Schweitzer-Mauduit International, Inc.

Welcome to SWM's first quarter 2021 earnings conference call. Hosting the call today from SWM is Dr. Jeff Kramer, Chief Executive Officer. He is joined by Andrew Wamser, Chief Financial Officer, and Mark Chekhanow, Director of Investor Relations. Today's call is being recorded and will be available for replay this afternoon. At this time, all participant lines have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require any operator assistance, please press star 0. We ask that you please pick up your handset to allow optimal sound quality. It is now my pleasure to turn the floor over to Mr. Chekhanow. Sir, the floor is yours.

Thank you, Tina. Good morning. I'm Mark Checkenow, Director of Investor Relations at SWM. Thank you for joining us to discuss our first quarter 2021 earnings results. Before we begin, I'd like to remind you that the comments included in today's conference call include forward-looking statements. Actual results may differ materially from the results suggested by these comments for a number of reasons, which are discussed in more detail in our Securities and Exchange Commission filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. In particular, the extent to which the COVID-19 pandemic continues to impact our business is uncertain and depends on numerous evolving factors which are difficult to predict, including the duration and scope of the pandemic and of actions taken in response to it. Some of the financial measures discussed during this call are non-GAAP financial measures. Reconciliations of these measures to the closest GAAP measures are included in the appendix of this presentation and the earnings release. Unless stated otherwise, financial and operational metrics are to the prior year period and relate to continuing operations. This presentation and the earnings release are available on the investor relations section of our website, www.swmintl.com. I'll now turn the call over to Jeff.

Thank you, Mark, and good morning, everyone. We are pleased to report a very strong quarter with positive momentum continuing in several key areas of the business, particularly across our fastest-growing and most strategic product lines. As we now operate in the new COVID normal, I want to again commend our global organization for staying nimble and adjusting to challenges as they arise. This quarter, it has been around logistics, as businesses around the world deal with varying constraints related to the positive pulls of an improving economy. And while many areas of the economy will grapple with inflation and tight global supply chains this year, we are confident in our ability to raise prices and manage costs to preserve excellent profitability. We are equally confident in our ability to execute on the SCAPA integration and ultimately deliver another year of strong financial performance. Bottom line, despite the heavy lifting behind the scenes to keep service levels high, Strong AMS organic sales growth and good execution in both operating segments drove 20% adjusted EPS growth in the quarter to $1.02. As you likely saw, we closed the SCAPA acquisition on April 15th, two weeks after quarter end, so none of SCAPA's financials are reflected in our results. That said, in addition to our more typical quarterly discussion, I will elaborate on the exciting new capabilities we added with SCAPA, as well as the expected acquisition, accretion, and overall annual earnings guidance we are finally able to share. Our annual guidance implies mid to high single-digit earnings growth in 2021, which reflects some of the immediate accretion we expect this year from joining the two firms. Importantly, We expect a significant step up in accretion for the following year as we complete our integration and begin our value creation activities. I can confidently say that looking longer term, we have never been better positioned for sustainable top and bottom line growth as we are today. Our end markets are demonstrating good demand, our operations are running well, and our portfolio of products and services continues to expand. furthering our vision of being the supplier of choice of performance materials and integrated solutions for specialty applications. For AMS, overall sales increased 33 percent, including the benefit of the TECRA acquisition, while organic sales increased 15 percent in the quarter. We were particularly encouraged by the breadth of strength across the portfolio. In transportation, We are up 20% overall in this profitable end market with over 50% growth in paid protection films as our customers are seeing returns to normalized demand and restocking after a choppy 2020. Despite some of the swings in sales between COVID impacts and the current recovery, we continue to see our transportation business as a consistent high growth business over the long term. Global demand for the product remains high, Consumers are becoming increasingly aware of the offering and distribution and consumer access continues to increase, especially in Asia. We have also continued to invest in improving our technology and capabilities to stay at the forefront of the industry and are starting to deliver on the benefits of the added capabilities that came with the Tecra acquisition last year. Filtration was another 20% plus glow in the first quarter. Again, demand is recovering from COVID disruptions, customers are restocking to some degree, and the fundamentals across our business are strong. Consistent with the past several quarters, air filtration led the way with over 50% growth. Importantly, though, we saw a solid double-digit growth across our entire filtration business, which includes our water filtration products as well as materials for other specialty applications such as semiconductor manufacturing. AMS's existing healthcare business also had a great quarter. By the way, we had previously referred to this as medical, but given SCAPA's broader product line and services, as well as their branding in the marketplace, we will be referring to this area in our investor communications going forward as healthcare to better represent our increased capabilities. We saw strong performance in our traditional consumer-oriented finger bandage business, as well as more specialty applications like packaging and face masks. The healthcare arena is very attractive long-term, given the need for specialized material and aging demographics, and we are excited to essentially triple our business to about $250 million annually with the addition of SCAPA. Simply put, the more things we can do for a customer, the better positioned we are to win more wallet share. With the increased scale and breadth we will have with SCAPR, our combined teams will have a far greater offering to present to our customers. There will be opportunities to cross-sell products, and perhaps most importantly, bring a variety of value-added services and capabilities like development, formulations, coding, converting, packaging, and even regulatory assistance to our current customers, which goes beyond the materials value proposition we currently provide. Lastly, construction sales also increased in the first quarter. Higher activity in the oil and gas industry drove year-over-year gains for perimeter controls materials used in the Marcellus Shell region, as well as an increased focus on solar farms. In addition, netting for highway infrastructure and other construction projects also grew nicely. Further, we saw gains in our building products there. an area we also expect to drive value from through the SCAPA acquisition, as we will bring its well-regarded specialty construction tapes to business to our customers. I think it is also important to address the budding supply chain pressures that most industries are seeing, and which we expect to experience during the remainder of the year as the global economy awakens. We are seeing pricing and supply chain pressures across many of our inputs as raw material manufacturers have been hit by temporary shutdowns, availability constraints in their key inputs, and shipping challenges just as global demand is starting to rebound. With that said, and as demonstrated by our strong 2020 results with COVID pressures, I am confident in our supply chain's ability to meet customer demands and handle the increased cost pressures although there may be some choppiness due to timing. All told, AMS sales drove over 40% adjusted operating profit growth in the segment, and we look forward to continued strength in 2021. Switching to engineered papers, the business performed as expected in the first quarter. As we had previously noted, we recently closed our Spotswood, New Jersey facility and begun transitioning that facility's key customers to products made in other sites. As part of this transition, that customer worked through legacy inventories before now restocking with new product, which had a temporary impact in the first quarter, contributing to a total segment sales decline of 10 percent. The transition is going in plan, and we are realizing cost savings from this initiative. On the positive side, We had solid performance in some specialty tobacco papers and very strong growth in heat-not-burn volumes as our customers continue to drive sales of these reduced-risk products. Of note, despite the lower sales, segment-adjusted operating profit declined only 6 percent due to good manufacturing performance and cost savings from the site closure. With that, I'll turn the call over to Andy to review the financials in more detail.