Mativ Holdings, Inc. ("Mativ" or the "Company") (NYSE: MATV)
reported earnings results for the three months ended June 30, 2023.
On July 6, 2022, Schweitzer-Mauduit International, Inc. ("SWM") and
Neenah, Inc. ("Neenah") completed a merger of equals ("the
merger"). Financial results for periods prior to the merger reflect
only the legacy SWM results.
Adjusted measures are reconciled to GAAP at the end of this
release. Financial comparisons are versus the prior year period
unless stated otherwise. Figures may not sum to total due to
rounding. "Comparable" or "organic" – non-GAAP measures used to
compare current period Mativ results with the combined reported
results for legacy Neenah and SWM operations, adjusted for certain
reclassifications and other reporting conformations in the periods
prior to the close of the merger. December 22, 2022 8-K includes
reconciliations of periods prior to the merger.
Mativ Second Quarter 2023
Highlights
- Sales increased 56.7% to $668.3 million, reflecting the benefit
of the merger; 8% organic sales decline with negative volume/mix
offsetting price increases
- GAAP loss was $4.5 million, GAAP EPS was $(0.08), which all
included merger integration and purchase accounting expenses
- Adjusted income was $27.7 million, Adjusted EPS was $0.51, and
Adjusted EBITDA was $87.4 million (see non-GAAP reconciliations);
comparable Adjusted EBITDA was down 10% versus a very strong 2Q:22,
and increased 33% sequentially from 1Q:23
- Substantially higher sequential margins driven by significantly
improved operations versus 1Q:23
- Comparable Adjusted EBITDA margin was flat versus prior year;
strong pricing, moderating input costs and expense reductions were
offset by lower volumes from customer de-stocking and demand
softness
- On August 1, Company announced the proposed sale of Engineered
Papers and capital allocation changes
- Proposed sale price of $620 million, or approximately 6.5x EP's
trailing twelve-month Adjusted EBITDA; expected to close in 4Q:23,
subject to customary closing conditions and regulatory
approvals
- Approximately $575 million of expected net proceeds to be used
to reduce net debt by 35%
- Rebalanced capital allocation strategy: re-sized dividend, new
$30 million share repurchase program
Management Commentary
Chief Executive Officer Julie Schertell commented "We were
pleased to report that second quarter results reflect strong
sequential EBITDA growth, driven by improved manufacturing
execution, incremental cost reductions, synergy realization, and
continued positive price/cost performance. While volumes remained
challenged due to heightened de-stocking across much of our
customer base and continued macro uncertainty, we remain focused on
those areas within our control to deliver improved profitability.
We have reduced capacity and operating costs and remained
disciplined in our pricing, and expect to deliver solid margin
expansion when demand returns to more robust levels."
"We also announced a transformational strategic transaction
earlier this month with the proposed divestiture of our Engineered
Papers business. The merger of SWM and Neenah provided the benefits
of increased scale and unlocked the opportunity to focus our
portfolio on those categories with the greatest growth and margin
opportunities. We firmly believe this is the right move for Mativ
to accelerate our growth strategy, with increased focus on product
areas and end-markets with the greatest potential. We are pleased
with the valuation and sale price of the proposed transaction and
will use the cash proceeds to pay down 35% of our net debt. In
concert with this transaction announcement, we also shifted our
capital allocation approach to provide greater flexibility to
support continued debt reduction, long-term growth investments, and
a newly approved $30 million stock buyback plan. We look forward to
closing the proposed transaction later this year and supporting a
smooth transition for our employees and customers to the new
owners."
Ms. Schertell concluded, "It has been just over a year since we
completed the merger to become Mativ, and we are encouraged by what
we have achieved in the face of a challenging backdrop. A key focus
has been synergy delivery, and we are pleased to share that we have
executed over half of our $65 million plan in our first year as a
combined company, consistent with the expectations we announced at
the time of the merger. These actions position us well to deliver
accelerated longer-term growth and margin expansion as demand
normalizes. Beyond synergies, we have integrated and aligned our
global organization on our strategy with clearly communicated
priorities to amplify our growth, focus our efforts, and drive
value creation for our stakeholders."
Mativ Second Quarter 2023 Financial
Results
Note: The Reported Results below reflect consolidated Mativ
results in the current period, whereas the prior year period
reflects only legacy SWM results. The Comparable Results reflect
the inclusion of the legacy Neenah operations in the prior year
period. See the supplemental tables titled Non-GAAP Reconciliation
of Combined Legacy Neenah and SWM Operating Profit for
Comparability for additional financial information regarding the
combined company’s legacy financial information.
Advanced Technical Materials (ATM) as
Reported
Three Months Ended June
30,
(in millions; unaudited)
2023
2022
Change
2023
2022
Net Sales
$
419.8
$
288.1
$
131.7
GAAP Operating Profit & Margin %
$
35.1
$
29.4
$
5.7
8.4
%
10.2
%
Adjusted EBITDA & Margin %
$
63.1
$
49.2
$
13.9
15.0
%
17.1
%
ATM Comparable Results
Net Sales
$
419.8
$
469.4
$
(49.6
)
GAAP Operating Profit & Margin %
$
35.1
$
48.2
$
(13.1
)
8.4
%
10.3
%
Adjusted EBITDA & Margin %
$
63.1
$
76.7
$
(13.6
)
15.0
%
16.3
%
Advanced Technical Materials (ATM) segment sales were
$419.8 million, up 45.7%, and reflect the merged company results
versus the prior year period which reflected only legacy SWM
results. Constant currency organic sales were down 9% versus a very
strong 2Q:22. Release liners was the top performing category with
mid-single digit growth. Industrial was down nearly 20% due
primarily to customer de-stocking, and filtration and protective
solutions were also lower versus prior year due to softer demand.
For the segment, price increases of 5% partially offset lower
volume/mix of 14%, which was driven by customer de-stocking and
economic uncertainty.
Comparable Adjusted EBITDA decreased 18%, or $13.6 million, (see
non-GAAP reconciliations) compared to a very strong 2Q:22, with
margin declining 130 basis points year-over-year to 15.0%. Price
increases across the portfolio more than offset higher input costs,
but this net benefit was offset by volume contraction.
Adjusted EBITDA increased 7% sequentially with margin expanding
150 basis points versus 1Q:23. Incremental initiatives to reduce
expenses and operating costs, including manufacturing labor have
been implemented in response to soft demand.
Fiber-Based Solutions (FBS) as
Reported
Three Months Ended June
30,
(in millions; unaudited)
2023
2022
Change
2023
2022
Net Sales
$
248.5
$
138.3
$
110.2
GAAP Operating Profit & Margin %
$
31.9
$
22.4
$
9.5
12.8
%
16.2
%
Adjusted EBITDA & Margin %
$
45.7
$
27.0
$
18.7
18.4
%
19.5
%
FBS Comparable Results
Net Sales
$
248.5
$
263.8
$
(15.3
)
GAAP Operating Profit & Margin %
$
31.9
$
37.3
$
(5.4
)
12.8
%
14.1
%
Adjusted EBITDA & Margin %
$
45.7
$
45.2
$
0.5
18.4
%
17.1
%
Fiber-Based Solutions (FBS) segment sales were $248.5
million, up 79.7%, and reflect the merged company results versus
the prior year period which reflected only legacy SWM results.
Constant currency organic sales were down 6%, with price increases
of 6% offset by lower volume/mix of 12%. Packaging and specialty
papers drove the volume decline due to heightened downstream
inventory de-stocking.
Comparable Adjusted EBITDA increased 1%, or $0.5 million (see
non-GAAP reconciliations), with margin expansion versus prior year
of 130 basis points to 18.4%. Strong pricing across the portfolio
and cost improvements offset higher input costs and the impact of
lower volumes. The Company has implemented increased cost control
measures and manufacturing labor reductions until demand normalizes
at higher levels.
On a sequential basis, versus 1Q:23, Adjusted EBITDA increased
61% and margin expanded 680 basis points, reflecting improved
operations and efficiency initiatives. 1Q:23 operations were
significantly impacted by French labor strikes in the Engineered
Papers business; the strikes had no material impact on 2Q:23.
Unallocated as Reported
Three Months Ended June
30,
(in millions; unaudited)
2023
2022
Change
2023
2022
GAAP Operating Expense & % of
Sales
$
(33.4
)
$
(24.0
)
$
(9.4
)
(5.0
)%
(5.6
)%
Adjusted EBITDA & % of Sales
$
(21.4
)
$
(15.2
)
$
(6.2
)
(3.2
)%
(3.6
)%
Unallocated Comparable Results
GAAP Operating Expense & % of
Sales
$
(33.4
)
$
(41.0
)
$
7.6
(5.0
)%
(5.6
)%
Adjusted EBITDA & % of Sales
$
(21.4
)
$
(25.0
)
$
3.6
(3.2
)%
(3.4
)%
Unallocated expenses reflect the merged Company expenses
in 2Q:23, compared to only legacy SWM expenses in the prior year
period. On a comparable basis, Adjusted unallocated expenses
(EBITDA) decreased $3.6 million, and improved 20 basis points a as
percentage of total sales. Cost saving synergies related to the
merger were the primary driver of the improvement.
Interest expense was $28.2 million, versus $20.4
million in the prior year period which reflected only the legacy
SWM results. The increase was due to the merger and related
incremental expense of assuming existing debt on the legacy Neenah
balance sheet, as well as higher interest rates on floating rate
debt versus the prior year.
Other income (expense), net was $(3.4) million, versus
other income in the prior year period of $7.3 million; prior year
period income included several asset sales gains.
Tax rate was 330.0% during 2Q:23. The unusually high tax
rate was driven by a $6.4 million tax expense related to a
valuation allowance that reduced the carrying value of a long-term
tax asset, as that asset is not expected to be fully realized in
the future. Excluding the impact of that valuation allowance and
other non-GAAP adjustments, the Company's tax rate was 19.2%.
Non-GAAP Adjustments reflect items included in GAAP
operating profit, income, and EPS, but excluded from Adjusted
Operating Profit, EBITDA, income, and EPS (see non-GAAP
reconciliation tables for additional details). The most significant
adjustments to second quarter 2023 results were as follows:
- $0.20 per share of purchase accounting expenses (purchase
accounting expenses reflect primarily ongoing non-cash intangible
asset amortizations associated with mergers and acquisitions)
- $0.12 per share of expenses related to the Neenah merger, which
included integration and severance expenses
- $0.16 per share of expenses related to discrete tax items,
including tax valuation allowances
Cash Flow & Debt
Year-to-date 2023 cash provided by operating activities was
$19.5 million, and capital spending and software costs totaled
$42.5 million, resulting in negative free cash flow of $23.0
million. Working capital was a $42.4 million use of cash. While
1Q:23 operating cash flow was negative $20.7 million and free cash
flow was negative $39.9 million, 2Q:23 operating cash flow and free
cash flow were positive $40.2 million and $16.9 million,
respectively, due to sequentially higher Adjusted EBITDA and
improved working capital. The Company expects positive quarterly
cash flow trends to continue throughout the second half of the
year.
Total debt was $1,747.6 million as of June 30, 2023 and total
cash was $107.6 million resulting in net debt of $1,640.0 million.
Pursuant to the terms of the Company's credit agreement, net debt
to Adjusted EBITDA was 4.2x as of June 30, 2023. Net leverage is
defined in the Company's credit agreement, and includes EBITDA
adjustments for certain expected cost synergies. Total liquidity of
approximately $442 million consisted of $108 million of cash and
$334 million of revolver availability. The Company's debt matures
on a staggered basis between 2026 and 2028.
Dividend & Buyback
The Company announced a quarterly cash dividend of $0.10 per
share. The dividend will be payable on September 22, 2023 to
stockholders of record as of August 25, 2023. On August 1, 2023,
the Company announced capital allocation changes, including plans
to modify the dividend (previously $0.40 per share per quarter).
These changes reflect the Company's evolving portfolio with the
proposed divestiture of Engineered Papers, and a more balanced and
flexible capital allocation strategy.
On August 1, 2023, the Company also authorized a $30 million
share repurchase program. The Company intends to repurchase shares
opportunistically.
Conference Call
Mativ will hold a conference call to review second quarter 2023
results with investors and analysts at 8:30 a.m. Eastern time on
Thursday, August 10, 2023. The earnings conference call will be
simultaneously broadcast over the Internet at http://ir.mativ.com.
To listen to the call, please go to the Company’s website at least
15 minutes prior to the call to register and to download and
install any necessary audio software. For those unable to listen to
the live broadcast, a replay will be available on the Company’s
website shortly after the call.
Mativ will use a presentation in conjunction with its conference
call. The presentation can be found on the Company's website under
the Investor Relations section in advance of the earnings
conference call. The presentation can also be accessed via the
earnings conference call webcast.
About Mativ
Mativ Holdings, Inc. is a global leader in specialty materials
headquartered in Alpharetta, Georgia. The Company offers a wide
range of critical components and engineered solutions to solve our
customers’ most complex challenges. With over 7,500 employees
worldwide, we manufacture on four continents and generate sales in
more than 100 countries. The Company’s two operating segments,
Advanced Technical Materials and Fiber-Based Solutions, target
premium applications across diversified and growing end-markets,
from filtration to healthcare to sustainable packaging. Our broad
portfolio of technologies combines polymers, fibers, and resins to
optimize the performance of our customers’ products across multiple
stages of the value chain. Our leading positions are a testament to
our best-in-class global manufacturing, supply chain, and materials
science capabilities. We drive innovation and enhance performance,
finding potential in the impossible.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
(the "Act") that are subject to the safe harbor created by that Act
and other legal protections. Forward-looking statements include,
without limitation, those regarding EPS and other financial
guidance, acquisition integration and performance, growth
prospects, future end-market trends, the future effects of supply
chain challenges and price increases, future cash flows, net
leverage, purchase accounting impacts, effective tax rates, planned
investments, any lingering impacts of the COVID-19 pandemic on our
operations, profitability, and cash flow, the expected benefits and
accretion of the Neenah merger and Scapa acquisition and
integration and other statements generally identified by words such
as "believe," "expect," "intend," "guidance," "plan," "forecast,"
"potential," "anticipate," "confident," "project," "appear,"
"future," "should," "likely," "could," "may," "will," "typically,"
and similar words.
These forward-looking statements are prospective in nature and
not based on historical facts, but rather on current expectations
and on numerous assumptions regarding the business strategies and
the environment in which Mativ will operate in the future and are
subject to risks and uncertainties that could cause actual results
to differ materially from those expressed or implied by those
statements. No assurance can be given that such expectations will
prove to have been correct and persons reading this presentation
are therefore cautioned not to place undue reliance on these
forward-looking statements which speak only as at the date of this
press release. These statements are not guarantees of future
performance and involve certain risks and uncertainties, and
assumptions that may cause actual results to differ materially from
our expectations as of the date of this release. These risks
include, among other things, the following factors:
- Risks associated with the implementation of our strategic
growth initiatives, including diversification, and the Company's
understanding of, and entry into, new industries and
technologies;
- Risks associated with acquisitions, dispositions, strategic
transactions and global asset realignment initiatives of Mativ,
including the proposed sale of the Company's Engineered Papers
business;
- Adverse changes in the filtration, release liners, protective
solutions, industrials and healthcare sectors impacting key ATM
segment customers;
- Changes in the source and intensity of competition in our
commercial end-markets;
- Adverse changes in sales or production volumes, pricing and/or
manufacturing costs in our ATM or FBS operating segments;
- Seasonal or cyclical market and industry fluctuations which may
result in reduced net sales and operating profits during certain
periods;
- Risks associated with our technological advantages in our
intellectual property and the likelihood that our current
technological advantages are unable to continue indefinitely;
- Supply chain disruptions, including the failure of one or more
material suppliers, including energy, resin, fiber, and chemical
suppliers, to supply materials as needed to maintain our product
plans and cost structure;
- Increases in operating costs due to inflation and continuing
increases in the inflation rate or otherwise, such as labor
expense, compensation and benefits costs;
- Business disruptions from the merger that will harm the
Company’s business, including current plans and operations;
- The possibility that Mativ may be unable to successfully
integrate Neenah’s operations with those of Mativ and achieve
expected synergies and operating efficiencies within the expected
time-frames or at all;
- Potential adverse reactions or changes to business
relationships resulting from the Neenah merger, including as it
relates to the Company’s ability to successfully renew existing
client contracts on favorable terms or at all and obtain new
clients;
- Our ability to attract and retain key personnel, including as a
result of the merger, labor shortages, labor strikes, stoppages or
other disruptions;
- The substantial indebtedness Mativ has incurred and assumed in
connection with the Neenah merger and the need to generate
sufficient cash flows to service and repay such debt;
- Changes in general economic, financial and credit conditions in
the U.S., Europe, China and elsewhere, including the impact thereof
on currency exchange rates (including any weakening of the Euro and
Real) and on interest rates;
- The phasing out of USD LIBOR rates after 2023 and the
replacement with SOFR;
- A failure in our risk management and/or currency or interest
rate swaps and hedging programs, including the failures of any
insurance company or counterparty;
- Changes in the manner in which we finance our debt and future
capital needs, including potential acquisitions;
- Changes in tax rates, the adoption of new U.S. or international
tax legislation or exposure to additional tax liabilities;
- Uncertainty as to the long-term value of the common stock of
Mativ, including the dilution caused by Mativ's issuance of
additional shares of its common stock in connection with the Neenah
Merger;
- Changes in employment, wage and hour laws and regulations in
the U.S., France and elsewhere, including the loi de Securisation
de l'emploi in France, unionization rule and regulations by the
National Labor Relations Board in the U.S., equal pay initiatives,
additional anti-discrimination rules or tests and different
interpretations of exemptions from overtime laws;
- The impact of tariffs, and the imposition of any future
additional tariffs and other trade barriers, and the effects of
retaliatory trade measures;
- Existing and future governmental regulation and the enforcement
thereof that may materially restrict or adversely affect how we
conduct business and our financial results;
- Weather conditions, including potential impacts, if any, from
climate change, known and unknown, and natural disasters or unusual
weather events;
- International conflicts and disputes, such as the ongoing
conflict between Russia and Ukraine, which restrict our ability to
supply products into affected regions, due to the corresponding
effects on demand, the application of international sanctions, or
practical consequences on transportation, banking transactions, and
other commercial activities in troubled regions;
- Compliance with the FCPA and other anti-corruption laws or
trade control laws, as well as other laws governing our
operations;
- The continued evolution of COVID-19, or new public health
crises that may arise in the future, could have adverse and
disparate impacts on the Company, our employees and customers;
- The number, type, outcomes (by judgment or settlement) and
costs of legal, tax, regulatory or administrative proceedings,
litigation and/or amnesty programs, including those in Brazil,
France and Germany;
- Increased scrutiny from stakeholders related to environmental,
social and governance (“ESG”) matters, particularly our sales of
combustible products business within the tobacco industry which
represents approximately 18% of the Company’s net sales for the six
months ended June 30, 2023, as well as our ability to achieve our
broader ESG goals and objectives;
- Costs and timing of implementation of any upgrades or changes
to our information technology systems;
- Failure by us to comply with any privacy or data security laws
or to protect against theft of customer, employee and corporate
sensitive information;
- The impact of cybersecurity risks related to breaches of
security pertaining to sensitive Company, customer or vendor
information, as well as breaches in the technology that manages
operations and other business processes; and
- Other factors described elsewhere in this document and from
time to time in documents that we file with the U.S. Securities and
Exchange Commission (the “SEC”).
All forward-looking statements made in this document are
qualified by these cautionary statements. Forward-looking
statements herein are made only as of the date of this document,
and Mativ undertakes no obligation, other than as may be required
by law, to update or revise any forward-looking or cautionary
statements to reflect changes in assumptions, the occurrence of
events, unanticipated or otherwise, or changes in future operating
results over time or otherwise. For a more detailed discussion of
these factors, also see the information under the captions “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Mativ's most recent annual
report on Form 10-K for the year ended December 31, 2022 and any
material updates to these factors contained in any of Mativ’s
future filings with the SEC. The discussion of these risks is
specifically incorporated by reference into this release. The
financial results reported in this release are unaudited.
Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future
performance unless expressed as such and should only be viewed as
historical data. The financial results reported in this release are
unaudited.
Non-GAAP Financial
Measures
Certain financial measures and comments contained in this press
release exclude restructuring and impairment expenses, certain
purchase accounting adjustments related to ATM and FBS segment
acquisitions, acquisition/merger and integration related costs,
interest expense, the effect of income tax provisions and other tax
impacts, capital spending, capitalized software costs, and
depreciation and amortization. This press release also provides
certain information regarding the Company's financial results
excluding currency impacts. This information estimates the impact
of changes in foreign currency rates on the translation of the
Company's current financial results as compared to the applicable
comparable period and is derived by translating the current local
currency results into U.S. Dollars based upon the foreign currency
exchange rates for the applicable comparable period. Financial
measures which exclude or include these items have not been
determined in accordance with accounting principles generally
accepted in the United States (GAAP) and are therefore "non-GAAP"
financial measures. Reconciliations of these non-GAAP financial
measures to the most closely analogous measure determined in
accordance with GAAP are included in the financial schedules
attached to this release.
The Company believes that the presentation of non-GAAP financial
measures in addition to the related GAAP measures provides
investors with greater transparency on the information used by the
Company’s management in its financial and operational
decision-making. Management also believes that the non-GAAP
financial measures provide additional insight for analysts and
investors in evaluating the Company’s financial and operational
performance in the same way that management evaluates the Company's
financial performance. Management believes that providing this
information enables investors to better understand the Company’s
operating performance and financial condition. These non-GAAP
financial measures are not calculated or presented in accordance
with, and are not intended to be considered in isolation or as
alternatives or substitutes for, or superior to, financial measures
prepared and presented in accordance with GAAP, and should be read
only in conjunction with the Company's financial measures prepared
and presented in accordance with GAAP. The non-GAAP financial
measures used in this release may be different from the measures
used by other companies.
Combined Legacy Financial
Information
Due to the significance of the merger and the resulting change
in our reportable segments, Mativ is providing the supplemental
combined legacy financial information set forth in the tables below
under the captions “Non-GAAP Reconciliation of Combined Legacy
Neenah and SWM Operating Profit for Comparability” and “Non-GAAP
Reconciliation of Organic Net Sales Growth” to enhance its
investors’ ability to evaluate and compare the Company's operating
performance on a combined basis with Neenah. The purpose of the
supplemental legacy combined financial information is to reflect
changes to our reportable segments and to present certain non-GAAP
financial measures on a combined company basis.
The supplemental combined legacy financial information in the
attached schedules is not necessarily indicative of the operating
results of the combined companies had the merger been completed at
the beginning of or prior to the periods presented or of the
operating results of the combined company in the future. The
supplemental combined legacy financial information for periods
prior to the date of the merger does not reflect cost savings or
other synergies anticipated as a result of the merger. The
supplemental combined legacy financial information is not pro forma
information prepared in accordance with Article 11 of Regulation
S-X of the SEC, and the preparation of information in accordance
with Article 11 would result in a different presentation.
MATIV HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(LOSS)
(in millions, except per share
amounts)
(Unaudited)
Three Months Ended June
30,
2023
2022
% Change
Net sales
$
668.3
$
426.4
56.7
%
Cost of products sold
539.8
326.8
65.2
Gross profit
128.5
99.6
29.0
Selling expense
23.6
15.0
57.3
Research and development expense
7.0
5.4
29.6
General expense
63.8
49.0
30.2
Total nonmanufacturing expenses
94.4
69.4
36.0
Restructuring and impairment expense
0.5
2.4
(79.2
)
Operating profit
33.6
27.8
20.9
Interest expense
28.2
20.4
38.2
Other income (expense), net
(3.4
)
7.3
N.M.
Income (loss) before income taxes and
income from equity affiliates
2.0
14.7
(86.4
)
Income tax expense
6.6
4.6
43.5
Income from equity affiliates, net of
income taxes
0.1
1.7
(94.1
)
Net income (loss)
$
(4.5
)
$
11.8
N.M.
Dividends to participating securities
(0.1
)
(0.3
)
(66.7
)%
Net income (loss) attributable to Common
Stockholders
$
(4.6
)
$
11.5
N.M.
Net income (loss) per share:
Basic
$
(0.08
)
$
0.36
N.M.
Diluted
$
(0.08
)
$
0.36
N.M.
Weighted average shares outstanding:
Basic
54,656,400
31,260,100
Diluted
54,656,400
31,409,800
N.M. - Not Meaningful
MATIV HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(LOSS)
(in millions, except per share
amounts)
(Unaudited)
Six Months Ended June
30,
2023
2022
% Change
Net sales
$
1,347.3
$
833.2
61.7
%
Cost of products sold
1,109.8
641.0
73.1
Gross profit
237.5
192.2
23.6
Selling expense
47.5
29.3
62.1
Research and development expense
16.1
10.6
51.9
General expense
129.7
98.3
31.9
Total nonmanufacturing expenses
193.3
138.2
39.9
Restructuring and impairment expense
1.3
15.6
(91.7
)
Operating profit
42.9
38.4
11.7
Interest expense
54.7
34.9
56.7
Other income (expense), net
3.6
12.8
(71.9
)
Income (loss) before income taxes and
income from equity affiliates
(8.2
)
16.3
N.M.
Income tax expense
4.2
6.7
(37.3
)
Income from equity affiliates, net of
income taxes
0.2
3.8
(94.7
)
Net income (loss)
(12.2
)
13.4
N.M.
Dividends to participating securities
(0.2
)
(0.5
)
(60.0
)%
Net income (loss) attributable to Common
Stockholders
$
(12.4
)
$
12.9
N.M.
Net income (loss) per share:
Basic
$
(0.23
)
$
0.41
N.M.
Diluted
$
(0.23
)
$
0.41
N.M.
Weighted average shares outstanding:
Basic
54,570,100
31,209,300
Diluted
54,570,100
31,412,000
N.M. - Not Meaningful
MATIV HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
June 30, 2023
December 31,
2022
ASSETS
Cash and cash equivalents
$
107.6
$
124.4
Accounts receivable, net
277.5
266.8
Inventories, net
521.6
534.9
Income taxes receivable
20.3
19.7
Other current assets
36.2
28.9
Total current assets
963.2
974.7
Property, plant and equipment, net
874.7
874.9
Finance lease right-of-use assets
17.2
17.4
Operating lease right-of-use assets
46.5
35.8
Deferred income tax benefits
34.3
34.4
Investment in equity affiliates
56.1
59.1
Goodwill
874.9
847.2
Intangible assets, net
660.2
710.3
Other assets
121.8
115.4
Total assets
$
3,648.9
$
3,669.2
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current debt
$
34.7
$
34.6
Finance lease liabilities
0.9
0.9
Operating lease liabilities
8.6
9.3
Accounts payable
214.4
225.7
Income taxes payable
16.5
11.4
Accrued expenses and other current
liabilities
151.1
184.2
Total current liabilities
426.2
466.1
Long-term debt
1,712.9
1,659.3
Finance lease liabilities, noncurrent
17.6
17.6
Operating lease liabilities,
noncurrent
38.1
29.7
Long-term income tax payable
8.4
14.6
Pension and other postretirement
benefits
79.1
81.6
Deferred income tax liabilities
160.0
172.2
Other liabilities
57.6
48.8
Total liabilities
2,499.9
2,489.9
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; 54,840,660 and 54,929,973 shares issued and
outstanding at June 30, 2023 and December 31, 2022,
respectively
5.5
5.5
Additional paid-in-capital
665.7
658.5
Retained earnings
551.2
610.7
Accumulated other comprehensive loss, net
of tax
(73.4
)
(95.4
)
Total stockholders’ equity
1,149.0
1,179.3
Total liabilities and stockholders’
equity
$
3,648.9
$
3,669.2
MATIV HOLDINGS, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOW
(in millions)
(Unaudited)
Six Months Ended June
30,
2023
2022
Operating
Net income (loss)
$
(12.2
)
$
13.4
Non-cash items included in net income
(loss):
Depreciation and amortization
84.8
47.5
Amortization of deferred issuance
costs
3.7
3.4
Impairments
—
12.9
Deferred income tax
(9.2
)
(5.1
)
Pension and other postretirement
benefits
(5.5
)
(0.4
)
Stock-based compensation
6.7
7.0
Income from equity affiliates
(0.2
)
(3.8
)
Brazil tax assessment and settlements,
net
—
(2.2
)
Gain on sale of assets
—
(2.9
)
Cash dividends received from equity
affiliates
—
1.1
Loss (gain) on foreign currency
transactions
3.3
(10.7
)
Other non-cash items
(7.4
)
(2.8
)
Cash received from settlement of interest
swap agreements
—
23.6
Other operating
(2.1
)
—
Net changes in operating working
capital
(42.4
)
(63.0
)
Net cash provided by operations
19.5
18.0
Investing
Capital spending
(42.0
)
(17.8
)
Capitalized software costs
(0.5
)
(1.6
)
Cash received from settlement of
cross-currency swap contracts
—
35.8
Other investing
3.0
1.6
Net cash provided by (used in)
investing
(39.5
)
18.0
Financing
Cash dividends paid
(44.3
)
(28.1
)
Proceeds from long-term debt
115.1
40.0
Payments on long-term debt
(65.3
)
(47.6
)
Payments for debt issuance costs
—
(12.5
)
Payments on financing lease
obligations
(0.5
)
(0.3
)
Purchases of common stock
(2.8
)
(3.0
)
Other financing
(0.2
)
—
Net cash provided by (used in)
financing
2.0
(51.5
)
Effect of exchange rate changes on cash
and cash equivalents
1.2
(2.9
)
Decrease in cash and cash equivalents
(16.8
)
(18.4
)
Cash and cash equivalents at beginning of
period
124.4
74.7
Cash and cash equivalents at end of
period
$
107.6
$
56.3
MATIV HOLDINGS, INC. AND
SUBSIDIARIES
BUSINESS SEGMENT REPORTING
(in millions)
(Unaudited)
NOTE REGARDING SEGMENT REPORTING AND
COMPARABILITY
Effective July 6, 2022, in connection with
the close of the merger, Mativ has two reportable segments for
financial reporting purposes: Advanced Technical Materials ("ATM")
and Fiber-Based Solutions ("FBS"). ATM is comprised of the legacy
SWM Advanced Materials & Structures segment and the legacy
Neenah Technical Products segment. FBS is comprised of the legacy
SWM Engineered Papers segment and the legacy Neenah Fine Paper and
Packaging segment. For accounting purposes, SWM was the surviving
entity, thus periods subsequent to the September 2022 quarter
results reflect the merged company's financials while all prior
periods reflect only previously reported SWM consolidated and
segment results. As a result of the proposed sale of Engineered
Papers, in our third quarter 2023 results, we expect EP to be
presented as a discontinued operation, its net assets classified as
held for sale, and certain prior period amounts retrospectively
revised to reflect these changes.
Net Sales
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
% Change
2023
2022
% Change
ATM
$
419.8
$
288.1
45.7
%
$
854.1
$
561.0
52.2
%
FBS
248.5
138.3
79.7
%
493.2
272.2
81.2
%
Total Consolidated
$
668.3
$
426.4
56.7
%
$
1,347.3
$
833.2
61.7
%
Operating Profit
Three Months Ended June
30,
Six Months Ended June
30,
Return on Net Sales
Return on Net Sales
2023
2022
2023
2022
2023
2022
2023
2022
ATM
$
35.1
$
29.4
8.4
%
10.2
%
$
72.7
$
39.7
8.5
%
7.1
%
FBS
31.9
22.4
12.8
%
16.2
%
38.1
48.1
7.7
%
17.7
%
Unallocated
(33.4
)
(24.0
)
(5.0
)%
(5.6
)%
(67.9
)
(49.4
)
(5.0
)%
(5.9
)%
Total Consolidated
$
33.6
$
27.8
5.0
%
6.5
%
$
42.9
$
38.4
3.2
%
4.6
%
Non-GAAP Adjustments to Operating
Profit
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
ATM - Amortization of intangibles and
other purchase accounting adjustments
$
14.4
$
11.1
$
21.4
$
22.2
ATM - Restructuring, impairment, and other
expenses
0.8
1.1
1.5
14.3
FBS - Amortization of intangibles and
other purchase accounting adjustments
1.0
—
9.9
—
FBS - Restructuring, impairment, and other
expenses
—
(0.9
)
0.1
(0.6
)
Unallocated - Restructuring, impairment,
and other expenses
1.1
—
1.1
—
Unallocated - Acquisition/Merger and
integration costs
9.1
6.5
19.5
13.6
Total Consolidated
$
26.4
$
17.8
$
53.5
$
49.5
Adjusted Operating Profit
Three Months Ended June
30,
Six Months Ended June
30,
Return on Net Sales
Return on Net Sales
2023
2022
2023
2022
2023
2022
2023
2022
ATM
$
50.3
$
41.6
12.0
%
14.4
%
$
95.6
$
76.2
11.2
%
13.6
%
FBS
32.9
21.5
13.2
%
15.5
%
48.1
47.5
9.8
%
17.5
%
Unallocated
(23.2
)
(17.5
)
(3.5
)%
(4.1
)%
(47.3
)
(35.8
)
(3.5
)%
(4.3
)%
Total Consolidated
$
60.0
$
45.6
9.0
%
10.7
%
$
96.4
$
87.9
7.2
%
10.5
%
Non-GAAP Adjustments to Adjusted
Operating Profit
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
ATM - Depreciation and stock-based
compensation
$
12.8
$
7.6
$
26.3
$
15.4
FBS - Depreciation and stock-based
compensation
12.8
5.5
26.0
10.4
Unallocated - Depreciation and stock-based
compensation
1.8
2.3
4.4
5.8
Total Consolidated
$
27.4
$
15.4
$
56.7
$
31.6
Adjusted EBITDA
Three Months Ended June
30,
Six Months Ended June
30,
Return on Net Sales
Return on Net Sales
2023
2022
2023
2022
2023
2022
2023
2022
ATM
$
63.1
$
49.2
15.0
%
17.1
%
$
121.9
$
91.6
14.3
%
16.3
%
FBS
45.7
27.0
18.4
%
19.5
%
74.1
57.9
15.0
%
21.3
%
Unallocated
(21.4
)
(15.2
)
(3.2
)%
(3.6
)%
(42.9
)
(30.0
)
(3.2
)%
(3.6
)%
Total Consolidated
$
87.4
$
61.0
13.1
%
14.3
%
$
153.1
$
119.5
11.4
%
14.3
%
Non-GAAP Reconciliation of Organic Net
Sales Growth
Advanced Technical
Materials
Fiber-Based Solutions
Consolidated Mativ
Three Months Ended June
30,
Mativ Combined 2022 Net Sales
$
469.4
$
263.8
$
733.2
Divestiture/closure adjustments
(7.9
)
—
(7.9
)
Mativ Combined 2022 Comparable Net
Sales
$
461.5
$
263.8
$
725.3
Mativ Combined 2023 Net Sales
$
419.8
$
248.5
$
668.3
Divestiture/closure adjustments
—
—
—
Mativ Combined 2023 Comparable Net
Sales
$
419.8
$
248.5
$
668.3
Organic growth
(9.0
)%
(5.8
)%
(7.9
)%
Currency effects on 2023
$
1.2
$
(0.1
)
1.1
Mativ 2023 Comparable Net Sales with
Currency Adjustment
$
418.6
$
248.6
$
667.2
Organic constant currency growth
(9.3
)%
(5.8
)%
(8.0
)%
MATIV HOLDINGS, INC. AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES AND SUPPLEMENTAL DATA
(in millions, except per share
amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Operating profit
$
33.6
$
27.8
$
42.9
$
38.4
Plus: Restructuring and impairment related
expenses
1.9
2.4
2.7
15.9
Plus: Purchase accounting adjustments
15.4
11.1
31.3
22.2
Plus: Acquisition/merger and integration
related costs
9.1
6.5
19.5
13.6
Less: Litigation/tax settlement
—
(2.2
)
—
(2.2
)
Adjusted Operating Profit
$
60.0
$
45.6
$
96.4
$
87.9
Income (loss)
$
(4.5
)
$
11.8
$
(12.2
)
$
13.4
Plus: Restructuring and impairment
expenses
0.5
$
2.4
1.3
15.9
Less: Tax impact of restructuring and
impairment expense
(0.1
)
$
(0.5
)
(0.3
)
(3.3
)
Less: Gain on sale of assets
—
$
(2.4
)
—
(2.9
)
Plus: Tax impact on gain on sale of
assets
—
$
0.7
—
0.8
Plus: Other restructuring related
expenses
0.9
$
—
1.4
—
Less: Tax impact of other restructuring
related expenses
(0.2
)
$
—
(0.3
)
—
Plus: Purchase accounting adjustments
15.4
$
11.1
31.3
22.2
Less: Tax impact of purchase accounting
adjustments
(4.1
)
$
(2.3
)
(7.7
)
(4.6
)
Less: Litigation/tax settlement
6.2
$
(2.8
)
6.2
(2.8
)
Plus: Tax impact of litigation/tax
settlement
(1.7
)
$
1.0
(1.7
)
1.0
Plus: Acquisition/merger and integration
related costs
9.1
$
9.8
19.5
16.9
Less: Tax impact on acquisition/merger and
integration related costs
(2.3
)
$
(2.3
)
(4.6
)
(3.8
)
Plus: Tax legislative changes, net of
other discrete items
8.5
$
1.2
8.5
3.0
Adjusted Income
$
27.7
$
27.7
$
41.4
$
55.8
Earnings (loss) per share - diluted
$
(0.08
)
$
0.36
$
(0.23
)
$
0.41
Plus: Restructuring and impairment related
expenses
0.01
0.08
0.02
0.51
Less: Tax impact of restructuring and
impairment expense
—
(0.01
)
(0.01
)
(0.10
)
Less: Gain on sale of assets
—
(0.07
)
—
(0.09
)
Plus: Tax impact on gain on sale of
assets
—
0.02
—
0.02
Plus: Other restructuring related
expenses
0.02
—
0.03
—
Less: Tax impact of other restructuring
related expenses
—
—
(0.01
)
—
Plus: Purchase accounting adjustments
0.28
0.36
0.57
0.71
Less: Tax impact of purchase accounting
adjustment
(0.08
)
(0.08
)
(0.14
)
(0.15
)
Less: Litigation/tax settlement
0.11
(0.09
)
0.11
(0.09
)
Plus: Tax impact of litigation/tax
settlement
(0.03
)
0.03
(0.03
)
0.03
Plus: Acquisition/merger and integration
related costs
0.16
0.29
0.36
0.52
Less: Tax impact on acquisition/merger and
integration related costs
(0.04
)
(0.07
)
(0.08
)
(0.12
)
Plus: Tax legislative changes, net of
other discrete items
0.16
0.04
0.16
0.10
Adjusted Earnings Per Share - Diluted
$
0.51
$
0.86
$
0.75
$
1.75
MATIV HOLDINGS, INC. AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES AND SUPPLEMENTAL DATA
(in millions, except per share
amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net Income (loss)
$
(4.5
)
$
11.8
$
(12.2
)
$
13.4
Plus: Interest expense
28.2
21.1
54.7
35.6
Plus: Interest income on litigation/tax
settlement
—
(0.7
)
—
(0.7
)
Plus: Provision for income taxes
6.6
4.6
4.2
6.7
Plus: Depreciation & amortization
41.2
23.6
83.2
47.5
Plus: Stock compensation expense
1.6
—
3.4
—
Plus: Inventory step up expense
—
—
1.4
—
Plus: Restructuring and impairment
expense
0.5
2.4
1.3
15.9
Plus: Other restructuring related
expense
1.4
—
1.4
—
Plus: Acquisition/merger and integration
related costs
9.1
6.5
19.5
13.6
Plus: Income from equity affiliates
(0.1
)
(1.7
)
(0.2
)
(3.8
)
Plus: Litigation/tax settlement
6.2
(2.2
)
6.2
(2.2
)
Plus: Other income, net
(2.8
)
(7.3
)
(9.8
)
(12.8
)
Adjusted EBITDA (1)
$
87.4
$
58.1
$
153.1
$
113.2
Cash provided by (used in) operating
activities
$
40.2
$
13.0
$
19.5
$
18.0
Less: Capital spending
(22.9
)
(9.1
)
(42.0
)
(17.8
)
Less: Capitalized software costs
(0.4
)
(0.7
)
(0.5
)
(1.6
)
Free Cash Flow
$
16.9
$
3.2
$
(23.0
)
$
(1.4
)
June 30, 2023
December 31, 2022
Total Debt
$
1,747.6
$
1,693.9
Less: Cash
107.6
124.4
Net Debt
$
1,640.0
$
1,569.5
(1) This reconciliation from Net income to
Adjusted EBITDA for the quarter ended and year to date ended June
30, 2022 is consistent with the press release filed on August 9,
2022. For conformed reconciliations for the quarter ended and year
to date ended June 30, 2022, refer to the Non-GAAP reconciliations
of combined results in the tables below.
Non-GAAP Reconciliation of Combined
Legacy Neenah and SWM Operating Profit for Comparability
(in millions) (Unaudited)
Three Months Ended
June 30, 2022
June 30, 2023
Legacy Neenah
Adjustments
Legacy Neenah Adjusted
Legacy SWM
Mativ Combined for
Comparison
Mativ
Advanced Technical Materials (ATM)
(1)
Net Sales
$
198.5
$
(17.2
)
$
181.3
$
288.1
$
469.4
$
419.8
GAAP Operating Profit
16.3
2.5
18.8
29.4
48.2
35.1
Amortization of intangibles and other
purchase accounting adjustments
2.1
(0.1
)
2.0
11.1
13.1
14.4
Restructuring, impairment, and other
expenses
2.1
—
2.1
1.1
3.2
0.8
Acquisition/Merger and integration
costs
0.3
—
0.3
—
0.3
—
Adjusted Operating Profit (2)
$
20.8
$
2.4
$
23.2
$
41.6
$
64.8
$
50.3
Adjusted Operating Profit Margin
10.5
%
N/A
12.8
%
14.4
%
13.8
%
12.0
%
Depreciation and stock-based compensation
expense (3)
5.0
(0.7
)
4.3
7.6
11.9
12.8
Adjusted EBITDA (4)
$
25.8
$
1.7
$
27.5
$
49.2
$
76.7
$
63.1
Adjusted EBITDA Margin
13.0
%
N/A
15.2
%
17.1
%
16.3
%
15.0
%
Fiber-Based Solutions (FBS) (1)
Net Sales
$
108.3
$
17.2
$
125.5
$
138.3
$
263.8
$
248.5
GAAP Operating Profit
14.5
0.4
14.9
22.4
37.3
31.9
Amortization of intangibles and other
purchase accounting adjustments
0.2
0.1
0.3
—
0.3
1.0
Restructuring, impairment, and other
expenses
—
—
—
(0.9
)
(0.9
)
—
Adjusted Operating Profit (2)
$
14.7
$
0.5
$
15.2
$
21.5
$
36.7
$
32.9
Adjusted Operating Profit Margin
13.6
%
N/A
12.1
%
15.5
%
13.9
%
13.2
%
Depreciation and stock-based compensation
expense (3)
2.3
0.7
3.0
5.5
8.5
12.8
Adjusted EBITDA (4)
$
17.0
$
1.2
$
18.2
$
27.0
$
45.2
$
45.7
Adjusted EBITDA Margin
15.7
%
N/A
14.5
%
19.5
%
17.1
%
18.4
%
Non-GAAP Reconciliation of Combined
Legacy Neenah and SWM Operating Profit for Comparability
(in millions) (Unaudited)
Three Months Ended
June 30, 2022
June 30, 2023
Legacy Neenah
Adjustments
Legacy Neenah Adjusted
Legacy SWM
Mativ Combined for
Comparison
Mativ
Corporate Unallocated
GAAP Operating Loss
$
(13.8
)
$
(3.2
)
$
(17.0
)
$
(24.0
)
$
(41.0
)
$
(33.4
)
Restructuring, impairment, and other
expenses
—
—
—
—
—
1.1
Acquisition/Merger and integration
costs
5.4
—
5.4
6.5
11.9
9.1
Adjusted Operating Loss (2)
$
(8.4
)
$
(3.2
)
$
(11.6
)
$
(17.5
)
$
(29.1
)
$
(23.2
)
% of total Net Sales
(2.7
)%
N/A
(3.8
)%
(4.1
)%
(4.0
)%
(3.5
)%
Depreciation and stock-based compensation
expense (3)
1.8
—
1.8
2.3
4.1
1.8
Adjusted EBITDA (4)
$
(6.6
)
$
(3.2
)
$
(9.8
)
$
(15.2
)
$
(25.0
)
$
(21.4
)
% of total Net Sales
(2.2
)%
N/A
(3.2
)%
(3.6
)%
(3.4
)%
(3.2
)%
Consolidated
Net Sales
$
306.8
$
—
$
306.8
$
426.4
$
733.2
$
668.3
GAAP Operating Profit (1)
17.0
(0.3
)
16.7
27.8
44.5
33.6
Amortization of intangibles and other
purchase accounting adjustments
2.3
—
2.3
11.1
13.4
15.4
Restructuring, impairment, and other
expenses
2.1
—
2.1
0.2
2.3
1.9
Acquisition/Merger and integration
costs
5.7
—
5.7
6.5
12.2
9.1
Adjusted Operating Profit (2)
$
27.1
$
(0.3
)
$
26.8
$
45.6
$
72.4
$
60.0
Adjusted Operating Profit Margin
8.8
%
N/A
8.7
%
10.7
%
9.9
%
9.0
%
Depreciation and stock-based compensation
expense (3)
9.1
—
9.1
15.4
24.5
27.4
Adjusted EBITDA (4)
$
36.2
$
(0.3
)
$
35.9
$
61.0
$
96.9
$
87.4
Adjusted EBITDA Margin
11.8
%
N/A
11.7
%
14.3
%
13.2
%
13.1
%
The following notes apply to all
periods and tables presented herein:
(1) Effective with the merger, certain
assets/net sales were reclassified out of ATM and into FBS, and to
conform with legacy SWM accounting practices certain of legacy
Neenah operating expenses were reclassified out of the ATM and FBS
operating segments and moved to Corporate Unallocated. In addition,
certain legacy Neenah Corporate Unallocated operating expenses were
reclassified out of GAAP Operating Profit and moved to Other
income, net to conform with legacy SWM accounting practices.
(2) Effective with the merger, legacy
Neenah's definition of Adjusted Operating Profit, a non-GAAP
financial measure, was conformed to legacy SWM's Adjusted Operating
Profit definition which includes an add-back for amortization of
intangible assets and other purchase accounting adjustments.
(3) Depreciation and stock-based
compensation excludes stock-based compensation included in
acquisition/merger and integration costs.
(4) Effective with the merger, legacy
SWM's definition of EBITDA, a non-GAAP financial measure, was
conformed to legacy Neenah's EBITDA definition which includes an
add-back for stock-based compensation. The revised EBITDA
definition is more aligned with the terms of the Company's Credit
Agreement.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809066397/en/
Mark Chekanow, CFA VP, Investor Relations +1-770-569-4229
Website: http://www.mativ.com
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