Company Quick10K Filing
Schweitzer Mauduit
Price31.66 EPS2
Shares31 P/E13
MCap978 P/FCF8
Net Debt490 EBIT115
TEV1,468 TEV/EBIT13
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-04
10-Q 2020-06-30 Filed 2020-08-05
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-04
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-02
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-01
10-Q 2017-06-30 Filed 2017-08-02
10-Q 2017-03-31 Filed 2017-05-03
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-03
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-04
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-11-05
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-07
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-06
10-Q 2013-06-30 Filed 2013-07-31
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-03-01
10-Q 2012-09-30 Filed 2012-10-31
10-Q 2012-06-30 Filed 2012-08-01
10-Q 2012-03-31 Filed 2012-05-02
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-11-02
10-Q 2011-06-30 Filed 2011-08-03
10-Q 2011-03-31 Filed 2011-05-04
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-09-30 Filed 2010-11-03
10-Q 2010-06-30 Filed 2010-08-04
10-Q 2010-03-31 Filed 2010-05-05
10-K 2009-12-31 Filed 2010-03-08
8-K 2020-11-04
8-K 2020-08-05
8-K 2020-06-30
8-K 2020-05-06
8-K 2020-04-29
8-K 2020-03-17
8-K 2020-02-24
8-K 2020-02-20
8-K 2020-02-18
8-K 2019-11-04
8-K 2019-10-18
8-K 2019-08-07
8-K 2019-05-01
8-K 2019-04-25
8-K 2019-03-29
8-K 2019-02-22
8-K 2019-02-21
8-K 2019-01-28
8-K 2018-11-07
8-K 2018-09-25
8-K 2018-09-14
8-K 2018-09-10
8-K 2018-08-01
8-K 2018-05-02
8-K 2018-04-27
8-K 2018-03-06
8-K 2018-02-22
8-K 2018-02-21
8-K 2018-01-11

SWM 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1. General
Note 2. Revenue Recognition
Note 3. Other Comprehensive Loss
Note 4. Business Acquisitions
Note 5. Net Income per Share
Note 6. Inventories
Note 7. Goodwill
Note 8. Intangible Assets
Note 9. Restructuring and Impairment Activities
Note 10. Debt
Note 11. Derivatives
Note 12. Commitments and Contingencies
Note 13. Postretirement and Other Benefits
Note 14. Income Taxes
Note 15. Segment Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31120200930.htm
EX-31.2 ex31220200930.htm
EX-32 ex3220200930.htm

Schweitzer Mauduit Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
1.61.31.00.60.30.02012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.30.20.0-0.1-0.3-0.42012201420172020
Ops, Inv, Fin

swm-20200930
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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 endedSeptember 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 in its charter) 
Delaware62-1612879
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
100 North Point Center East,Suite 600
Alpharetta,Georgia30022
(Address of principal executive offices)(Zip Code)
 
1-800-514-0186
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $0.10 par valueSWMNew York Stock Exchange

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    No 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes        No  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer," “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

The Company had 31,323,338 shares of common stock issued and outstanding as of November 4, 2020.



SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

TABLE OF CONTENTS
   Page
 Part I. - Financial Information 
Item 1. 
Item 2. 
Item 3. 
Item 4. 
Part II. - Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6. 
 
 




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
(Unaudited)
 Three Months EndedNine Months Ended
 September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net sales$279.3 $256.4 $795.0 $784.3 
Cost of products sold199.1 184.2 566.2 565.2 
Gross profit80.2 72.2 228.8 219.1 
Selling expense9.0 8.6 27.3 25.8 
Research and development expense3.6 3.1 10.4 10.1 
General expense24.6 24.3 77.9 72.0 
Total nonmanufacturing expenses37.2 36.0 115.6 107.9 
Restructuring and impairment expense6.0 1.6 7.7 2.0 
Operating profit37.0 34.6 105.5 109.2 
Interest expense7.8 6.7 22.8 29.6 
Other (expense) income, net(1.0)1.7 (0.7)(1.6)
Income from continuing operations before income taxes and income from equity affiliates28.2 29.6 82.0 78.0 
Provision for income taxes4.8 3.2 15.5 12.8 
Income from equity affiliates, net of
income taxes
1.1 1.3 2.0 0.4 
Income from continuing operations24.5 27.7 68.5 65.6 
Net income$24.5 $27.7 $68.5 $65.6 
Net income per share - basic:  
Income per share from continuing operations$0.78 $0.90 $2.19 $2.13 
Net income per share – basic$0.78 $0.90 $2.19 $2.13 
Net income per share – diluted:    
Income per share from continuing operations$0.78 $0.90 $2.18 $2.12 
Net income per share – diluted$0.78 $0.90 $2.18 $2.12 
Weighted average shares outstanding:  
Basic30,909,700 30,662,800 30,805,300 30,648,400 
Diluted31,142,500 30,831,900 31,020,100 30,804,700 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1


SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in millions)
(Unaudited) 
 Three Months EndedNine Months Ended
 September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net income$24.5 $27.7 $68.5 $65.6 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments7.2 (10.2)4.3 (7.1)
Less: Reclassification adjustment for realized translation adjustments (0.3) (0.7)
Unrealized (losses) gain on derivative instruments (0.6)(13.4)0.7 
Less: Reclassification adjustment for gains on derivative instruments included in net income0.8 (2.4)1.4 (5.1)
Net loss from postretirement benefit plans  (0.3) 
Reclassification adjustment for amortization of postretirement benefit plans' costs included in net periodic benefit cost0.8 0.1 2.4 1.6 
Other comprehensive income (loss)8.8 (13.4)(5.6)(10.6)
Comprehensive income$33.3 $14.3 $62.9 $55.0 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions, except per share amounts)
(Unaudited)
September 30,
2020
December 31,
2019
ASSETS  
Current assets  
Cash and cash equivalents$66.3 $103.0 
Accounts receivable, net166.5 143.2 
Inventories172.8 161.4 
Income taxes receivable9.6 12.5 
Other current assets7.2 7.4 
Total current assets422.4 427.5 
Property, plant and equipment, net327.7 330.3 
Deferred income tax benefits3.4 3.7 
Investment in equity affiliates53.5 52.4 
Goodwill400.3 337.4 
Intangible assets317.4 251.2 
Other assets65.9 69.2 
Total assets$1,590.6 $1,471.7 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities  
Current debt$2.7 $1.9 
Accounts payable66.9 66.4 
Income taxes payable2.9 2.8 
Accrued expenses and other current liabilities86.8 86.5 
Total current liabilities159.3 157.6 
Long-term debt630.2 540.8 
Long-term income tax payable17.6 21.4 
Pension and other postretirement benefits33.6 31.6 
Deferred income tax liabilities48.7 48.2 
Other liabilities72.7 74.4 
Total liabilities962.1 874.0 
Stockholders’ equity:  
Preferred stock, $0.10 par value; 10,000,000 shares authorized; none issued or outstanding
  
Common stock, $0.10 par value; 100,000,000 shares authorized; 31,321,775 and 30,896,661 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
3.1 3.1 
Additional paid-in-capital88.8 78.8 
Retained earnings664.8 638.4 
Accumulated other comprehensive loss, net of tax(128.2)(122.6)
Total stockholders’ equity628.5 597.7 
Total liabilities and stockholders’ equity$1,590.6 $1,471.7 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3



SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(dollars in millions, except per share amounts)
(Unaudited)
 Common Stock Issued    
 SharesAmountAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance, June 30, 201930,894,598 $3.1 $73.6 $617.6 $(121.7)$572.6 
Net income— — — 27.7 — 27.7 
Other comprehensive loss, net of tax— — — — (13.4)(13.4)
Dividends declared ($0.44 per share)
— — — (13.6)— (13.6)
Restricted stock issuances, net914 — — — — — 
Stock-based employee compensation expense— — 1.5 — — 1.5 
Stock issued to directors as compensation640 — — — — — 
Purchases and retirement of common stock(152)— — — — — 
Balance, September 30, 201930,896,000 $3.1 $75.1 $631.7 $(135.1)$574.8 
Balance, June 30, 202031,195,009 $3.1 $87.2 $654.1 $(137.0)$607.4 
Net income— — — 24.5 — 24.5 
Other comprehensive income, net of tax— — — — 8.8 8.8 
Dividends declared ($0.44 per share)
— — — (13.8)— (13.8)
Restricted stock issuances, net(21,932)— — — — — 
Stock-based employee compensation expense— — 1.4 — — 1.4 
Modification to director stock-based compensation plan— — — — — — 
Stock issued to directors as compensation149,469 — 0.2 — — 0.2 
Purchases and retirement of common stock(771)— — — — — 
Balance, September 30, 202031,321,775 $3.1 $88.8 $664.8 $(128.2)$628.5 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



4



Common Stock Issued
SharesAmountAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, December 31, 2018 30,771,244 $3.1 $71.1 $608.2 $(124.5)$557.9 
Cumulative effects of changes in accounting standards— — — (0.3)— (0.3)
Net income— — — 65.6 — 65.6 
Other comprehensive loss, net of tax— — — — (10.6)(10.6)
Dividends declared ($1.32 per share)
— — — (40.8)— (40.8)
Restricted stock issuances, net147,019 — — — — — 
Stock-based employee compensation expense— — 3.9 — — 3.9 
Stock issued to directors as compensation3,034 — 0.1 — — 0.1 
Purchases and retirement of common stock(25,297)— — (1.0)— (1.0)
Balance, September 30, 201930,896,000 $3.1 $75.1 $631.7 $(135.1)$574.8 
Balance, December 31, 201930,896,661 $3.1 $78.8 $638.4 $(122.6)$597.7 
Net income— — — 68.5 — 68.5 
Other comprehensive loss, net of tax— — — — (5.6)(5.6)
Dividends declared ($1.32 per share)
— — — (41.2)— (41.2)
Restricted stock issuances, net299,926 — — — — — 
Stock-based employee compensation expense— — 5.5 — — 5.5 
Modification to director stock-based compensation plan— — 4.0 — — 4.0 
Stock issued to directors as compensation151,667 — 0.5 — — 0.5 
Purchases and retirement of common stock(26,479)— — (0.9)— (0.9)
Balance, September 30, 202031,321,775 $3.1 $88.8 $664.8 $(128.2)$628.5 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


5


SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in millions)
(Unaudited) 
 Nine Months Ended
 September 30,
2020
September 30,
2019
Operating  
Net income$68.5 $65.6 
Non-cash items included in net income:  
Depreciation and amortization52.3 43.4 
Deferred income tax1.5 (2.2)
Pension and other postretirement benefits2.6 2.1 
Stock-based compensation5.6 4.0 
Income from equity affiliates(2.0)(0.4)
Brazil tax assessment accruals, net 10.9 
Cash dividends received from equity affiliates2.7 2.6 
Other items(4.7)2.0 
Changes in operating working capital, net of assets acquired:
Accounts receivable(21.9)(4.6)
Inventories1.7 (1.8)
Prepaid expenses0.6 (0.4)
Accounts payable(0.3)2.3 
Accrued expenses and other current liabilities(1.2)(1.4)
Accrued income taxes2.1 (3.2)
Net changes in operating working capital(19.0)(9.1)
Net cash provided by operations107.5 118.9 
Investing  
Capital spending(20.7)(20.0)
Capitalized software costs(2.8)(3.9)
Acquisitions, net of cash acquired(169.3) 
Other investing2.3 1.1 
Net cash used in investing(190.5)(22.8)
6


SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in millions)
(Unaudited) 
 Nine Months Ended
 September 30,
2020
September 30,
2019
Financing  
Cash dividends paid to SWM stockholders(41.2)(40.8)
Payments on current debt , net (0.1)
Proceeds from issuances of long-term debt212.7 0.1 
Payments on long-term debt(124.6)(60.9)
Purchases of common stock(0.9)(1.0)
Net cash provided by (used in) financing46.0 (102.7)
Effect of exchange rate changes on cash and cash equivalents0.3 (2.3)
Decrease in cash and cash equivalents(36.7)(8.9)
Cash and cash equivalents at beginning of period103.0 93.8 
Cash and cash equivalents at end of period$66.3 $84.9 
Supplemental Cash Flow Disclosures
Cash paid for interest, net$17.9 $17.6 
Cash paid for taxes, net$11.0 $17.1 
Change in capital spending in accounts payable and accrued liabilities$3.5 $2.9 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


7

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General

Nature of Business
 
Schweitzer-Mauduit International, Inc. ("SWM," "we," or the "Company"), headquartered in the United States of America, is a multinational diversified producer of highly engineered solutions and advanced materials for a variety of industries. The Company maintains two operating product line segments: Advanced Materials & Structures and Engineered Papers.

The Advanced Materials & Structures ("AMS") segment produces mostly resin-based rolled goods such as nets, films and meltblown materials, typically through an extrusion process or other non-woven technologies. AMS also provides converting and coating services. These products are used in a variety of specialty applications across the filtration, transportation, infrastructure and construction, medical, and industrial end-markets.

The Engineered Papers ("EP") segment primarily serves the tobacco industry with production of various cigarette papers and reconstituted tobacco products ("Recon"). Traditional reconstituted tobacco leaf ("RTL") is used as a blend with virgin tobacco in cigarettes and used as wrappers and binders for cigars. Recon, as well as low ignition propensity ("LIP") cigarette paper, a specialty product with fire-safety features, are two key profit drivers, which together account for more than half of segment net sales. The EP segment also produces non-tobacco papers for premium applications, such as energy storage and industrial commodity paper grades.

We conduct business in over 90 countries and operate 24 production locations worldwide, with locations in the U.S., Canada, United Kingdom, France, Luxembourg, Belgium, Russia, Brazil, China and Poland. We also have a 50% equity interest in two joint ventures in China. The first, China Tobacco Mauduit (Jiangmen) Paper Industry Ltd. ("CTM"), produces cigarette and porous plug wrap papers and the second, China Tobacco Schweitzer (Yunnan) Reconstituted Tobacco Co. Ltd. ("CTS"), produces RTL.

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements and the notes thereto have been prepared in accordance with the instructions of Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission ("SEC") and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America ("U.S. GAAP"). However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods.
 
The results of operations for the three or nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year. The unaudited condensed consolidated financial statements and these notes thereto included herein should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 2, 2020.
 
Principles of Consolidation
 
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned, majority-owned and controlled subsidiaries. The Company’s share of the net income of its 50%-owned joint ventures in China is included in the condensed consolidated statements of income as Income from equity affiliates, net of income taxes. Intercompany balances and transactions have been eliminated.

8

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Use of Estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, inventory valuation, useful lives of tangible and intangible assets, fair values, sales returns and rebates, receivables valuation, pension, postretirement and other benefits, restructuring and impairment, taxes and contingencies. Furthermore, the Company considered the potential impact from the global economic and social disruption caused by the novel coronavirus (“COVID-19”) in estimates used in the Company’s financial statements as of and for the period ended September 30, 2020. The Company determined changes to these estimates did not have a material impact on our assessment of recoverability of our assets, including Accounts receivable, net, Goodwill, Intangible assets or long-lived assets. There may also be long-term undetermined effects on some of our customers and suppliers, and as a result of these uncertainties, actual results could differ materially from these estimates and assumptions.

Recently Adopted Accounting Standards

In March 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). The update requires that an entity measure and recognize expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects a current estimate of credit losses expected to be incurred. The Company adopted this guidance as of January 1, 2020 on a prospective basis. There was no material impact upon adoption and the Company does not expect the provisions of this update to have a material impact on the condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendment eliminates the second step of the analysis that required the measurement of a goodwill impairment by comparing the implied value of a reporting unit’s goodwill and the goodwill’s carrying amount. While the provisions of the standard will simplify the measurement of goodwill impairments, the Company does not expect a material impact on the condensed consolidated financial statements from adoption, which was effective as of January 1, 2020.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements." The new standard modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The provisions of this ASU are effective for years beginning after December 15, 2019, with early adoption permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company has adopted this guidance effective as of January 1, 2020, the provisions of which did not impact existing fair value measurements.

In August 2018, the FASB issued ASU 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The new standard provides updated guidance surrounding implementation costs associated with cloud computing arrangements that are service contracts. The provisions of this ASU are effective for years beginning after December 15, 2019. The Company adopted the provisions of this guidance prospectively as of January 1, 2020. There was no material impact upon adoption and the Company does not expect the provisions of this update to have a material impact on the condensed consolidated financial statements.



9

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The new standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The provisions of this ASU are effective for years beginning after December 15, 2020, with early adoption permitted. The new standard requires the amendments to be applied on a retrospective basis for all periods presented. The Company is currently in the process of evaluating the impact of the pronouncement and does not expect the adoption of this guidance to have a material impact on the condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The new standard simplifies income tax accounting requirements by removing certain exceptions to the general principles in Topic 740, Income Taxes. The provisions of this ASU are effective for years beginning after December 15, 2020 with early adoption permitted. The Company is currently in the process of evaluating the impact of the pronouncement and does not expect the adoption of this guidance to have a material impact on the condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The new standard provides optional expedients and exceptions for applying generally accepted accounting principles ("GAAP") to contracts, hedging relationships, and other transactions affected by reference rate reform and the anticipated discontinuance of the London Interbank Offered Rate ("LIBOR") if certain criteria are met. The amendments in this ASU are effective for all entities as of March 12, 2020, through December 31, 2022. The Company does not currently have any contracts that have been changed to a new reference rate but will continue to evaluate the applicability and impact of the guidance.


10

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2. Revenue Recognition

The Company has two main sources of revenue: product sales and materials conversion. The Company recognizes product sales revenues when control of a product is transferred to the customer. For the majority of product sales, transfer of control occurs when the products are shipped from one of the Company’s manufacturing facilities to the customer. The cost of delivering finished goods to the Company’s customers is recorded as a component of Cost of products sold. Those costs include the amounts paid to a third party to deliver the finished goods. Any freight costs billed to and paid by a customer are included in net sales. The Company also provides services to customers through the conversion of customer-owned raw materials into processed finished goods. In these transactions, the Company generally recognizes revenue as processing is completed.

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, which generally occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Generally, the Company considers collectability of amounts due under a contract to be probable upon inception of a sale based on an evaluation of the credit worthiness of each customer. If collectability is not considered to be probable, the Company defers recognition of revenue on satisfied performance obligations until the uncertainty is resolved. We record estimates for bad debts based on our expectations for the collectability of amounts due from customers, considering historical collection history, expectations for future activity and other discrete events as applicable.

Variable consideration, such as discounts or price concessions, is set forth in the terms of the contract at inception and is included in the assessment of the transaction price at the outset of the arrangement. The transaction price is allocated to the individual performance obligations due under the contract based on the relative stand-alone fair value of the performance obligations identified in the contract. The Company typically uses an observable price to determine the stand-alone selling price for separate performance obligations.

The Company does not typically include extended payment terms or significant financing components in its contracts with customers. Certain product sales contracts may include cash-based incentives (volume rebates or credits), which are accounted for as variable consideration.  We estimate these amounts at least quarterly based on the expected forecast quantities to be provided to customers and reduce revenues recognized accordingly. Incidental items that are immaterial in the context of the contract are recognized as expense in the period incurred. The Company generally expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within sales and marketing expenses. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. As a practical expedient, the Company treats shipping and handling activities that occur after control of the good transfers as fulfillment activities, and therefore, does not account for shipping and handling costs as a separate performance obligation.

Following is the Company’s Net sales disaggregated by revenue source ($ in millions). Sales and usage-based taxes are excluded from Net sales.
Three Months Ended
September 30, 2020September 30, 2019
AMSEPTotalAMSEPTotal
Product revenues$135.8 $126.6 $262.4 $122.7 $116.0 $238.7 
Materials conversion revenues2.5 12.5 15.0 2.3 12.9 15.2 
Other revenues0.6 1.3 1.9 1.1 1.4 2.5 
Total revenues (1)
$138.9 $140.4 $279.3 $126.1 $130.3 $256.4 
     (1) Revenues include net hedging gains and losses for the three months ended September 30, 2020 and 2019.



11

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Nine Months Ended
September 30, 2020September 30, 2019
AMSEPTotalAMSEPTotal
Product revenues$379.9 $361.2 $741.1 $