SWM - Mark Moore

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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
ConclusionThe accounting strategy a firm decides to use, whether aggressive or conservative, isimportant when valuing a firm. This is due to the fact that manager’s performance is usuallytied to their ability to create or maintain profits. When analyzing Schweitzer Mauduit, it seemsas if they typically follow more of an aggressive accounting policy.Asset Level of DisclosureGoodwillForeignCurrencyPensionLiabilitiesResearch andDevelopmentLowModerateHighModerateAsset Accounting Policy: Conservative or AggressiveGoodwillForeignCurrencyPensionLiabilitiesAggressiveAggressiveAggressive71
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Schweitzer-Mauduit International,
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Buyers Willingness to Switch……
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Net Sales/Accounts Receivable……
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Enterprise/EBITDA………………
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Competitive ForceRivalry Among Exis
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they spend money devoted to R & D.
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The next part of our financial anal
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Company OverviewSchweitzer-Mauduit
Page 19 and 20: table also shows that SWM’s sales
Page 21 and 22: Competitive ForceDegree of Competit
Page 23 and 24: The size of the firms in the indust
Page 25 and 26: Total Assets 3500 3000 2500 2000 1
Page 27 and 28: Excess CapacityExcess capacity aris
Page 29 and 30: scale in the industry is vital to a
Page 31 and 32: 1400 1200 1000 800 600 400 200 0 Pr
Page 33 and 34: RelationshipsThe relationships of t
Page 35 and 36: its product (indirectly), the threa
Page 37 and 38: it is easy for them to dictate the
Page 39 and 40: As far as the purpose of tobacco pa
Page 41 and 42: Volume per BuyersThe volume a buyer
Page 43 and 44: (SWM 10-K). Considering the overall
Page 45 and 46: Cost LeadershipCost leadership mean
Page 47 and 48: likely for the customer to return a
Page 49 and 50: of pride in being the “the world
Page 51 and 52: educing product costs. The governme
Page 53 and 54: It is evident when reading the tabl
Page 55 and 56: The second of the two accounting po
Page 57 and 58: SWM for the most part does a suffic
Page 59 and 60: Schweitzer-Mauduit and its competit
Page 61 and 62: their economic activity. If firms h
Page 63 and 64: contracts and, to a lesser extent,
Page 65 and 66: The ability to do this gives firms
Page 67 and 68: their sales in U.S. dollars to mini
Page 69: Schweitzer Mauduit 2004 2005 2006 2
Page 73 and 74: Schweitzer-Mauduit2004 2007 2006 20
Page 75 and 76: than capitalized. The only reason t
Page 77 and 78: 5 Δ Sales/Cash from Sales 4 3 2
Page 79 and 80: Δ Net Sales/Accounts Receivable
Page 81 and 82: Δ Net Sales/Inventory 30 25 20 1
Page 83 and 84: 0.3 CFFO/OI 0.25 0.2 0.15 0.1 0.05
Page 85 and 86: 12 CFFO/NOA 10 8 6 4 2 SWM AOI UVV
Page 87 and 88: 200 Δ Asset Turnover 150 100 50
Page 89 and 90: 4 Δ Total Accurals/ Sales 2 0 -
Page 91 and 92: ConclusionThe ratios examined above
Page 93: of a firm’s financials. The firm
Page 96 and 97: Restated Income Statement For ye
Page 98 and 99: Research and Development Schweitz
Page 100 and 101: New taxes on Net IncomeIn millions
Page 102 and 103: Amortized Goodwill
Page 104 and 105: obligations in the past five years,
Page 106 and 107: 1.200 Quick Asset Ratio 1.000 0.8
Page 108 and 109: 2004 2005 2006 2007 2008SWM 25.9881
Page 110 and 111: comparison. A small ratio shows inv
Page 112 and 113: 6 Inventory Turnover 5 4 3 2 1 SWM
Page 114 and 115: 2004 2005 2006 2007 2008SWM 79.5248
Page 116 and 117: Profitability Ratio AnalysisProfita
Page 118 and 119: Operating Expense RatioThe operatin
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15 Operating Pro`it Margin 10 5 0
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Net Profit Margin 2004 2005 2006 20
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Return on AssetsThe return on asset
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40 Return on Equity 20 0 -20 -40
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Internal Growth Rate 2004 2005 2006
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industry average as much as it did
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Debt/Equity RatioThe debt-to-equity
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Schweitzer-Mauduit is at a low 1.61
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Mauduit has stayed pretty stable th
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it looks to keep declining, meaning
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Gross profit is the next step in fo
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Balance Sheet143
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liabilities, we take the already fo
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Statement of Cash FlowsThe statemen
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Estimating Cost of CapitalCost of E
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Size-Adjusted Cost of EquityThe CAP
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The table below shows the liability
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The cost of capital is the interest
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declared overvalued. Prices falling
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P/E ForecastedCompany PPS EPS P/E F
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Dividends/Price RatioCompany PPS DP
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Price/EBITDACompany Market Cap EBIT
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Price/Free Cash FlowCompany Market
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November 2, 2009 we had to calculat
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Schweitzer-‐Mauduit's Free Ca
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Now that we have calculated the tot
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subtracting the normal earnings for
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Long-Run Residual Income Valuation
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Cost of EquityReturn on Equity-0.14
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Growth RateReturn on Equity-0.14 -0
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Return on Equity RestatedGrowth Rat
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Once the industry analysis had been
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AppendicesSales Manipulation Diagno
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CFFO/ OI Change 2004 2005 2006
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UVV 2.170832 2.687889 2.78523 2
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Capital Structure RatiosDebt to Equ
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3MonthRatesSUMMARY OUTPUT Regressio
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Coefficients Intercept 0.035115 X
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Total 71 0.987349 Intercept X Vari
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Total 35 0.775347 Intercept X Vari
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Total 59 1 2 0.939751 Coefficients
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Total 23 3 5 0.624714 Coefficients
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Residual Total 46 47 0.624852 0.848
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Residual Total 70 71 1 1 6 0.7615
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Residual Total 34 35 0.519917 0.775
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Price Earnings Growth(P.E.G.)Compan
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Discounted Free Cash Flowt 0 1 2 3
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Price(11/1/1988)Initial Costof Equi
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Figures in Millions (Except per S
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Growth Rate RestatedReturn on Equit
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Return on EquityGrowth RateKe -30%
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Schweitzer-‐Mauduit Restated
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Heakal, Reem. "What Are Economies o
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SWM - Mark Moore

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