Mativ(US:MATV)2023-08-09 20:11Part I - Financial Information Financial Statements Mativ Holdings, Inc.'s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023, are presented, including income, balance sheets, cash flows, and detailed notes Condensed Consolidated Statements of Income (Loss) The company reported net losses of $4.5 million and $12.2 million for the three and six months ended June 30, 2023, respectively, primarily due to higher costs despite increased net sales from the Neenah merger Income Statement Highlights (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $668.3 | $426.4 | $1,347.3 | $833.2 | | Gross profit | $128.5 | $99.6 | $237.5 | $192.2 | | Operating profit | $33.6 | $27.8 | $42.9 | $38.4 | | Net income (loss) | $(4.5) | $11.8 | $(12.2) | $13.4 | | Diluted EPS | $(0.08) | $0.36 | $(0.23) | $0.41 | Condensed Consolidated Balance Sheets As of June 30, 2023, total assets slightly decreased to $3.65 billion, with stable liabilities around $2.5 billion, while goodwill increased and cash decreased Balance Sheet Summary (in millions) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $963.2 | $974.7 | | Total Assets | $3,648.9 | $3,669.2 | | Total Current Liabilities | $426.2 | $466.1 | | Long-term Debt | $1,712.9 | $1,659.3 | | Total Liabilities | $2,499.9 | $2,489.9 | | Total Stockholders' Equity | $1,149.0 | $1,179.3 | Condensed Consolidated Statements of Cash Flows Net cash provided by operations slightly increased to $19.5 million for the six months ended June 30, 2023, while investing activities shifted to a $39.5 million cash outflow due to higher capital spending Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operations | $19.5 | $18.0 | | Net cash provided by (used in) investing | $(39.5) | $18.0 | | Net cash provided by (used in) financing | $2.0 | $(51.5) | | Decrease in cash and cash equivalents | $(16.8) | $(18.4) | Notes to Condensed Consolidated Financial Statements This section details accounting policies and financial data, including the Neenah merger, revenue recognition, debt, derivatives, restructuring, and the proposed sale of the Engineered Papers business - On July 6, 2022, SWM consummated its merger with Neenah, Inc. and changed its name to Mativ Holdings, Inc. The company now operates under two reporting segments: Advanced Technical Materials (ATM) and Fiber-Based Solutions (FBS)24 - The total consideration for the Neenah merger was $1,056.3 million, which included equity, repayment of Neenah's debt, and other costs. The transaction resulted in $230.8 million of goodwill allocated to the ATM segment5963 - On August 1, 2023, the Company received a binding offer from Evergreen Hill Enterprise to acquire its Engineered Papers business for $620.0 million in cash. The transaction is expected to close in Q4 2023 and the business is expected to be presented as a discontinued operation in Q3 2023164 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, noting the Neenah merger's impact on sales and expenses, leading to increased sales but a net loss in Q2 2023 due to higher costs and volume declines - The July 2022 merger with Neenah is the primary driver of year-over-year changes in financial results, significantly increasing the scale of operations167 - As of June 30, 2023, the company had total debt of $1.75 billion, cash of $107.6 million, and undrawn revolving credit capacity of $333.9 million. Net leverage was 4.2x, below the maximum covenant of 5.00x170 Results of Operations - Q2 2023 vs 2022 Q2 2023 net sales increased 56.7% to $668.3 million due to the Neenah merger, but gross margin declined and higher expenses resulted in a net loss of $4.5 million Q2 2023 vs Q2 2022 Performance (in millions) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $668.3 | $426.4 | 56.7% | | Gross Profit | $128.5 | $99.6 | 29.0% | | Operating Profit | $33.6 | $27.8 | 20.9% | | Net Income (Loss) | $(4.5) | $11.8 | N/A | - Sales growth was primarily due to the addition of Neenah operations. Price increases were offset by volume declines caused by customer de-stocking trends, particularly in industrials and packaging174175 Results of Operations - H1 2023 vs 2022 H1 2023 net sales increased 61.7% to $1.35 billion, but gross margin declined and a net loss of $12.2 million was reported, partly due to FBS segment challenges H1 2023 vs H1 2022 Performance (in millions) | Metric | H1 2023 | H1 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,347.3 | $833.2 | 61.7% | | Gross Profit | $237.5 | $192.2 | 23.6% | | Operating Profit | $42.9 | $38.4 | 11.7% | | Net Income (Loss) | $(12.2) | $13.4 | N/A | - FBS operations in France were negatively impacted by nationwide labor strikes in the first quarter, leading to lost sales and inefficiencies192 Liquidity and Capital Resources The company's liquidity is supported by operating cash flow and credit facilities, with cash of $107.6 million and increased capital spending of $42.0 million in H1 2023 - Net cash provided by operating activities was $19.5 million for H1 2023, a slight increase from $18.0 million in H1 2022206 - Capital spending for H1 2023 was $42.0 million, up significantly from $17.8 million in H1 2022, due to the Neenah merger and capacity expansion projects for filtration and release liner products208 - On August 9, 2023, the company announced a quarterly cash dividend of $0.10 per share212 Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure as of June 30, 2023, remains consistent with disclosures in its 2022 Annual Report on Form 10-K - There have been no material changes to the company's market risk exposure since the end of 2022225 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023226 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls227 Part II - Other Information Legal Proceedings No material developments in legal proceedings have occurred beyond what was previously disclosed in the 2022 Form 10-K and Note 12 - There have been no material developments in the company's legal proceedings during the quarter230 Risk Factors The company's risk factors are consistent with those discussed in its 2022 Annual Report on Form 10-K, which could materially affect its business - The company's risk factors are consistent with those disclosed in its 2022 Annual Report on Form 10-K231 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 118,779 shares at an average price of $22.20 during H1 2023, primarily for tax withholding on vested stock awards, not a formal program Issuer Purchases of Equity Securities (Year-to-Date 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Total YTD 2023 | 118,779 | $22.20 | - Share repurchases represent vested restricted shares from employees to satisfy tax withholding requirements and are not part of a formal buyback program232 Other Information The Compensation Committee approved a Short-Term Cash Incentive Plan effective January 1, 2023, for eligible employees, and no Rule 10b5-1 trading plans were adopted or terminated - The Compensation Committee approved a Short-Term Cash Incentive Plan for eligible employees, including executive officers, effective January 1, 2023236237 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, credit agreement amendments, the Short-Term Incentive Plan, and CEO/CFO certifications