Mativ Holdings, Inc. (formerly Schweitzer-Mauduit International, Inc.) — 2021 Form 10-K
Business context and reporting period. The filing covers the fiscal year ended December 31, 2021. The company operated two segments: Advanced Materials & Structures (AMS), serving healthcare, construction, industrial, transportation and filtration markets; and Engineered Papers (EP), primarily serving tobacco customers. Scapa was acquired on April 15, 2021, and its results are included from that date. This is an annual report, not a standalone fourth-quarter filing.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Net sales | $1,440.0 million | $1,074.4 million |
| Gross profit / margin | $330.3 million / 22.9% | $308.3 million / 28.7% |
| Operating profit / margin | $83.3 million / 5.8% | $128.8 million / 12.0% |
| Net income | $88.9 million | $83.8 million |
| Diluted EPS | $2.80 | $2.66 |
| Cash from operations | $58.1 million | $161.6 million |
| Cash and total debt at year-end | $74.7 million / $1,270.3 million | $54.7 million / $593.3 million |
- Sales rose 34.0%, primarily reflecting $305.6 million of Scapa sales, Tekra’s inclusion for a full year, organic AMS growth and currency impacts. AMS sales increased 71.2% to $930.7 million; EP sales declined 4.1% to $509.3 million.
- Operating profit fell 35.3% despite higher sales. Gross margin contracted as resin, pulp, energy and freight costs rose, while price increases and sales growth did not fully offset inflation. AMS operating profit was $61.6 million versus $64.8 million; EP operating profit was $100.5 million versus $116.8 million.
- Net income increased modestly even as operating profit declined. Results included a $35.2 million gain on the Spotswood facility sale, a $9.4 million income tax benefit (versus an $18.4 million provision in 2020), and Scapa-related purchase-accounting and transaction costs. Interest expense increased to $46.1 million from $30.5 million, principally due to higher debt following the acquisition.
- Operating cash flow fell by $103.5 million, including a $61.4 million working-capital cash outflow. Capital spending and capitalized software totaled $38.9 million; operating cash flow less that spending was approximately $19.2 million.
- Year-end current assets were $594.6 million and current liabilities $231.1 million. Cash was $74.7 million, and undrawn capacity under the $500 million revolving facility was $102.2 million. Net leverage was 4.8x at year-end.
- Dividends were $1.76 per share in 2021, unchanged from 2020. The company reported a 65.1% total-debt-to-capital ratio, up from 47.7%.
Material changes and unusual items
- Scapa was acquired for $630.6 million of net cash consideration, funded with additional borrowings. The acquisition expanded AMS’s healthcare, industrial, coating, adhesive and converting capabilities. Scapa contributed $305.6 million of sales and $0.6 million of net income from acquisition through year-end.
- Scapa-related 2021 costs included $21.4 million of acquisition and integration costs, $17.5 million of incremental purchase-accounting expenses and $6.9 million of acquisition-related foreign-exchange impacts.
- The Spotswood, New Jersey facility was sold in December 2021; the company reported a $35.2 million gain. The Winkler, Manitoba facility ceased production in December, with approximately $1.5 million of additional EP restructuring costs expected in 2022.
- Cash dividends paid were $55.3 million. The company borrowed $744.5 million and repaid $55.9 million of long-term debt during 2021; debt issuance costs were $14.6 million.
Outlook, risks and contingencies
- Management expects AMS organic sales growth to support segment profit growth, subject to raw-material cost movements. It expects long-term above-GDP growth in selected filtration, transportation surface-protection and healthcare applications. No numerical earnings or sales guidance is provided.
- Management expects EP to face the long-term decline in cigarette consumption, alongside exposure to tobacco regulation, customer inventory patterns and foreign exchange. HnB products and non-tobacco applications are areas of development.
- Key risks include resin and pulp price inflation and availability, energy and freight costs, supply-chain and labor constraints, acquisition integration, customer concentration, foreign exchange and interest-rate changes, and the secular decline and regulation of tobacco. The company also identifies COVID-19 disruption, environmental obligations, facility concentration and intellectual-property litigation as risks.
- The company reported covenant compliance at December 31, 2021. A February 22, 2022 amendment set a maximum net-debt-to-EBITDA covenant of 6.00x, stepping down to 4.50x effective June 30, 2023; the interest-coverage minimum remained 3.00x. The nearest stated debt maturity was the revolving facility in 2023.
- Brazilian electricity-tax assessments of $9.9 million and revised assessments totaling $7.9 million remained unresolved; no loss was accrued because the outcome could not be determined. A separate Brazilian tax matter was settled in 2021 for $2.6 million, generating a reported $6.1 million benefit. The company also disclosed ongoing German LIP patent litigation and environmental contingencies, without stating that these matters were expected to have a material effect.
- The combined U.S., U.K. and French pension plans were underfunded by $11.4 million at year-end, compared with $25.7 million in 2020. The filing identifies LIBOR replacement and potential borrowing-cost effects as a risk.
Investor verification priorities
- Assess whether AMS can restore margins as input costs, specialty-resin availability and price pass-through evolve; separate organic growth from acquisition-driven growth.
- Review Scapa integration, realized synergies, purchase-accounting effects and the final acquisition valuation allocation.
- Monitor leverage, cash conversion, working-capital needs, covenant headroom and the 2023 revolving-facility maturity, including the scheduled covenant step-down.
- Check whether the reported net-income increase is repeatable given the facility-sale gain and tax benefit, and review the underlying operating-profit trend.
- Track EP customer ordering, tobacco-market attrition, HnB growth, the Brazilian tax disputes and the German patent proceedings.