations ........ 43.3 39.5
------- -------
Investing
Capital spending ............................ (14.0) (20.3)
Capitalized software costs .................. (1.1) (2.7)
Other ....................................... (2.9) (0.7)
------- -------
Cash Used for Investing ............ (18.0) (23.7)
------- -------
Financing
Cash dividends paid to SWM stockholders ..... (6.9) (7.2)
Cash dividends paid to minority owner ....... (4.6) (5.2)
Purchases of treasury stock ................. (10.1) (3.4)
Changes in short-term debt .................. (7.3) (2.6)
Proceeds from issuances of long-term debt ... 4.9 6.1
Payments on long-term debt .................. (3.6) (4.6)
------- -------
Cash Used for Financing ............ (27.6) (16.9)
------- -------
Decrease in Cash and Cash Equivalents ............ (2.3) (1.1)
Cash and Cash Equivalents at Beginning of Period . 15.1 6.7
------- -------
Cash and Cash Equivalents at End of Period ....... $ 12.8 $ 5.6
======= =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
5
<PAGE> 6
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
NOTE 1. NATURE OF THE BUSINESS
Schweitzer-Mauduit International, Inc., including its subsidiaries,
("SWM" or the "Company") is a diversified producer of premium specialty papers
and the world's largest supplier of fine papers to the tobacco industry. The
Company was formed as a spin-off from Kimberly-Clark Corporation
("Kimberly-Clark") at the close of business on November 30, 1995.
NOTE 2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of SWM and
all of its majority-owned subsidiaries. All material intercompany and
interdivisional amounts and transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission and on the same basis as the audited financial
statements included in the Company's 1999 Annual Report on Form 10-K. All
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods have been
made and are generally of a normal recurring nature. Operating results for any
quarter are not necessarily indicative of the results for any other quarter or
for the full year. These financial statements should be read in connection with
the financial statements and notes thereto included in the Company's 1999
Annual Report on Form 10-K.
Basic net income per common share is computed based on net income
divided by the weighted average number of common shares outstanding. The
average numbers of common shares used in the calculations of basic net income
per common share for the three and nine month periods ended September 30, 2000
were approximately 15,132,200 and 15,344,600, respectively, and for the three
and nine month periods ended September 30, 1999 were approximately 15,756,600
and 15,849,200, respectively. Diluted net income per common share is computed
based on net income divided by the weighted average number of common and
potential common shares outstanding. The average numbers of common and
potential common shares used in the calculations of diluted net income per
common share for the three and nine month periods ended September 30, 2000 were
approximately 15,168,900 and 15,380,900, respectively, and for the three and
nine month periods ended September 30, 1999 were approximately 15,759,400 and
15,851,000, respectively. Potential common shares are those related to stock
options and restricted stock outstanding and directors' deferred stock
compensation during the respective periods.
NOTE 3. INVENTORIES
The following schedule details inventories by major class:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
At the lower of cost on the First-In, First-Out (FIFO)
and weighted average methods or market:
Raw materials ........................................................ $ 25.1 $ 29.0
Work in process ...................................................... 8.2 5.6
Finished goods ....................................................... 21.1 21.1
Supplies and other ................................................... 12.1 12.0
------- -------
66.5 67.7
Excess of FIFO cost over Last-In, First-Out (LIFO) cost ................... (5.2) (4.8)
------- -------
Total .............................................................. $ 61.3 $ 62.9
======= =======
</TABLE>
6
<PAGE> 7
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
NOTE 4. INCOME TAXES
The effective income tax rates for the three and nine month periods
ended September 30, 2000 were 31.8 percent and 30.5 percent, respectively,
compared with 39.2 percent and 38.5 percent for the respective corresponding
periods of 1999. The lower effective income tax rates for the three and nine
month periods of 2000 were in part due to a decrease in the French corporate
income tax rate from 40.0 percent for 1999 to 37.7 percent for 2000, a decline
in the Brazilian corporate income tax rate from 37.0 percent in the third
quarter of 1999 to 34.0 percent in the corresponding current year period, as
well as a favorable income tax adjustment in the third quarter of 2000 that,
along with associated entries, increased net income by $0.7. Additionally, a
$1.0 favorable adjustment to reduce Spanish deferred income tax valuation
allowances and favorable tax treatment of a settlement related to a
prior-period claim were reflected in the nine month period of 2000.
NOTE 5. 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, its exposure to
liability for environmental claims and its obligation to participate in the
remediation of certain hazardous waste disposal sites 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.
The Company is a party to an administrative consent order with the
Massachusetts Department of Environmental Protection ("MDEP") governing the
post-closure care of Kimberly-Clark's former operation of the Willow Hill
Landfill in Lee, Massachusetts. The consent order required the Company to
perform certain remedial measures and to reduce the concentration of landfill
gases to specified levels at all monitoring points by September 15, 1998, or
the Company would be liable for stipulated penalties. Although all tests have
consistently shown low or undetectable levels of gases at most monitoring
points, and some previous tests have shown full compliance at all points,
concentrations of methane at two or three points persisted at higher than
stipulated levels. However, results of the most recent tests conducted in
October 2000 show that the Company has achieved full compliance with the
consent order and reduced the concentration of landfill gases at all monitoring
points to the levels specified in the consent order. MDEP previously advised
the Company informally that penalties would not be assessed because of the
Company's ongoing efforts to resolve the issue and no monetary sanctions have
been imposed to date. The Company must continue bimonthly monitoring and remain
in compliance at all monitoring points for twelve months. Costs of these
measures were previously accrued and are not material. The Company does not
believe that this matter will result in the imposition of monetary sanctions or
have a material adverse effect on the Company's business or financial
condition.
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, France, Brazil and Canada. For these purposes,
the Company anticipates that it will incur capital expenditures of
approximately $2 to $4 annually in 2000 and 2001. The major projects included
in these estimates include upgrading wastewater
7
<PAGE> 8
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
treatment facilities at various locations and installation of ink solvent
treatment equipment in France. 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.
NOTE 6. LEGAL PROCEEDINGS
The Company is involved in certain legal actions and claims arising in
the ordinary course of business. Management believes that such litigation and
claims will be resolved without a material adverse effect on the Company's
consolidated financial statements.
NOTE 7. BUSINESS SEGMENT REPORTING
The Company is operated and managed based on the geographical location
of its manufacturing operations: the United States, France and Brazil. These
business segments manufacture and sell cigarette, plug wrap and tipping papers
used to wrap various parts of a cigarette, reconstituted tobacco products and
paper products used in cigarette packaging. While the products are comparable
in each segment, they vary based on the technological capabilities of each of
the manufacturing operations and the respective markets and customers served.
Sales by a segment into markets primarily served by a different segment occur
where specific product needs cannot be cost-effectively met by the
manufacturing operations domiciled in that segment.
Tobacco industry products comprised between 87 and 90 percent of the
Company's consolidated net sales in the periods presented. The Company's
non-tobacco industry products are a diverse mix of products, certain of which
represent commodity paper grades produced to maximize machine operations.
For purposes of the segment disclosure in the following tables, the
term "United States" includes operations in the United States and Canada. The
Canadian operations only produce flax fiber used as raw material in the U.S.
operations.
Intercompany sales of products between segments are made at market
prices and are referred to as intersegment sales. Expense amounts not
associated with segments are referred to as unallocated expenses. Assets
reported by segment represent assets which are directly used and an allocated
portion of jointly used assets. These assets include receivables from other
segments and are included in eliminations.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------- % OF CONSOLIDATED
SEPTEMBER 30, SEPTEMBER 30, % CHANGE ----------------------
NET SALES 2000 1999 VS. 1999 2000 1999
--------- ------------- ------------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
United States ...................... $ 41.9 39.1 + 7.2% 33.0% 31.2%
France.............................. 67.2 72.5 - 7.3 53.0 57.8
Brazil.............................. 18.6 14.2 +31.0 14.7 11.3
------- -------
Subtotal................... 127.7 125.8
Intersegment sales by:
United States.................. (0.1) (0.1) (0.1) (0.1)
France......................... (0.1) (0.2) (0.1) (0.2)
Brazil......................... (0.7) -- (0.5) --
------- -------- ----- -----
Consolidated .............. $ 126.8 $ 125.5 + 1.0% 100.0% 100.0%
======= ======== ===== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------- % OF CONSOLIDATED % RETURN ON SALES
SEPTEMBER 30, SEPTEMBER 30, % CHANGE ----------------- -----------------
OPERATING PROFIT 2000 1999 VS. 1999 2000 1999 2000 1999
---------------- ------------- ------------- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
United States.............. $ 1.3 $ 1.1 + 18.2% 9.1% 6.8% 3.1% 2.8%
France..................... 12.7 15.2 - 16.4 88.8 93.8 18.9 21.0
Brazil..................... 1.4 0.8 + 75.0 9.8 4.9 7.5 5.6
Unallocated expenses....... (1.1) (0.9) (7.7) (5.5)
------- ------ ----- -----
Consolidated...... $ 14.3 $ 16.2 - 11.7% 100.0% 100.0% 11.3% 12.9%
======= ====== ===== =====
</TABLE>
8
<PAGE> 9
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------- % OF CONSOLIDATED
SEPTEMBER 30, SEPTEMBER 30, % CHANGE ------------------
NET SALES 2000 1999 VS. 1999 2000 1999
--------- ------------- ------------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
United States ...................... $ 119.8 $ 124.1 - 3.5% 32.7% 33.2%
France.............................. 195.9 212.3 - 7.7 53.4 56.8
Brazil.............................. 51.7 37.8 +36.8 14.1 10.1
------- --------
Subtotal................... 367.4 374.2
Intersegment sales by:
United States.................. (0.1) (0.1) -- --
France......................... (0.1) (0.3) -- (0.1)
Brazil......................... (0.7) -- (0.2) --
------- -------- ----- ------
Consolidated .............. $ 366.5 $ 373.8 - 2.0% 100.0% 100.0%
======= ======== ===== ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
--------------------------- % OF CONSOLIDATED % RETURN ON SALES
SEPTEMBER 30, SEPTEMBER 30, % CHANGE ----------------- -----------------
OPERATING PROFIT 2000 1999 VS. 1999 2000 1999 2000 1999
---------------- ------------- ------------- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
United States.............. $ 3.1 $ 6.9 - 55.1% 8.4% 14.4% 2.6% 5.6%
France..................... 33.2 41.3 - 19.6 90.2 86.4 16.9 19.5
Brazil..................... 4.2 3.3 + 27.3 11.4 6.9 8.1 8.7
Unallocated expenses....... (3.7) (3.7) (10.0) (7.7)
------- ------- ----- -----
Consolidated...... $ 36.8 $ 47.8 - 23.0% 100.0% 100.0% 10.0% 12.8%
======= ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
% OF CONSOLIDATED
SEPTEMBER 30, DECEMBER 31, ----------------------
TOTAL ASSETS 2000 1999 2000 1999
------------ ------------- ------------ ---- ----
<S> <C> <C> <C> <C>
United States................................ $ 146.0 $ 147.6 35.1% 33.8%
France....................................... 213.5 237.7 51.3 54.4
Brazil....................................... 55.7 53.0 13.4 12.1
Unallocated and intersegment eliminations.... 0.9 (1.7) 0.2 (0.3)
-------- -------- ----- -----
Consolidated........................ $ 416.1 $ 436.6 100.0% 100.0%
======= ======== ===== =====
</TABLE>
Approximately 65 percent of the Company's assets and liabilities are
outside of the United States, substantially all of which are in France or
Brazil. The balance sheets of the Company's foreign subsidiaries are translated
at period-end currency exchange rates, and the differences from historical
exchange rates are reflected in accumulated other comprehensive income (loss)
as unrealized foreign currency translation adjustments. Negative unrealized
foreign currency translation adjustments for the nine month period ended
September 30, 2000 are primarily due to a stronger U.S. dollar against the
French franc at September 30, 2000 versus December 31, 1999.
NOTE 8. NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which will require that all
derivative financial instruments be recognized as either assets or liabilities
on the balance sheet. In July 1999, the FASB issued SFAS No. 137, which delays
the effective date for the new requirements of SFAS No. 133 by one year. As a
result, SFAS No. 133 will be effective no later than for the Company's first
quarter of 2001. In June 2000, the FASB issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", which amends
and clarifies certain requirements of SFAS No. 133. The Company continues to
evaluate the effects of these new accounting rules, which the Company will
adopt in the first quarter of 2001. Based on preliminary evaluation, the
Company currently does not expect these new accounting rules to have a material
effect on the Company's financial condition or results of operations.
9
<PAGE> 10
ITEM 2. SCHWEITZER-MAUDUIT INTERNATIONAL, INC. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management believes that the following commentary and the tables
presented in Note 7 to the Notes to Unaudited Consolidated Financial Statements
appropriately discuss and analyze the comparative results of operations and the
financial condition of the Company for the periods covered.
RESULTS OF OPERATIONS
Net Sales
Net sales increased by $1.3 million in the three month period ended
September 30, 2000 compared with the corresponding period of the preceding
year. This increase was a result of higher sales volumes, largely offset by
unfavorable changes in currency exchange rates. Net sales increased by $7.4
million in the quarter as a result of a 1.5 percent increase in total sales
volumes compared with the same quarter of the prior year. For the Brazilian
business segment, sales volumes improved by 14 percent, with improvements in
non-tobacco related papers and sales of tobacco-related papers to Latin
American countries other than Brazil. Sales of tobacco-related papers within
the Brazilian market were approximately at the prior-year level, reflecting
relative stability in that market. The implementation of an export tax on some
raw materials used in the manufacturing of cigarettes that was enacted in
Brazil during the third quarter had a small unfavorable impact on the Company's
Brazilian business segment during the quarter. For the U.S. business segment,
sales volumes increased by four percent, with higher sales of tobacco-related
papers partially offset by lower sales of non-tobacco related papers. The
improvement in tobacco-related papers was achieved in all major product lines,
reflecting increased market share in North America for tobacco-related papers.
For the French business segment, sales volumes decreased by five percent, with
lower sales of both reconstituted tobacco leaf and tobacco-related paper
products. Changes in currency exchange rates had an unfavorable impact of $6.7
million on the net sales comparison, primarily as a result of a weaker French
franc versus the U.S. dollar compared with the same quarter of the prior year.
Additionally, changes in average selling prices and the mix of products sold
favorably affected the net sales comparison by $0.6 million, with favorable
effects at the Brazilian and U.S. business segments partially offset by
unfavorable effects at the French business segment.
Net sales decreased by $7.3 million in the nine month period ended
September 30, 2000 compared with the corresponding period of the preceding
year. This decrease was a result of unfavorable changes in currency exchange
rates and lower average selling prices, partially offset by an increase in
sales volumes. Changes in currency exchange rates had an unfavorable impact of
$20.7 million on the net sales comparison, primarily as a result of a weaker
French franc versus the U.S. dollar compared with the same period of the prior
year. Lower average selling prices reduced net sales by $1.5 million as a
result of an unfavorable mix of products sold and the effects of certain price
reductions that occurred during 1999, primarily at the French business segment.
Net sales increased by $14.9 million as a result of a two percent increase in
total sales volumes compared with the same period of the prior year. For the
Brazilian business segment, sales volumes improved by 18 percent, with
improvements in non-tobacco related papers and sales of tobacco-related papers
to Latin American countries other than Brazil more than offsetting weakness in
tobacco-related paper sales within the Brazilian market. Sales volumes for the
nine month period declined by one percent compared to the prior-year period at
the French business segment. Sales volumes for the period decreased at the U.S.
business segment by five percent primarily due to lower domestic cigarette
shipments and a decline in the export of cigarettes by U.S. cigarette
manufacturers. Sales volumes of all three business segments were unfavorably
impacted in the first quarter of 2000 by a shift of sales volumes related to
Year 2000 concerns of certain customers which increased their year-end 1999
inventories.
10
<PAGE> 11
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Operating Profit
Operating profit decreased by $1.9 million in the three month period
ended September 30, 2000 compared with the corresponding period of the
preceding year, with improved operating profit in the Brazilian and U.S.
business segments more than offset by a decline in operating profit in the
French business segment. Operating profit was unfavorably impacted in all three
business segments by higher per ton wood pulp costs and increased energy costs
of $4.3 million and $0.9 million, respectively. Operating profit for the French
business segment decreased by $2.5 million as a result of higher wood pulp and
energy costs, lower average selling prices, a decline in reconstituted tobacco
leaf sales and production volumes and the unfavorable effects of changes in
currency exchange rates, partially offset by improved mill operations. For the
U.S. business segment, operating profit improved by $0.2 million, as a result
of increased sales volumes, higher average selling prices and the benefits of
cost reduction programs, partially offset by increased wood pulp and energy
costs. Operating profit for the Brazilian business segment increased by $0.6
million, with the benefits of increased sales volumes, higher average selling
prices and improved mill operations more than offsetting the impact of
increased wood pulp and other material costs. Nonmanufacturing expenses
decreased by $0.8 million during the quarter, as a result of lower general and
selling expenses due to cost reduction efforts and the effects of changes in
currency exchange rates.
Operating profit decreased by $11.0 million in the nine month period
ended September 30, 2000 compared with the corresponding period of the
preceding year, with declines in the French and U.S. business segments
partially offset by improved operating profit at the Brazilian business
segment. Operating profit was unfavorably impacted in all three business
segments by higher per ton wood pulp costs and increased energy costs of $13.6
million and $3.8 million, respectively. The Year 2000 sales volume shift
unfavorably impacted first quarter 2000 operating profit by approximately $1.8
million. Operating profit for the French business segment decreased by $8.1
million as a result of lower average selling prices, higher wood pulp and
energy costs and the unfavorable impact of changes in currency exchange rates,
partially offset by improved mill operations. Operating profit for the U.S.
business segment declined by $3.8 million, with the benefits of cost savings
programs and higher average selling prices partially offsetting the effects of
lower production and sales volumes and higher wood pulp and energy costs.
Operating profit for the Brazilian business segment increased by $0.9 million,
with the benefits of increased sales volumes, higher average selling prices,
improved mill operations and cost reduction programs partially offset by higher
costs of wood pulp, energy and other materials. Nonmanufacturing expenses
decreased by $1.9 million during the period as a result of lower selling,
research and general expenses, in part due to cost reduction efforts and
changes in currency exchange rates.
NON-OPERATING EXPENSES
Interest expense was higher for the three and nine month periods ended
September 30, 2000 compared with the corresponding periods of the preceding
year as a result of higher average interest rates in 2000. Other income, net
consisted primarily of interest income, royalty income and foreign currency
transaction gains and losses in each of the periods presented, as well as a
favorable settlement related to a prior-period claim reflected in the nine
month period of 2000 and recovery of prior-period business taxes reflected in
the nine month period of 1999.
11
<PAGE> 12
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
INCOME TAXES
The effective income tax rates for the three and nine month periods
ended September 30, 2000 were 31.8 percent and 30.5 percent, respectively,
compared with 39.2 percent and 38.5 percent for the respective corresponding
periods of 1999. The lower effective income tax rates for the three and nine
month periods of 2000 were in part due to a decrease in the French corporate
income tax rate from 40.0 percent for 1999 to 37.7 percent for 2000, a decline
in the Brazilian corporate income tax rate from 37.0 percent in the third
quarter of 1999 to 34.0 percent in the corresponding current year period, as
well as a favorable income tax adjustment in the third quarter of 2000 that,
along with associated entries, increased net income by $0.7 million.
Additionally, a $1.0 million favorable adjustment to reduce Spanish deferred
income tax valuation allowances and favorable tax treatment of a settlement
related to a prior-period claim were reflected in the nine month period of
2000.
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES Nine Months Ended September 30,
-------------------------------
(U.S. $ in millions)
Cash Provided by (Used for): 2000 1999
---------------------------- ---- ----
<S> <C> <C>
Changes in operating working capital.............................................. $ (6.9) $ (11.4)
Operations........................................................................ 43.3 39.5
Capital spending.................................................................. (14.0) (20.3)
Purchases of treasury stock....................................................... (10.1) (3.4)
</TABLE>
The Company's primary source of liquidity is cash flow from
operations, which is principally obtained through operating earnings. The
Company's net cash provided by operations increased from $39.5 million to $43.3
million for the nine months ended September 30, 1999 and September 30, 2000,
respectively, primarily due to less cash used for changes in operating working
capital. Changes in operating working capital contributed unfavorably to cash
flow by $6.9 million and $11.4 million in the nine month periods ended
September 30, 2000 and 1999, respectively. The 2000 increase in working capital
was primarily due to an increase in accounts receivable associated with higher
quarter-end sales. The 1999 increase in working capital was primarily due to a
decrease in accounts payable associated with 1999 payments for capital
expenditures and inventory purchases included in accounts payable at December
31, 1998. Additionally, accounts receivable as of September 30, 1999 increased
from the December 31, 1998 amount because of increased export sales having
longer payment terms and higher quarter-end sales.
During the second quarter of 2000, the Company and Philip Morris
Incorporated ("Philip Morris") reached agreement to proceed with the
modification of paper machines and related manufacturing equipment at the
Company's Spotswood, New Jersey mill to produce commercial quantities of a new
proprietary banded cigarette paper for Philip Morris. Capital spending to
implement the banded cigarette paper project is currently expected to total
approximately $10 million in 2000 and $40 million in 2001. The Company does not
expect this project to impair its ability to pursue other appropriate business
opportunities. Funding for the Spotswood mill conversion and increased working
capital requirements will come from internal sources and from advance payments
by Philip Morris against future product purchases.
12
<PAGE> 13
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Capital spending for the nine months ended September 30, 2000 included
$6.7 million toward three projects at the Spotswood mill, one of which is the
new banded cigarette paper project, another is a new high-speed slitter and the
other is a project for mill effluent solids removal. Also included in the total
capital spending for the nine months ended September 30, 2000 is $1.3 million
toward improvement of a reconstituted tobacco leaf machine in the Spay, France
mill. During the first nine months of 1999, capital spending included $7.2
million toward the speed-up of two machines in the French mills, $3.1 million
toward the expansion of the Malaucene, France mill and $1.1 million toward
replacement of a yankee dryer in the Spay mill.
In December 1998, the Company announced that the Board of Directors
had authorized the repurchase of shares of the Company's common stock during
the period January 1, 1999 through December 31, 2000 in an amount not to exceed
$20 million. Through September 30, 2000, the Company has repurchased a total of
1,000,550 shares of its common stock for $14.4 million under this program, of
which 706,200 shares have been purchased thus far in 2000 for $10.1 million.
For full year 2000, the Company anticipates repurchasing common stock totaling
in the range of $12 to $15 million, although future purchases will be dependent
upon various factors including the stock price and cash availability. The
Company's Board of Directors recently authorized the repurchase of shares of
the Company's common stock during the period January 1, 2001 through December
31, 2002 in an amount not to exceed $20 million.
On October 26, 2000, the Company announced that the Board of Directors
had declared a quarterly cash dividend of fifteen cents per share of common
stock. The dividend will be payable on December 11, 2000 to stockholders of
record on November 13, 2000.
The Company's ongoing requirements for cash are expected to consist
principally of amounts required for capital expenditures, including the banded
cigarette paper project, purchases of treasury stock, stockholder dividends and
working capital. Other than expenditures associated with capital projects, the
Company had no material outstanding commitments as of September 30, 2000. The
principal sources of cash are expected to be cash flow from operations,
including advance payments from Philip Morris for future product purchases, and
borrowings from commercial banks.
The Company believes its cash flow from operations, together with
borrowings available under its revolving credit and overdraft facilities, will
be sufficient to fund its ongoing cash requirements.
NEW ACCOUNTING STANDARD
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which will require that all derivative
financial instruments be recognized as either assets or liabilities on the
balance sheet. In July 1999, the FASB issued SFAS No. 137, which delays the
effective date for the new requirements of SFAS No. 133 by one year. As a
result, SFAS No. 133 will be effective no later than for the Company's first
quarter of 2001. In June 2000, the FASB issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", which amends
and clarifies certain requirements of SFAS No. 133. The Company continues to
evaluate the effects of these new accounting rules, which the Company will
adopt in the first quarter of 2001. Based on preliminary evaluation, the
Company currently does not expect these new accounting rules to have a material
effect on the Company's financial condition or results of operations.
13
<PAGE> 14
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
OUTLOOK
Although cigarette production in the United States was lower in the
first nine months of 2000 compared with the comparable period of the prior year
as a result of declines in domestic cigarette consumption and exports of
cigarettes manufactured in the United States, sales volumes of the Company's
U.S. business segment appear to be stabilizing. The negative impact of lower
U.S. cigarette production is being partially offset by the Company's increased
market share within the U.S. market and this trend is expected to continue.
Outside the United States, recent improvements in the Company's sales volumes
to several key markets compared with prior-year levels, including Eastern
Europe and Russia, are expected to continue. Sales of tobacco-related papers
within the Brazilian market appear to be stabilizing. The Company's Brazilian
business continues to benefit from increased sales of its non-tobacco papers
and sales to Latin American countries outside of Brazil, although the level of
these exports is being unfavorably impacted because of the implementation of an
export tax on some raw materials used in the manufacturing of cigarettes.
The new Brazilian export tax, which was enacted late in the third
quarter, is a 150 percent tax which applies to tobacco-related papers
manufactured by the Company's Brazilian business and exported from Brazil to
other Latin American countries. This new tax was apparently enacted by the
Brazilian government in an attempt to reduce the quantity of contraband or
smuggled cigarettes being sold in Brazil. The Company has been working with the
Brazilian government concerning the impact of this new export tax on the
Company's Brazilian business and asked the government to explore other methods
to address the contraband cigarette issue in Brazil. Modifications to the new
export tax were recently enacted during the fourth quarter and should reduce
the negative impact on our Brazilian operation's exports from Brazil; however,
even as modified, the new tax could unfavorably impact the Company's financial
results by approximately $.01 to $.02 per share per quarter beginning in this
fourth quarter.
Worldwide demand for tobacco-related papers remains below worldwide
capacity for such papers despite actions by suppliers, including the Company,
to shut-down less efficient machines. Although weaker foreign currencies in
relation to the U.S. dollar have caused pressure to reduce selling prices,
particularly in countries served by the Company's French businesses, selling
prices appear to have stabilized in most key markets with somewhat higher
average selling prices anticipated in the fourth quarter of 2000.
The Company's customers in the United States traditionally reduce
their operating schedules around holidays during the fourth quarter, which
typically softens demand for the Company's products and allows for additional
maintenance and capital work. Similarly, in Brazil, customer orders are
typically lower in December due to a January and February holiday season.
Cost reduction continues to be a priority in each of the Company's
business segments. Future periods are expected to benefit from various cost
savings programs and certain past and future capital projects.
The per ton cost of wood pulp has steadily increased during the latter
half of 1999 and the first three quarters of 2000, although it now appears that
the cost of wood pulp may have stabilized. The Company believes that further
increases in the per ton cost of wood pulp are unlikely in the fourth quarter
of 2000 and that the per ton cost of wood pulp will only increase moderately,
if at all, in 2001 from its current level. Additionally, higher energy costs
were experienced in the first nine months of 2000 in each of the Company's
business segments. The Company is experiencing a lag in its ability to offset
these cost increases with higher selling prices. Although selling price
increases are anticipated, the higher costs are not expected to be fully offset
by increased selling prices. The continuing strong U.S. dollar is limiting the
14
<PAGE> 15
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Company's ability to raise selling prices since several competitors have cost
structures that are based upon currencies that have weakened versus the U.S.
dollar.
The French corporate income tax rate declined from 40.0 percent for
1999 to 37.7 percent effective beginning January 1, 2000. The Brazilian
corporate income tax rate declined from 37.0 percent to 34.0 percent effective
beginning February 1, 2000. The Company expects its consolidated effective
income tax rate to be approximately 37 percent for the fourth quarter of 2000.
This effective income tax rate could decline from 37 percent in 2001 and in
subsequent years if a plan that the French government recently proposed to
reduce the French corporate income tax rate is implemented. This proposal
includes the phase-out of the current 10 percent income tax surcharge on the
base income tax rate of 33.3 percent over the next three years. If implemented
as proposed, this would reduce the Company's French corporate income tax rate
by approximately one percentage point in each of the next three years.
During the second quarter of 2000, the Company and Philip Morris
reached agreement to proceed with the modification of paper machines and
related manufacturing equipment at the Company's Spotswood mill to produce
commercial quantities of a new proprietary banded cigarette paper for Philip
Morris. This new cigarette paper was jointly developed by the Company and
Philip Morris and may make a cigarette less likely to ignite certain fabrics.
During the quarter just ended, Philip Morris announced that this new
banded cigarette paper would be used nationwide in the United States in Philip
Morris' Merit brand of cigarettes. Philip Morris has publicly commented that it
plans to evaluate for a few months how the paper works on the Merit brand
before a decision is made whether to use it on other brands of cigarettes.
Capital spending to implement the banded cigarette paper project is currently
expected to total approximately $10 million in 2000 and $40 million in 2001.
The Company does not expect this project to impair its ability to pursue other
appropriate business opportunities. Funding for the Spotswood mill conversion
and increased working capital requirements will come from internal sources and
from advance payments by Philip Morris against future product purchases. The
banded cigarette paper operations are expected to have a positive, but small,
impact on 2001 financial results since 2001 will be a phase-in year for the new
product.
Excluding capital spending associated with the banded cigarette paper
project, the Company expects to control its capital spending to approximately
$20 million for 2000 and $20 to $25 million for 2001, focused primarily on
product quality improvements and cost reduction opportunities. Capitalized
software costs in 2000 are expected to total approximately $2 million and
decline to approximately $1 million in 2001.
During the first nine months of 2000, the Company repurchased 706,200
shares of its common stock for $10.1 million. For full year 2000, the Company
anticipates repurchasing common stock totaling in the range of $12 to $15
million, although future purchases will be dependent upon various factors
including the stock price and cash availability.
The Company's current expectation is that diluted earnings per share
for the fourth quarter of 2000 will be in the range of the 1999 fourth quarter
results of $.49, even though the fourth quarter of last year did benefit from a
Year 2000 sales volume shift that improved fourth quarter 1999 results by
approximately $.07 per share. Furthermore, as a result of expected negative
impacts of the Brazilian export tax and the challenging pricing environment, it
is likely that operating profit for the Company in 2001 will only show a small
improvement compared with 2000 despite anticipated volume gains.
15
<PAGE> 16
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain matters discussed in this report, particularly in the
foregoing discussion regarding the "Outlook" of the Company, constitute
forward-looking statements, generally identified by phrases such as "the
Company expects" or "the Company anticipates", as well as by use of words of
similar effect, such as "appears", "could", "should", "may" and "typically".
This report contains many such forward-looking statements, including statements
regarding management's expectations of future selling prices for the Company's
products, future market prices for wood pulp used by the Company, expected
sales volumes trends, new product introductions, anticipated cost savings,
anticipated financial and operational results, anticipated capital spending,
anticipated tax and other governmental actions, contingencies, anticipated
common stock share repurchases and other expected transactions of the Company.
Forward-looking statements are made based upon management's expectations and
beliefs concerning future events impacting the Company. There can be no
assurances that such events will occur or that the results of the Company will
be as estimated. Many factors outside the control of the Company also could
impact the realization of such estimates. Certain factors in some cases have
affected, and in the future could affect, the Company's actual results and
could cause the Company's actual results for 2000 and beyond, to differ
materially from those expressed in any forward-looking statements made by, or
on behalf of, the Company. In addition to those mentioned above, certain
factors that could cause the Company's future results to differ materially from
those expressed in any such forward-looking statements are discussed in the
Company's 1999 Annual Report on Form 10-K, Part II, Item 7, under the heading
"Factors That May Affect Future Results".
16
<PAGE> 17
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
4.1 Form of Common Stock Certificate as of October 1, 2000.
4.2 Rights Agreement Amended and Restated as of October 1, 2000.
15. Independent Accountants' Report, dated October 19, 2000 from Deloitte & Touche LLP
to Schweitzer-Mauduit International, Inc.
23. Consent of Deloitte & Touche LLP.
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K:
(1) On July 19, 2000, the Company filed a Current Report on Form 8-K to report its expected
earnings for the second quarter of 2000.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Schweitzer-Mauduit International, Inc.
(Registrant)
By: /s/ PAUL C. ROBERTS By: /s/ WAYNE L. GRUNEWALD
-------------------------------- ---------------------------------
Paul C. Roberts Wayne L. Grunewald
Chief Financial Officer and Controller
Treasurer (principal accounting officer)
(duly authorized officer and
principal financial officer)
November 13, 2000 November 13, 2000
17
<PAGE> 18
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
4.1 -- Form of Common Stock Certificate as of October 1, 2000.
4.2 -- Rights Agreement Amended and Restated as of October 1, 2000.
15. -- Independent Accountants' Report, dated October 19, 2000 from
Deloitte & Touche LLP to Schweitzer-Mauduit International, Inc.
23. -- Consent of Deloitte & Touche LLP.
27. -- Financial Data Schedule (for SEC use only).
</TABLE>
