Mativ Holdings, Inc. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022. Mativ completed its all-stock merger with Neenah on July 6, 2022; FY2022 includes Neenah only from that date, so year-over-year comparisons are not like-for-like. The company operates Advanced Technical Materials (ATM) and Fiber-Based Solutions (FBS).
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $2,167.4 million | $1,440.0 million |
| Gross profit / gross margin | $437.6 million / 20.2% | $330.3 million / 22.9% |
| Operating profit / margin | $51.4 million / 2.4% | $83.3 million / 5.8% |
| Net income (loss) | $(6.6) million; $(0.18) diluted EPS | $88.9 million; $2.80 diluted EPS |
| Cash from operations | $202.2 million | $58.1 million |
| Capital spending | $56.9 million | $35.9 million |
- Sales increased 50.5%, including Neenah, price increases and volume growth, partly offset by unfavorable currency movements. ATM sales were $1,396.2 million, up 50.0%; FBS sales were $771.2 million, up 51.4%.
- Segment operating profit rose to $98.8 million in ATM from $61.6 million; FBS operating profit increased to $106.6 million from $100.5 million. Company-wide operating profit declined as unallocated expenses grew substantially.
- Cost of products sold increased faster than sales, reducing gross margin by 2.7 percentage points. Higher input costs included pulp and fibers, resins and energy; price increases more than offset these costs in segment gross profit, but purchase-accounting expenses also weighed on results.
- Net cash from operations improved year over year, aided by working-capital movements and cash received from interest-rate swaps. Investing cash outflow was $481.3 million, including merger-related acquisition cash flows; financing cash inflow was $331.6 million.
Merger, debt and liquidity
- The Neenah merger involved approximately 22.8 million newly issued shares; total consideration was $1,056.3 million, including assumed-debt repayment. Neenah contributed $560.2 million of sales and $2.5 million of net income from the acquisition date through year-end.
- Reported merger and integration expenses were $72.6 million; the company also cited $29.4 million of incremental non-cash purchase-accounting expenses. Restructuring and impairment expense was $19.3 million.
- At December 31, 2022, total debt was $1,693.9 million and cash was $124.4 million. The company had $404.0 million of undrawn capacity on its $600 million revolving facility. Net leverage under the credit agreement was 3.71x, against a 5.50x maximum covenant; the company reported covenant compliance.
- The nearest stated debt maturity was the 6.875% senior unsecured notes due in 2026. The company paid $1.68 per share in dividends during 2022 and announced a $0.40-per-share dividend in February 2023.
Outlook, risks and unusual items
- Management targets $65 million of merger synergies within three years, approximately half from selling, general and organizational efficiencies and half from procurement and supply-chain opportunities. The filing does not provide clear numerical earnings or sales guidance.
- Management expects long-term growth in ATM, particularly filtration, protective solutions, release liners and healthcare. FBS faces mature markets and declining combustible-tobacco demand, partly offset by opportunities in premium packaging, sustainable alternatives and innovation. Management cautioned that inflation, higher interest rates and geopolitical uncertainty reduce near-term demand visibility.
- About 20% of 2022 consolidated sales were from products used in tobacco products. Risks include declining cigarette consumption and regulation, raw-material and energy costs, foreign exchange and interest rates, merger integration and synergy execution, customer concentration in FBS, and international and supply-chain disruption.
- A 2022 cyberattack temporarily disrupted some operations and delayed sales transactions; attackers accessed and exfiltrated data, including some employee personal information. The company said it contained the incident, restored operations and implemented remediation measures.
- Contingencies include disputed Brazilian electricity-tax assessments for which no loss was accrued, and ongoing German patent litigation after a court ruling invalidated relevant patent claims and nullified the prior infringement decision and injunction. Pension plans were underfunded by $26.8 million at year-end.
- The company reported an unqualified audit opinion and effective internal control over financial reporting. Goodwill and intangible-asset impairment tests disclosed no impairment; goodwill allocated to a disposal group was impaired separately.
Investor verification priorities
- Assess normalized earnings and margins excluding Neenah’s partial-year contribution, merger and integration charges, purchase-accounting effects, and other unusual gains or costs.
- Track delivery and timing of the $65 million synergy plan, integration spending, and whether cash generation supports debt reduction and dividends.
- Review debt terms, floating-rate exposure and covenant headroom as the maximum leverage covenant steps down to 4.50x in December 2023.
- Examine working-capital cash-flow effects and the receivables sales program, including its use and any implications for recurring operating cash flow.
- Monitor outcomes and potential exposure from the Brazilian tax assessments, German patent dispute, cyber incident, pension obligations, and tobacco-market decline.