SWM - Mark Moore

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Restated Income Statement For years ended December 31 (dollars in millions) 2003 2004 2005 2006 2007 2008 Net Sales 566.90 657.50 669.80 655.20 714.80 767.90 Cost of Goods Sold 458.00 535.40 572.50 571.10 606.70 664.70 Gross Profit 108.90 122.10 97.30 84.10 108.10 103.20 Selling expense 23.10 27.10 24.40 22.70 22.80 23.10 Research expense 0.83 1.86 1.80 1.46 1.60 0.83 General expense 23.60 28.00 24.60 27.70 35.40 32.80 Total nonmanufacturing expenses 47.53 56.96 50.80 51.86 59.80 56.76 Restructuring and Impairment expense -‐ -‐ 21.10 24.00 22.10 Operating Profit 61.37 65.14 46.50 11.14 24.30 24.37 Interest expense -‐2.30 3.70 6.20 5.50 5.90 10.50 Other expenses -‐0.20 1.50 2.50 -‐0.50 0.10 3.40 Income before Income Taxes 59.05 62.94 42.80 5.14 18.30 10.47 Provision for income taxes at 27% 12.00 12.10 10.40 -‐4.20 0.50 -‐1.90 Minority interest in earnings of subsidiaries 4.90 7.00 5.80 4.10 8.00 0.20 Loss from equity affiliates -‐ -‐ 0.20 -‐ 4.00 Net Income 42.15 43.84 26.60 5.04 9.80 8.17 96
Restated Balance Sheet For years ended December 31 (dollars in millions) Assets 2003 2004 2005 2006 2007 2008 Current Assets Cash and cash equivalents 3.7 4.5 5.1 13.7 4 11.9 Accounts Receivable 91.9 97.7 99.8 88.9 100.6 87 Inventories 97.5 119.6 123 119.2 131.2 118.4 Other Current Assets 9.2 9.9 14.8 13.8 11.4 11.1 Total Current Assets 202.3 231.7 242.7 235.6 247.2 228.4 Research and Development 7.47 7.44 7.2 5.84 6.4 7.47 PP & E 413.8 453.2 414 416.8 456 407.8 Deferred Income Tax Benefits 2.3 -‐ -‐ -‐ 15.2 26.4 Goodwill and Intangible Assets -‐ -‐ -‐ 2.8 15.6 Investment in Equity Affiliates -‐ -‐ -‐ 15.4 15.4 Other Assets 19.8 32.2 34.1 44.2 38.4 35.1 Total Assets 645.67 724.54 698 702.44 781.4 736.17 Liabilities and Stockholders' Equity Current Liabilities Current Debt 30.7 50.9 30 17.1 13.6 34.9 Accounts Payable 68.8 71.3 64.3 62.5 84.3 64.5 Accrued Expenses 74.1 76.7 71.7 80.9 111.3 91.7 Current deferred revenue 6 7.5 6 6 6 6 Total Current Liabilities 179.6 206.4 172 166.5 215.2 197.1 Long-‐term Debt 66.2 63 83.7 80.2 87.3 144.9 Pension and Post retirement Benefits 47.9 47.8 38.1 54.2 38.9 67.3 Deferred income tax liabilities 26.3 39.3 40.2 29 25 11 Deferred Revenue 41.6 35.9 30 24.1 18.1 12.3 Other Liabilities 14.6 18.7 20.1 23 22.7 18.7 Minority Interest 9.5 13.4 13.8 15.6 26 Total Liabilities 385.7 424.5 397.9 392.6 433.2 451.3 Common Stock 1.6 1.6 1.6 1.6 1.6 1.6 Additional Paid-‐in-‐Capital 61.5 63.3 63.8 63.6 68 64.6 Treasury Stock -‐21.9 -‐22.3 -‐15.6 -‐11.4 -‐12.3 -‐14.1 Retained Earnings 251.47 278.94 289 277.44 271 263.37 Unearned compensation on stock -‐0.7 -‐0.5 -‐0.3 Accumulated OCI -‐21 -‐38.4 -‐21.1 19.9 -‐30.6 Total Stockholders' Equity 259.97 300.04 300.1 309.84 348.2 284.87 Total Liabilities & Stockholders' Equity 645.67 724.54 698 702.44 781.4 736.17 97
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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
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table also shows that SWM’s sales
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Competitive ForceDegree of Competit
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The size of the firms in the indust
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Total Assets 3500 3000 2500 2000 1
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Excess CapacityExcess capacity aris
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scale in the industry is vital to a
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1400 1200 1000 800 600 400 200 0 Pr
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RelationshipsThe relationships of t
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its product (indirectly), the threa
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it is easy for them to dictate the
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As far as the purpose of tobacco pa
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Volume per BuyersThe volume a buyer
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(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 and 70: Schweitzer Mauduit 2004 2005 2006 2
Page 71 and 72: ConclusionThe accounting strategy a
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 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
Page 120 and 121: 15 Operating Pro`it Margin 10 5 0
Page 122 and 123: Net Profit Margin 2004 2005 2006 20
Page 124 and 125: Return on AssetsThe return on asset
Page 126 and 127: 40 Return on Equity 20 0 -20 -40
Page 128 and 129: Internal Growth Rate 2004 2005 2006
Page 130 and 131: industry average as much as it did
Page 132 and 133: Debt/Equity RatioThe debt-to-equity
Page 134 and 135: Schweitzer-Mauduit is at a low 1.61
Page 136 and 137: Mauduit has stayed pretty stable th
Page 138 and 139: it looks to keep declining, meaning
Page 140: Gross profit is the next step in fo
Page 143 and 144: Balance Sheet143
Page 145 and 146: liabilities, we take the already fo
Page 147 and 148:
Statement of Cash FlowsThe statemen
Page 149 and 150:
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
Page 167 and 168:
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
Page 183 and 184:
Once the industry analysis had been
Page 185 and 186:
AppendicesSales Manipulation Diagno
Page 187 and 188:
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
Page 221 and 222:
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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