Mativ Holdings Inc

Previous wording

As part of the organizational realignment effective during Q1 of 2024, we reorganized into two new reportable segments: Filtration & Advanced Materials ("FAM") and Sustainable & Adhesive Solutions ("SAS"). Refer to Note 1. General of the Notes to the unaudited Condensed Consolidated Financial Statements for more information on our new segment structure.

Current wording

As part of the organizational realignment effective during the first quarter of 2024, we reorganized into two new reportable segments: Filtration & Advanced Materials ("FAM") and Sustainable & Adhesive Solutions ("SAS"). Refer to Note 1. General of the Notes to the unaudited Condensed Consolidated Financial Statements for more information on our new segment structure.

Previous wording

This MD&A discusses the financial condition and results of operations of the Company as of and for the three and six months ended June 30, 2024.

Current wording

This MD&A discusses the financial condition and results of operations of the Company as of and for the three and nine months ended September 30, 2024.

Previous wording

As of June 30, 2024, the Company had $1,136.4 million of total debt, $133.4 million of cash, and $302.6 million of undrawn capacity on its $600.0 million revolving line of credit facility (the "Revolving Facility"). Per the terms of the Company's amended credit agreement (the "Amended Credit Agreement"), net leverage was 4.1x at the end of the second quarter, versus a current maximum covenant ratio of 4.50x. The Company’s nearest debt maturity is our 6.875% $350.0 million senior unsecured notes which are due October 1, 2026. Refer to "Liquidity and Capital Resources" section for additional detail.

Current wording

As of September 30, 2024, the Company had $1,143.4 million of total debt, $162.2 million of cash, and $300.6 million of undrawn capacity on its $600.0 million revolving line of credit facility (the "Revolving Facility"). Per the terms of the Company's amended credit agreement (the "Amended Credit Agreement"), net leverage was 4.1x at the end of the third quarter, versus a current maximum covenant ratio of 4.50x.

Previous wording

FAM segment net sales of $206.4 million during the three months ended June 30, 2024 decreased $5.3 million, or 2.5%, compared to the prior-year quarter. The FAM net sales decline reflected higher volumes in filtration offset by lower volumes in advanced films as some customers remained cautious in the current economic environment, as well as lower selling prices across the segment due to input cost deflation.

Current wording

FAM segment net sales of $189.6 million during the three months ended September 30, 2024 decreased $6.2 million, or 3.2%, compared to the prior-year quarter. The FAM net sales decline reflected lower volumes in advanced films along with lower selling prices, partially offset by higher volumes in filtration & netting.

Previous wording

SAS segment net sales of $317.4 million during the three months ended June 30, 2024 increased $2.6 million, or 0.8%, compared to the prior-year quarter, reflecting higher volumes across all end-markets net of lower selling prices due to input cost deflation.

Current wording

SAS segment net sales of $308.9 million during the three months ended September 30, 2024 increased $6.5 million, or 2.1%, compared to the prior-year quarter, reflecting higher volumes across all end-markets and higher selling prices, partially offset by sales associated with closed and divested facilities.

Previous wording

Gross profit of $108.9 million during the three months ended June 30, 2024 increased $13.4 million, or 14.0%, compared to the prior-year quarter. The increase in gross profit reflected favorable relative net selling price versus input cost performance, higher volumes and improved distribution and manufacturing costs partially offset by less favorable mix contribution.

Current wording

Gross profit of $93.6 million during the three months ended September 30, 2024 increased $6.9 million, or 8.0%, compared to the prior-year quarter. The increase in gross profit reflected lower manufacturing costs, partially offset by lower volumes in advanced films and unfavorable mix.

Previous wording

Nonmanufacturing expenses of $86.6 million during the three months ended June 30, 2024 increased $2.0 million, or 2.4%, compared to the prior-year quarter. The increase is primarily due to expenses related to the EP Divestiture and organizational realignment and integration.

Current wording

Nonmanufacturing expenses of $75.4 million during the three months ended September 30, 2024 decreased $13.9 million, or 15.6%, compared to the prior-year quarter. The decrease is primarily due to 2023 expenses related to the EP Divestiture and integration.

Previous wording

The following table presents restructuring and impairment expense for the three months ended June 30, 2024 and 2023 (in millions):

Current wording

The following table presents restructuring and other impairment expense for the three months ended September 30, 2024 and 2023 (in millions):

Previous wording

The Company incurred total restructuring and impairment expense of $11.8 million and $0.5 million in the three months ended June 30, 2024 and 2023, respectively.

Current wording

The Company incurred total restructuring and other impairment expense of $11.2 million and $16.3 million in the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Restructuring and impairment expenses related to the organizational realignment plan (the "Plan") were comprised primarily of severance charges. For the three months ended June 30, 2024, these charges were $3.0 million, of which $0.5 million, $2.2 million and $0.3 million incurred within FAM, SAS and Unallocated, respectively. For additional information on the Plan, refer to Note 8. Restructuring and Impairment Activities of the Notes to the unaudited Condensed Consolidated Financial Statements.

Current wording

Restructuring and other impairment expenses related to the organizational realignment plan (the "Plan") were comprised primarily of severance charges. For the three months ended September 30, 2024, these charges were $0.7 million, of which $0.2 million, $0.5 million and none incurred within FAM, SAS and Unallocated, respectively. For additional information on the Plan, refer to Note 8. Restructuring and Other Impairment Activities of the Notes to the unaudited Condensed Consolidated Financial Statements.

Previous wording

Restructuring and impairment expenses in the FAM segment, excluding costs associated with the Plan were $0.8 million and $0.5 million for the three months ended June 30, 2024 and 2023, respectively. Restructuring and impairment expenses for the three months ended June 30, 2024 and 2023 were primarily due to facility closures announced in prior years.

Current wording

Restructuring and other impairment expenses in the FAM segment, excluding costs associated with the Plan, were primarily due to facility closures announced in prior years.

Previous wording

Restructuring and impairment expenses in the SAS segment, excluding costs associated with the Plan, were $8.0 million and none for the three months ended June 30, 2024 and 2023, respectively. Restructuring and impairment expenses for the three months ended June 30, 2024 included impairment charges of $7.2 million related to long-lived assets at our Eerbeek, Netherlands facility to reduce the carrying value of the assets to fair value using management estimates for future cash flows. The impairment assessment was performed after revising our long-term view on market conditions and profitability. The remaining restructuring and impairment expenses for the three months ended June 30, 2024 were related to a facility closure announced in a prior year.

Current wording

Restructuring and other impairment expenses in the SAS segment, excluding costs associated with the Plan, included impairment charges of $8.9 million to fully impair the net assets at our Eerbeek, Netherlands facility. The impairment assessment was performed after revising our long-term view on cash flows associated with the facility. The remaining restructuring and other impairment expenses for the three months ended September 30, 2024 were related to a facility closure announced in a prior year.

Previous wording

In the FAM segment, operating income was $25.2 million during the three months ended June 30, 2024 reflecting an unfavorable $3.3 million, or 11.6%, change, compared to the prior year period, primarily due to lower volumes in advanced films, and higher SG&A expenses, partially offset by higher volumes in filtration, favorable relative net selling price versus input cost performance and improved manufacturing efficiencies.

Current wording

In the FAM segment, operating income was $19.9 million during the three months ended September 30, 2024 reflecting an unfavorable $2.7 million, or 11.9%, change, compared to the prior year period, primarily due to lower volumes in advanced films, and lower selling prices, partially offset by higher volumes in filtration & netting, lower selling and general expenses, and improved manufacturing efficiencies.

Previous wording

In the SAS segment, operating income of $15.6 million during the three months ended June 30, 2024 increased $0.3 million, or 2.0%, compared to the prior year period, driven by favorable relative net selling price versus input cost performance, higher volumes, and improved distribution costs partially offset by unfavorable mix and higher SG&A expenses.

Current wording

In the SAS segment, operating income of $10.3 million during the three months ended September 30, 2024 increased $416.1 million, compared to the prior year period, driven by the 2023 $401.0 million goodwill impairment, decrease in other impairment expense, favorable manufacturing and distribution costs, favorable relative net selling price versus input cost performance, higher volumes, partially offset by unfavorable mix and higher selling and general expenses.

Previous wording

Unallocated expenses of $30.3 million during the three months ended June 30, 2024 decreased $3.1 million, or 9.3%, compared to the prior year period primarily due to the integration related costs incurred in the prior year period.

Current wording

Unallocated expenses of $23.2 million during the three months ended September 30, 2024 decreased $13.5 million, or 36.8%, compared to the prior year period primarily due to the EP Divestiture and integration costs incurred in the prior year period.

Previous wording

Interest expense of $18.4 million during the three months ended June 30, 2024 increased $2.0 million, or 12.2%, compared to the prior year period. Interest expense increased primarily due to higher average balances and higher average interest rates on the floating portion of our outstanding debt in 2024.

Current wording

Interest expense of $18.3 million during the three months ended September 30, 2024 increased $1.5 million, or 8.9%, compared to the prior year period. Interest expense increased primarily due to higher average balances and higher average interest rates on the floating portion of our outstanding debt in 2024.

Previous wording

A $7.6 million income tax benefit in the three months ended June 30, 2024 resulted in an effective tax rate of 84.4% compared with (66.3)% in the prior year period. The net change was primarily due to favorable mix of earnings and one time discrete tax adjustments in the prior and current periods.

Current wording

A $3.2 million income tax benefit in the three months ended September 30, 2024 resulted in an effective tax rate of 13.3% compared with (6.2)% in the prior year period. The net change was primarily due to mix of earnings in the current period, impact from valuation allowance changes in the current and prior periods, and goodwill impairment not deductible for tax purposes in the prior period.

Previous wording

Net loss during the three months ended June 30, 2024 was $1.4 million, or $0.03 per diluted share, compared with net loss of $14.3 million, or $0.26 per diluted share, during the prior-year quarter.

Current wording

Net loss during the three months ended September 30, 2024 was $20.8 million, or $0.38 per diluted share, compared with net loss of $464.3 million, or $8.50 per diluted share, during the prior-year quarter.

Previous wording

FAM segment net sales of $409.1 million during the six months ended June 30, 2024 decreased $23.2 million, or 5.4%, compared to the prior year period. Higher volumes in filtration were more than offset by lower volumes in advanced films as some customers remain cautious in the current economic environment, as well as lower selling prices across the segment due to input cost deflation.

Current wording

FAM segment net sales of $598.7 million during the nine months ended September 30, 2024 decreased $29.4 million, or 4.7%, compared to the prior year period primarily due to lower volumes in advanced films, as well as lower selling prices across the segment.

Previous wording

SAS segment net sales of $614.9 million during the six months ended June 30, 2024 decreased $28.3 million, or 4.4%, compared to the prior year period, reflecting lower volume/mix and lower selling prices due to input cost deflation.

Current wording

SAS segment net sales of $923.8 million during the nine months ended September 30, 2024 decreased $21.8 million, or 2.3%, compared to the prior year period, reflecting lower volume/mix and lower selling prices, partially offset by favorable currency translation.

Previous wording

Gross profit of $192.9 million during the six months ended June 30, 2024 increased $9.7 million, or 5.3%, compared to the prior year period. The change in gross profit reflected favorable relative net selling price versus input cost performance and favorable distribution expenses partially offset by lower volume, less favorable product mix, associated fixed cost absorption, and higher manufacturing costs. The Company monitors and continues to adjust staffing levels of manufacturing labor relative to volumes.

Current wording

Gross profit of $286.5 million during the nine months ended September 30, 2024 increased $16.6 million, or 6.2%, compared to the prior year period. The change in gross profit reflected favorable relative net selling price versus input cost performance, favorable distribution costs, partially offset by lower volume, less favorable product mix, and higher manufacturing costs. The Company monitors and continues to adjust staffing levels of manufacturing labor relative to volumes.

Previous wording

Nonmanufacturing expenses of $170.0 million during the six months ended June 30, 2024 decreased $3.7 million, or 2.1%, compared to the prior year period primarily driven by integration related costs incurred in the prior year period.

Current wording

Nonmanufacturing expenses of $245.4 million during the nine months ended September 30, 2024 decreased $17.6 million, or 6.7%, compared to the prior year period primarily driven by integration related costs incurred in the prior year period.

Previous wording

The following table presents restructuring and impairment expense by segment (in millions):

Current wording

The following table presents restructuring and other impairment expense by segment (in millions):

Previous wording

The Company incurred total restructuring and impairment expense of $26.2 million in the six months ended June 30, 2024 compared with $1.3 million in the prior year period.

Current wording

The Company incurred total restructuring and other impairment expense of $37.4 million in the nine months ended September 30, 2024 compared with $17.6 million in the prior year period.

Previous wording

Restructuring and impairment expenses related to the Plan were comprised primarily of severance charges. For the six months ended June 30, 2024, these charges were $15.7 million, of which $2.9 million, $9.5 million and $3.3 million incurred within FAM, SAS and Unallocated, respectively. For additional information on the Plan, refer to Note 8. Restructuring and Impairment Activities of the Notes to the unaudited Condensed Consolidated Financial Statements.

Current wording

Restructuring and other impairment expenses related to the Plan were comprised primarily of severance charges. For the nine months ended September 30, 2024, these charges were $16.4 million, of which $3.1 million, $10.0 million and $3.3 million incurred within FAM, SAS and Unallocated, respectively. For additional information on the Plan, refer to Note 8. Restructuring and Other Impairment Activities of the Notes to the unaudited Condensed Consolidated Financial Statements.

Previous wording

Restructuring and impairment expenses in the FAM segment, excluding costs associated with the Plan were $1.6 million and $1.2 million for the six months ended June 30, 2024 and 2023, and were due to facility closures announced in prior periods.

Current wording

Restructuring and other impairment expenses in the FAM segment, excluding costs associated with the Plan were due to facility closures announced in prior periods.

Previous wording

Restructuring and impairment expenses in the SAS segment, excluding costs associated with the Plan, were $8.9 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively. Restructuring and impairment expenses for the six months ended June 30, 2024 included impairment charges of $7.2 million related to long-lived assets at our Eerbeek, Netherlands facility to reduce the carrying value of the assets to fair value using management estimates for future cash flows. The impairment assessment was performed after revising our long-term view on market conditions and profitability. The remaining restructuring and impairment expenses for the six months ended June 30, 2024 were related to a facility closure announced in a prior year.

Current wording

Restructuring and other impairment expenses in the SAS segment, excluding costs associated with the Plan included charges of $16.1 million to fully impair the net assets at our Eerbeek, Netherlands facility. The impairment assessment was performed after revising our long-term view on cash flows associated with the facility. The remaining restructuring and other impairment expenses for the nine months ended September 30, 2024 were related to a facility closure announced in a prior year.

Previous wording

In the FAM segment, operating income of $39.8 million during the six months ended June 30, 2024 decreased $15.9 million, or 28.5%, compared to the prior year period, reflecting lower volumes and associated fixed cost absorption and higher manufacturing costs partially offset by favorable relative net selling price versus input cost performance, and favorable distribution expenses.

Current wording

In the FAM segment, operating income of $59.7 million during the nine months ended September 30, 2024 decreased $18.6 million, or 23.8%, compared to the prior year period primarily due to lower volumes in advanced films and higher manufacturing costs.

Previous wording

In the SAS segment, operating income was $19.8 million during the six months ended June 30, 2024 reflecting a $0.6 million decrease, or 2.9% change, compared to the prior year period, driven by favorable relative net selling price versus input cost performance, and favorable distribution expenses, partially offset by lower volume/mix.

Current wording

In the SAS segment, operating income was $30.1 million during the nine months ended September 30, 2024 reflecting a $415.5 million increase, compared to the prior year period, driven by the $401.0 million goodwill impairment in 2023, favorable relative net selling price versus input cost performance, and favorable distribution and manufacturing expenses, partially offset by lower volume/mix and higher selling and general expenses.

Previous wording

Unallocated expenses of $62.9 million during the six months ended June 30, 2024 decreased $5.0 million, or 7.4% compared to the prior year period primarily due to integration related costs incurred in the prior year period.

Current wording

Unallocated expenses of $86.1 million during the nine months ended September 30, 2024 decreased $18.5 million, or 17.7% compared to the prior year period primarily due to integration related costs incurred in the prior year period.

Previous wording

Interest expense of $36.7 million during the six months ended June 30, 2024 increased $4.7 million, or 14.7%, compared to the prior year period. Interest expense increased primarily due to higher average interest rates and higher average balances on the floating portion of our outstanding debt in 2024.

Current wording

Interest expense of $55.0 million during the nine months ended September 30, 2024 increased $6.2 million, or 12.7%, compared to the prior year period. Interest expense increased primarily due to higher average interest rates and higher average balances on the floating portion of our outstanding debt in 2024.

Previous wording

A $10.0 million income tax benefit in the six months ended June 30, 2024 resulted in an effective tax rate of 25.4% compared with (10.0)% in the prior year period. The net change was primarily due to favorable mix of earnings and one time discrete tax adjustments in the prior and current periods.

Current wording

A $13.2 million income tax benefit in the nine months ended September 30, 2024 resulted in an effective tax rate of 20.8% compared with (6.5)% in the prior year period. The net change was primarily due to mix of earnings in the current period, impact from valuation allowance changes in the current and prior periods, and goodwill impairment not deductible for tax purposes in the prior period.

Previous wording

Net loss during the six months ended June 30, 2024 was $29.4 million, or $0.54 per diluted share, compared to net loss of $29.8 million, or $0.55 per diluted share, during the prior year period.

Current wording

Net loss during the nine months ended September 30, 2024 was $50.2 million, or $0.93 per diluted share, compared to net loss of $494.1 million, or $9.06 per diluted share, during the prior year period.

Previous wording

As of June 30, 2024, $128.0 million of the Company's $133.4 million of cash and cash equivalents was held by foreign subsidiaries. We believe our sources of liquidity and capital, including cash on-hand, cash generated from operations and our Revolving Facility, will be sufficient to finance our continued operations, our current and long-term growth plan, and dividend payments.

Current wording

As of September 30, 2024, $134.5 million of the Company's $162.2 million of cash and cash equivalents was held by foreign subsidiaries. We believe our sources of liquidity and capital, including cash on-hand, cash generated from operations, our Revolving Facility, and our Receivables Sales Agreement (an off-balance sheet arrangement as defined in Item 303(a)(4)(ii) of SEC Regulation S-K), will be sufficient to finance our continued operations, our current and long-term growth plan, and dividend payments.

Previous wording

As of June 30, 2024, the Company had net operating working capital of $449.3 million, including cash and cash equivalents of $133.4 million, compared to net operating working capital of $433.9 million, including cash and cash equivalents of $120.2 million as of December 31, 2023. The increase is attributable primarily to an increase in accounts receivable and cash and cash equivalents, partially offset by an increase in accounts payable.

Current wording

As of September 30, 2024, the Company had net operating working capital of $452.1 million, including cash and cash equivalents of $162.2 million, compared to net operating working capital of $433.9 million, including cash and cash equivalents of $120.2 million as of December 31, 2023. The increase was attributable primarily to an increase in accounts receivable and cash and cash equivalents, partially offset by an increase in accounts payable and accrued liabilities and other current liabilities.

Previous wording

During the six months ended June 30, 2024, net changes in operating working capital resulted in cash outflows of $3.6 million, a decrease from $36.0 million of outflows during the prior year period. The $32.4 million decrease was due to an increase in net changes of accounts payable and other current liabilities, offset by a decrease in net changes of accounts receivable.

Current wording

During the nine months ended September 30, 2024, net changes in operating working capital resulted in cash inflows of $0.8 million, an increase from $13.4 million of outflows during the prior year period. The $14.2 million increase was due to an increase in net changes of accounts payable and other current liabilities, partially offset by a decrease in net changes of inventories and accounts receivable.

Previous wording

Cash used in investing activities during the six months ended June 30, 2024 was $20.0 million, compared to cash outflows of $33.9 million during the prior year period, which were mainly attributable to capital spending and proceeds from sale of assets. Within investing cash flows, capital spending was $20.8 million compared to $34.7 million in the prior year period.

Current wording

Cash used in investing activities during the nine months ended September 30, 2024 was $29.4 million, compared to cash outflows of $49.4 million during the prior year period, primarily attributable to changes in capital spending and proceeds from sale of assets. Within investing cash flows, capital spending was $32.9 million compared to $49.4 million in the prior year period.

Previous wording

Cash provided by financing activities during the six months ended June 30, 2024 was $16.4 million, compared to cash provided of $2.8 million during the prior year period. During the six months ended June 30, 2024, financing activities primarily consisted of $94.0 million of borrowings under the Revolving Facility, $10.8 million of dividends paid to the Company's stockholders, and payments on our long-term debt of $65.3 million.

Current wording

Cash provided by financing activities during the nine months ended September 30, 2024 was $12.2 million, compared to cash used of $13.2 million during the prior year period. During the nine months ended September 30, 2024, financing activities primarily consisted of $127.0 million of borrowings under the Revolving Facility, $16.2 million of dividends paid to the Company's stockholders, and payments on our long-term debt of $97.0 million.

Previous wording

During the prior year period, financing activities primarily consisted of $115.1 million of proceeds from borrowings under the Revolving Facility, $64.7 million of payments on our long-term debt, and $44.3 million of dividends paid to the Company's stockholders.

Current wording

During the prior year period, financing activities primarily consisted of $180.0 million of proceeds from borrowings under the Revolving Facility, $134.2 million of payments on our long-term debt, and $49.8 million of dividends paid to the Company's stockholders.

Previous wording

The following table presents activity related to our debt instruments for the six months ended June 30, 2024 and 2023 (in millions):

Current wording

The following table presents activity related to our debt instruments for the nine months ended September 30, 2024 and 2023 (in millions):