SCHWEITZER MAUDUIT INTERNATIONAL INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)


[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003


[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 1-13948

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)


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

100 North Point Center East
Suite 600
Alpharetta, Georgia
30022-8246
(Address of principal executive offices)
(Zip Code)

1-800-514-0186
(Registrant’s telephone number, including area code)

No change
(Former name, former address and former fiscal year, if changed since last report)

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 [X]. No [ ].

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes [X]. No [ ].

As of July 31, 2003, 14,748,817 shares of the Corporation’s common stock, par value $.10 per share, together with preferred stock purchase rights associated therewith, were outstanding.

PART I — FINANCIAL INFORMATION


ITEM 1.		FINANCIAL STATEMENTS

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
U.S. $ in millions, except per share amounts
(Unaudited)


			For the three months					For the six months
			ended June 30,					ended June 30,

			2003			2002		2003			2002

Net Sales			$	141.7		$	125.5	$	277.4		$	247.9
	Cost of products sold			116.8			98.3		227.1			193.5

Gross Profit				24.9			27.2		50.3			54.4
	Selling expense			5.7			5.1		11.1			9.9
	Research expense			2.2			1.6		4.2			3.5
	General expense			6.2			5.6		12.1			10.9

Operating Profit				10.8			14.9		22.9			30.1
	Interest expense			0.6			1.0		1.3			2.1
	Other income (expense), net			(1.0	)		0.4		(0.7	)		0.9

Income Before Income Taxes and Minority Interest				9.2			14.3		20.9			28.9
	Provision for income taxes			1.1			4.9		5.0			9.9

Income Before Minority Interest				8.1			9.4		15.9			19.0
	Minority interest in earnings of subsidiaries			1.0			1.1		2.3			2.1

Net Income			$	7.1		$	8.3	$	13.6		$	16.9

Net Income per Common Share:
		Basic	$	.48		$	.56	$	.92		$	1.14

		Diluted	$	.47		$	.54	$	.90		$	1.11

Cash Dividends Declared per Common Share			$	.15		$	.15	$	.30		$	.30

See Notes to Unaudited Consolidated Financial Statements

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
U.S. $ in millions, except per share amounts
(Unaudited)


					June 30,			December 31,
					2003			2002
				ASSETS
Current Assets
	Cash and cash equivalents				$	6.7		$	15.3
	Accounts receivable					83.0			69.4
	Inventories					75.3			74.1
	Current income tax refunds receivable					2.2			—
	Deferred income tax benefits					4.3			3.7
	Prepaid expenses					5.9			3.8

		Total Current Assets				177.4			166.3

Gross Property, at cost						616.9			562.9
	Less accumulated depreciation					277.6			255.6

		Net Property				339.3			307.3

Noncurrent Deferred Income Tax Benefits						3.6			2.6

Deferred Charges and Other Assets						16.8			15.0

Total Assets					$	537.1		$	491.2

				LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
		Current portion of long-term debt			$	5.1		$	4.0
		Other short-term debt				14.6			5.9
		Accounts payable				47.8			45.9
		Accrued expenses				60.1			55.4
		Income taxes payable				—			1.2
		Current deferred revenue				5.5			5.6

			Total Current Liabilities			133.1			118.0

Long-Term Debt						52.8			37.4

Noncurrent Deferred Income Tax Liabilities						21.2			17.0

Noncurrent Deferred Revenue						45.3			48.0

Noncurrent Pension and Other Postretirement Benefits						45.2			47.3

Other Noncurrent Liabilities						13.8			12.6

Minority Interest						6.4			13.4

Contingencies (See Notes 5 and 6)
Stockholders’ Equity
		Preferred Stock -$.10 par value - 10,000,000 shares authorized, none issued				—			—
		Common Stock -$.10 par value - 100,000,000 shares authorized, 16,078,733 shares issued at both June 30, 2003 and December 31, 2002 (14,746,992 and 14,947,318 shares outstanding at June 30, 2003 and December 31, 2002, respectively)				l.6			1.6
		Additional paid-in capital				61.1			61.1
		Common stock in treasury, at cost – 1,331,741 and 1,131,415 shares at June 30, 2003 and December 31, 2002, respectively				(22.8	)		(18.2	)
		Retained earnings				223.7			214.6
		Unearned compensation on restricted stock				(0.4	)		(0.5	)
		Accumulated other comprehensive loss, net of tax				(43.9	)		(61.1	)

			Total Stockholders’ Equity			219.3			197.5

Total Liabilities and Stockholders’ Equity					$	537.1		$	491.2

See Notes to Unaudited Consolidated Financial Statements

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
U.S. $ in millions, except per share amounts
(Unaudited)


																			Accumulated
	Common Stock Issued				Additional		Treasury Stock												Other
					Paid-In								Retained			Unearned			Comprehensive
	Shares		Amount		Capital		Shares			Amount			Earnings			Compensation			Income (Loss)			Total

Balance, December 31, 2001		16,078,733	$	1.6	$	60.6		1,242,749		$	(19.8	)	$	190.9		$	(0.5	)	$	(53.3	)	$	179.5
Net income for the six months ended June 30, 2002														16.9									16.9
Change in unrealized fair value of derivative instruments																				0.4			0.4
Adjustments to unrealized foreign currency translation																				2.5			2.5

Comprehensive income																							19.8

Dividends declared ($0.30 per share)														(4.5	)								(4.5	)
Restricted stock issuances								(10,000	)		0.2						(0.2	)					—
Amortization of unearned compensation																	0.1						0.1
Stock issued to directors as compensation								(1,311	)		—												—
Issuance of shares for options exercised		—		—		0.3		(91,600	)		1.5			—			—			—			1.8

Balance, June 30, 2002		16,078,733		1.6		60.9		1,139,838			(18.1	)		203.3			(0.6	)		(50.4	)		196.7
Net income for the six months ended December 31, 2002														15.7									15.7
Adjustments to minimum pension liability																				(11.8	)		(11.8	)
Change in unrealized fair value of derivative instruments																				0.2			0.2
Adjustments to unrealized foreign currency translation																				0.9			0.9

Comprehensive income																							5.0

Dividends declared ($0.30 per share)														(4.4	)								(4.4	)
Purchases of treasury stock								21,900			(0.5	)											(0.5	)
Amortization of unearned compensation																	0.1						0.1
Stock issued to directors as compensation								(1,419	)		—												—
Tax benefit of options exercised						0.2																	0.2
Issuance of shares for options exercised		—		—		—		(28,904	)		0.4			—			—			—			0.4

Balance, December 31, 2002		16,078,733		1.6		61.1		1,131,415			(18.2	)		214.6			(0.5	)		(61.1	)		197.5
Net income for the six months ended June 30, 2003														13.6									13.6
Adjustments to unrealized foreign currency translation																				17.2			17.2