UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________________to __________________ 1-13948 (Commission file number) SCHWEITZER-MAUDUIT INTERNATIONAL, INC. (Exact name of registrant as specified i ...

Part I - Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements for Q2 and H1 2020 versus 2019, covering income, balance sheets, and cash flows with detailed notes Condensed Consolidated Statements of Income (Q2 & H1 2020 vs 2019, in millions) | Indicator | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $254.2 | $269.9 | $515.7 | $527.9 | | **Gross profit** | $74.3 | $79.0 | $148.6 | $146.9 | | **Operating profit** | $34.4 | $44.2 | $68.5 | $74.6 | | **Net income** | $21.5 | $20.5 | $44.0 | $37.9 | | **Diluted EPS** | $0.68 | $0.66 | $1.40 | $1.22 | Condensed Consolidated Balance Sheet Highlights (in millions) | Indicator | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $404.4 | $427.5 | | **Total assets** | $1,578.1 | $1,471.7 | | **Total current liabilities** | $136.7 | $157.6 | | **Long-term debt** | $666.4 | $540.8 | | **Total liabilities** | $970.7 | $874.0 | | **Total stockholders' equity** | $607.4 | $597.7 | Condensed Consolidated Statements of Cash Flow (Six Months Ended, in millions) | Indicator | June 30, 2020 | June 30, 2019 | | :--- | :--- | :--- | | **Net cash provided by operations** | $49.3 | $55.0 | | **Net cash used in investing** | $(183.8) | $(17.2) | | **Net cash provided by (used in) financing** | $96.6 | $(43.5) | | **Decrease in cash and cash equivalents** | $(39.1) | $(6.0) | [Note 1. General](index=11&type=section&id=Note%201.%20General) SWM operates as a multinational producer of engineered solutions and advanced materials across two segments: Advanced Materials & Structures (AMS) and Engineered Papers (EP) - The company operates through two main segments: Advanced Materials & Structures (AMS), which produces resin-based goods, and Engineered Papers (EP), which primarily serves the tobacco industry[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - SWM conducts business in over 90 countries with 24 production sites and holds a 50% equity interest in two Chinese joint ventures, CTM and CTS[28](index=28&type=chunk) [Note 2. Revenue Recognition](index=14&type=section&id=Note%202.%20Revenue%20Recognition) Revenue is recognized upon transfer of control, with disaggregation of net sales provided by source, operating segment, and geographic location Net Sales by Segment (Six Months Ended June 30, in millions) | Segment | 2020 | 2019 | | :--- | :--- | :--- | | **Advanced Materials & Structures (AMS)** | $255.7 | $247.2 | | **Engineered Papers (EP)** | $260.0 | $280.7 | | **Total Revenues** | **$515.7** | **$527.9** | Net Sales by Geography (Six Months Ended June 30, 2020, in millions) | Geography | Amount | | :--- | :--- | | **United States** | $254.7 | | **Europe and former CIS** | $107.0 | | **Asia/Pacific (including China)** | $99.2 | | **Latin America** | $25.4 | | **Other foreign countries** | $29.4 | | **Total Revenues** | **$515.7** | [Note 4. Business Acquisitions](index=17&type=section&id=Note%204.%20Business%20Acquisitions) The company acquired Tekra and Trient for **$169.3 million** in March 2020, funded by debt, with **$61.2 million** in preliminary goodwill - Completed the acquisition of Tekra on March 13, 2020, for a net consideration of **$169.3 million**, funded by the revolving credit facility[59](index=59&type=chunk)[60](index=60&type=chunk) - The preliminary purchase price allocation resulted in **$61.2 million** of goodwill and **$81.8 million** of identifiable intangible assets, primarily customer relationships[64](index=64&type=chunk)[67](index=67&type=chunk) - From the acquisition date through June 30, 2020, Tekra contributed **$30.5 million** in net sales and a loss from continuing operations of **$0.3 million**[68](index=68&type=chunk) [Note 10. Debt](index=23&type=section&id=Note%2010.%20Debt) Total debt increased to **$669.0 million** by June 30, 2020, primarily due to the Tekra acquisition, with compliance across all covenants Total Debt Composition (in millions) | Component | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Revolving credit facility | $127.0 | $— | | Term loan facility | $196.5 | $197.5 | | 6.875% senior unsecured notes, net | $343.5 | $343.1 | | **Total debt** | **$669.0** | **$542.7** | - The company maintains a **$700.0 million** credit agreement, consisting of a **$500.0 million** revolving credit facility and a **$200.0 million** term loan facility[86](index=86&type=chunk) - The weighted average effective interest rate on debt facilities was approximately **3.92%** for the six months ended June 30, 2020, down from **4.43%** in the prior-year period[94](index=94&type=chunk) [Note 15. Segment Information](index=33&type=section&id=Note%2015.%20Segment%20Information) This note details net sales, operating profit, and assets for AMS and EP segments, highlighting EP's higher profit despite lower sales Segment Operating Profit (Six Months Ended, in millions) | Segment | June 30, 2020 | June 30, 2019 | | :--- | :--- | :--- | | **Advanced Materials & Structures** | $26.8 | $35.3 | | **Engineered Papers** | $65.1 | $61.2 | | **Unallocated** | $(23.4) | $(21.9) | | **Total Consolidated** | **$68.5** | **$74.6** | Segment Assets (in millions) | Segment | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Advanced Materials & Structures** | $961.2 | $781.2 | | **Engineered Papers** | $469.0 | $512.4 | | **Unallocated** | $147.9 | $178.1 | | **Total Consolidated** | **$1,578.1** | **$1,471.7** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial performance and condition, focusing on COVID-19 impacts, Q2 and H1 2020 results, segment performance, liquidity, and capital resources - The COVID-19 pandemic has impacted sales, operations, and profitability, particularly affecting the transportation end-market. The company has withdrawn its 2020 financial guidance but expects to remain profitable with sufficient liquidity[145](index=145&type=chunk)[154](index=154&type=chunk) - Q2 2020 net sales decreased **5.8%** to **$254.2 million**, and operating profit fell **22.2%** to **$34.4 million** compared to Q2 2019[158](index=158&type=chunk)[166](index=166&type=chunk) - For H1 2020, net sales decreased **2.3%** to **$515.7 million**, while net income increased to **$44.0 million** from **$37.9 million** in H1 2019, largely due to lower interest and other expenses related to a prior-year Brazil tax assessment[175](index=175&type=chunk)[190](index=190&type=chunk) - The company believes it has sufficient liquidity, with **$63.9 million** in cash and **$368.5 million** of undrawn capacity on its revolving credit facility as of June 30, 2020[156](index=156&type=chunk) [COVID-19 Overview](index=35&type=section&id=COVID-19%20Overview) The COVID-19 pandemic has varied impacts, with minimal effect on tobacco and medical, but significant negative effects on transportation - End-market impact varies: Tobacco and Medical are expected to see minimal impact, while the Transportation end-market (automotive paint protection films) has faced significant near-term negative effects[147](index=147&type=chunk)[148](index=148&type=chunk)[150](index=150&type=chunk) - Four of 24 manufacturing sites experienced temporary shutdowns but are now operational. Many AMS products are deemed 'essential', reducing the risk of further shutdowns[153](index=153&type=chunk) - The company has withdrawn its 2020 financial guidance but expects operating cash flow to exceed capital spending and believes it has sufficient liquidity to fund operations and obligations, including dividends[154](index=154&type=chunk)[155](index=155&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section compares Q2 and H1 2020 financial results to 2019, detailing sales declines and net income increases due to specific factors Net Sales Change (Q2 2020 vs Q2 2019, in millions) | Segment | Q2 2020 | Q2 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **AMS** | $132.8 | $126.7 | $6.1 | 4.8% | | **EP** | $121.4 | $143.2 | $(21.8) | (15.2)% | | **Total** | **$254.2** | **$269.9** | **$(15.7)** | **(5.8)%** | - Q2 AMS sales increased due to the Tekra acquisition; excluding Tekra, sales decreased **14.9%** due to COVID-19 impacts on transportation and construction markets[158](index=158&type=chunk) - Q2 EP sales decreased **15.2%** due to industry attrition, customer inventory destocking, and temporary site closures related to COVID-19[159](index=159&type=chunk) - H1 2020 net income increased to **$44.0 million** from **$37.9 million** in H1 2019, primarily because the prior-year period included significant non-recurring interest and other expenses related to Brazil tax assessments[186](index=186&type=chunk)[187](index=187&type=chunk)[190](index=190&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Liquidity is driven by operations and credit, with H1 2020 cash flow from operations at **$49.3 million** and significant investing cash use due to the Tekra acquisition - Net cash provided by operations was **$49.3 million** for the first six months of 2020, a decrease from **$55.0 million** in the prior-year period, mainly due to unfavorable working capital movements[193](index=193&type=chunk) - Cash used in investing was **$183.8 million**, dominated by the **$169.3 million** net cash paid for the Tekra acquisition[196](index=196&type=chunk) - Financing activities provided a net **$96.6 million** in cash, reflecting **$212.0 million** in new borrowings (primarily for the Tekra acquisition) offset by debt payments and **$27.4 million** in dividends[197](index=197&type=chunk) - On August 5, 2020, the company announced a quarterly cash dividend of **$0.44** per share[199](index=199&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk exposure as of June 30, 2020, remains consistent with the disclosures in the 2019 Annual Report on Form 10-K - Market risk exposure at the end of Q2 2020 is consistent with and not materially different from the risk disclosed at year-end 2019[215](index=215&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[216](index=216&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[217](index=217&type=chunk) Part II - Other Information [Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 12 disclosures on legal proceedings, reporting no material developments since the last annual report - The company is involved in various legal proceedings, with no material developments to report beyond what is disclosed in Note 12 of the financial statements[220](index=220&type=chunk) [Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from 2019 Annual Report, except for new risks related to the COVID-19 pandemic - The primary new risk factor relates to the COVID-19 pandemic and its potential adverse effects on business, financial condition, and cash flows[221](index=221&type=chunk)[222](index=222&type=chunk) - Specific pandemic-related risks include decreased demand, disruptions to manufacturing and suppliers, and the inability of employees to work at facilities due to health concerns or government restrictions[224](index=224&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **25,708** equity shares at an average price of **$35.24** in H1 2020 to cover employee tax obligations Issuer Purchases of Equity Securities (YTD 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | **Total YTD 2020** | 25,708 | $35.24 | [Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is not applicable to the current report [Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the current report [Other Information](index=52&type=section&id=Item%205.%20Other%20Information) This section is not applicable to the current report [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q report, including corporate documents and CEO/CFO certifications - Lists exhibits filed with the report, including CEO and CFO certifications (Exhibits 31.1, 31.2, 32) and iXBRL formatted financial statements (Exhibit 101)[230](index=230&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________________to __________________ 1-13948 (Commission file number) SCHWEITZER-MAUDUIT INTERNATIONAL, INC. (Exact name of registrant as specified in it ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ 1-13948 (Commission file number) SCHWEITZER-MAUDUIT INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 62-1612879 (State or other jurisdiction of incorporation or organization) (I.R.S. Em ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________________to __________________ 1-13948 (Commission file number) SCHWEITZER-MAUDUIT INTERNATIONAL, INC. (Exact name of registrant as specified i ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________________to __________________ 1-13948 (Commission file number) SCHWEITZER-MAUDUIT INTERNATIONAL, INC. (Exact name of registrant as specified in its ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2019 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________________to __________________ 1-13948 (Commission file number) SCHWEITZER-MAUDUIT INTERNATIONAL, INC. (Exact name of registrant as specified in it ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) SWM transformed into a diversified performance materials producer, with non-tobacco sales reaching **51% of total revenue** in 2018 through strategic acquisitions Business Segments Overview | Segment | Description | | :--- | :--- | | **Advanced Materials & Structures (AMS)** | Manufactures resin-based products (papers, nets, films) for specialty applications in filtration, infrastructure, construction, transportation, industrial, and medical end-markets | | **Engineered Papers (EP)** | Produces cigarette papers, reconstituted tobacco products for the tobacco industry, and various other non-tobacco paper products | - The company has strategically shifted its focus to increase profit streams outside the tobacco industry through acquisitions, transforming into a more diversified, growth-oriented enterprise[13](index=13&type=chunk) - From 2013 to 2018, SWM invested approximately **$850 million** in acquiring three primary businesses (DelStar, Argotec, and Conwed) and two bolt-on acquisitions, which now form the AMS segment[14](index=14&type=chunk)[15](index=15&type=chunk) - As a result of its diversification strategy, non-tobacco sales grew to represent **51%** of the company's total revenue in 2018, up from about 6% before 2013[15](index=15&type=chunk) [Advanced Materials & Structures](index=6&type=section&id=Advanced%20Materials%20%26%20Structures) AMS Segment End-Market Sales Breakdown (2018) | End-Market | Percentage of AMS Sales | | :--- | :--- | | Filtration | 25% | | Infrastructure & Construction | 30% | | Transportation | 25% | | Medical | 10% | | Industrial | 10% | - The primary raw material for the AMS segment is plastic resin. Total resin purchases were **$143 million** in 2018 and **$129 million** in 2017[44](index=44&type=chunk)[45](index=45&type=chunk) AMS Segment Order Backlog | Date | Backlog ($ millions) | | :--- | :--- | | Dec 31, 2018 | $65 | | Dec 31, 2017 | $71 | [Engineered Papers](index=8&type=section&id=Engineered%20Papers) - The Engineered Papers (EP) segment's key products are low ignition propensity (LIP) cigarette paper and reconstituted tobacco (Recon). Approximately **88%** of EP segment sales are to the tobacco end-market[48](index=48&type=chunk)[49](index=49&type=chunk)[55](index=55&type=chunk) - The company's four largest customers (Philip Morris-USA, Philip Morris International, Japan Tobacco Inc., and British American Tobacco) accounted for **28%** of consolidated net sales in 2018, down from 31% in 2017 and 35% in 2016[56](index=56&type=chunk) - Wood pulp is the primary raw material for the EP segment, with purchases totaling approximately **$54 million** in 2018 and **$42 million** in 2017[61](index=61&type=chunk) EP Segment Order Backlog | Business Line | Dec 31, 2018 ($ millions) | Dec 31, 2017 ($ millions) | | :--- | :--- | :--- | | French Paper Operations | $27 | $34 | | Reconstituted Tobacco Leaf (RTL) | $92 | $100 | [Risk Factors](index=15&type=page&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from its tobacco-exposed business, including declining consumption, regulatory pressures, patent expirations, and international operational complexities - Approximately **49%** of 2018 net sales were from products used by the tobacco industry, which is subject to declining consumption due to social acceptance, health concerns, and government actions[91](index=91&type=chunk) - The company's technological advantages, particularly patents for LIP cigarettes, are expected to diminish as patents expire (generally **before 2023**), which will likely reduce sales and margins[95](index=95&type=chunk) - The company is exposed to international risks, including adverse changes in laws, tariffs, political/economic conditions, and foreign currency fluctuations, as it operates in many countries and sells products in over 90 countries[103](index=103&type=chunk)[104](index=104&type=chunk)[113](index=113&type=chunk) - Four major customers accounted for over **28%** of net sales in 2018, creating a dependency risk. The loss of one or more of these customers could have a material adverse effect[127](index=127&type=chunk) - The company faces significant risk from the cost and availability of raw materials like wood pulp and resins, and energy. Unanticipated cost increases may not be fully passed on to customers[151](index=151&type=chunk)[152](index=152&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) SWM operates 22 global production facilities, with 2018 capacity utilization at approximately **58%** for AMS and **80%** for EP segments - The company operates 22 production facilities worldwide, with locations in the U.S., United Kingdom, Canada, France, Luxembourg, Russia, Brazil, China, Belgium, and Poland[12](index=12&type=chunk)[181](index=181&type=chunk) Capacity Utilization (2018 vs. 2017) | Segment | 2018 Capacity Utilization | 2017 Capacity Utilization | | :--- | :--- | :--- | | **AMS** | ~58% | ~63% | | **EP** | 80% | 82% | - The RTL Philippines facility in Sto. Tomas, Philippines, is currently being marketed for sale and is classified as 'Assets held for sale'[184](index=184&type=chunk) [Legal Proceedings](index=32&type=section&id=Item%203.%20Legal%20Proceedings) The company is engaged in various legal disputes, including tax assessments in Brazil, a labor claim in France, and patent infringement litigation in Germany - In Brazil, the company's subsidiary is contesting two sets of value-added tax (ICMS) assessments: one for raw materials (approx. **$11 million**) and several for electricity purchases[186](index=186&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) - In France, a subsidiary was ordered to pay approximately **€1.3 million** to former employees on the grounds of being a 'co-employer,' a decision the company is appealing and believes will be reversed[191](index=191&type=chunk) - The company initiated patent infringement proceedings in Germany against competitor Glatz related to LIP-related patents, with a German court affirming an infringement judgment in December 2017[192](index=192&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=35&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) SWM common stock is listed on NYSE, consistently pays increasing quarterly dividends, and repurchased shares in 2018 Annual Dividends Declared and Paid Per Share | Year | Dividend per Share | | :--- | :--- | | 2018 | $1.73 | | 2017 | $1.69 | | 2016 | $1.62 | - In 2018, the company repurchased **75,395 shares** of its common stock at a total cost of approximately **$3.0 million** (average price of **$39.86 per share**). These purchases were not part of a publicly announced program[206](index=206&type=chunk)[300](index=300&type=chunk) [Selected Financial Data](index=37&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of SWM's key financial data, including net sales, profitability, and non-GAAP reconciliations Selected Financial Data (2016-2018) | Metric ($ in millions) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Net sales** | $1,041.3 | $982.1 | $839.9 | | **Gross profit** | $278.5 | $283.4 | $257.9 | | **Operating profit** | $135.0 | $128.3 | $110.0 | | **Net income** | $94.5 | $34.5 | $82.8 | | **Total assets** | $1,466.5 | $1,542.5 | $1,173.7 | | **Total debt** | $622.1 | $684.2 | $440.4 | Adjusted EBITDA Reconciliation (2016-2018) | Metric ($ in millions) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Income from continuing operations** | $94.8 | $34.4 | $82.8 | | **EBITDA from continuing operations** | $193.9 | $192.4 | $157.6 | | **Adjusted EBITDA from continuing operations** | $196.9 | $197.9 | $178.4 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial performance, highlighting sales growth, margin pressures, tax act impacts, liquidity, and capital allocation priorities - In 2018, net sales increased by **$59.2 million** year-over-year, driven by organic growth in both AMS and EP segments and the full-year impact of the Conwed acquisition[212](index=212&type=chunk) - Net income increased from **$34.5 million** in 2017 to **$94.5 million** in 2018. The comparison is affected by several one-time items, including a **$15.0 million** impairment of a China JV in 2018 and a **$39.6 million** net expense from the U.S. Tax Act in 2017[213](index=213&type=chunk) - Cash provided by operations was **$139.1 million** in 2018. Major uses of cash included **$61.1 million** in net debt repayments, **$53.2 million** in dividends, and **$27.0 million** in capital spending[214](index=214&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Net sales grew in 2018 and 2017, but gross margins faced pressure, while net income was significantly impacted by the 2017 U.S. Tax Act Net Sales by Segment (2018 vs. 2017) | Segment ($ in millions) | 2018 | 2017 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Advanced Materials & Structures** | $467.9 | $433.2 | $34.7 | 8.0% | | **Engineered Papers** | $573.4 | $548.9 | $24.5 | 4.5% | | **Total** | **$1,041.3** | **$982.1** | **$59.2** | **6.0%** | Operating Profit by Segment (2018 vs. 2017) | Segment ($ in millions) | 2018 | 2017 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Advanced Materials & Structures** | $49.5 | $48.5 | $1.0 | 2.1% | | **Engineered Papers** | $121.8 | $119.7 | $2.1 | 1.8% | | **Unallocated expenses** | ($36.3) | ($39.9) | $3.6 | 9.0% | | **Total** | **$135.0** | **$128.3** | **$6.7** | **5.2%** | - The effective tax rate decreased to **9.2%** in 2018 from **68.6%** in 2017. The 2017 rate was significantly impacted by charges related to the U.S. Tax Act, while 2018 included a **$13 million** favorable adjustment to the one-time transition tax[256](index=256&type=chunk) - In 2017, net sales increased **16.9%** over 2016, primarily due to **$141.3 million** in incremental revenue from the Conwed acquisition in the AMS segment[262](index=262&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is driven by operating cash flow, supported by a major 2018 debt refinancing, with projected capital spending for 2019 Cash Flow Summary (2016-2018) | Cash Flow ($ in millions) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Cash from Operations** | $139.1 | $131.0 | $129.7 | | **Cash used for Investing** | ($27.5) | ($318.5) | ($22.4) | | **Cash (used in) from Financing** | ($120.9) | $179.5 | ($185.7) | - In September 2018, the company refinanced its debt by closing a private offering of **$350.0 million** of **6.875%** senior unsecured notes due 2026 and entering into a new **$700.0 million** credit agreement[303](index=303&type=chunk)[306](index=306&type=chunk) - Capital spending was **$27.0 million** in 2018, down from **$37.2 million** in 2017. Projected capital spending for 2019 is approximately **$35.0 million to $40.0 million**[284](index=284&type=chunk)[295](index=295&type=chunk) Contractual Obligations Summary | Obligation Type | Total Commitment ($ millions) | | :--- | :--- | | Current & Long-term debt | $636.9 | | Debt interest | $265.8 | | Purchase obligations (raw materials & energy) | $82.8 | | Tax Act transition obligation | $27.0 | | **Total** | **$1,045.8** | [Quantitative and Qualitative Disclosures about Market Risk](index=65&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) SWM manages market risks including foreign currency, interest rates, and commodity price volatility, with significant exposure to resin and wood pulp costs - A hypothetical 10% unfavorable change in foreign currency exchange rates would result in a net pre-tax loss of approximately **$2.3 million** on transactional exposures[326](index=326&type=chunk) - As of December 31, 2018, **85%** of the company's debt was subject to fixed interest rates, including the impact of interest rate hedge transactions. A **100 basis point** increase in interest rates would decrease future annual pre-tax earnings by **$4.5 million**[327](index=327&type=chunk) Commodity Price Risk Sensitivity | Commodity | Hypothetical 10% Price Change Impact on Annual Pre-tax Earnings ($ millions) | | :--- | :--- | | Resin | ~$14.3 | | Wood Pulp | ~$5.9 | [Financial Statements and Supplementary Data](index=67&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2016-2018, including income, balance sheet, cash flow, and notes Consolidated Statement of Income Highlights (2018) | Metric ($ in millions) | Amount | | :--- | :--- | | **Net sales** | $1,041.3 | | **Gross profit** | $278.5 | | **Operating profit** | $135.0 | | **Net income** | $94.5 | | **Diluted EPS** | $3.06 | Consolidated Balance Sheet Highlights (as of Dec 31, 2018) | Metric ($ in millions) | Amount | | :--- | :--- | | **Total Assets** | $1,466.5 | | **Total Liabilities** | $908.6 | | **Total Stockholders' Equity** | $557.9 | | **Cash and cash equivalents** | $93.8 | | **Total Debt (Current + Long-term)** | $622.1 | Consolidated Statement of Cash Flow Highlights (2018) | Metric ($ in millions) | Amount | | :--- | :--- | | **Net cash from operating activities** | $139.1 | | **Net cash used for investing activities** | ($27.5) | | **Net cash used in financing activities** | ($120.9) | [Controls and Procedures](index=123&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with no material weaknesses - Management, including the principal executive and financial officers, concluded that as of December 31, 2018, the company's disclosure controls and procedures were **effective**[619](index=619&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2018, with **no material weaknesses identified**[621](index=621&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=125&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, corporate governance, and Section 16(a) compliance is incorporated by reference from the 2019 Proxy Statement - Information regarding directors, corporate governance, and beneficial ownership reporting compliance is incorporated by reference from the company's 2019 Proxy Statement[632](index=632&type=chunk) - Biographical information for the company's executive officers is located in Part I, Item 1 of this Form 10-K[81](index=81&type=chunk)[632](index=632&type=chunk) [Executive Compensation](index=125&type=section&id=Item%2011.%20Executive%20Compensation) Detailed executive compensation information is incorporated by reference from the 2019 Proxy Statement - Detailed information on executive compensation is incorporated by reference from the 'Executive Compensation' section of the 2019 Proxy Statement[633](index=633&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=125&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details securities available for future issuance under equity compensation plans and incorporates beneficial ownership information by reference Securities Available for Future Issuance under Equity Compensation Plans (as of Dec 31, 2018) | Plan Category | Number of Securities Available | | :--- | :--- | | **Equity compensation plans approved by stockholders** | **4,611,892** | | **Equity compensation plans not approved by stockholders** | 0 | | **Grand total** | **4,611,892** | Part IV [Exhibits and Financial Statement Schedules](index=127&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including key legal agreements, compensation plans, and SEC certifications - Lists key legal and financial documents filed as exhibits, including the Equity Interest Purchase Agreement for Conwed, the Indenture for the 6.875% Senior Notes due 2026, and the 2018 Credit Agreement[640](index=640&type=chunk)[642](index=642&type=chunk) - Includes management compensation plans such as the 2015 Long-Term Incentive Plan and various executive severance and deferred compensation plans[640](index=640&type=chunk)[641](index=641&type=chunk) - Contains required certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002[642](index=642&type=chunk)