<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 JUNE 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)
DELAWARE 62-1612879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 June 30, 2000, 15,294,807 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 SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales ........................................... $ 121.7 $ 119.7 $ 239.7 $ 248.3
Cost of products sold ............................ 99.8 95.0 195.8 194.2
-------- -------- -------- --------
Gross Profit ........................................ 21.9 24.7 43.9 54.1
Selling expense .................................. 4.7 4.5 9.1 9.2
Research expense ................................. 1.5 1.6 3.2 3.4
General expense .................................. 4.6 5.0 9.1 9.9
-------- -------- -------- --------
Operating Profit .................................... 11.1 13.6 22.5 31.6
Interest expense ................................. (1.6) (1.4) (3.1) (2.9)
Other income, net ................................ 0.5 0.9 2.1 1.9
-------- -------- -------- --------
Income Before Income Taxes and Minority Interest .... 10.0 13.1 21.5 30.6
Provision for income taxes ....................... 2.5 4.9 6.4 11.7
-------- -------- -------- --------
Income Before Minority Interest ..................... 7.5 8.2 15.1 18.9
Minority interest in earnings of subsidiaries .... 1.1 1.1 1.9 2.7
-------- -------- -------- --------
Net Income .......................................... $ 6.4 $ 7.1 $ 13.2 $ 16.2
======== ======== ======== ========
Net Income per Common Share:
Basic ............................................ $ .41 $ .45 $ .85 $ 1.02
======== ======== ======== ========
Diluted .......................................... $ .41 $ .45 $ .85 $ 1.02
======== ======== ======== ========
Cash Dividends Declared per Common Share ............ $ .15 $ .15 $ .30 $ .30
======== ======== ======== ========
</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>
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ........................................................ $ 9.9 $ 15.1
Accounts receivable .............................................................. 77.7 72.1
Inventories ...................................................................... 63.0 62.9
Current income tax refunds receivable ............................................ 3.2 2.2
Deferred income tax benefits ..................................................... 4.1 4.1
Prepaid expenses ................................................................. 4.4 2.8
------ ------
Total Current Assets ......................................................... 162.3 159.2
------ ------
Gross Property ...................................................................... 445.9 451.9
Less accumulated depreciation .................................................... 204.5 199.8
------ ------
Net Property ................................................................. 241.4 252.1
------ ------
Noncurrent Deferred Income Tax Benefits .............................................. 3.6 6.9
------ ------
Deferred Charges and Other Assets .................................................... 17.3 18.4
------ ------
Total Assets ......................................................................... $424.6 $436.6
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt ................................................ $ 3.7 $ 3.2
Other short-term debt ............................................................ 7.0 8.8
Accounts payable ................................................................. 41.3 46.3
Accrued expenses ................................................................. 49.8 49.1
------ ------
Total Current Liabilities .................................................... 101.8 107.4
------ ------
Long-Term Debt ....................................................................... 98.8 100.9
------ ------
Deferred Income Taxes ................................................................ 13.8 13.1
------ ------
Other Noncurrent Liabilities ......................................................... 24.1 23.9
------ ------
Minority Interest .................................................................... 3.9 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 June 30, 2000 and December 31, 1999 .......... l.6 1.6
Additional paid-in capital ....................................................... 60.5 60.7
Common stock in treasury, at cost - 783,926 and 441,845 shares at June 30, 2000
and December 31, 1999, respectively ........................................... (12.8) (8.0)
Retained earnings ................................................................ 165.3 156.7
Unearned compensation ............................................................ (0.4) --
Accumulated other comprehensive income (loss)-
Unrealized foreign currency translation adjustments ............................ (32.0) (26.8)
------ ------
Total Stockholders' Equity ................................................... 182.2 184.2
------ ------
Total Liabilities and Stockholders' Equity ........................................... $424.6 $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
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ISSUED TREASURY STOCK ADDITIONAL
--------------------- -------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
---------- ------ -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 .................. 16,078,733 $1.6 154,668 $ (3.8) $ 60.7 $134.8
Net income for the six months
ended June 30, 1999 .................... 16.2
Adjustments to unrealized foreign
currency translation ...................
Comprehensive loss ..........................
Dividends declared ($0.30 per share) ........ (4.8)
Purchases of treasury stock ................. 127,200 (2.0)
Stock issued to directors as compensation ... -- -- (3,491) -- -- --
---------- ---- -------- ------ ------ ------
BALANCE, JUNE 30, 1999 ...................... 16,078,733 1.6 278,377 (5.8) 60.7 146.2
Net income for the six months
ended December 31, 1999 ................ 15.2
Adjustments to unrealized foreign
currency translation ...................
Comprehensive income ........................
Dividends declared ($0.30 per share) ........ (4.7)
Purchases of treasury stock ................. 167,150 (2.3)
Stock issued to directors as compensation ... -- -- (3,682) 0.1 -- --
---------- ---- -------- ------ ------ ------
BALANCE, DECEMBER 31, 1999 .................. 16,078,733 1.6 441,845 (8.0) 60.7 156.7
Net income for the six months
ended June 30, 2000 .................... 13.2
Adjustments to unrealized foreign
currency translation ...................
Comprehensive income ........................
Dividends declared ($0.30 per share) ........ (4.6)
Purchases of treasury stock ................. 375,200 (5.4)
Restricted stock issuances .................. (30,000) 0.6 (0.2)
Stock issued to directors as compensation ... -- -- (3,119) -- -- --
---------- ---- -------- ------ ------ ------
BALANCE, JUNE 30, 2000 ...................... 16,078,733 $1.6 783,926 $(12.8) $ 60.5 $165.3
========== ==== ======== ====== ====== ======
<CAPTION>
ACCUMULATED
OTHER
UNEARNED COMPREHENSIVE
COMPENSATION INCOME (LOSS) TOTAL
------------ ------------- ------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 .................. $ 3.7 $197.0
Net income for the six months
ended June 30, 1999 .................... 16.2
Adjustments to unrealized foreign
currency translation ................... (27.5) (27.5)
------
Comprehensive loss .......................... (11.3)
Dividends declared ($0.30 per share) ........ (4.8)
Purchases of treasury stock ................. (2.0)
Stock issued to directors as compensation ... -- --
-------- ------
BALANCE, JUNE 30, 1999 ...................... (23.8) 178.9
Net income for the six months
ended December 31, 1999 ................ 15.2
Adjustments to unrealized foreign
currency translation ................... (3.0) (3.0)
------
Comprehensive income ........................ 12.2
Dividends declared ($0.30 per share) ........ (4.7)
Purchases of treasury stock ................. (2.3)
Stock issued to directors as compensation ... -- 0.1
-------- ------
BALANCE, DECEMBER 31, 1999 .................. (26.8) 184.2
Net income for the six months
ended June 30, 2000 .................... 13.2
Adjustments to unrealized foreign
currency translation ................... (5.2) (5.2)
------
Comprehensive income ........................ 8.0
Dividends declared ($0.30 per share) ........ (4.6)
Purchases of treasury stock ................. (5.4)
Restricted stock issuances .................. $ (0.4) --
Stock issued to directors as compensation ... -- -- --
------ -------- ------
BALANCE, JUNE 30, 2000 ...................... $ (0.4) $ (32.0) $182.2
====== ======== ======
</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 SIX MONTHS
ENDED JUNE 30,
------------------
2000 1999
------ ------
<S> <C> <C>
Operations
Net income ....................................... $ 13.2 $ 16.2
Depreciation and amortization .................... 11.2 10.9
Deferred income tax provision .................... 3.5 4.2
Minority interest in earnings of subsidiaries .... 1.9 2.7
Other ............................................ 0.4 1.2
Changes in operating working capital ............. (12.6) (11.9)
------ ------
Cash Provided by Operations ............. 17.6 23.3
------ ------
Investing
Capital spending ................................. (7.5) (15.5)
Capitalized software costs ....................... (0.8) (2.2)
Other ............................................ 0.5 0.5
------ ------
Cash Used for Investing ................. (7.8) (17.2)
------ ------
Financing
Cash dividends paid to SWM stockholders .......... (4.6) (4.8)
Cash dividends paid to minority owner ............ (4.6) (5.2)
Purchases of treasury stock ...................... (5.4) (2.0)
Changes in short-term debt ....................... (1.8) 1.3
Proceeds from issuances of long-term debt ........ 4.5 5.2
Payments on long-term debt ....................... (3.1) (4.1)
------ ------
Cash Used for Financing ................. (15.0) (9.6)
------ ------
Decrease in Cash and Cash Equivalents ............... (5.2) (3.5)
Cash and Cash Equivalents at Beginning of Period .... 15.1 6.7
------ ------
Cash and Cash Equivalents at End of Period .......... $ 9.9 $ 3.2
====== ======
</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 six month periods ended June 30, 2000 were approximately
15,352,400 and 15,451,900, respectively, and for the three and six month periods
ended June 30, 1999 were approximately 15,867,200 and 15,896,200, 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 six month
periods ended June 30, 2000 were approximately 15,389,300 and 15,488,100,
respectively, and for the three and six month periods ended June 30, 1999 were
approximately 15,870,100 and 15,897,600, respectively. Potential common shares
are those related to stock options and restricted stock outstanding during the
respective periods.
NOTE 3. INVENTORIES
The following schedule details inventories by major class:
<TABLE>
<CAPTION>
June 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 ......................................... $ 25.3 $ 29.0
Work in process ....................................... 7.6 5.6
Finished goods ........................................ 23.2 21.1
Supplies and other .................................... 12.4 12.0
------ ------
68.5 67.7
Excess of FIFO cost over Last-In, First-Out (LIFO) cost .... (5.5) (4.8)
------ ------
Total ................................................ $ 63.0 $ 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 six month periods
ended June 30, 2000 were 25.0 percent and 29.8 percent, respectively, compared
with 37.4 percent and 38.2 percent for the respective corresponding periods of
1999. The lower effective income tax rates for the three and six 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 an average of 35.7 percent in the second quarter
of 1999 to 34.0 percent in the current year, as well as a $1.0 favorable
adjustment to reduce Spanish deferred income tax valuation allowances in the
second quarter of 2000 and favorable tax treatment of a settlement in the six
month period of 2000 related to a prior-period claim.
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 has continuing 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. Results of tests conducted in February 2000 showed that
the Company had achieved compliance with the consent order and reduced the
concentration of landfill gases to the levels specified in the consent order at
30 feet below ground level in all of the gas monitoring wells. However, more
recent tests again showed gas levels in a few of the monitoring wells were above
the consent order limits. The Company is undertaking additional steps to address
this issue and will continue its remediation activities on a reduced monitoring
schedule approved by MDEP for this landfill, the remaining cost of which was
previously accrued and is not material. The Company does not believe that this
proceeding will result in the imposition of monetary sanctions or will 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 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.
7
<PAGE> 8
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
U.S. $ IN MILLIONS, EXCEPT PER SHARE AMOUNTS
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 approximately 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
JUNE 30, JUNE 30, % CHANGE ------------------
NET SALES 2000 1999 VS. 1999 2000 1999
--------- ------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
United States ...................... $ 39.8 $ 39.5 + 0.8% 32.7% 33.0%
France.............................. 64.7 68.3 - 5.3 53.2 57.1
Brazil.............................. 17.2 11.9 +44.5 14.1 9.9
------- -------
Subtotal................... 121.7 119.7
Intersegment sales by:
United States.................. - - - -
France......................... - - - -
Brazil......................... - - - -
------- ------- ----- -----
Consolidated .............. $ 121.7 $ 119.7 + 1.7% 100.0% 100.0%
======= ======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------- % OF CONSOLIDATED % RETURN ON SALES
JUNE 30, JUNE 30, % CHANGE ----------------- -----------------
OPERATING PROFIT 2000 1999 VS. 1999 2000 1999 2000 1999
---------------- ------- -------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
United States.............. $ 0.1 $ 1.7 - 94.1% 0.9% 12.5% 0.3% 4.3%
France..................... 10.8 12.5 - 13.6 97.3 91.9 16.7 18.3
Brazil..................... 1.5 0.5 N.M. 13.5 3.7 8.7 4.2
Unallocated expenses....... (1.3) (1.1) (11.7) (8.1)
------- ------ ----- -----
Consolidated...... $ 11.1 $ 13.6 - 18.4% 100.0% 100.0% 9.1% 11.4%
======= ====== ===== =====
</TABLE>
N.M. - Not Meaningful.
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 SIX MONTHS ENDED
------------------------ % OF CONSOLIDATED
JUNE 30, JUNE 30, % CHANGE -----------------
NET SALES 2000 1999 VS. 1999 2000 1999
--------- ------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C>
United States ...................... $ 77.9 $ 85.0 - 8.4% 32.5% 34.2%
France.............................. 128.7 139.8 - 7.9 53.7 56.3
Brazil.............................. 33.1 23.6 +40.3 13.8 9.5
------- -------
Subtotal................... 239.7 248.4
Intersegment sales by:
United States.................. - - - -
France......................... - (0.1) - -
Brazil......................... - - - -
------- -------- ----- -----
Consolidated .............. $ 239.7 $ 248.3 - 3.5% 100.0% 100.0%
======= ======== ===== =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------ % OF CONSOLIDATED % RETURN ON SALES
JUNE 30, JUNE 30, % CHANGE ----------------- -----------------
OPERATING PROFIT 2000 1999 VS. 1999 2000 1999 2000 1999
---------------- ------- ------ -------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
United States.............. $ 1.8 $ 5.8 - 69.0% 8.0% 18.4% 2.3% 6.8%
France..................... 20.5 26.1 - 21.5 91.1 82.6 15.9 18.7
Brazil..................... 2.8 2.5 + 12.0 12.4 7.9 8.5 10.6
Unallocated expenses....... (2.6) (2.8) (11.5) (8.9)
------- ------- ----- -----
Consolidated...... $ 22.5 $ 31.6 - 28.8% 100.0% 100.0% 9.4% 12.7%
======= ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
% OF CONSOLIDATED
JUNE 30, DECEMBER 31, -----------------
TOTAL ASSETS 2000 1999 2000 1999
------------ -------- ----------- ---- ----
<S> <C> <C> <C> <C>
United States......................... $ 146.2 $ 147.6 34.4% 33.8%
France................................ 223.6 237.7 52.7 54.4
Brazil................................ 54.8 53.0 12.9 12.1
Intersegment eliminations............. - (1.7) - (0.3)
-------- ------- ----- -----
Consolidated................. $ 424.6 $ 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 six month period ended June 30, 2000
are primarily due to a stronger U.S. dollar against the French franc at June 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 is evaluating the
effects of these new accounting rules, which the Company will adopt in the first
quarter of 2001.
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 $2.0 million in the three month period ended
June 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 $8.9 million in the
quarter as a result of a seven percent increase in total sales volumes compared
with the same quarter of the prior year. For the Brazilian business segment,
sales volumes improved by 20 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. For the French business segment, sales volumes increased
by four percent with increases in both reconstituted tobacco leaf and
tobacco-related paper products. Sales volumes for the quarter were approximately
at the prior-year level at the U.S. business segment. Changes in currency
exchange rates had an unfavorable impact of $7.1 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 $0.2 million.
Net sales decreased by $8.6 million in the six month period ended June
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 $14.0 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 $2.1 million as a result of an unfavorable
mix of products sold and the effects of certain price reductions that occurred
during the first half of 1999. Net sales increased by $7.5 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
20 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 six month period were approximately at the prior-year
level at the French business segment. Sales volumes for the period decreased at
the U.S. business segment by 10 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.
Operating Profit
Operating profit decreased by $2.5 million in the three month period
ended June 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 in 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 $4.6 million and $1.1 million,
respectively. Operating profit for the French business segment decreased by $1.7
million as a result of lower average selling prices and higher wood pulp and
energy costs, partially offset by increased sales and production volumes and
improved mill operations. For
10
<PAGE> 11
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
the U.S. business segment, operating profit declined by $1.6 million, with the
benefits of cost savings programs and higher average selling prices partially
offsetting unfavorable effects of higher wood pulp, energy and health care
costs. Operating profit for the Brazilian business segment increased by $1.0
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. Non-manufacturing
expenses decreased by $0.3 million during the quarter, primarily as a result of
lower general expenses due to cost reduction efforts and changes in currency
exchange rates.
Operating profit decreased by $9.1 million in the six month period
ended June 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 $9.3 million and $2.9 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 $5.6 million as a result of lower
average selling prices and higher wood pulp and energy costs, partially offset
by improved mill operations and reduced manufacturing costs. Operating profit
for the U.S. business segment declined by $4.0 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 $0.3
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. Non-manufacturing
expenses decreased by $1.1 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 six month periods ended
June 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, a favorable settlement in the
six month 2000 period related to a prior-period claim and recovery in the 1999
periods of prior-period business taxes.
INCOME TAXES
The effective income tax rates for the three and six month periods
ended June 30, 2000 were 25.0 percent and 29.8 percent, respectively, compared
with 37.4 percent and 38.2 percent for the respective corresponding periods of
1999. The lower effective income tax rates for the three and six 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 an average of 35.7 percent in the second quarter
of 1999 to 34.0 percent in the current year, as well as a $1.0 million favorable
adjustment to reduce Spanish deferred income tax valuation allowances in the
second quarter of 2000 and favorable tax treatment of a settlement in the six
month period of 2000 related to a prior-period claim.
11
<PAGE> 12
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES Six Months Ended June 30,
-------------------------
(U.S. $ in millions)
Cash Provided by (Used for): 2000 1999
---------------------------- ---- ----
<S> <C> <C>
Changes in operating working capital............. $(12.6) $(11.9)
Operations....................................... 17.6 23.3
Capital spending................................. (7.5) (15.5)
Capitalized software costs....................... (0.8) (2.2)
Purchases of treasury stock...................... (5.4) (2.0)
</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 decreased from $23.3 million to $17.6 million for the six
months ended June 30, 1999 and June 30, 2000, respectively, primarily due to
lower net income. Changes in operating working capital contributed unfavorably
to cash flow by $12.6 million and $11.9 million in the six month periods ended
June 30, 2000 and 1999, respectively. The 2000 increase in working capital was
primarily due to a decrease in accounts payable associated with 2000 payments
for capital expenditures and purchases of inventory and maintenance services
included in accounts payable at December 31, 1999 and an increase in accounts
receivable associated with increased sales late in the second quarter of 2000.
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.
Capital spending for the six months ended June 30, 2000 included $2.3
million toward two projects at the Spotswood, New Jersey mill, one of which is a
new high-speed slitter and the other is a project for mill effluent solids
removal, and $0.9 million toward improvement of a reconstituted tobacco leaf
machine in the Spay, France mill. During the first six months of 1999, capital
spending included $6.4 million toward the speed-up of two machines in the French
mills and $2.4 million toward the expansion of the Malaucene, France mill.
In addition to capital spending, in the six month period ended June 30,
2000, the Company incurred and deferred on the balance sheet software
development costs of $0.8 million toward additional software modules of new
integrated computer systems, primarily in France. Additional modules of the
software development project in France are scheduled to be placed in operation
during the remainder of 2000, although a large portion of the installation of
the new French systems has been completed.
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 June 30, 2000, the Company has repurchased a total of 669,550
shares of its common stock for $9.7 million under this program, of which 375,200
shares have been purchased thus far in 2000 for $5.4 million. The Company
anticipates repurchasing additional common stock under this program during the
remainder of 2000.
On July 27, 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 September 11, 2000 to stockholders of record on
August 14, 2000.
The Company's ongoing requirements for cash are expected to consist
principally of amounts required for capital expenditures, 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 June 30, 2000. The principal sources of cash are expected to
be cash flow from operations 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.
12
<PAGE> 13
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
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 is evaluating the
effects of these new accounting rules, which the Company will adopt in the first
quarter of 2001.
OUTLOOK
Although cigarette production in the United States was lower in the
first six 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. Outside the United States, improvements in
the Company's sales volumes to several key markets, including Eastern and
Western Europe, Russia and Asia, excluding China, are expected to continue. The
Company's Brazilian business also expects to continue to increase its
non-tobacco paper sales and sales to Latin American countries outside of Brazil,
offsetting weakness in the sale of tobacco-related papers within the Brazilian
market.
There continues to be excess worldwide manufacturing capacity for
tobacco-related papers, however, the amount of excess capacity continues to
decline as paper manufacturers, including the Company, have shut down unneeded
and less efficient capacity or converted machines to production of different
types of papers. Selling prices appear to have stabilized in most key markets,
with somewhat higher average selling prices anticipated in the third quarter of
2000.
The Company's customers in the United States traditionally reduce their
operating schedules around holidays during the third and fourth quarters, 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 will continue 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 first half of 2000. The Company expects further increases in
the per ton cost of wood pulp during the remainder of 2000 and in 2001.
Additionally, higher energy costs were experienced in the first six 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 will not be
fully offset by increased selling prices until the per ton cost of wood pulp and
energy costs stabilize.
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 remainder of 2000.
13
<PAGE> 14
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
During the quarter just ended, the Company reached agreement with
Philip Morris to extend to December 31, 2004 the strategic supply agreement for
fine papers under which the Company supplies tobacco-related papers to Philip
Morris' U.S. operations. Also during the quarter, the Company and Philip Morris
reached agreement to proceed with the modification of certain 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.
Philip Morris recently announced that this new banded cigarette paper
will be used nationwide in the United States in Philip Morris' Merit brand of
cigarettes by September 2000. 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. The Company
cannot currently make any projections concerning the impact this new paper
product may have on its operations and financial results. The timing and pace at
which equipment will be converted to produce this new product are in the process
of being finalized. The total capital cost to implement the banded cigarette
paper project will be dependent upon the equipment conversion plan which, if
fully implemented at the Spotswood mill, could result in capital investments in
excess of $40 million. 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.
Excluding capital spending associated with the banded cigarette paper
project, the Company expects to control its capital spending for 2000 and 2001
to approximately $20 to $25 million per year, focused primarily on product
quality improvements and cost reduction opportunities. Capitalized software
costs in 2000 are expected to total approximately $2 million and diminish to
less than $1 million in 2001.
During the first half of 2000, the Company repurchased 375,200 shares
of its common stock for $5.4 million. For full year 2000, the Company
anticipates repurchasing common stock totaling $10 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 earnings per share for the
full year 2000 will be somewhat below 1999 results, although earnings per share
for the second half of 2000 are expected to exceed those of the first half of
this year.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Many factors outside the control of the Company could impact the
Company's results. The following important factor and others 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.
14
<PAGE> 15
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Euro Currency Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies ("legal
currencies") and one common currency - the euro. The euro now trades on currency
exchanges and may be used in business transactions. Beginning in January 2002,
new euro-denominated bills and coins will be issued, and legal currencies will
be withdrawn from circulation by no later than June 2002. The Company
established a committee to identify and implement changes necessary to address
the systems and business issues raised by the euro currency conversion. These
issues include, among others, the need to adapt computer and other business
systems and equipment to accommodate euro-denominated transactions, competitive
implications of increased price transparency within European Union countries,
changes in currency exchange costs and rate exposures, continuity of contracts
that require payment in a legal currency and tax implications of the conversion.
The Company's French subsidiaries currently utilize multi-currency
software that was capable of euro-denominated sales and purchase transactions on
January 1, 1999. Consideration has also been given to other potential issues in
connection with the conversion, including those mentioned above. The Company's
French subsidiaries are in the process of implementing already-purchased
software capable of translating current and historical data into euro currency
data, which implementation will be fully completed no later than January 1,
2002, at which time the euro will become the functional currency of the French
subsidiaries. The Company does not anticipate any significant negative
consequences of these issues and does not anticipate that the euro conversion
will have a material adverse impact on its financial condition or results of
operations.
FORWARD-LOOKING STATEMENTS
Certain sections of this report, particularly the foregoing discussion
regarding the "Outlook" of the Company and "Factors That May Affect Future
Results", contain certain forward-looking statements, generally identified by
phrases such as "the Company expects" or words of similar effect.
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. The above-mentioned important factor
and others 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. 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".
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on Thursday,
April 27, 2000, at which the following matter was submitted to a vote, as had
been indicated in the Company's proxy statement mailed on or about March 14,
2000:
Three nominees, Mr. K.C. Caldabaugh, Mr. Jean-Pierre Le Hetet and Mr.
Richard D. Jackson, were elected as Class II Directors to serve a three-year
term expiring at the 2003 Annual Meeting of Stockholders and one nominee, Mr.
Alan R. Batkin, was elected as a Class I Director to serve a two-year term
expiring at the 2002 Annual Meeting of Stockholders. The results of the voting
of stockholders were as follows:
<TABLE>
<CAPTION>
Broker
For Against Withheld Abstentions Non-Votes
--- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Director: Mr. Batkin 13,405,658 - 79,740 - -
Director: Mr. Caldabaugh 13,404,477 - 80,921 - -
Director: Mr. Le Hetet 13,401,878 - 83,519 - -
Director: Mr. Jackson 13,404,495 - 80,903 - -
</TABLE>
Other Directors continuing in office are (i) Mr. Wayne H. Deitrich, Mr.
Leonard J. Kujawa and Mr. Larry B. Stillman, Class III Directors, whose terms
will expire at the 2001 Annual Meeting of Stockholders and (ii) Ms. Claire L.
Arnold and Mr. Laurent G. Chambaz, Class I Directors, whose terms will expire at
the 2002 Annual Meeting of Stockholders.
ITEM 5. OTHER INFORMATION
On May 31, 2000, the Company reached agreement with Philip Morris
Incorporated on an amendment of their strategic supply agreement for fine papers
and related agreements. The amendment extends the term of the Company's supply
of tobacco-related papers to Philip Morris' U.S. operations through December 31,
2004. Similar to arrangements in the original strategic supply agreement, there
is a right to extend or terminate the amended strategic supply agreement by
giving notice 24 months before the end of the then-current contract term. If the
decision were to terminate the agreement, the amended contract provides for a
two-year phase-out period.
On June 16, 2000, the Company reached agreement with Philip Morris to
proceed with the modification of some paper machines and related manufacturing
equipment at the Company's Spotswood mill to produce commercial quantities of a
proprietary banded cigarette paper for Philip Morris. This new cigarette paper
was jointly developed by Philip Morris and the Company and may make a cigarette
less likely to ignite certain fabrics. The Company has made no public
projections concerning the impact this new product may have on its operations
and financial results. The timing and pace at which equipment will be converted
to produce this new product are in the process of being finalized. The capital
cost to implement the banded cigarette paper project will depend upon the
equipment conversion plan which, if fully implemented at Spotswood, could result
in a capital investment in excess of $40 million. The Company does not expect
the banded cigarette paper 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.
New labor agreements were signed in Brazil and France at the Company's
mills in Santanesia and Saint-Girons, respectively. The agreement in Santanesia
is a one-year agreement expiring May 31, 2001, and includes annual base salary
increases of approximately 4.5 percent. The agreement in Saint-Girons is a
two-year agreement expiring April 30, 2002, with base salary increases totaling
approximately 3.1 percent.
16
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<S> <C>
10.1 Second Amended and Restated Agreement between Philip Morris
Incorporated and Schweitzer-Mauduit International, Inc. for
Fine Paper Supply effective as of July 1, 2000*.
10.2 Amended and Restated Technology Ownership, Technical
Assistance and Technology License Agreement by and among
Philip Morris Incorporated, Philip Morris Products, Inc. and
Schweitzer-Mauduit International, Inc. effective as of July 1,
2000*.
10.3 Amended and Restated Addendum to Second Amended and Restated
Agreement between Philip Morris Incorporated and
Schweitzer-Mauduit International, Inc. for Fine Paper Supply
effective as of July 1, 2000*.
15. Independent Accountants' Report, dated July 20, 2000 from
Deloitte & Touche LLP to Schweitzer-Mauduit International,
Inc.
23. Independent Accountants' Consent.
27. Financial Data Schedule (for SEC use only).
</TABLE>
*Exhibit has been redacted pursuant to a Confidentiality Request under
Rule 24(b)-2 of the Securities Exchange Act of 1934.
(b) Reports on Form 8-K:
(1) On May 31, 2000, the Company filed a Current Report on Form 8-K to
report the extension of its supply agreement with Philip Morris
Incorporated.
(2) On June 19, 2000, the Company filed a Current Report on Form 8-K
dated June 16, 2000, to report its agreement with Philip Morris to
proceed with the modification of some of its paper machines and
related manufacturing equipment to produce commercial quantities
of a proprietary banded cigarette paper for Philip Morris.
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)
August 4, 2000 August 4, 2000
17
<PAGE> 18
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C> <C>
10.1 --- Second Amended and Restated Agreement between Philip Morris
Incorporated and Schweitzer-Mauduit International, Inc. for
Fine Paper Supply effective as of July 1, 2000*.
10.2 --- Amended and Restated Technology Ownership, Technical
Assistance and Technology License Agreement by and among
Philip Morris Incorporated, Philip Morris Products, Inc. and
Schweitzer-Mauduit International, Inc. effective as of July 1,
2000*.
10.3 --- Amended and Restated Addendum to Second Amended and Restated
Agreement between Philip Morris Incorporated and
Schweitzer-Mauduit International, Inc. for Fine Paper Supply
effective as of July 1, 2000*.
15. --- Independent Accountants' Report, dated July 20, 2000 from
Deloitte & Touche LLP to Schweitzer-Mauduit International,
Inc.
23. --- Independent Accountants' Consent.
27. --- Financial Data Schedule (for SEC use only).
</TABLE>
*Exhibit has been redacted pursuant to a Confidentiality Request under
Rule 24(b)-2 of the Securities Exchange Act of 1934.
