SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the quarterly period ended	March 31, ~~2020~~2021

1-~~800~~-~~514-0186~~1-800-514-0186

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.

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 ~~31,195,562~~31,409,529 shares of common stock issued and outstanding as of May ~~6, 2020.~~5, 2021.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

TABLE OF CONTENTS


						Page
				Part I. - Financial Information
Item 1.				Financial Statements		1

Item 2.					~~Page~~
	~~Part I. - Financial Information~~
~~Item 1.~~	~~Financial Statements~~		1

~~Item 2.~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2827

Item 3.				Quantitative and Qualitative Disclosures About Market Risk		3736

Item 4.				Controls and Procedures		3736
				Part II. - Other Information
Item 1.				Legal Proceedings		3837

Item 1A.				Risk Factors		3837

Item 2.				Unregistered Sales of Equity Securities and Use of Proceeds		3937

Item 3.				Defaults Upon Senior Securities		3937

Item 4.				Mine Safety Disclosures		3937

Item 5.				Other Information		3937

Item 6.				Exhibits		4038

Signatures						4139

Glossary of Terms						4240

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 Ended						Three Months Ended
	March 31, 2020		March 31, 2019				March 31, 2021		March 31, 2020
Net sales	$	261.5	$	258.0		Net sales	$	288.2	$	261.5
Cost of products sold	187.2		190.1			Cost of products sold	207.4		187.2
Gross profit	74.3		67.9			Gross profit	80.8		74.3

Selling expense	9.5		8.6			Selling expense	9.1		9.5
Research and development expense	3.2		3.3			Research and development expense	3.8		3.2
General expense	27.4		25.6			General expense	32.7		27.4
Total nonmanufacturing expenses	40.1		37.5			Total nonmanufacturing expenses	45.6		40.1


Restructuring and impairment expense	0.1		—			Restructuring and impairment expense	1.7		0.1
Operating profit	34.1		30.4			Operating profit	33.5		34.1
Interest expense	6.9		7.8			Interest expense	2.9		6.9
Other income (expense), net	0.6		(0.6		)
Income from continuing operations before income taxes and income from equity affiliates	27.8		22.0
Other (expense) income, net						Other (expense) income, net	(2.6)		0.6
Income before income taxes and income from equity affiliates						Income before income taxes and income from equity affiliates	28.0		27.8

Provision for income taxes	5.3		4.4			Provision for income taxes	7.4		5.3
Loss from equity affiliates, net of income taxes	—		(0.2		)
Income from continuing operations	22.5		17.4
Income from equity affiliates, net of income taxes						Income from equity affiliates, net of income taxes	1.0		0

Net income	$	22.5	$	17.4		Net income	$	21.6	$	22.5

Net income per share - basic:						Net income per share - basic:
Income per share from continuing operations	$	0.72	$	0.57

Net income per share – basic	$	0.72	$	0.57		Net income per share – basic	$	0.69	$	0.72

Net income per share – diluted:						Net income per share – diluted:
Income per share from continuing operations	$	0.72	$	0.56

Net income per share – diluted	$	0.72	$	0.56		Net income per share – diluted	$	0.68	$	0.72

Weighted average shares outstanding:						Weighted average shares outstanding:

Basic	30,712,300		30,620,600			Basic	30,974,200		30,712,300

Diluted	30,910,000		30,716,700			Diluted	31,340,500		30,910,000

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in millions)

(Unaudited)

Three Months Ended
March 31, 2020 March 31, 2019
Net income $ 22.5
$ 17.4
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments (3.5 ) 0.9
Less: Reclassification adjustment for realized translation adjustments —
(0.2 )

Unrealized (losses) gains on derivative instruments (12.7 ) 0.4
Less: Reclassification adjustment for gains on derivative instruments included in net income —
(0.9 )

Net gain from postretirement benefit plans 0.1
—
Reclassification adjustment for amortization of postretirement benefit plans' costs included in net periodic benefit cost 0.4
0.5
Other comprehensive (loss) income (15.7 ) 0.7
Comprehensive income $ 6.8
$ 18.1


	Three Months Ended
	March 31, 2021		March 31, 2020


Net income	$	21.6	$	22.5
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(9.9)		(3.5)


Unrealized gain (losses) on derivative instruments	4.4		(12.7)


Net gain from postretirement benefit plans	0.1		0.1
Less: amortization of postretirement benefit plans' costs included in net periodic cost	1.6		0.4
Other comprehensive loss	(3.8)		(15.7)
Comprehensive income	$	17.8	$	6.8

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions, except per share amounts)

(Unaudited)


	March 31, 2020			December 31, 2019				March 31, 2021		December 31, 2020
ASSETS							ASSETS
Current assets							Current assets
Cash and cash equivalents	$	126.7		$	103.0		Cash and cash equivalents	$	63.7	$	54.7
Accounts receivable, net	170.4			143.2			Accounts receivable, net	172.9		148.5
Inventories	159.5			161.4			Inventories	173.3		179.7
Income taxes receivable	5.9			12.5			Income taxes receivable	3.3		6.2

Other current assets	11.2			7.4			Other current assets	14.9		7.3
Total current assets	473.7			427.5			Total current assets	428.1		396.4

Property, plant and equipment, net	324.9			330.3			Property, plant and equipment, net	324.1		339.0

Deferred income tax benefits	4.7			3.7			Deferred income tax benefits	0.2		2.6
Investment in equity affiliates	51.5			52.4			Investment in equity affiliates	60.0		59.3
Goodwill	396.5			337.4			Goodwill	401.8		403.7
Intangible assets	329.8			251.2			Intangible assets	304.8		314.7
Other assets	74.1			69.2			Other assets	68.5		69.2
Total assets	$	1,655.2		$	1,471.7		Total assets	$	1,587.5	$	1,584.9

LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities							Current liabilities
Current debt	$	1.9		$	1.9		Current debt	$	2.7	$	2.8
Accounts payable	67.7			66.4			Accounts payable	66.6		60.5
Income taxes payable	3.0			2.8			Income taxes payable	4.9		2.7

Accrued expenses and other current liabilities	69.8			86.5			Accrued expenses and other current liabilities	83.5		100.9
Total current liabilities	142.4			157.6			Total current liabilities	157.7		166.9

Long-term debt	752.8			540.8			Long-term debt	615.2		590.5

Long-term income tax payable	18.2			21.4			Long-term income tax payable	17.7		17.7
Pension and other postretirement benefits	31.3			31.6			Pension and other postretirement benefits	35.3		36.5
Deferred income tax liabilities	45.1			48.2			Deferred income tax liabilities	45.0		45.1
Other liabilities	73.4			74.4			Other liabilities	63.7		78.6
Total liabilities	1,063.2			874.0			Total liabilities	934.6		935.3
Stockholders’ equity:							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; 31,193,345 and 30,896,661 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	3.1			3.1
Preferred stock, $0.10 par value; 10,000,000 shares authorized; NaN issued or outstanding							Preferred stock, $0.10 par value; 10,000,000 shares authorized; NaN issued or outstanding	0		0
Common stock, $0.10 par value; 100,000,000 shares authorized; 31,407,136 and 31,324,745 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively							Common stock, $0.10 par value; 100,000,000 shares authorized; 31,407,136 and 31,324,745 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	3.1		3.1
Additional paid-in-capital	81.0			78.8			Additional paid-in-capital	94.6		92.2
Retained earnings	646.2			638.4			Retained earnings	670.9		666.2
Accumulated other comprehensive loss, net of tax	(138.3		)	(122.6		)	Accumulated other comprehensive loss, net of tax	(115.7)		(111.9)
Total stockholders’ equity	592.0			597.7			Total stockholders’ equity	652.9		649.6
Total liabilities and stockholders’ equity	$	1,655.2		$	1,471.7		Total liabilities and stockholders’ equity	$	1,587.5	$	1,584.9

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in millions, except per share amounts)

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in millions)

(Unaudited)




	Three Months Ended
	March 31, 2021		March 31, 2020
Operating
Net income	$	21.6	$	22.5


Non-cash items included in net income:
Depreciation and amortization	16.9		15.3

Deferred income tax	3.0		0.7
Pension and other postretirement benefits	1.1		0.8
Stock-based compensation	2.1		2.2
Income from equity affiliates	(1.0)		0
Brazil tax assessment accruals, net	(6.1)		0





Other items	5.6		(2.7)
Changes in operating working capital, net of assets acquired:
Accounts receivable	(27.7)		(33.7)
Inventories	1.8		10.8
Prepaid expenses	(4.8)		(3.5)
Accounts payable	11.3		1.3
Accrued expenses and other current liabilities	(13.5)		(10.7)
Accrued income taxes	2.4		2.1
Net changes in operating working capital	(30.5)		(33.7)



Net cash provided by operations	12.7		5.1
Investing
Capital spending	(7.1)		(7.4)
Capitalized software costs	(0.5)		(0.7)
Acquisitions, net of cash acquired	0		(170.6)


Other investing	0.3		2.4
Net cash used in investing	(7.3)		(176.3)

Three Months Ended
March 31,
2020 March 31,
2019
Operating
Net income $ 22.5
$ 17.4
Non-cash items included in net income:
Depreciation and amortization 15.3
14.4
Deferred income tax 0.7
(0.5 )
Pension and other postretirement benefits 0.8
0.7
Stock-based compensation 2.2
0.9
Loss from equity affiliates —
0.2
Other items (2.7 ) 1.9
Changes in operating working capital, net of assets acquired:
Accounts receivable (33.7 ) (12.5 )
Inventories 10.8
(4.0 )
Prepaid expenses (3.5 ) (2.7 )
Accounts payable 1.3
7.5
Accrued expenses and other current liabilities (10.7 ) (11.7 )
Accrued income taxes 2.1
1.4
Net changes in operating working capital (33.7 ) (22.0 )
Net cash provided by operations 5.1
13.0
Investing
Capital spending (7.4 ) (7.3 )
Capitalized software costs (0.7 ) (1.4 )
Acquisitions, net of cash acquired (170.6 ) —
Other investing 2.4
1.1
Net cash used in investing (176.3 ) (7.6 )

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in millions)

(Unaudited)


	Three Months Ended							Three Months Ended
	March 31, 2020			March 31, 2019				March 31, 2021		March 31, 2020
Financing							Financing
Cash dividends paid to SWM stockholders	(13.7		)	(13.6		)	Cash dividends paid to SWM stockholders	(13.8)		(13.7)
Changes in short-term debt	—			(0.2		)

Proceeds from issuances of long-term debt	212.0			—			Proceeds from issuances of long-term debt	25.0		212.0
Payments on long-term debt	(0.4		)	(0.6		)	Payments on long-term debt	(0.6)		(0.4)
Purchases of common stock	(1.0		)	(0.9		)	Purchases of common stock	(3.1)		(1.0)
Net cash provided by (used in) financing	196.9			(15.3		)
Payments for debt issuance costs							Payments for debt issuance costs	(3.0)		0

Net cash provided by financing							Net cash provided by financing	4.5		196.9
Effect of exchange rate changes on cash and cash equivalents	(2.0		)	(0.5		)	Effect of exchange rate changes on cash and cash equivalents	(0.9)		(2.0)
Increase (decrease) in cash and cash equivalents	23.7			(10.4		)
Increase in cash and cash equivalents							Increase in cash and cash equivalents	9.0		23.7
Cash and cash equivalents at beginning of period	103.0			93.8			Cash and cash equivalents at beginning of period	54.7		103.0
Cash and cash equivalents at end of period	$	126.7		$	83.4		Cash and cash equivalents at end of period	$	63.7	$	126.7

Supplemental Cash Flow Disclosures							Supplemental Cash Flow Disclosures
Cash paid for interest, net	$	2.3		$	3.5		Cash paid for interest, net	$	1.4	$	2.3
Cash paid for taxes, net	$	2.3		$	3.3		Cash paid for taxes, net	$	2.0	$	2.3
Change in capital spending in accounts payable and accrued liabilities	$	2.9		$	1.7		Change in capital spending in accounts payable and accrued liabilities	$	4.9	$	2.9

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 2 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, healthcare, construction, and ~~infrastructure, transportation,~~ industrial ~~and medical~~ 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~~in the production of small 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 2423 production locations worldwide, with ~~locations~~facilities in the U.S., Canada, United Kingdom, France, Luxembourg, Belgium, Russia, Brazil, China and Poland. We also have a 50% equity interest in 2 joint ventures in China. The first, China Tobacco Mauduit (Jiangmen) Paper Industry Ltd. ("CTM"), produces various cigarette ~~and porous plug wrap~~ papers and the second, China Tobacco Schweitzer (Yunnan) Reconstituted Tobacco Co. Ltd. ("CTS"), produces RTL.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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 months ended March 31, ~~2020~~2021 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,~~2020, as filed with the SEC on March ~~2, 2020.~~1, 2021.

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.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 March 31, ~~2020.~~2021. 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 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 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

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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 will 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 consolidated financial statements.

~~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 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~~were adopted 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~~January 1, 2021 and ~~does~~did not ~~expect the adoption of this guidance to~~ have a material impact on the condensed consolidated financial statements.

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 annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans and requires the amendments to be applied on a retrospective basis for all periods presented. The provisions of this ASU were adopted effective January 1,2021 and the required changes, which are not significant and not expected to have a material impact, will be reflected in the annual financial statements.

Recently Issued Accounting Standards

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.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2. Revenue Recognition

The Company has 2 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~~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

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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~~selling 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
	March 31, 2021						March 31, 2020
	AMS		EP		Total		AMS		EP		Total
Product revenues	$	158.3	$	109.0	$	267.3	$	117.0	$	124.7	$	241.7
Materials conversion revenues	2.3		15.1		17.4		3.8		12.9		16.7
Other revenues	2.4		1.1		3.5		2.1		1.0		3.1
Total revenues (1)	$	163.0	$	125.2	$	288.2	$	122.9	$	138.6	$	261.5

Three Months Ended
March 31, 2020 March 31, 2019
AMS EP Total AMS EP Total
Product revenues $ 117.0
$ 124.7
$ 241.7
$ 117.5
$ 121.2
$ 238.7
Materials conversion revenues 3.8
12.9
16.7
1.9
14.9
16.8
Other revenues 2.1
1.0
3.1
1.1
1.4
2.5
Total revenues ⁽¹⁾
$ 122.9
$ 138.6
$ 261.5
$ 120.5
$ 137.5
$ 258.0

(1) Revenues include net hedging gains and losses for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Net sales are attributed to the following geographic locations based on the location of the Company’s direct customers ($ in millions):


	Three Months Ended
	March 31, 2021						March 31, 2020
	AMS		EP		Total		AMS		EP		Total
United States	$	105.7	$	37.4	$	143.1	$	83.3	$	43.9	$	127.2
Europe and the former Commonwealth of Independent States	17.8		49.4		67.2		12.6		43.5		56.1
Asia/Pacific (including China)	32.4		22.2		54.6		20.7		28.8		49.5
Latin America	2.4		8.8		11.2		2.3		11.0		13.3
Other foreign countries	4.7		7.4		12.1		4.0		11.4		15.4
Total revenues (1)	$	163.0	$	125.2	$	288.2	$	122.9	$	138.6	$	261.5

Three Months Ended
March 31, 2020 March 31, 2019
AMS EP Total AMS EP Total
United States $ 83.3
$ 43.9
$ 127.2
$ 83.3
$ 47.4
$ 130.7
Europe and the former Commonwealth of Independent States 12.6
43.5
56.1
13.2
45.1
58.3
Asia/Pacific (including China) 20.7
28.8
49.5
17.2
20.4
37.6
Latin America 2.3
11.0
13.3
2.0
11.1
13.1
Other foreign countries 4.0
11.4
15.4
4.8
13.5
18.3
Total revenues⁽¹⁾
$ 122.9
$ 138.6
$ 261.5
$ 120.5
$ 137.5
$ 258.0

(1) Revenues include net hedging gains and losses for the three months ended March 31, ~~2020~~2021 and ~~2019.~~

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 3.3. Other Comprehensive Loss

Comprehensive income includes Net income, as well as certain items charged and credited directly to stockholders' equity, which are excluded from net income. The Company has presented Comprehensive income in the condensed consolidated statements of comprehensive income (loss). Reclassification adjustments of derivative instruments are presented in Net sales, Other (expense) income, ~~(expense),~~ net, or Interest expense in the condensed consolidated statements of income. See Note 11.11. Derivatives for additional information. Amortization of accumulated pension and other post-employment benefit ("OPEB"), liabilities are included in the computation of net periodic pension and OPEB costs, which are more fully discussed in Note 13.13. Postretirement and Other Benefits.

Components of Accumulated other comprehensive loss, net of tax, were as follows ($ in millions):


	March 31, 2021		December 31, 2020


Accumulated pension and OPEB liability adjustments, net of income tax benefit of $12.2 million and $11.6 million at March 31, 2021 and December 31, 2020, respectively	$	(18.8)	$	(20.5)
Accumulated unrealized loss on derivative instruments, net of income tax benefit of $2.8 million and $2.8 million at March 31, 2021 and December 31, 2020, respectively	(8.7)		(13.1)
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $6.8 million and $10.1 million at March 31, 2021 and December 31, 2020, respectively	(88.2)		(78.3)
Accumulated other comprehensive loss	$	(115.7)	$	(111.9)

March 31, 2020 December 31, 2019
Accumulated pension and OPEB liability adjustments, net of income tax benefit of $12.6 million and $12.8 million at March 31, 2020 and December 31, 2019, respectively $ (23.8 ) $ (24.3 )
Accumulated unrealized loss on derivative instruments, net of income tax benefit of $4.4 million and $1.6 million at March 31, 2020 and December 31, 2019, respectively (16.2 ) (3.5 )
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $5.7 million and $5.0 million at March 31, 2020 and December 31, 2019, respectively (98.3 ) (94.8 )
Accumulated other comprehensive loss $ (138.3 ) $ (122.6 )

Changes in the components of Accumulated other comprehensive ~~loss~~(loss) income were as follows ($ in millions):

Three Months Ended
March 31, 2020 March 31, 2019
Pre-tax Tax
Net of
Tax
Pre-tax Tax
Net of
Tax
Net gain (loss) on pension and OPEB liability adjustments $ 0.7
$ (0.2 ) $ 0.5
$ (0.6 ) $ 1.1
$ 0.5
Unrealized (loss) gain on derivative instruments (15.6 ) 2.9
(12.7 ) (0.5 ) —
(0.5 )
Unrealized (loss) gain on foreign currency translation (4.1 ) 0.6
(3.5 ) (1.6 ) 2.3
0.7
Total $ (19.0 ) $ 3.3
$ (15.7 ) $ (2.7 ) $ 3.4
$ 0.7




	Three Months Ended
	March 31, 2021						March 31, 2020
	Pre-tax		Tax		Net of Tax		Pre-tax		Tax		Net of Tax
Net gain (loss) on pension and OPEB liability adjustments	$	1.1	$	0.6	$	1.7	$	0.7	$	(0.2)	$	0.5
Unrealized gain (loss) on derivative instruments	4.5		(0.1)		4.4		(15.6)		2.9		(12.7)
Unrealized (loss) gain on foreign currency translation	(6.5)		(3.4)		(9.9)		(4.1)		0.6		(3.5)
Total	$	(0.9)	$	(2.9)	$	(3.8)	$	(19.0)	$	3.3	$	(15.7)

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4. Business Acquisitions

On March 13, 2020, the Company completed the acquisition of 100% of the equity interest in Tekra, LLC and Trient, LLC, “Tekra,” pursuant to the definitive agreement signed as of February 20, 2020. ~~The Company purchased all of the equity interests in Tekra. As a result of the transaction, Tekra and its subsidiaries became wholly-owned subsidiaries of the Company.~~ Tekra is a converter of high-performance films and substrates which enhances the Company’s films capabilities. Tekra, part of the AMS segment, operates ~~two~~2 manufacturing facilities located in Wisconsin.

The consideration transferred to acquire Tekra was ~~$170.6~~$169.3 million, net of ~~$2.1~~$1.6 million cash and cash equivalents acquired, ~~and~~ subject to working capital adjustments ~~which will be~~that were finalized ~~during the second quarter of~~in 2020. The purchase price was funded with borrowings from our ~~revolving credit facility.~~Revolving Credit Facility (as described under Note 10. Debt below).

The acquisition ~~has been~~was accounted for as a business combination with the assets acquired and liabilities assumed measured at their ~~preliminary estimated~~ fair values as of the acquisition date, primarily using Level 3 inputs.

The ~~acquisition consideration~~estimated purchase price allocation ~~below is preliminary, pending completion~~disclosed as of March 31, 2020, was revised during the ~~fair value analyses~~second and third quarters as new information was received and analyzed resulting in a decrease in net intangible assets of ~~acquired assets~~$3.4 million, and ~~liabilities, including the~~other adjustments, consisting primarily of reclassifications within working capital, ~~settlement and valuations~~leading to a net decrease in total consideration of certain intangibles. The excess of the acquisition consideration over the estimated fair values of the acquired assets and assumed liabilities is assigned to goodwill which is primarily attributable to expected revenue synergies. As additional information becomes available, we may further revise the preliminary acquisition consideration allocation during the remainder of the measurement period, which shall not exceed twelve months from the closing of the acquisition. Such revisions or changes may be material.$1.8 million.

The consideration paid for Tekra and the ~~preliminary estimated~~final fair values of the assets acquired, and liabilities assumed as of the March 13, 2020 acquisition date ~~were~~are as follows ($ in millions):

Preliminary
Fair Values as of March 13, 2020
Cash and cash equivalents $ 2.1
Accounts receivable 8.8
Inventory 14.1
Other current assets 0.2
Property, plant and equipment 7.3
Identifiable intangible assets 85.2
Other noncurrent assets 3.3
Total assets 121.0

Accounts payable 2.4
Other current liabilities 3.6
Other noncurrent liabilities 2.7

Net assets acquired 112.3

Goodwill 60.4

Total consideration $ 172.7


	Fair Value as of March 13, 2020
Cash and cash equivalents	$	1.6
Accounts receivable	8.6
Inventory	14.2
Other current assets	0.2
Property, plant and equipment	7.3
Identifiable intangible assets	81.8
Other noncurrent assets	3.7
Total assets	$	117.4

Accounts payable	$	3.0
Other current liabilities	2.0
Other noncurrent liabilities	2.7

Net assets acquired	$	109.7

Goodwill	61.2

Total consideration	$	170.9

The fair value of receivables acquired approximates the gross contractual value.The contractual amount not expected to be collected is immaterial.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~The fair value of receivables acquired approximates the gross contractual value. The contractual amount not expected to be collected is immaterial.~~

Acquired inventory was comprised of finished goods and raw materials.The fair value of finished goods was based on net realizable value adjusted for the costs of selling and a reasonable profit margin on selling effort.The fair value of raw materials was determined to approximate book value.

Acquired intangible assets include customer relationships, tradenames and unpatented developed technologies. Intangible assets were valued using the multi-period excess earnings and relief-from-royalty methods, both forms of the income approach which considers a forecast of future cash flows generated from the use of each asset.The following table shows the ~~preliminary~~final fair values assigned to identifiable intangible assets ($ in millions):


	Fair Value as of March 13, 2020		Weighted-Average Amortization Period (Years)
Amortizable intangible assets:
Customer relationships	$	63.0	15
Tradenames and other	10.8		15
Developed technology	8.0		10
Total amortizable intangible assets	$	81.8

Preliminary Fair Values as of March 13, 2020 Weighted-Average Amortization Period (Years)
Amortizable intangible assets:
Customer relationships $ 66.0
15
Tradenames and other 11.2
15
Developed technology 8.0
10
Total amortizable intangible assets $ 85.2

During the three months ended March 31, 2020, the Company recognized $1.1 million in direct and indirect acquisition-related costs for the Tekra acquisition.Direct and indirect acquisition-related costs were expensed as incurred and are included in the General expense line item in the condensed consolidated statements of income.

The amounts of Net sales and Net Income ~~from continuing operations~~ of Tekra included in the Company's condensed consolidated income statement from the acquisition date are as follows ($ in millions):

March 13, 2020 - March 31, 2020

Net Sales $ 5.5
Income from Continuing Operations $ 0.4


	March 13, 2020 - March 31, 2020
Net Sales	$	5.5
Net Income	$	0.4

The amount of unaudited pro forma Net sales for the three months ended March 31, 2020 ~~and March 31, 2019~~ for the combined entity were $285.4 ~~million and $285.1 million, respectively.~~million. Preparation of pro forma income from continuing operations for the periods presented is impractical given recent changes to the ownership structure of the acquired entities prior to the transaction.

Note 5.5. Net Income Per Share

The Company uses the two-class method to calculate earnings per share. The Company has granted restricted stock that contains non-forfeitable rights to dividends on unvested shares. Since these unvested shares are considered participating securities under the two-class method, the Company allocates earnings per share to common stock and participating securities according to dividends declared and participation rights in undistributed earnings.

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. Potential common shares during the respective periods are those related to dilutive stock-based compensation, including long-term stock-based incentive compensation and directors’ accumulated deferred stock compensation, which may be received by the directors in the form of stock or cash. A reconciliation of the average number of common and potential common shares outstanding used in the calculations of basic and diluted net income per share follows ($ in millions, shares in thousands):

Three Months Ended
March 31,
2020
March 31,
2019
Numerator (basic and diluted):
Net income $ 22.5
$ 17.4
Less: Dividends paid to participating securities (0.3 ) (0.1 )
Undistributed and distributed earnings available to common stockholders $ 22.2
$ 17.3

Denominator:

Average number of common shares outstanding 30,712.3
30,620.6
Effect of dilutive stock-based compensation 197.7
96.1
Average number of common and potential common shares outstanding 30,910.0
30,716.7

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)




	Three Months Ended
	March 31, 2021		March 31, 2020
Numerator (basic and diluted):
Net income	$	21.6	$	22.5
Less: Dividends paid to participating securities	(0.1)		(0.3)
Less: Undistributed earnings available to participating securities	(0.1)		0
Undistributed and distributed earnings available to common stockholders	$	21.4	$	22.2

Denominator:
Average number of common shares outstanding	30,974.2		30,712.3
Effect of dilutive stock-based compensation	366.3		197.7
Average number of common and potential common shares outstanding	31,340.5		30,910.0

Note 6. Inventories

Inventories are valued at the lower of cost (using the First-In, First-Out and weighted average methods) or net realizable value. The Company's costs included in inventory primarily include resins, pulp, chemicals, direct labor, utilities, maintenance, depreciation, finishing supplies and an allocation of certain overhead costs. Machine start-up costs or abnormal machine ~~shut downs~~shutdowns are expensed in the period incurred and are not reflected in inventory. The Company reviews inventories at least quarterly to determine the necessity of write-offs for excess, obsolete or unsalable inventory. The Company estimates write-offs for inventory obsolescence and ~~shrinkage based on its judgment of future realization.~~shrinkage. These reviews require the Company to assess customer and market demand. The following schedule details inventories by major class ($ in millions):




	March 31, 2021		December 31, 2020
Raw materials	$	65.2	$	65.3
Work in process	24.6		23.2
Finished goods	75.5		83.5
Supplies and other	8.0		7.7
Total	$	173.3	$	179.7

March 31,
2020 December 31,
2019
Raw materials $ 67.4
$ 61.1
Work in process 23.1
20.7
Finished goods 59.8
65.3
Supplies and other 9.2
14.3
Total $ 159.5
$ 161.4

Note 7. Goodwill

The changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, 2021 were as follows ($ in millions):


	AMS		EP		Total
Goodwill as of December 31, 2020	$	398.4	$	5.3	$	403.7

Foreign currency translation adjustments	(1.7)		(0.2)		(1.9)
Goodwill as of March 31, 2021	$	396.7	$	5.1	$	401.8

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Note~~ 7~~. Goodwill~~

~~The changes in the carrying amount of goodwill by segment for the three months ended March 31, 2020 were as follows ($ in millions):~~

AMS EP Total
Goodwill as of December 31, 2019 $ 332.5
$ 4.9
$ 337.4
Goodwill acquired during the period 60.4
—
60.4
Foreign currency translation adjustments (1.2 ) (0.1 ) (1.3 )
Goodwill as of March 31, 2020 $ 391.7
$ 4.8
$ 396.5

Note 8. Intangible Assets

The gross carrying amount and accumulated amortization for intangible assets which are in our AMS segment consisted of the following ($ in millions):


	March 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairments		Accumulated Foreign Exchange		Net Carrying Amount
Amortized Intangible Assets
Customer relationships	$	339.2	$	94.1	$	0	$	(1.1)	$	246.2
Developed technology	42.0		14.9		0		0.1		27.0
Trade names	32.7		1.6		20.7		0.3		10.1
Non-compete agreements	2.9		2.4		0		0		0.5
Patents	1.5		0.6		0		0		0.9


Total	$	418.3	$	113.6	$	20.7	$	(0.7)	$	284.7

Unamortized Intangible Assets
Trade names	$	20.0	$	—	$	0.1	$	(0.2)	$	20.1

March 31, 2020

Gross
Carrying
Amount

Accumulated
Amortization
Accumulated Impairments Accumulated Foreign Exchange
Net
Carrying
Amount
Amortized Intangible Assets (AMS)
Customer relationships $ 342.3
$ 72.0
$ —
$ 2.9
$ 267.4
Developed technology 42.0
11.8
—
0.5
29.7
Trade names 33.0
0.8
20.7
0.3
11.2
Non-compete agreements 2.9
2.2
—
—
0.7
Patents 1.5
0.5
—
—
1.0
Total $ 421.7
$ 87.3
$ 20.7
$ 3.7
$ 310.0

Unamortized Intangible Assets (AMS)
Trade names $ 20.0
$ —
$ 0.1
$ 0.1
$ 19.8

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

December 31, 2019

Gross
Carrying
Amount

Accumulated
Amortization
Accumulated Impairments Accumulated Foreign Exchange
Net
Carrying
Amount
Amortized Intangible Assets (AMS)
Customer relationships $ 276.3
$ 67.7
$ —
$ 1.8
$ 206.8
Developed technology 34.0
10.9
—
0.4
22.7
Trade names 21.8
0.8
20.7
0.3
—
Non-compete agreements 2.9
2.2
—
—
0.7
Patents 1.5
0.4
—
—
1.1
Total $ 336.5
$ 82.0
$ 20.7
$ 2.5
$ 231.3

Unamortized Intangible Assets (AMS)
Trade names $ 20.0
$ —
$ 0.1
$ —
$ 19.9


	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairments		Accumulated Foreign Exchange		Net Carrying Amount
Amortized Intangible Assets
Customer relationships	$	339.8	$	88.5	$	0	$	(2.9)	$	254.2
Developed technology	42.1		14.1		0		(0.2)		28.2

Trade names	32.7		1.4		20.7		0.3		10.3
Non-compete agreements	2.9		2.4		0		0		0.5
Patents	1.5		0.5		0		0		1.0


Total	$	419.0	$	106.9	$	20.7	$	(2.8)	$	294.2

Unamortized Intangible Assets
Trade names	$	20.0	$	—	$	0.1	$	(0.6)	$	20.5

Amortization expense of intangible assets was ~~$5.3~~$6.5 million and ~~$5.1~~$5.3 million for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Finite-lived intangibles in the AMS segment are expensed using the straight-line amortization method. The estimated average aggregate amortization expense is ~~$25.5~~$24.8 million in each of the next five years.

Note 9.9. Restructuring and Impairment Activities

The Company incurred restructuring and impairment expense of $1.7 million and $0.1 million in the three months ended March 31, 2021 and ~~$0.0~~2020, respectively, in the EP segment.

During the third quarter of 2020, we announced plans to shut down the Spotswood, New Jersey facility and shift the production of paper made there to other SWM facilities. This decision was part of our ongoing manufacturing optimization efforts and involved the co-development of a new paper production technology with one of the Company’s key customers. Production of paper at this facility ceased as of December 31, 2020.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As a result of this decision, $1.4 million of restructuring and impairment expense was recognized in the three months ended March 31, 2021 related to the costs associated with closing this facility, maintaining the property and preparing it for sale.

In addition to restructuring costs relating to the Spotswood facility, the EP segment recognized $0.3 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively, related to severance accruals for employees at other manufacturing facilities. These restructuring charges relate to ongoing cost optimization initiatives to remain competitive within the EP segment. The cost optimization initiative project started in 2019 and ~~2019, respectively~~is expected to be completed in 2022.The EP segment has recognized $7.2 million of restructuring charges cumulatively through March 31, 2021 related to this project.

The Company expects to record additional restructuring related costs in the EP ~~segment.~~ segment during 2021 of approximately $1.4 million relating to the shutdown of the Spotswood, New Jersey facility, primarily associated with closing the facility and maintaining the property until it is sold. The Company does not expect to incur significant restructuring expenses related to the cost optimization initiatives in the EP segment during the remainder of 2021.

In the AMS segment, there were 0 restructuring and impairment expenses for the three months ended March 31, ~~2020,~~2021 and 2020.

The following table summarizes total restructuring and ~~impairment expense consisted of $0.1 million~~related charges for ~~severance accruals for employees at our manufacturing facilities~~the three months ended March 31, 2021:


	Three Months Ended
	March 31, 2021		March 31, 2020
Restructuring and impairment expense:
Severance	$	0.3	$	0.1
Other	1.4		0
Total restructuring and impairment expense	$	1.7	$	0.1

The following table summarizes changes in ~~Brazil, Poland,~~restructuring liabilities during the periods ended March 31, 2021 and ~~the U.S.~~December 31, 2020.($ in millions):


	Three Months Ended
	March 31, 2021		March 31, 2020
Balance at beginning of year	$	7.4	$	0.5
Accruals for announced programs	0.3		0.1
Cash payments	(2.2)		(0.3)
Foreign exchange impact	(0.1)		0
Balance at end of period	$	5.4	$	0.3

Restructuring liabilities were classified within Accrued expenses and other current liabilities in each of the condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019. Changes in the restructuring liabilities, substantially all of which are employee-related, during the periods ended March 31, 2020 and December 31, 2019 are summarized as follows ($ in millions):sheets.

Three Months Ended Year Ended
March 31,
2020 December 31,
2019
Balance at beginning of year $ 0.5
$ 1.4
Accruals for announced programs 0.1
3.7
Cash payments (0.3 ) (4.2 )
Other —
(0.4 )
Balance at end of period $ 0.3
$ 0.5

Long-lived assets to be sold are classified as held for sale in the period in which all of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell the assets; the assets are available for immediate sale in present condition subject only to terms that are usual and customary for sales of such assets; an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; the sale of the assets is probable, and transfer of the assets is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the assets beyond one year; the assets are being actively marketed for sale at a price that is reasonable in relation to current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A long-lived asset that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. The fair value of a long-lived asset less any costs to sell is assessed each reporting period it remains classified as held for sale and any reduction in fair value is reported as an adjustment to the carrying value of the asset. Upon being classified as held for sale, depreciation is ceased. Long-lived assets to be disposed of other than by sale continue to be depreciated. Upon determining that a long-lived asset meets the criteria to be classified as held for sale, the assets and liabilities of the disposal group, if material, are reported in the line item Assets held for sale in our condensed consolidated balance sheets.

In early 2015, the Company made the decision to dispose of the Company's mothballed RTL facility and related equipment in the Philippines. These assets were included in the EP segment. The legal entity and its related assets were sold on December 18, 2019 for total consideration of $13.3 million, and the Company recorded a net gain of $0.3 million.

Note 10.10. Debt

The components of total debt are summarized in the following table ($ in millions):

March 31,
2020 December 31,
2019
Revolving credit facility - U.S. dollar borrowings $ 212.0
$ —
Term loan facility 197.0
197.5
6.875% senior unsecured notes due October 1, 2026, net of discount of $6.7 million and $6.9 million at March 31, 2020 and December 31, 2019, respectively 343.3
343.1
French employee profit sharing 4.6
4.8
Finance lease and capital lease obligations, respectively 3.4
3.2
Debt issuance costs (5.6 ) (5.9 )
Total debt 754.7
542.7
Less: Current debt (1.9 ) (1.9 )
Long-term debt $ 752.8
$ 540.8


	March 31, 2021		December 31, 2020
Revolving credit facility - U.S. dollar borrowings	$	75.0	$	50.0

Term loan facility	195.0		195.5


6.875% senior unsecured notes due October 1, 2026, net of discount of $5.8 million and $6.1 million at March 31, 2021 and December 31, 2020, respectively	344.2		343.9
French employee profit sharing	4.7		5.0
Finance lease obligations	3.3		3.5

Debt issuance costs	(4.3)		(4.6)
Total debt	617.9		593.3
Less: Current debt	(2.7)		(2.8)
Long-term debt	$	615.2	$	590.5

Credit Facility

On September 25, 2018, the Company entered into a $700.0 million credit agreement (the “Credit Agreement”), which replaced the Company’s previous senior secured credit facilities and provides for a five year $500.0 million revolving line of credit (the “Revolving Credit Facility”) and a seven year $200.0 million bank term loan facility (the “Term Loan A Facility”). Subject to certain conditions, including the absence of a default or event of default under the Credit Agreement, the Company may request incremental loans to be extended under the Revolving Credit Facility or ~~the~~as additional Term Loan ~~Facility~~Facilities so long as the Company is in pro forma compliance with the financial covenants set forth in the Credit Agreement and the aggregate of such increases does not exceed $400.0 million.

On February 10, 2021 we amended our Credit Agreement to, among other things, add a new seven year $350 million Term Loan B Facility (the “Term Loan B Facility”). The balance under the Term Loan B Facility was $0 as of March 31, 2021.

Borrowings under the Revolving Credit Facility ~~will initially~~currently bear interest, at the Company’s option, at either (i) ~~1.50%~~1.75% in excess of ~~a reserve adjusted London Interbank Offered Rate (“LIBOR”)~~LIBOR or (ii) 0.75% in excess of an alternative base rate. Borrowings under the Term Loan A Facility ~~will initially~~currently bear interest, at the Company’s option, at either (i) ~~1.75%~~2.00% in excess of ~~a reserve adjusted~~ LIBOR ~~rate~~ or (ii) 1.00% in excess of an alternative base rate. The Term Loan amortizes at the rate of 1.0% per year and will mature on September 25, 2025. Any borrowings under the Term Loan B Facility will bear interest, at the Company's option, at either (i) 4.00% in excess of a reserve adjusted LIBOR rate (subject to a minimum floor of 0.75%) or (ii) 3.00% in excess of an alternative base rate.

Under the terms of the amended Credit Agreement, the Company is required to maintain certain financial ratios and comply with certain financial covenants, including maintaining a net debt to EBITDA ratio, as defined in the amended Credit Agreement, calculated on a trailing four fiscal quarter basis, not greater than ~~4.50~~5.50 and an interest coverage ratio, also as defined in the amended Credit Agreement, of not less than 3.00. The net debt to EBITDA ratio will decrease over the course of 24 months, returning to 4.50x effective as of June 30, 2023. In addition, borrowings and loans made under the amended Credit Agreement are secured by substantially all of the Company’s and the guarantors’ personal property, excluding certain customary items of collateral, and will be guaranteed by the Company’s existing and future wholly-owned material domestic subsidiaries

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

and by SWM Luxembourg.

The Company was in compliance with all of its covenants under the Credit Agreement at March 31, ~~2020.~~2021.

Indenture for 6.875% Senior Unsecured Notes Due 2026

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On September 25, 2018, the Company closed a private offering of $350.0 million of 6.875% senior unsecured notes due 2026 (the “Notes”). The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended, pursuant to a purchase agreement between the Company, certain subsidiaries of the Company and J.P. Morgan Securities LLC, as representative of the initial purchasers. The Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned subsidiaries that is a borrower under or that guarantees obligations under the Credit Agreement ~~(as defined below)~~ or that guarantees certain other indebtedness, subject to certain exceptions.

The Notes were issued pursuant to an Indenture, ~~(the “Indenture”),~~ dated as of September 25, 2018 (the “Indenture”), by and among the Company, the guarantors listed therein and Wilmington Trust, National Association, as trustee. The Indenture provides that interest on the Notes will accrue from September 25, 2018 and is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2019, and the Notes mature on October 1, 2026.

The Company may redeem some or all of the Notes at any time on or after October 1, 2021, at the redemption prices set forth in the Indenture, together with accrued and unpaid interest, if any, to, but excluding, the redemption date. Prior to October 1, 2021, the Company may redeem some or all of the Notes at a price equal to 100% of the principal amount thereof, plus a “make-whole” premium as set forth in the Indenture. The Company may redeem up to 35% of the original aggregate principal amount of the Notes on or prior to October 1, 2021 with the proceeds of certain equity offerings at a redemption price equal to 106.875% of the principal amount of the Notes. If the Company sells certain assets or consummates certain change of control transactions, the Company will be required to make an offer to repurchase the Notes, subject to certain conditions.

The Indenture contains certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to incur additional indebtedness, make certain dividends, repurchase Company stock or make other distributions, make certain investments, create liens, transfer or sell assets, merge or consolidate and enter into transactions with the Company’s affiliates. Such covenants are subject to a number of exceptions and qualifications set forth in the Indenture. The Indenture also contains certain customary events of default, including failure to make payments in respect of the principal amount of the Notes, failure to make payments of interest on the Notes when due and payable, failure to comply with certain covenants and agreements and certain events of bankruptcy or insolvency. The Company was in compliance with all of its covenants under the Indenture at March 31, ~~2020.~~2021.

As of March 31, ~~2020,~~2021, the average interest rate was ~~2.50%~~2.33% on outstanding US Revolving Credit Facility borrowings and ~~2.75%~~1.88% on outstanding Term Loan A Facility borrowings. The effective rate on the 6.875% senior unsecured notes due 2026 was 7.248%. The weighted average effective interest rate on the Company's debt facilities, including the impact of interest rate hedges, was approximately ~~3.84%~~4.03% and ~~4.42%~~3.84% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

As of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, the Company's total deferred debt issuance costs, net of accumulated amortization, were ~~$5.6~~$4.3 million and ~~$5.9~~$4.6 million, respectively. Amortization expense of $0.3 million and $0.3 million was recorded during the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, and has been included as a component of Interest expense in the accompanying condensed consolidated statements of income.

Principal Repayments

Following are the expected maturities for the Company's debt obligations as of March 31, 2021 ($ in millions):


2021	$	3.4
2022	4.0
2023	78.4
2024	2.6
2025	188.7
Thereafter	345.1
Total	$	622.2

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Principal Repayments~~

Under the Credit Agreement, the Company selects an "interest period" for each of its borrowings from the Revolving Credit Facility. The Company can repay such borrowings and borrow again at a subsequent date if it chooses to do so, providing it flexibility and efficient use of any excess cash. The Company currently has the intent and ability to allow its debt balances to remain outstanding and expects to continue to file notices of continuation related to its borrowings outstanding at March 31, 2020 such that those amounts are not expected to be repaid prior to the September 2023 expiration of the Revolving Credit Facility. Following are the expected maturities for the Company's debt obligations as of March 31, 2020 ($ in millions):

2020 $ 3.1
2021 3.9
2022 3.9
2023 215.3
2024 2.5
Thereafter 531.6
Total * $ 760.3

Fair Value of Debt

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair market value of the Company's 6.875% senior unsecured notes was ~~$348.7~~$373.1 million and ~~$378.3~~$371.0 million, respectively. The fair market value for the senior unsecured notes was determined using quoted market prices, which are directly observable Level 1 inputs. The fair market value of all other debt as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 approximated the respective carrying amounts as the interest rates are variable and based on current market indices.

Debt Issuance Costs

In conjunction with amendment to our Credit Agreement on February 10, 2021, the Company capitalized approximately $4 million of debt issuance costs during three months ended March 31, 2021 which will be amortized over the term of the various facilities under the amended Credit Agreement.

Note 11.11. Derivatives

In the normal course of business, the Company is exposed to foreign currency exchange rate risk and interest rate risk on its variable-rate debt. To manage these risks, the Company utilizes a variety of practices including, where considered appropriate, derivative instruments. The Company has no derivative instruments for trading or speculative purposes or derivatives with credit risk-related contingent features. All derivative instruments used by the Company are either exchange traded or are entered into with major financial institutions in order to reduce credit risk and risk of nonperformance by third parties. The fair values of the Company’s derivative instruments are determined using observable inputs and are considered Level 2 assets or liabilities.

The Company utilizes currency forward, swap and, to a lesser extent, option contracts to selectively hedge its exposure to foreign currency risk when it is practical and economical to do so. The use of these contracts minimizes transactional exposure to exchange rate changes. We designate certain of our foreign currency hedges as cash flow hedges. Changes in the fair value of cash flow hedges are reported as a component of Accumulated other comprehensive loss and reclassified into earnings when the forecasted transaction affects earnings. For foreign exchange contracts not designated as cash flow hedges, changes in the contracts’ fair values are recorded to net income each period.

The Company selectively hedges its exposure to interest rate increases on variable-rate, long-term debt when it is practical and economical to do so. Changes in the fair value of interest rate contracts considered cash flow hedges are reported as a component of Accumulated other comprehensive loss and reclassified into earnings when the forecasted transaction affects earnings.

The Company also uses cross currency swap contracts to selectively hedge its exposure to foreign currency related changes in our net investments in certain foreign operations. We designate these cross currency swap contracts as net investment hedges. Changes in the fair value of these hedges are deferred within the foreign currency translation component of Accumulated other comprehensive income and reclassified into earnings when the foreign investment is sold or substantially liquidated.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

On January 20, 2017, the Company entered into an interest rate swap transaction with a major financial institution for a three year term on a notional amount of $315 million. The interest rate swap is intended to manage the Company's interest rate risk by fixing the interest rate on a portion of the Company's debt currently outstanding under its credit facility that was previously subject to a floating interest rate equal to 1-month LIBOR plus a credit spread. The swap provides for the Company to pay a fixed rate of 1.65% per annum in addition to the credit spread on such portion of its outstanding debt in exchange for receiving a variable interest rate based on 1-month LIBOR. On September 25, 2018, in conjunction with the debt refinancing discussed in Note 11. Debt, the Company settled a notional amount of $130 million which resulted in a gain of $1.8 million as of the settlement date. This gain will be amortized on a ratable basis from Accumulated other comprehensive loss into income as interest expense over the remaining term of the interest rate swap. On September 11, 2019, the Company terminated this interest rate swap. Concurrently, on September 11, 2019, the Company entered into a pay-fixed, receive-variable interest rate swap with a maturity date of January 31, 2027. The instrument is a hedge on a portion of the Company’s debt facility through the ~~existing credit agreement.~~Credit Agreement. Under the terms of the interest rate swap, SWM will pay a fixed amount of interest each period in an amount equal to 1.724% on a notional amount of $185 million and receive interest payments monthly in an amount equal to the One-Month USD-LIBOR rate on the notional amount. The notional amount will reduce throughout the term of the swap as follows:

•September 13, 2019 - December 31, 2020 $185 million notional

•December 31, 2020 - December 31, 2021 $150 million notional

•December 31, 2021 - January 31, 2027 $100 million notional

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As with the previous interest rate swap, the terms of the swap mirror the terms of the underlying debt, including timing of the payments and interest rates.

On January 20, 2017, the Company entered into a three year cross-currency swap with a major financial institution designated as a hedge of a portion of the Company's net investment in certain Euro-denominated subsidiaries. The terms of the cross-currency swap provide for an exchange of principal on a notional amount of $100 million swapped to €93.7 million at maturity. The Company will receive from our swap counterparty U.S. dollar interest at a fixed rate of 1.65% per annum and pay to our swap counterparty Euro interest at a fixed rate of -0.18% per annum. On September 11, 2019, SWM entered into an offsetting swap with a major financial institution whose terms perfectly mirrored the January 20, 2017 swap and which economically offset the previous cross-currency swap. At the maturity date of the new swap and the previous swap, January 20, 2020, there was no cash impact to the Company to settle these instruments as they perfectly offset each other.

On October 24, 2018, the Company entered into a ~~three year~~ cross-currency swap with a major financial institution designated as a hedge of a portion of the Company's net investment in certain Euro-denominated subsidiaries. The terms of the cross-currency swap provide for an exchange of principal on a notional amount of $75 million swapped to €65.4 million at maturity. The Company will receive from our swap counterparty U.S. dollar interest at a fixed rate of 6.875% per annum and pay to our swap counterparty Euro interest at a fixed rate of 3.6725% per annum. The cross-currency swap will mature on October 1, 2021.

On January 29, 2019, the Company entered into a cross-currency swap with a major financial institution designated as a hedge of a portion of the Company's net investment in certain Euro-denominated subsidiaries. The terms of the cross-currency swap provide for an exchange of principal on a notional amount of $75 million swapped to €66.0 million at maturity. The Company will receive from our swap counterparty U.S. dollar interest at a fixed rate of 6.875% per annum and pay to our swap counterparty Euro interest at a fixed rate of 4.0525% per annum. The cross-currency swap will mature on October 1, 2021.

On September 11, 2019, the Company entered into a new pay-EUR, receive-USD cross-currency swap arrangement with a major financial institution having a maturity date of April 1, 2023. The terms of the cross-currency swap provide for an exchange of principal on a notional amount of $100 million swapped to €90.9 million at maturity. Under the terms of the new cross-currency swap, SWM will pay a fixed amount of Euro-denominated interest at a rate of 5.638% semiannually and receive USD denominated payments at a rate of 6.875% semiannually on the notional amount of the swap.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~On January 26, 2021, in anticipation of our announcement of our offer to acquire Scapa Group (as defined in and

~~(Unaudited)~~

further described under Note 16. Subsequent Events, below), we entered into a currency forward contract with a major financial institution. The terms of the contract provide for an exchange of a notional amount of GBP 439 million for USD, calculated using the contract rate as applicable at the settlement date. An additional currency forward contract with a major financial institution provides for the exchange of a notional amount of GBP 9.6 million for USD, calculated using the contract rate on April 21, 2021. See Note 16. Subsequent Events for additional information on the settlement of these contracts.

The following table presents the fair value of asset and liability derivatives and the respective condensed consolidated balance sheet locations at March 31, ~~2020~~2021 ($ in millions):


	Asset Derivatives			Liability Derivatives				Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedges:							Derivatives designated as hedges:
Foreign exchange contracts	Accounts receivable, net	$	3.9	Accrued expenses and other current liabilities	$	4.5	Foreign exchange contracts	Accounts receivable, net	$	2.6	Accrued expenses and other current liabilities	$	4.9
Foreign exchange contracts	Other assets	11.0		Other liabilities	1.7		Foreign exchange contracts	Other assets	0		Other liabilities	7.3
Interest rate contracts	Accounts receivable, net	—		Other liabilities	8.3		Interest rate contracts	Accounts receivable, net	0		Other liabilities	3.6
Total derivatives designated as hedges		14.9			14.5		Total derivatives designated as hedges		2.6			15.8

Derivatives not designated as hedges:							Derivatives not designated as hedges:
Foreign exchange contracts	Accounts receivable, net	—		Accrued expenses and other current liabilities	0.2		Foreign exchange contracts	Accounts receivable, net	0		Accrued expenses and other current liabilities	5.7
Total derivatives not designated as hedges		—			0.2		Total derivatives not designated as hedges		0			5.7
Total derivatives		$	14.9		$	14.7	Total derivatives		$	2.6		$	21.5

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the fair value of asset and liability derivatives and the respective condensed consolidated balance sheet locations at December 31, ~~2019~~2020 ($ in millions):

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the gross effect that derivative instruments designated in hedging relationships had on Accumulated other comprehensive loss and results of operations ($ in millions):


Derivatives Designated in Hedging Relationships	Unrealized (Loss) Gain Recognized in AOCI on Derivatives, Net of Tax				Location of (Loss) Gain Reclassified from AOCI	(Loss) Gain Reclassified from AOCI

	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2021		2020					2021		2020
Derivatives designated as cash flow hedge
Foreign exchange contracts	$	(0.6)	$	(5.0)			Net sales	$	(0.6)	$	(0.6)
Foreign exchange contracts	0.9		0.5				Other income (expense), net	0.7		0.6
Interest rate contracts	4.1		(8.2)				Interest expense	0		0
Derivatives designated as net investment hedge
Foreign exchange contracts	7.0		12.0				Other income (expense), net	0		0
Total	$	11.4	$	(0.7)				$	0.1	$	0

Derivatives Designated in Hedging Relationships Unrealized Gain (Loss) Recognized in AOCI on Derivatives, Net of Tax
Location of Gain (Loss) Reclassified
from AOCI

Gain (Loss) Reclassified
from AOCI
Three Months Ended Three Months Ended
March 31, March 31,
2020 2019 2020 2019
Derivatives designated as cash flow hedge
Foreign exchange contracts $ (5.0 ) $ 0.1
Net sales $ (0.6 ) $ (0.2 )
Foreign exchange contracts 0.5
(0.3 ) Other income (expense), net 0.6
(0.4 )
Interest rate contracts (8.2 ) 0.6
Interest expense —
1.5
Derivatives designated as net investment hedge
Foreign exchange contracts 12.0
—
Other income (expense), net —
—
Total $ (0.7 ) $ 0.4
$ —
$ 0.9

The Company's designated derivative instruments are highly effective. As such, related to the hedge ineffectiveness or amounts excluded from hedge effectiveness testing, there were no gains or losses recognized immediately in income for the three and three months ended March 31, ~~2020~~2021 or ~~2019,~~2020, other than those related to the cross-currency swap, noted below.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The Company’s cross currency swaps were designated with terms based on the spot rate of the EUR. Future changes in the components related to the spot change on the notional will be recorded in OCI and remain there until the hedged subsidiaries are substantially liquidated. All coupon payments are recorded in earnings and the initial value of excluded components currently recorded in Accumulated other comprehensive loss as an unrealized translation adjustment are amortized to interest expense over the remaining term of the swap. For the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively, ~~$0.0~~$1.1 million and ~~$0.2 million was reclassified from Accumulated other comprehensive loss into income as interest expense and~~ $2.0 ~~million and $0.5~~ million was recognized in income as derivative amounts excluded from effectiveness testing as Interest expense.

The following table provides the effect that derivative instruments not designated as cash flow hedging instruments had on net income ($ in millions):

Derivatives Not Designated as Cash Flow Hedging Instruments

Location of Gain Recognized in Income

Amount of (Loss) Gain Recognized in Income

Three Months Ended

March 31, 2021

March 31, 2020

Foreign exchange contracts

Other income, net

(6.6)

0.2

Derivatives Not Designated as Cash Flow Hedging Instruments Location of Gain (Loss) Recognized in Income Amount of Gain (Loss) Recognized in Income
Three Months Ended
March 31, 2020 March 31, 2019
Foreign exchange contracts Other income (expense), net $ 0.2
$ (0.1 )

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 12.12. Commitments and Contingencies

Imposto sobre Circulação de Mercadorias e Serviços ("ICMS"), a form of value-added tax in Brazil, was assessed to SWM-B in December of 2000. SWM-B received 2 assessments from the tax authorities of the State of Rio de Janeiro (the "State") for unpaid ICMS taxes on certain raw materials from January 1995 through October 1998 and from November 1998 through November 2000 (collectively, the "Raw Materials Assessments"). The Raw Materials Assessments concerned the accrual and use by SWM-B of ICMS tax credits generated from the production and sale of certain non-tobacco related grades of paper sold domestically. SWM-B contested the Raw Materials Assessments based on Article 150, VI of the Brazilian Federal Constitution of 1988, which grants immunity from ICMS taxes to papers intended for printing books, newspapers and periodicals, on the ground that tax immunity extends to the raw material inputs used to produce such papers. In 2015, the first chamber of the Federal Supreme Court decided the first Raw Materials Assessment in favor of SWM-B. ~~On May 24, 2019, the second chamber~~Different chambers of the Federal Supreme Court decided one Raw Materials Assessment 2in favor of SWM-B and the other against SWM-B. SWM-B ~~in the amount~~recorded a liability of ~~approximately $9.4~~$8.6 million ~~based~~(based on the foreign currency exchange rate at March 31, 2020. SWM-B, with assistance of outside counsel, is currently evaluating the decision and exploring its options and other defenses to partially satisfy or reduce the judgment and SWM-B plans to pursue these avenues vigorously. However, because the outcome of any reductions and defenses is uncertain, SWM-B recorded an expense sufficient2021) in Other Liabilities to satisfy ~~this amount~~the adverse judgment in the second quarter of ~~2019. This judgment may be settled over~~2019 and continued to pursue appeals. On April 9, 2021, SWM-B resolved the ~~course~~remaining Raw Materials Assessment by paying $2.6 million (based on the foreign currency exchange rate at March 31, 2021) under a tax amnesty program which reduced the tax liability by approximately 70%. All litigation is now concluded and this matter is fully resolved. As the result of ~~60 months after all possible challenges are concluded.~~the favorable settlement, we recognized a total benefit of $6.1 million in the first quarter of 2021, of which $4.6 million was in Interest expense and ~~penalties will continue to accrue until the judgment is paid.~~

$1.6 million was in Other expense, net.

SWM-B received assessments from the tax authorities of the State for unpaid ICMS and Fundo Estadual de Combate à Pobreza ("FECP," a value-added tax similar to ICMS) taxes on interstate purchases of electricity. The State issued 4 sets of assessments against SWM-B, one for May 2006 - November 2007, a second for January 2008 - December 2010, a third for September 2011 - September 2013, which was replaced by a smaller assessment for January - June 2013, and a fourth for July 2013 - December 2017 (collectively the "Electricity Assessments"). SWM-B challenged all Electricity Assessments in administrative proceedings before the State tax council (in the first-level court Junta de Revisão Fiscal and the appellate court Conselho de Contribuintes) based on Resolution 1.610/89, which defers these taxes on electricity purchased by an "electricity-intensive consumer." In 2014, a majority of the Conselho de Contribuintes sitting en banc ruled against SWM-B in each of the first and second Electricity Assessments ($~~3.5~~3.3 million

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

and ~~$6.8~~$6.3 million, respectively, based on the foreign currency exchange rate at March 31, ~~2020)~~2021), and SWM-B is now pursuing challenges to these assessments in the State judicial system where SWM-B obtained preliminary injunctions against enforcement of both assessments. In March 2020, the first-level judicial court ruled in favor of SWM-B in the second Electricity Assessment, a decision that is now on appeal. The third Electricity Assessment was dismissed on technical grounds by the Conselho de Contribuintes in 2018 after the State admitted the tax did not apply as it had asserted. Instead, in August 2018, the State filed a revised third Electricity Assessment in the amount of $0.5 million for ICMS on electricity purchased during part of 2013, and a fourth Electricity Assessment in the amount of ~~$7.6~~$7.0 million pertaining to ICMS and FECP on electricity purchased from July 2013 to December 2017. SWM-B filed challenges to these 2018 assessments in the first-level administrative court on the same grounds as the older cases. The Junta de Revisão Fiscal rejected SWM-B’s challenge to the revised third Electricity Assessment, but the Conselho de Contribuintes agreed with SWM-B that the 2013 claim was time-barred. Both the Junta de Revisão Fiscal and the Conselho de Contribuintes ruled against SWM-B in the fourth Electricity Assessment. Both 2019 decisions from the Conselho de Contribuintes are ~~subject to further appeals~~being appealed to the full bench of the Conselho de Contribuintes. The State issued a new regulation effective January 1, 2018 that only specific industries are “electricity-intensive consumers,” a list that excludes paper manufacturers. SWM-B contends this regulation shows that paper manufacturers were electricity-intensive consumers eligible to defer ICMS before 2018. ~~In March 2020, the first-level judicial court ruled in favor of SWM-B in the second Electricity Assessment.~~

SWM-B cannot determine the outcome of the Electricity Assessments ~~matters, so~~matters; as such, 0 loss has been accrued in our condensed consolidated financial ~~statements for them.~~statements.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In January 2015, the Company initiated patent infringement proceedings in Germany against Glatz under multiple LIP-related patents. In December 2017, the Dusseldorf Appeal Court affirmed the German District Court judgment on infringement of EP1482815 against Glatz. The Company filed an action against Glatz in the German District Court to set the amount of damages for the infringement and Glatz has filed a counterclaim. Glatz has filed an action in the German Patent Court to invalidate the German part of EP1482815. The ~~trial~~German Patent Court held that some of the patent claims at issue were invalid and also that another claim at issue was valid.The Company has appealed the portion of the decision with respect to the claims held to be invalid. The hearing on this invalidity ~~action~~appeal has ~~not yet~~ been ~~scheduled.~~scheduled for September 2021. The cost, timing and outcome of intellectual property litigation can be unpredictable and thus no assurances can be given as to the outcome or impact on us of such litigation.

Environmental Matters

The Company's operations are subject to various nations' federal, state and local laws, regulations and ordinances relating to environmental matters. The nature of the Company's operations exposes it to the risk of claims with respect to various environmental matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. While the Company has incurred in the past several years, and will continue to incur, capital and operating expenditures in order to comply with environmental laws and regulations, it believes that its future cost of compliance with environmental laws, regulations and ordinances, and its exposure to liability for environmental claims and its obligation to participate in the remediation and monitoring of certain hazardous waste disposal sites, will not have a material effect on its financial condition or results of ~~operations or cash flows.~~operations. However, future events, such as changes in existing laws and regulations, ~~(including the enforcement thereof),~~ or unknown contamination or costs of remediation 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)~~, or similar circumstances arising at our unconsolidated joint ventures,~~ may give rise to additional costs which could have a material effect on ~~the Company's~~its financial condition or results of operations.

In the ordinary course of conducting business activities, the Company and its subsidiaries become involved in certain other judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured regulatory, employment, intellectual property, general and commercial liability, environmental and other matters. At this time, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial condition, results of operations or cash flows. However, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial condition, results of operations or cash flows.

~~SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 13.13. Postretirement and Other Benefits

The Company sponsors pension benefits in the United States, France and Canada and OPEB benefits related to postretirement healthcare and life insurance in the United States and Canada. The Company’s Canadian pension and OPEB benefits and U.S. OPEB liability are not material and therefore are not included in the following disclosures.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pension and OPEB Benefits

The components of net pension ~~and OPEB~~ benefit costs for U.S. ~~employees~~ and ~~net pension benefit costs for~~ French employees during the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows ($ in millions):


	Three Months Ended March 31,
	U.S. Pension Benefits				French Pension Benefits
	2021		2020		2021		2020
Service cost	$	0	$	0	$	0.3	$	0.3
Interest cost	0.7		0.9		0		0
Expected return on plan assets	(1.0)		(1.2)		0		0
Amortizations and other	0.9		0.8		0.3		0.3
Net periodic benefit cost	$	0.6	$	0.5	$	0.6	$	0.6

Three Months Ended March 31,
U.S. Pension Benefits French Pension Benefits U.S. OPEB Benefits
2020 2019 2020 2019 2020 2019
Service cost $ —
$ —
$ 0.3
$ 0.2
$ —
$ —
Interest cost 0.9
1.2
—
0.1
—
—
Expected return on plan assets (1.2 ) (1.5 ) —
—
—
—
Amortizations and other 0.8
0.5
0.3
0.2
—
—
Net periodic benefit cost $ 0.5
$ 0.2
$ 0.6
$ 0.5
$ —
$ —

The components of net periodic benefit cost other than the service cost component are included in Other (expense) income, ~~(expense),~~ net in the condensed consolidated statements of income. During the fiscal year ending December 31, ~~2020,~~2021, the Company expects to recognize approximately ~~$3.2~~$3.6 million of amortization in Accumulated other comprehensive loss related to its U.S. pension and OPEB plans and approximately ~~$0.9~~$1.0 million for its French pension plans.

Note 14. Income Taxes

For interim financial reporting, the Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision in accordance with ASC No. 740-270 "Accounting for Income Taxes in Interim Periods."These interim estimates are subject to variation due to several factors, including the ability of the Company to accurately forecast pre-tax and taxable income and loss by jurisdiction, changes in laws or regulations, and expenses or losses for which tax benefits are not recognized.Jurisdictions with a projected loss for the year or an actual year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.The impact of including these jurisdictions on the quarterly effective tax rate calculations could result in a higher or lower effective tax rate during a quarter, based upon the mix and timing of actual earnings versus annual projections.

As a result of the Tax Cuts and Jobs Act of 2017, the Company has significant previously taxed earnings and profits ~~(“PTEP”)~~ from its foreign subsidiaries ~~as a result~~that it is generally able to repatriate free of U.S. federal tax, due to transition tax and global intangible low taxed income (“GILTI”)~~, that is generally able to be repatriated free of U. S. federal tax.~~ treatment. Further, to the extent that any untaxed earnings and profits are distributed from foreign subsidiaries, such dividends should be eligible for a 100% dividends received deduction. Therefore, the Company does not ~~intend to~~ assert indefinite reinvestment on earnings generated after December 31, 2017. ~~Note, the~~ The Company ~~does provide~~provides for deferred non-U.S. withholding taxes and U.S. state taxes on hypothetical repatriation of earnings generated after December 31, 2017.

All unrecognized tax positions could impact the Company's effective tax rate if recognized. With respect to penalties and interest incurred from income tax assessments or related to unrecognized tax benefits, the Company’s policy is to classify penalties as provision for income taxes and interest as interest expense in its condensed consolidated statement of income. There were no0 material income tax penalties or interest accrued during the three months ended March 31, 2021 or 2020.

The Company's effective tax rate was 26.4% and 19.1% for the three months ended March 31, 2021 and 2020, ~~or 2019.~~respectively. The increase was materially due to unfavorable discrete items, mix of earnings by jurisdiction and a reduction in US tax credits due to foreign law changes.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company's effective tax rate from continuing operations was 19.1% and 20.0% for the three months ended March 31, 2020 and 2019, respectively. The decrease was materially due to favorable mix of earnings by jurisdiction, non-US legislative tax rate reductions and discrete items in the current year.

Note 15.15. Segment Information

The Company's 2 operating product line segments are also the Company's reportable segments: Advanced Materials & Structures and Engineered Papers. The AMS segment primarily produces engineered resin-based rolled goods such as nets, films and other non-wovens for use in high-performance applications in the filtration, ~~infrastructure and~~transportation, healthcare, construction, ~~transportation, medical~~ and industrial end-markets. It consists of the operations of various acquisitions. The EP segment primarily produces various cigarette papers and Recon for sale to cigarette manufacturers. The EP segment also includes non-tobacco paper for battery separators, printing and writing, drinking straw wrap and furniture laminates.

Information about Net Sales and Operating Profit

The accounting policies of these segments are the same as those described in Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The Company primarily evaluates segment performance and allocates resources based on operating profit. Expense amounts not associated with segments are referred to as unallocated expenses.


($ in millions)	Net Sales


	Three Months Ended
	March 31, 2021				March 31, 2020
AMS	$	163.0	56.6	%	$	122.9	47.0	%
EP	125.2		43.4		138.6		53.0
Total Consolidated	$	288.2	100.0	%	$	261.5	100.0	%


($ in millions)	Operating Profit


	Three Months Ended
	March 31, 2021				March 31, 2020
AMS	$	21.3	63.6	%	$	13.7	40.2	%
EP	29.9		89.2		33.4		97.9
Unallocated	(17.7)		(52.8)		(13.0)		(38.1)
Total Consolidated	$	33.5	100.0	%	$	34.1	100.0	%

($ in millions) Net Sales
Three Months Ended
March 31, 2020 March 31, 2019
Advanced Materials & Structures $ 122.9
47.0 % $ 120.5
46.7 %
Engineered Papers 138.6
53.0
137.5
53.3
Total Consolidated $ 261.5
100.0 % $ 258.0
100.0 %

($ in millions) Operating Profit
Three Months Ended
March 31, 2020 March 31, 2019
Advanced Materials & Structures $ 13.7
40.2 % $ 14.9
49.0 %
Engineered Papers 33.4
97.9
28.7
94.4
Unallocated (13.0 ) (38.1 ) (13.2 ) (43.4 )
Total Consolidated $ 34.1
100.0 % $ 30.4
100.0 %

($ in millions) Segment Assets
March 31,
2020 December 31,
2019
Advanced Materials & Structures $ 973.2
$ 781.2
Engineered Papers 475.5
512.4
Unallocated 206.5
178.1
Total Consolidated $ 1,655.2
$ 1,471.7

Note 16. Subsequent Events

On January 27, 2021, we issued an announcement pursuant to Rule 2.7 of the United Kingdom City Code on Takeovers and Mergers disclosing the terms of a recommended cash offer to acquire the entire issued and to be issued ordinary shares of Scapa Group plc, a company incorporated in England and Wales (“Scapa”), to be effected through a scheme of arrangement (the “Scheme”) under Part 26 of the United Kingdom Companies Act 2006, as amended (the “Acquisition”). Scapa is a UK-based innovation, design, and manufacturing solutions provider for healthcare and industrial markets and has operations across North America, Europe and Asia.

On April 15, 2021, the Scheme became effective in accordance with its terms following delivery to the Registrar of Companies in England and Wales of the orders of the High Court of Justice of England and Wales sanctioning the Scheme, and the Acquisition was completed. The offer price for the Acquisition was £2.15 (approximately $2.96 based on an exchange rate of $1:£1.3788 on April 15, 2021) in cash for each ordinary share of Scapa, valuing the entire ordinary share capital of Scapa at approximately £412.6 million on a fully-diluted basis (approximately $568.9 million). The Company settled the offer consideration with payment to Scapa shareholders under the Scheme on April 29, 2021.

As a result of the Acquisition, Scapa will become wholly-owned subsidiaries of the Company and part of the AMS segment.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company used the proceeds from the $350.0 million Term Loan B Facility, together with up to $325.0 million of the Company’s $500.0 million Revolving Credit Facility, to finance the cash consideration payable to Scapa shareholders under the Scheme and expenses payable in connection with the Acquisition.

On April 20, 2021 we settled currency forward contracts with notional amounts of £439 million and £9.6 million, reversing the unrealized loss recognized as of March 31, 2021.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition and results of operations. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and related notes and the selected financial data included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The discussion of our financial condition and results of operations includes various forward-looking statements about our markets, the demand for our products, our future prospects and other matters. These statements are based on certain assumptions and estimates that we consider reasonable. For information about risks and exposures relating to us and our business, you should read the section entitled "Risk Factors" in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and the sections entitled "Forward-Looking Statements" at the end of this Item ~~2 and "Risk Factors" in Part II, Item 1A of this report.~~2. Unless the context indicates otherwise, references to "SWM," "we," "us," "our," the "Company" or similar terms include Schweitzer-Mauduit International, Inc. and our consolidated subsidiaries.

This Management's Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of our financial statements with an understanding of our recent performance, our financial condition and our prospects.

COVID-19 ~~Overview~~Pandemic

~~As a result~~We continue to monitor the impact of ~~global economic and social disruption caused by~~ the novel coronavirus (“COVID-19”), the Company’s sales, manufacturing operations, profitability, and cash flow are expected be impacted for the current year. This is a highly uncertain period with events and circumstances changing frequently, and while senior management is meeting regularly to addressCOVID-19 pandemic on all aspects of our business. In general, many areas that were resilient to the ~~challenge,~~economic challenges and volatility in 2020 remain healthy, such as tobacco, healthcare, and filtration, while those areas that were most affected, such as transportation and construction, began improving during the ~~magnitude and duration of economic disruption is difficult to predict. This overview is intended to provide management’s view of COVID-19’s impact on the Company’s first~~fourth quarter of 2020 and ~~projected future impacts~~continued to assist investors in understanding these developments. These comments contain forward looking statements about operations, financial performance and liquidity, and are current as of May 6, 2020. Further details about the risks and impacts discussed in the section below can be found in the forward-looking statements and Part II, Item 1A. Risk Factors.

~~Health and Safety.~~ The company maintains a primary commitment to the health of our global teams. As such, the Company has reviewed and modified our standard operating procedures to reflect the increased needs from the COVID-19 pandemic. All non-essential travel and visitors to any site has been forbidden. We have reviewed all work responsibilities and those employees whose responsibilities could be completed from home have been instructed to work remotely. At operating sites, only essential production employees remain, and we have increased our health and safety protocols. These protocols include a stepped-up focus and employee education on hygiene and sterilization procedures, we have implemented increased social distancing requirements and staggered schedules where appropriate. We have also increased guidelines for all employees on how to safely handle potential infections, including temperature checks prior to entering the site and self-quarantine/return to work requirements.

~~End-markets and sales.~~ SWM serves a variety of end-markets around the world, each with unique demand dynamics. Management believes many of the Company’s end-markets will be relatively insulated from Coronavirus-related economic challenges; however the Company expects some end-markets to be negatively affected by decreased demand, particularly transportation. In addition, there could be volatility in quarterly sales results from potential inventory builds as customers may elect to build safety stocks to protect against potential supply chain disruptions.

~~Tobacco (EP)~~ - The Company’s largest single end-market is the tobacco industry, and at this time, management anticipates minimal impact to overall demand, outside of typically expected industry attrition, given the consumer staple nature of the industry.

~~Medical (AMS)~~ - The Company’s medical products are largely used in finger bandages, diagnostic test strips, and hospital-setting products, and management believes sales of these products are not sensitive to COVID-19-related economic weakness.

~~Filtration (AMS)~~ ~~- The Company serves water and other filtration markets, and management believes these products are generally less sensitive to economic volatility than typical industrial goods.~~

~~Transportation (AMS)~~ - The Company’s primary products are aftermarket automotive paint protection films. Management believes this product line can deliver steady long-term growth due to increasing global consumer adoption, although this category is likely to face near-term negative impacts as a result of significant auto industry disruption and near-term consumer purchasing behaviors, as a result of COVID-19.

~~Infrastructure & Construction (AMS)~~ - The Company’s key products service highway development, residential construction, oil & gas site services) and various other industrial projects which must move soil and require erosion and sediment control. Management believes these end-markets may be impacted in the short term by local self distancing regulations that may affect the construction industry, but these end markets could be positively supported by a potential increase in infrastructure spending if governments provide stimulus funding to reinvigorate economic activities .

~~Industrial (AMS & EP)~~ - The Company’s products service a broad range of applications, most of which are considered to be sensitive to economic activity and therefore would likely also be negatively impacted by a slowing economy as a result of COVID-19.

~~Manufacturing & Operations.~~ ~~Beyond the potential general demand impacts described above, the Company’s operations could be affected by external supply chain and customer-driven disruptions as~~perform well ~~as within the Company’s manufacturing footprint. During~~during the first quarter ~~and into the early weeks~~ of the second quarter, four of the Company's 24 sites temporarily shut down production in response to local government mandates and/or proactive safety measures to protect employees. In these cases, the Company continued to ship products from inventories on hand, and the financial impact of these disruptions is not expected to have a material impact on the Company’s full year results.2021. At present, all ~~but one~~ of ~~SWM’s manufacturing sites~~our facilities are ~~either fully operational or operating at a modified schedule.~~operational. Furthermore, there have been only isolated and temporary customer shutdowns, and the Company is maintaining active dialogue with all key customers and suppliers ~~in regard to~~regarding supply chain and production planning. ~~The Company’s primary raw materials remain readily available in the global marketplace and no significant procurement challenges have risen.~~ Many of the Company’s products in our AMS segment have been deemed “essential” (e.g., filtration and ~~medical)~~healthcare) by local governments and thus the production facilities are not expected to have further shutdowns unless local governments mandate temporary closure or there are additional health and safety concerns beyond the current circumstances.

~~Financial Results Impacts & Outlook.~~ ~~During~~Given the ~~first quarter,~~recent financial results, the ~~Company generally performed above internal expectations despite moderate COVID-19 related impacts, the most significant of which was the reduced sales of transportation films sold into China.~~Company’s operating cash flows and available liquidity are ample to support operations and financial obligations. The Company ~~expects near-term results~~also continues to ~~be impacted due~~actively assess the credit worthiness of its customers in the context of the potential business disruptions from COVID-19 but has not yet seen evidence of a material change to ~~softer demand in several regions as decreased customer ordering began in March 2020 when~~its ability to collect accounts receivable balances.

This is an uncertain period with events and circumstances changing frequently, and while senior management is meeting regularly to address all aspects of the ~~Coronavirus impact spread globally and cases dramatically increased. While the Company expects demand to recover later in 2020, it is challenging to predict~~pandemic, the magnitude and duration of economic disruption is difficult to predict and will depend on the ~~global~~scope, severity and duration of the pandemic. Further details about the risks and impacts discussed in the section below can be found in the forward-looking statements.

End-markets and sales. Management believes many of the Company’s end-markets have been and will remain relatively insulated from COVID-19-related economic ~~downturn~~challenges; however, some end-markets were temporarily negatively affected by decreased demand, particularly transportation, which has rebounded since the peak impacts in mid-2020. In addition, sales results may continue to demonstrate, some variability as customers manage inventories and safety stocks to protect against future potential supply chain disruptions.

Tobacco (EP) – The Company’s largest single end-market is the ~~speed~~tobacco industry, which has not been materially affected by the pandemic. The Company believes some customers have increased their inventory levels to minimize supply chain impacts of ~~subsequent recovery. As such~~potential future COVID-19 related disruptions.

Healthcare (AMS) – Management believes sales of these products, mostly consumables, are not sensitive to COVID-19-related economic weakness.

Filtration (AMS)– The Company believes these products are generally less sensitive to economic volatility than typical industrial goods. Within the ~~Company has elected~~portfolio, air filtration products have seen accelerated demand due to ~~withdraw its 2020 financial guidance (please refer~~heightened focus on air quality and attempts to minimize the spread of COVID-19.

Transportation (AMS)– The Company’s primary products are aftermarket automotive paint protection films, which faced pronounced temporary near-term negative impacts, beginning late in the first quarter of 2020 ~~earnings press release / Form 8-K for additional commentary), though it still expects~~through most of the third quarter of 2020, as a result of significant auto industry disruption and consumer purchasing behaviors as a result of COVID-19. However, since late in the third quarter of 2020, the Company’s transportation sales have improved significantly.

Construction (AMS)– Management believes these end-markets have been impacted by local self-distancing regulations that may affect the construction industry, but these end markets have exhibited recent improvements and could be further positively supported by a potential increase in government-sponsored infrastructure spending.

Industrial (AMS & EP)– The Company’s products service a broad range of applications, some of which are considered to be ~~profitable~~sensitive to economic activity and ~~for operating cash flow to exceed capital spending requirements in 2020.~~associated impacts of COVID-19, while other applications have been relatively unaffected.

In response to the COVID-19 outbreak, the Company has, and continues to, conduct extensive sensitivity analyses on the potential 2020 financial impacts, particularly on cash flow and liquidity. These sensitivity tests include a range of outcomes from demand-only disruption, to multi-week shutdowns across our manufacturing footprint with all sales, production, and shipping halted. At present, the Company believes it has sufficient liquidity to fund the Company’s operations and financial obligations under likely scenarios despite the expected challenges of the near-term economic environment. These obligations include approximately $55 million of expected annual cash dividend payments to stockholders in 2020. While management believes a meaningful escalation of manufacturing disruptions is unlikely, the Company’s cash on hand, credit facility availability, and ability to manage expenses and capital expenditures, should provide sufficient liquidity to support the Company’s operations during a more pronounced short-term economic downturn.

Liquidity & Debt Overview. The Company currently has ~~$754.7~~$617.9 million of total debt, ~~$126.7~~$63.7 million of cash, and undrawn capacity on its $500.0 million revolving line of credit facility (the "Revolving Credit Facility") of ~~$283.6~~$420.2 million at the end of the first ~~quarter. Capacity on the revolving credit facility reflects the $212.0 million draw on the facility during the first~~ quarter of ~~2020.~~2021. Per the terms of the Company's $700.0 million credit ~~facility,~~agreement (the "Credit Agreement"), net leverage was ~~2.7x~~2.37x at the end of the first quarter, versus a maximum covenant ratio of 4.5x, though covenants contain an acquisition-related provision, allowing net leverage to reach 5.0x throughout ~~2020.~~2021. The

Company’s nearest debt maturity is the ~~revolving credit facility~~Revolving Credit Facility which is due in 2023. Please refer to liquidity and capital resources section for additional detail.


($ in millions, except per share amounts)	Three Months Ended
	March 31,				Percent of Net Sales
	2021		2020		2021		2020
Net sales	$	288.2	$	261.5	100.0	%	100.0	%
Gross profit	80.8		74.3		28.0		28.4
Restructuring & impairment expense	1.7		0.1		0.6		—
Operating profit	33.5		34.1		11.6		13.0
Interest expense	2.9		6.9		1.0		2.6


Net income	$	21.6	$	22.5	7.5	%	8.6	%

Diluted earnings per share	$	0.68	$	0.72
Cash provided by operations	$	12.7	$	5.1
Capital spending	$	(7.1)	$	(7.4)

($ in millions, except per share amounts) Three Months Ended
March 31, Percent of Net Sales
2020 2019 2020 2019
Net sales $ 261.5
$ 258.0
100.0 % 100.0 %
Gross profit 74.3
67.9
28.4
26.3
Restructuring & impairment expense 0.1
—
—
—
Operating profit 34.1
30.4
13.0
11.8
Interest expense 6.9
7.8
2.6
3.0
Income from continuing operations 22.5
17.4
8.6
6.7
Net income $ 22.5
$ 17.4
8.6 % 6.7 %
Diluted earnings per share from continuing operations $ 0.72
$ 0.56

Diluted earnings per share $ 0.72
$ 0.56

Cash provided by operations $ 5.1
$ 13.0

Capital spending $ 7.4
$ 7.3

RESULTS OF OPERATIONS

Three Months Ended March 31, ~~2020~~2021 Compared with the Three Months Ended March 31, ~~2019~~2020

Net Sales

($ in millions)


	Three Months Ended
	March 31, 2021		March 31, 2020		Change		Percent Change
Advanced Materials & Structures	$	163.0	$	122.9	$	40.1	32.6	%
Engineered Papers	125.2		138.6		(13.4)		(9.7)
Total	$	288.2	$	261.5	$	26.7	10.2	%

Three Months Ended
March 31, 2020 March 31, 2019 Change Percent Change
Advanced Materials & Structures $ 122.9
$ 120.5
$ 2.4
2.0 %
Engineered Papers 138.6
137.5
1.1
0.8
Total $ 261.5
$ 258.0
$ 3.5
1.4 %

Net sales were ~~$261.5~~$288.2 million in the three months ended March 31, ~~2020~~2021 compared with ~~$258.0~~$261.5 million in the prior-year period. The increase in net sales consisted of the following ($ in millions):

Amount Percent
Changes in volume, product mix and selling prices $ 7.5
2.9 %
Changes due to net foreign currency impacts (3.4 ) (1.3 )
Changes due to royalties (0.6 ) (0.2 )
Total $ 3.5
1.4 %


	Amount		Percent

Changes in volume, product mix and selling prices	$	19.1	7.3	%
Changes due to net foreign currency impacts	7.3		2.8
Changes due to royalties	0.3		0.1
Total	$	26.7	10.2	%

AMS segment net sales were~~$122.9~~ $163.0 million for the three months ended March 31, ~~2020~~2021 compared to ~~$120.5~~$122.9 million during the prior-year period. The increase of ~~$2.4~~$40.1 million or ~~2.0%~~32.6% included the ~~acquisition~~ benefit from the Tekra acquisition (closed March 13, 2020). Excluding the acquisition benefit from Tekra, sales decreased 2.6% primarily due to decline in sales of the Company's transportation films, which were significantly impacted by the global disruption of the auto industry, particularly in China, by the COVID-19 pandemic. The decline, and reflected rapid growth in transportation and filtration sales. Tekra net sales ~~offset gains~~were $23.6 million and $5.5 million for the three months ended March 31, 2021 and 2020, respectively. Transportation sales continued to rebound sharply from negative COVID-19 impacts that began in ~~each~~the first quarter of ~~AMS’s~~2020. Sales into filtration end-markets were up also double digits, driven by strong growth in air filtration, while all other ~~end-markets.~~filtration sub-segments increased as well. Healthcare increased, driven by continued robust volumes of woundcare, facemask, and packaging materials. Construction sales increased, led by double-digit growth in key infrastructure and construction applications. Industrial sales declined during the quarter.

EP segment net sales during the three months ended March 31, ~~2020~~2021 of ~~$138.6~~$125.2 million ~~increased~~decreased by ~~$1.1~~$13.4 million, or ~~0.8%~~9.7%, versus net sales of ~~$137.5~~$138.6 million in the prior-year quarter. ~~Compared to the prior-year period, the increase~~The decrease in net sales was primarily the result of a ~~favorable~~ 6% volume decrease, and unfavorable price/mix of ~~products sold and average selling prices,~~8%, partially offset by ~~lower sales~~a 4% currency benefit. Decrease in volume reflected the continued strategic de-emphasis of non-tobacco products, as well as the decrease in high-value LIP tobacco papers as a result of the transitioning of supplies to a large customer from the Spotswood, NJ facility to other sites while the customer worked through legacy inventories. The decline in LIP papers also negatively impacted mix. These negative factors were partially offset by growth in Heat-not-Burn and ~~unfavorable foreign currency movements.~~certain other specialty tobacco paper products.

Gross Profit

($ in millions)


	Three Months Ended							Percent Change			Percent of Net Sales							Three Months Ended											Percent Change					Percent of Net Sales
	March 31, 2020		March 31, 2019		Change					2020			2019				March 31, 2021				March 31, 2020				Change							2021					2020
Net sales	$	261.5	$	258.0	$	3.5			1.4	%		100.0	%		100.0	%	Net sales		$	288.2			$	261.5			$	26.7			10.2		%			100.0		%			100.0	%
Cost of products sold	187.2		190.1		(2.9		)	(1.5	)		71.6			73.7		Cost of products sold		207.4				187.2				20.2				10.8					72.0					71.6
Gross profit	$	74.3	$	67.9	$	6.4		9.4	%		28.4	%		26.3	%	Gross profit		$	80.8			$	74.3			$	6.5		8.7		%			28.0		%			28.4		%

Gross profit increased by ~~$6.4~~$6.5 million during the three months ended March 31, ~~2020~~2021 to ~~$74.3~~$80.8 million versus the prior-year period of ~~$67.9~~$74.3 million.

AMS gross profit increased by ~~$0.4~~$9.2 million, primarily due to strong organic sales growth and the ~~addition~~incremental benefit of the acquired Tekra business, ~~and lower resin~~partially offset by higher input costs, ~~offset by the decline in transportation film sales.~~ primarily of polypropylene resin.

In the EP segment, gross profit ~~increased~~decreased by ~~$6.0~~$2.7 million, primarily due to ~~positive~~lower sales and unfavorable price/mix ~~movements within the portfolio, lower~~impacts, and higher wood pulp input costs, partially offset by manufacturing cost improvements and $1.9 million of favorable foreign currency ~~movements from lower local currency operating costs in Brazil.~~exchange.

Nonmanufacturing Expenses

Nonmanufacturing expenses in the three months ended March 31, ~~2020~~2021 increased by ~~$2.6~~$5.5 million to ~~$40.1~~$45.6 million from ~~$37.5~~$40.1 million in the prior-year period, primarily due to $3.6 million of transaction ~~expenses~~costs associated with the ~~Tekra acquisition.~~Scapa acquisition and higher deferred compensation expenses and third party consulting expenses.

Restructuring and Impairment Expense

The Company incurred total restructuring and impairment expense of ~~$0.1~~$1.7 million and ~~$0.0~~$0.1 million in the three months ended March 31, 2021 and 2020, respectively. In the 2021 period, restructuring expense in the EP segment included $1.4 million related to the 2020 decision to shut down the Spotswood, New Jersey facility and ~~2019, respectively.~~included costs associated with closing the facility, maintaining the property and preparing it for sale.

In the 2021 period the EP segment also recognized $0.3 million of restructuring expenses related to severance accruals for employees at other manufacturing facilities.

In the comparable 2020 period, restructuring expense primarily related to ongoing cost optimization initiatives to remain competitive within the EP segment.


	Three Months Ended						Percent Change		Return on Net Sales
	March 31, 2021		March 31, 2020		Change				2021		2020
Advanced Materials & Structures	$	21.3	$	13.7	$	7.6	55.5	%	13.1	%	11.1	%
Engineered Papers	29.9		33.4		(3.5)		(10.5)		23.9		24.1
Unallocated expenses	(17.7)		(13.0)		(4.7)		(36.2)
Total	$	33.5	$	34.1	$	(0.6)	(1.8)	%	11.6	%	13.0	%

Three Months Ended Percent Change Return on Net Sales
March 31, 2020 March 31, 2019 Change 2020 2019
Advanced Materials & Structures $ 13.7
$ 14.9
$ (1.2 ) (8.1 )% 11.1 % 12.4 %
Engineered Papers 33.4
28.7
4.7
16.4
24.1
20.9
Unallocated expenses (13.0 ) (13.2 ) 0.2
1.5

Total $ 34.1
$ 30.4
$ 3.7
12.2 % 13.0 % 11.8 %

Operating profit was ~~$34.1~~$33.5 million in the three months ended March 31, ~~2020~~2021 compared with ~~$30.4~~$34.1 million during the prior-year period.

The AMS segment's operating profit in the three months ended March 31, ~~2020~~2021 was ~~$13.7~~$21.3 million compared to ~~$14.9~~$13.7 million in the prior-year period. The ~~decrease~~increase of ~~$1.2~~$7.6 million, or ~~8.1%~~55.5%, ~~was primarily due to~~reflected strong organic sales growth and the ~~decline in transportation film sales, which was~~incremental benefit of the acquired Tekra business partially offset by ~~lower~~higher raw material costs.

The EP segment's operating profit in the three months ended March 31, ~~2020~~2021 was ~~$33.4~~$29.9 million, ~~an increase~~a decrease of ~~$4.7~~$3.5 million, or ~~16.4%~~10.5%, from ~~$28.7~~$33.4 million in the prior-year period. The ~~increase~~decrease was primarily ~~due to the combination~~driven by lower gross profit and higher restructuring expenses as discussed above and an unfavorable $0.5 million of ~~positive pricing and mix of products sold, ongoing~~currency movements impact, partially offset by decreased SG&A expenses from cost reduction activities, lower input costs and favorable local currency operating costs, which combined to more than offset certain inefficiencies from temporary plant shutdowns related to COVID-19 safety measures.

control initiatives.

Unallocated expenses in the three months ended March 31, ~~2020~~2021 were ~~$13.0~~$17.7 million compared to ~~$13.2~~$13.0 million in the prior-year period, ~~a decrease~~an increase of ~~$0.2~~$4.7 million, or ~~1.5%~~36.2%. The ~~decrease~~increase was ~~driven by lower~~primarily due to $3.6 million of transaction costs related to the Scapa acquisition and higher deferred compensation ~~expenses, related to stock market volatility, partially offset by transaction expenses associated with the Tekra acquisition.~~expenses.

Non-Operating Expenses

Interest expense was ~~$6.9~~$2.9 million in the three months ended March 31, ~~2020,~~2021, a decrease from ~~$7.8~~$6.9 million in the prior-year period. The ~~Company benefited from lower average interest rates and debt balances,~~decrease was primarily due to a benefit of $4.5 million prior year expense reversal related to the ~~closing~~favorable settlement of Brazil tax assessments as discussed in Note 12. Commitments and Contingencies of the ~~Tekra acquisition, when compared~~notes to the ~~prior year period. The weighted average effective interest rate~~unaudited condensed consolidated financial statements. Interest expense on ~~our~~ debt ~~facilities was approximately 3.84% and 4.42% for the three months ended March 31, 2020 and 2019, respectively.~~increased $0.5 million.

Other ~~income,~~expense, net, was ~~$0.6~~$2.6 million during the three months ended March 31, ~~2020~~2021 compared to Other ~~expense, net,~~income of $0.6 million in the prior year quarter, due primarily to $5.6 million mark-to-market loss of forward currency contracts on the British pound associated with the Scapa acquisition to hedge currency risk of the purchase price during the ~~three months ended March 31, 2019.~~period between the transaction agreement and closing. This expense was partially offset by other components of the favorable Brazil tax assessment settlement.

A ~~$5.3~~$7.4 million provision for income taxes in the three months ended March 31, ~~2020~~2021 resulted in an effective tax rate of ~~19.1%~~26.4% compares with ~~20.0%~~19.1% in the prior-year quarter. The ~~decrease~~increase was ~~primarily~~ due to ~~favorable~~unfavorable discrete items, mix of earnings by jurisdiction ~~non-US legislative~~and a reduction in US tax ~~rate reductions and discrete items in the current year.~~credits due to foreign law changes.

Income ~~(Loss)~~ from Equity Affiliates

Income from equity affiliates, which reflects the results of operations of CTM and CTS, was ~~$0.0~~$1.0 million in the three months ended March 31, ~~2020~~2021 compared with ~~loss~~income of ~~$0.2~~$0.0 million during the prior-year ~~period.~~period, and reflects the results of operations of CTM and CTS.

Net Income and Income per Share

Net income in the three months ended March 31, ~~2020~~2021 was $21.6 million, or $0.68 per diluted share, compared with $22.5 million, or $0.72 per diluted share, ~~compared with $17.4 million, or $0.56 per diluted share,~~ during the prior-year period. ~~The increase in net income was primarily due to operating profit growth in the EP segment.~~

LIQUIDITY AND CAPITAL RESOURCES

A major factor in our liquidity and capital resource planning is our generation of cash flow from operations, which is sensitive to changes in the mix of products sold, sales volume and selling prices of our products, as well as changes in our production volumes, costs, foreign currency exchange rates and working capital. Our liquidity is supplemented by funds available under our ~~New~~ Credit Agreement with a syndicate of banks that is used as either operating conditions or strategic opportunities warrant.

As of March 31, ~~2020, $49.4~~2021, $44.1 million of the Company's ~~$126.7~~$63.7 million of cash and cash equivalents was held by foreign subsidiaries. We believe that our sources of liquidity and capital, including cash on-hand, cash generated from operations and our existing credit facilities, will be sufficient to finance our continued ~~operations and~~operations. We believe the proceeds from our Term Loan B Facility (as defined below) along with our existing credit facilities will be sufficient to fund our current growth ~~strategy.~~plan.

Cash Provided by Operations

Net cash provided by operations was ~~$5.1~~$12.7 million in the three months ended March 31, ~~2020~~2021 compared with ~~$13.0~~$5.1 million in the prior-year period. The ~~decrease~~increase was primarily related to ~~unfavorable~~favorable year-over-year movements in working capital related cash flows.

As of March 31, ~~2020,~~2021, the Company had net ~~operating~~ working capital of ~~$206.5~~$273.1 million, ~~and~~including cash and cash equivalents of ~~$126.7~~$63.7 million, compared with net ~~operating~~ working capital of ~~$168.8~~$232.3 million, ~~and~~including cash and cash equivalents of ~~$103.0~~$54.7 million as of December 31, ~~2019.~~2020. These changes primarily reflect the ~~Tekra acquisition~~timing of payments and ~~an increase in accounts receivable.~~collections.

In the three months ended March 31, ~~2020,~~2021, net changes in operating working capital used cash of $30.5 million, down from $33.7 million ~~compared to~~in the prior-year period, in which net changes in operating working capital used cash of $22.0 million. The most significant working capital related cash flow items were accounts receivable (use) and inventories (source). The higher receivables-related outflows were due to a larger sequential sales increase from fourth quarter 2019 to first quarter 2020 versus the comparable prior year periods. The Company is actively assessing the credit worthiness of its customers in the context of the potential business disruptions from COVID-19 but has not yet seen evidence of a material change to its ability to collect accounts receivable balances. The positive change in cash flows from inventories were driven by the Company’s continued shipment of inventories on hand during temporary production halts related to COVID-19.period.

Cash Used for Investing

Cash Provided by ~~(Used in)~~ Financing Activities

During the three months ended March 31, ~~2020,~~2021, financing activities consisted of $25.0 million proceeds from borrowings under the revolving credit facility, $13.8 million in cash paid for dividends declared to SWM stockholders, share repurchases of $3.1 million, $3.0 million payment for debt issuance costs associated with the amendment of our Credit Agreement as discussed in Note 10. Debt and Note16. Subsequent Events, of the notes to the unaudited condensed consolidated financial statements, and $0.6 million payments on long-term debt.

In the prior-year period, financing activities consisted of $212.0 million net proceeds from borrowings under the ~~revolving credit facility,~~Revolving Credit Facility primarily to fund the Tekra acquisition, $13.7 million in cash paid for dividends declared to SWM stockholders, ~~and~~ share repurchases of $1.0 ~~million. In the prior-year period, financing activities consisted of $13.6~~ million, ~~in cash paid for dividends declared to SWM stockholders in the first three months of 2019, $0.8~~and $0.4 million ~~in net repayments~~payments on ~~short-term and~~ long-term ~~debt and share repurchases of $0.9 million.~~debt.

The Company presently believes that the sources of liquidity discussed above are sufficient to meet its anticipated funding needs for the foreseeable future.

We have declared and paid cash dividends on our common stock every fiscal quarter since the second quarter of 1996. On May ~~6, 2020,~~5, 2021, we announced a cash dividend of $0.44 per share payable on June ~~19, 2020~~18, 2021 to stockholders of record as of May ~~22, 2020.~~21, 2021. The covenants contained in our Indenture and ~~New~~ Credit Agreement ~~(as defined below)~~ require that we maintain certain financial ratios as disclosed in Note 10. Debt of the notes to the unaudited condensed consolidated financial statements, none of which under normal business conditions we would expect to materially limit our ability to pay such dividends. We plan to continue to assess our dividend policy in light of our capital allocation strategy, cash generation, debt levels and ongoing requirements for cash to fund operations and to pursue possible strategic opportunities.

~~Share Repurchases~~

In the three months ended March 31, 2020, we repurchased and retired 25,274 shares of our common stock at a cost of $1.0 million for the value of employees' stock-based compensation share awards surrendered to satisfy their personal statutory income tax withholding obligations. See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In the three months ended March 31, 2019, we repurchased and retired 24,372 shares of our common stock for $0.9 million for the value of employees' stock-based compensation share awards surrendered to satisfy their personal statutory income tax withholding obligations.

Debt Instruments and Related Covenants

Net proceeds from borrowings were ~~$211.6~~$24.4 million during the three months ended March 31, ~~2020.~~ 2021.

On February 10, 2021 we amended our Credit Agreement to, among other things, add a new seven year Term Loan B facility, which provides for additional capacity of $350 million (the "Term Loan B Facility"). See Note 10. Debt and Note 16. Subsequent Events, of the notes to unaudited condensed consolidated financial statements for additional information about the Term Loan B Facility. Other than potential borrowings under the Term Loan B Facility, the Company does not expect to incur any significant additional borrowings during 2021.



Delaware		62-1612879
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 North Point Center East,	Suite 600
Alpharetta,	Georgia	30022
(Address of principal executive offices)		(Zip Code)



Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.10 par value	SWM	New York Stock Exchange



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
			For the transition period from __________________to __________________


																	Common Stock Issued
	Common Stock Issued																Shares	Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance, December 31, 2019																Balance, December 31, 2019	30,896,661	$	3.1	$	78.8	$	638.4	$	(122.6)	$	597.7
	Shares		Amount		Additional Paid-In Capital		Retained Earnings			Accumulated 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	—		—		—		17.4			—			17.4
Other comprehensive income, net of tax	—		—		—		—			0.7			0.7
Dividends declared ($0.44 per share)	—		—		—		(13.6		)	—			(13.6		)
Restricted stock issuances, net	141,021		—		—		—			—			—
Stock-based employee compensation expense	—		—		0.9		—			—			0.9
Stock issued to directors as compensation	1,696		—		—		—			—			—
Purchases and retirement of common stock	(24,372	)	—		—		(0.9		)	—			(0.9		)
Balance, March 31, 2019	30,889,589		$	3.1	$	72.0	$	610.8		$	(123.8	)	$	562.1

Balance, December 31, 2019	30,896,661		$	3.1	$	78.8	$	638.4		$	(122.6	)	$	597.7
Net income			—		—		22.5			—			22.5			Net income	—	—		—		22.5		—		22.5
Other comprehensive loss, net of tax			—		—		—			(15.7		)	(15.7		)	Other comprehensive loss, net of tax	—	—		—		—		(15.7)		(15.7)
Dividends declared ($0.44 per share)			—		—		(13.7		)	—			(13.7		)	Dividends declared ($0.44 per share)	—	—		—		(13.7)		—		(13.7)
Restricted stock issuances, net	320,005		—		—		—			—			—			Restricted stock issuances, net	320,005	—		—		—		—		—
Stock-based employee compensation expense			—		2.1		—			—			2.1			Stock-based employee compensation expense	—	—		2.1		—		—		2.1

Stock issued to directors as compensation	1,130		—		0.1		—			—			0.1			Stock issued to directors as compensation	1,130	—		0.1		—		—		0.1
Purchases and retirement of common stock	(25,274	)	—		—		(1.0		)	—			(1.0		)	Purchases and retirement of common stock	(25,274)	—		—		(1.0)		—		(1.0)
Balance, March 31, 2020	31,192,522		$	3.1	$	81.0	$	646.2		$	(138.3	)	$	592.0		Balance, March 31, 2020	31,192,522	$	3.1	$	81.0	$	646.2	$	(138.3)	$	592.0

Balance, December 31, 2020																Balance, December 31, 2020	31,324,745	$	3.1	$	92.2	$	666.2	$	(111.9)	$	649.6

Net income																Net income	—	—		—		21.6		—		21.6
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax	—	—		—		—		(3.8)		(3.8)
Dividends declared ($0.44 per share)																Dividends declared ($0.44 per share)	—	—		—		(13.8)		—		(13.8)
Restricted stock issuances, net																Restricted stock issuances, net	148,530	—		—		—		—		—
Stock-based employee compensation expense																Stock-based employee compensation expense	—	—		2.1		—		—		2.1

Stock issued to directors as compensation																Stock issued to directors as compensation	590	—		0.3		—		—		0.3
Purchases and retirement of common stock																Purchases and retirement of common stock	(66,729)	—		—		(3.1)		—		(3.1)
Balance, March 31, 2021																Balance, March 31, 2021	31,407,136	$	3.1	$	94.6	$	670.9	$	(115.7)	$	652.9



	March 31, 2020			December 31, 2019
Accumulated pension and OPEB liability adjustments, net of income tax benefit of $12.6 million and $12.8 million at March 31, 2020 and December 31, 2019, respectively	$	(23.8	)	$	(24.3	)
Accumulated unrealized loss on derivative instruments, net of income tax benefit of $4.4 million and $1.6 million at March 31, 2020 and December 31, 2019, respectively	(16.2		)	(3.5		)
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $5.7 million and $5.0 million at March 31, 2020 and December 31, 2019, respectively	(98.3		)	(94.8		)
Accumulated other comprehensive loss	$	(138.3	)	$	(122.6	)



	AMS			EP			Total
Goodwill as of December 31, 2019	$	332.5		$	4.9		$	337.4
Goodwill acquired during the period	60.4			—			60.4
Foreign currency translation adjustments	(1.2		)	(0.1		)	(1.3		)
Goodwill as of March 31, 2020	$	391.7		$	4.8		$	396.5



	Three Months Ended			Year Ended
	March 31, 2020			December 31, 2019
Balance at beginning of year	$	0.5		$	1.4
Accruals for announced programs	0.1			3.7
Cash payments	(0.3		)	(4.2		)
Other	—			(0.4		)
Balance at end of period	$	0.3		$	0.5



Derivatives Designated in Hedging Relationships	Unrealized Gain (Loss) Recognized in AOCI on Derivatives, Net of Tax						Location of Gain (Loss) Reclassified from AOCI	Gain (Loss) Reclassified from AOCI
	Three Months Ended							Three Months Ended
	March 31,							March 31,
	2020			2019				2020			2019
Derivatives designated as cash flow hedge
Foreign exchange contracts	$	(5.0	)	$	0.1		Net sales	$	(0.6	)	$	(0.2	)
Foreign exchange contracts	0.5			(0.3		)	Other income (expense), net	0.6			(0.4		)
Interest rate contracts	(8.2		)	0.6			Interest expense	—			1.5
Derivatives designated as net investment hedge
Foreign exchange contracts	12.0			—			Other income (expense), net	—			—
Total	$	(0.7	)	$	0.4			$	—		$	0.9



Derivatives Not Designated as Cash Flow Hedging Instruments	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income
		Three Months Ended
		March 31, 2020		March 31, 2019
Foreign exchange contracts	Other income (expense), net	$	0.2	$	(0.1	)



($ in millions)	Segment Assets
	March 31, 2020		December 31, 2019
Advanced Materials & Structures	$	973.2	$	781.2
Engineered Papers	475.5		512.4
Unallocated	206.5		178.1
Total Consolidated	$	1,655.2	$	1,471.7


Debt Instruments ($ in millions)	Three Months Ended						Debt Instruments ($ in millions)	Three Months Ended
	March 31, 2020			March 31, 2019				March 31, 2021		March 31, 2020
Changes in short-term debt	$	—		$	(0.2	)

Proceeds from issuances of long-term debt	212.0			—			Proceeds from issuances of long-term debt	$	25.0	$	212.0
Payments on long-term debt	(0.4		)	(0.6		)	Payments on long-term debt	(0.6)		(0.4)
Net proceeds from (repayments on) borrowings	$	211.6		$	(0.8	)
Net proceeds from borrowings							Net proceeds from borrowings	$	24.4	$	211.6


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs
				(# shares)	($ in millions)	($ in millions)
January 1 - 31, 2021	619	$	41.84
February 1 - 28, 2021	66,110	45.87		—	—	—
March 1-31, 2021	—	—
Total Year-to-Date 2021	66,729	$	45.83	—	—	—



Exhibit Number						Exhibit
~~3.1~~2.1						Rule 2.7 Announcement, dated January 27, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed January 27, 2021).
2.2						Announcement for the Revised Offer, dated March 8, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed March 8, 2021).
2.3						Co-operation Agreement, dated January 27, 2021, between AMS Holdco 2 Limited and Scapa Group plc. (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed January 27, 2021).
3.1						Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 10-Q for the quarter ended September 30, 2009).
3.2						Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on February 22, 2019).
~~31.1~~10.1						First Amendment, dated as of February 9, 2021, to the Credit Agreement, dated September 25, 2018, by and among Schweitzer-Mauduit International, Inc., SWM Luxembourg, the other loan parties party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 10, 2021).
10.2						Form of Director Deed of Irrevocable Undertaking (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 27, 2021).
10.3						Backstop Credit Agreement, dated as of January 27, 2021, among Schweitzer-Mauduit International, Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as bookrunner and lead arranger (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on January 27, 2021)
31.1						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
31.2						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
32						Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020,~~2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the condensed consolidated statements of income, (ii) the condensed consolidated statements of comprehensive income (loss), (iii) the condensed consolidated balance sheets, (iv) the condensed consolidated statements of changes in stockholders' equity, (v) the condensed consolidated statements of cash flow, and (vi) notes to condensed consolidated financial statements.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit101).


•	~~"Total debt to capital ratio"~~ ~~is total debt divided by the sum of total debt and total stockholders' equity.~~


•	~~"Net operating working capital"~~ ~~is accounts receivable, inventory, income taxes receivable assets held for sale and prepaid expense, less accounts payable, accrued expenses and other current liabilities and income taxes payable.~~


•	~~"Polyurethane"~~ ~~is a polymer composed of organic units joined by carbamate (urethane) links.~~


•	~~"Reconstituted tobacco"~~ is produced in two forms: leaf, or reconstituted tobacco leaf, and wrapper and binder products. Reconstituted tobacco leaf is blended with virgin tobacco as a design aid to achieve certain attributes of finished cigarettes. Wrapper and binder are reconstituted tobacco products used by manufacturers of cigars.


•	~~"Reverse osmosis"~~ ~~is a water purification technology that uses a semipermeable membrane to remove larger particles from drinking water.~~


•	~~"Thermoplastics"~~ ~~are a plastic material, polymer, that becomes pliable or moldable above a specific temperature and solidifies upon cooling.~~