SWM - Mark Moore

2004 2005 2006 2007 2008Schweitzer 3.5 3.5 3.5 3.5 3.5Universal 2.5 3 5 5 5Alliance Unknown Unknown 3.75 3.75 3.75(Unknown because Alliance only has last two reports on website.)As you can see, Schweitzer Mauduit’s projected increase in salaries is lower than itscompetition. We are uncertain if this is due to the fact that they just have a lower expectedsalary increase or if they are trying to use this to excuse their discount rate. This could be apotential red flag, just because they are lower than the industry average as a whole.Research and DevelopmentThe SEC requires all final reporting to be done following the rules of GAAP. GAAPstrictly prohibits the capitalization of research and development, cutting off a significantpotential asset in the long run. They do this to offset potential problems that come up if aproduct in research and development becomes obsolete. For Schweitzer Mauduit, this unlikelybecause the amount of time it takes to create a new product is significantly less than say apharmaceutical company. Nonetheless, Schweitzer has to still recognize these as expenseswithout the ability to capitalize them once they begin creating profits. The level of disclosure ispretty much the same across the industry, in that they must follow strict guidelines from GAAPrecognizing it as an expense (so moderate). Because of this, each firm follows a conservativeaccounting policy.70