Tobacco, a Killer Investment?

Schweitzer-Mauduit International

The Company

Schweitzer-Mauduit was initially incorporated as a wholly-owned subsidiary of Kimberly Clark Corporation in August 1995, later in the year the company distributed all of its shares of SWM as a dividend to shareholders effectively creating an independent public company. The company manufactures and distributes paper and reconstituted tobacco products to the tobacco industry. A full 94% of the company's revenues are derived from the 3 paper elements that combine to make a cigarette (tipping, plug wrap and cigarette), as well as the sale of "reconstituted" tobacco used as filler for both cigars and cigarettes. The rest of the company's revenues come from the sale of drinking straw wrap, printing paper, tea bag, coffee and other filter paper, in addition to other specialized paper products. The company is the leading producer of cigarette papers in the world, as well as the leading independent producer of reconstituted tobaco leaf (no US operations).

Latest Financials

Schweitzer-Mauduit reported that fourth quarter net income was $9.0 million compared with "pro forma" net income of $1.8 million in 1995. Excluding a one-time $7.3 million pre-tax ($4.4 million after-tax) restructuring charge in the fourth quarter of 1995 to exit the reconstituted tobacco leaf (RTL) product line in the U.S. and to restructure operations at the company's Malaucene, France mill, net income increased by 45 percent compared with the prior year fourth quarter "pro forma" net income of $6.2 million. Earnings per share were $.56, a 47 percent improvement compared with "pro forma" earnings per share of $.38 for the prior year quarter, excluding the one-time charge in 1995.

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