Mativ Holdings, Inc. - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒
	For the quarterly period ended	September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
			For the transition period from __________________to __________________

1-13948

(Commission file number)

MATIV HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware		62-1612879
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 Kimball Pl,	Suite 600
Alpharetta,	Georgia	30009
(Address of principal executive offices)		(Zip Code)

1-800-514-0186

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.10 par value	MATV	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer," “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The Company had 54,200,680 shares of common stock outstanding as of November 6, 2023.

MATIV HOLDINGS, INC.

TABLE OF CONTENTS


		Page
	Part I. - Financial Information
Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50

Item 4.	Controls and Procedures	50
	Part II. - Other Information
Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 3.	Defaults Upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	53

Signatures		54

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in millions, except per share amounts)

(Unaudited)




	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales	$	498.2	$	551.5	$	1,573.7	$	1,112.5
Cost of products sold	411.5		455.4		1,303.8		893.9
Gross profit	86.7		96.1		269.9		218.6

Selling expense	20.5		19.1		60.6		41.1
Research and development expense	5.4		5.9		16.6		12.7
General expense	63.4		100.9		185.8		189.8
Total nonmanufacturing expenses	89.3		125.9		263.0		243.6


Goodwill impairment expense	401.0		—		401.0		—
Restructuring and other impairment expense	16.3		1.8		17.6		17.3
Operating loss	(419.9)		(31.6)		(411.7)		(42.3)
Interest expense	16.8		14.9		48.8		43.7
Other income (expense), net	(0.3)		1.4		(3.6)		5.2
Loss from continuing operations before income taxes	(437.0)		(45.1)		(464.1)		(80.8)
Income tax expense (benefit), net	27.3		(11.1)		30.0		(14.4)



Net loss from continuing operations	(464.3)		(34.0)		(494.1)		(66.4)
Income from discontinued operations, net of tax	9.3		11.5		26.9		57.3
Net loss	(455.0)		(22.5)		(467.2)		(9.1)
Dividends to participating securities	(0.5)		(0.2)		(0.7)		(0.7)
Net loss attributable to Common Stockholders	$	(455.5)	$	(22.7)	$	(467.9)	$	(9.8)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net loss per share - basic:
Loss per share from continuing operations	$	(8.50)	$	(0.65)	$	(9.06)	$	(1.74)
Income per share from discontinued operations	0.17		0.22		0.49		1.49
Basic	$	(8.33)	$	(0.43)	$	(8.57)	$	(0.25)

Net loss per share – diluted:
Loss per share from continuing operations	$	(8.50)	$	(0.65)	$	(9.06)	$	(1.74)
Income per share from discontinued operations	0.17		0.22		0.49		1.49
Diluted	$	(8.33)	$	(0.43)	$	(8.57)	$	(0.25)

Weighted average shares outstanding:
Basic	54,659,100		52,593,900		54,600,100		38,415,900
Diluted	54,659,100		52,593,900		54,600,100		38,415,900

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022


Net loss	$	(455.0)	$	(22.5)	$	(467.2)	$	(9.1)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(17.7)		(84.1)		3.9		(95.2)


Unrealized gain (loss) on derivative instruments	(2.8)		19.9		(15.5)		50.0
Less: Reclassification adjustment for gain on derivative instruments included in net income	6.9		3.0		19.5		4.6


Amortization of postretirement benefit plans' costs included in net pension cost	—		(0.2)		0.5		1.7
Other comprehensive income (loss)	(13.6)		(61.4)		8.4		(38.9)
Comprehensive loss	$	(468.6)	$	(83.9)	$	(458.8)	$	(48.0)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

(Unaudited)


	September 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	84.7	$	101.1
Accounts receivable, net	179.3		178.2
Inventories, net	364.6		414.6
Income taxes receivable	18.4		19.4


Other current assets	29.1		27.6
Current assets held for sale	238.3		233.8
Total current assets	914.4		974.7
Property, plant and equipment, net	665.2		691.5
Finance lease right-of-use assets	16.7		17.3
Operating lease right-of-use assets	38.9		30.6
Deferred income tax benefits	2.8		34.4

Goodwill	468.0		844.2
Intangible assets, net	636.6		710.3
Other assets	128.6		110.1
Noncurrent assets held for sale	246.6		256.1
Total assets	$	3,117.8	$	3,669.2
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current debt	$	34.5	$	33.6
Finance lease liabilities	0.9		0.9
Operating lease liabilities	8.5		8.5
Accounts payable	149.3		180.6
Income taxes payable	11.8		10.2

Accrued expenses and other current liabilities	108.8		129.0
Current liabilities held for sale	89.7		103.4
Total current liabilities	403.5		466.2
Long-term debt	1,704.0		1,656.4
Finance lease liabilities, noncurrent	17.1		17.6
Operating lease liabilities, noncurrent	30.5		25.0
Long-term income tax payable	7.7		13.9
Pension and other postretirement benefits	55.6		60.3
Deferred income tax liabilities	137.2		152.1
Other liabilities	26.2		31.5
Noncurrent liabilities held for sale	63.0		66.9
Total liabilities	2,444.8		2,489.9

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

(Unaudited)


	September 30, 2023		December 31, 2022
Stockholders’ equity:
Preferred stock, $0.10 par value; 10,000,000 shares authorized; none issued or outstanding	—		—
Common stock, $0.10 par value; 100,000,000 shares authorized; 54,454,709 and 54,929,973 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	5.4		5.5
Additional paid-in-capital	668.3		658.5
Retained earnings	86.3		610.7
Accumulated other comprehensive loss, net of tax	(87.0)		(95.4)
Total stockholders’ equity	673.0		1,179.3
Total liabilities and stockholders’ equity	$	3,117.8	$	3,669.2

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in millions, except per share amounts)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
	Shares	Amount								Total
Balance, June 30, 2022	31,922,911	$	3.1	$	109.2	$	678.7	$	(96.5)	$	694.5

Net loss	—	—		—		(22.5)		—		(22.5)
Other comprehensive loss, net of tax	—	—		—		—		(61.4)		(61.4)
Dividends paid ($0.40 per share)	—	—		—		(22.0)		—		(22.0)
Restricted stock issuances, net	368,123	0.1		(0.1)		—		—		—
Stock-based employee compensation expense	—	—		9.5		—		—		9.5


Stock issued to directors as compensation	4,122	—		0.3		—		—		0.3
Deferred compensation directors stock trust	—	—		—		—		—		—
Purchases and retirement of common stock	(158,428)	—		—		(3.4)		—		(3.4)
Issuance of shares related to Merger	22,814,562	2.3		535.6		—		—		537.9
Balance, September 30, 2022	54,951,290	$	5.5	$	654.5	$	630.8	$	(157.9)	$	1,132.9

Balance, June 30, 2023	54,840,660	$	5.5	$	665.7	$	551.2	$	(73.4)	$	1,149.0

Net loss	—	—		—		(455)		—		(455)
Other comprehensive income, net of tax	—	—		—		—		(13.6)		(13.6)
Dividends paid ($0.10 per share)	—	—		—		(5.7)		—		(5.7)
Restricted stock issuances, net	(108,741)	—		—		—		—		—

Stock-based employee compensation expense	—	—		2.4		—		—		2.4


Stock issued to directors as compensation	4,710	—		0.2		—		—		0.2

Purchases and retirement of common stock	(281,920)	(0.1)		—		(4.2)		—		(4.3)

Balance, September 30, 2023	54,454,709	$	5.4	$	668.3	$	86.3	$	(87.0)	$	673.0

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in millions, except per share amounts)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss
	Shares	Amount								Total
Balance, December 31, 2021	31,449,563	$	3.1	$	101.7	$	696.4	$	(119.0)	$	682.2

Net loss	—	—		—		(9.1)		—		(9.1)
Other comprehensive loss, net of tax	—	—		—		—		(38.9)		(38.9)
Dividends paid ($1.28 per share)	—	—		—		(50.1)		—		(50.1)
Restricted stock issuances, net	875,149	0.1		(0.1)		—		—		—
Stock-based employee compensation expense	—	—		16.5		—		—		16.5


Stock issued to directors as compensation	5,779	—		0.8		—		—		0.8
Deferred compensation directors stock trust	60,899	—		—		—		—		—
Purchases and retirement of common stock	(254,662)	—		—		(6.4)		—		(6.4)
Issuance of shares related to Merger	22,814,562	2.3		535.6		—		—		537.9
Balance, September 30, 2022	54,951,290	$	5.5	$	654.5	$	630.8	$	(157.9)	$	1,132.9

Balance, December 31, 2022	54,929,973	$	5.5	$	658.5	$	610.7	$	(95.4)	$	1,179.3

Net loss	—	—		—		(467.2)		—		(467.2)
Other comprehensive income, net of tax	—	—		—		—		8.4		8.4
Dividends paid ($0.90 per share)	—	—		—		(50.2)		—		(50.2)
Restricted stock issuances, net	(86,814)	—		—		—		—		—
Stock options exercised	813	—		—		—		—		—
Stock-based employee compensation expense	—	—		9.1		—		—		9.1

Stock issued to directors as compensation	11,436	—		0.7		—		—		0.7

Purchases and retirement of common stock	(400,699)	(0.1)		—		(7.0)		—		(7.1)

Balance, September 30, 2023	54,454,709	$	5.4	$	668.3	$	86.3	$	(87.0)	$	673.0

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Operating
Net loss	$	(467.2)	$	(9.1)
Less: Income from discontinued operations	(26.9)		(57.3)
Loss from continuing operations	(494.1)		(66.4)
Non-cash items included in net loss:
Depreciation and amortization	112.4		72.5
Amortization of deferred issuance costs	5.6		5.1
Goodwill Impairment	401.0		—
Other impairments	14.8		13.6
Deferred income tax	24.9		(5.0)
Pension and other postretirement benefits	(10.4)		(5.9)
Stock-based compensation	9.3		16.5



Gain on sale of assets	—		(2.9)



Gain on foreign currency transactions	(1.2)		(19.8)

Other non-cash items	(7.3)		3.4
Cash received from settlement of interest swap agreements	—		23.6
Other operating	(3.8)		—
Changes in operating working capital, net of assets acquired:
Accounts receivable	(5.8)		(31.9)
Inventories	42.1		(47.5)
Prepaid expenses	(1.1)		1.8
Accounts payable and other current liabilities	(43.3)		16.1
Accrued income taxes	(5.3)		(17.8)
Net changes in operating working capital	(13.4)		(79.3)
Net cash provided by (used in) operating activities of:
Continuing operations	37.8		(44.6)
Discontinued operations	14.6		61.8
Net cash provided by operations	52.4		17.2
Investing
Capital spending	(49.4)		(27.1)
Capitalized software costs	(0.5)		(2.1)
Acquisitions, net of cash acquired	—		(462.5)

Proceeds from sale of assets	—		7.4
Cash received from settlement of cross-currency swap contracts	—		35.8
Other investing	0.5		(4.9)
Net cash used in investing of:
Continuing operations	(49.4)		(453.4)
Discontinued operations	(8.8)		(8.2)
Net cash used in investing	(58.2)		(461.6)

MATIV HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
Financing
Cash dividends paid	(49.8)		(50.1)

Proceeds from long-term debt	180.0		720.4
Payments on long-term debt	(134.2)		(179.5)
Payments for debt issuance costs	(1.5)		(22.6)
Payments on financing lease obligations	(0.7)		(0.3)
Purchases of common stock	(7.0)		(6.4)



Net cash provided by (used in) financing of:
Continuing operations	(13.2)		461.5
Discontinued operations	(0.9)		(1.2)
Net cash provided by (used in) financing	(14.1)		460.3
Effect of exchange rate changes on cash and cash equivalents	(0.9)		(8.3)
Increase (decrease) in cash and cash equivalents	(20.8)		7.6
Cash and cash equivalents at beginning of period	124.4		74.7
Cash and cash equivalents at end of period	$	103.6	$	82.3





Supplemental Cash Flow Disclosures
Cash paid for interest, net	$	94.9	$	48.0
Cash paid for taxes, net	$	27.5	$	16.8
Capital spending in accounts payable and accrued liabilities	$	7.5	$	8.7
Merger non-cash consideration	$	—	$	537.9

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. General

Nature of Business

On August 1, 2023, the Company entered into a final, binding and irrevocable offer letter (the “Offer Letter”) with Evergreen Hill Enterprise Pte. Ltd., an affiliate of PT Bukit Muria Jaya (“Evergreen Hill Enterprise”) pursuant to which Evergreen Hill Enterprise made a binding offer (the “Offer”) to acquire the Company’s Engineered Papers business ("EP business") for $620.0 million in cash, subject to customary closing date adjustments (the “Engineered Papers Transaction”). Pursuant to the terms of the Offer Letter, following the conclusion of the required employee consultation process with its French works councils (the "French Consultation Process"), the Company accepted Evergreen Hill Enterprise's Offer and countersigned the Purchase Agreement, dated as of August 1, 2023 (the "Purchase Agreement"), with respect to the Engineered Papers Transaction on October 4, 2023. Completion of the Engineered Papers Transaction remains subject to the satisfaction or waiver of customary closing conditions, including regulatory approvals. The Engineered Papers Transaction is expected to close in the fourth quarter of 2023. Upon closing of the transaction, the Company expects to record a gain on sale and the release of certain material deferred tax valuation allowances. Effective with the Offer, the EP business is presented as a discontinued operation for all periods presented. Current and non-current assets and liabilities of the EP business are classified as held for sale, and certain prior period amounts have been retrospectively revised to reflect these changes. The unaudited condensed consolidated financial statements and the notes thereto, unless otherwise indicated, are on a continuing operations basis. See Note 16. Discontinued Operations for more information on the discontinued operation and transaction.

On July 6, 2022, Schweitzer-Mauduit International, Inc. ("SWM") consummated its previously announced merger transaction involving Neenah, Inc. ("Neenah"). A wholly-owned subsidiary of SWM merged with and into Neenah (the "Merger"), with Neenah surviving the Merger as a direct and wholly-owned subsidiary of SWM. Effective as of the closing date of the Merger, SWM changed its name to Mativ Holdings, Inc. ("Mativ," "we," "our," or the "Company"). Mativ is a global leader in specialty materials headquartered in Alpharetta, Georgia, United States of America. The Company offers a wide range of critical components and engineered solutions to solve customers' most complex challenges, targeting premium applications across diversified and growing end markets. Combined with global manufacturing, supply chain, innovation, and material science capabilities, our broad portfolio of technologies combines polymers, fibers, and resins to optimize the performance of customers' products across multiple stages of the value chain. Effective with the Merger, the Company changed the name of its two reportable segments to: Advanced Technical Materials ("ATM") and Fiber-Based Solutions ("FBS"). There was no change to the historical reportable segments or historical results for the segments. Refer to Note 15. Segment Information for additional information on our segments.

We conduct business in over 100 countries and operate 40 production locations worldwide, with offices and facilities in the United States, United Kingdom, China, Germany, France, Belgium, Poland, India, Brazil, Canada, Spain, Italy, Mexico, Netherlands, Malaysia, and Luxembourg.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and the notes thereto have been prepared in accordance with the instructions on Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission ("SEC") and do not include all the information and disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods.

The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year. The unaudited condensed consolidated financial statements and these notes thereto included herein should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Reclassifications

Certain current and prior year amounts on the unaudited Condensed Consolidated Statements of Loss, unaudited Condensed Consolidated Balance Sheets, unaudited Condensed Consolidated Statements of Cash Flows, and Notes to unaudited Condensed Consolidated Financial Statements have been reclassified to conform to the current year presentation as continuing and discontinued operations and for comparative purposes.

Prior year's classification of certain end markets in the legacy SWM Advanced Materials & Structures segment have been reclassified to conform to the current year presentation of ATM's end markets for comparative purposes.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the revenues and expenses during the reporting period. Actual results could differ significantly from these estimates. The significant estimates underlying our unaudited condensed consolidated financial statements include, but are not limited to, inventory valuation, goodwill valuation, useful lives of tangible and intangible assets, business acquisitions, equity-based compensation, derivatives, receivables valuation, pension, postretirement and other benefits, taxes and contingencies.

Recently Adopted Accounting Standards

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The new standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform and the anticipated discontinuance of the London Interbank Offered Rate ("LIBOR") if certain criteria are met. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022, FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848", which extended the final sunset date from December 31, 2022 to December 31, 2024. The provisions of ASU 2020-04 and ASU 2022-06 were adopted effective April 1, 2022 and December 21, 2022, respectively, and did not have a material impact on the unaudited condensed consolidated financial statements.

Note 2. Revenue Recognition

The Company recognizes revenues when control of a product is transferred to the customer. Control is transferred when the products are shipped from one of the Company’s manufacturing facilities to the customer. Any freight costs billed to and paid by a customer are included in Net sales. The cost the Company pays to deliver finished goods to our customers is recorded as a component of Cost of products sold. These costs include the amounts paid to a third party to deliver the finished goods.

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, which generally occurs when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Generally, the Company considers collectability of amounts due under a contract to be probable upon inception of a sale based on an evaluation of the credit worthiness of each customer. If collectability is not considered to be probable, the Company defers recognition of revenue on satisfied performance obligations until the uncertainty is resolved. We record estimates for credit losses based on our expectations for the collectability of amounts due from customers, considering historical collections, expectations for future activity and other discrete events as applicable.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Variable consideration, such as discounts or price concessions, is set forth in the terms of the contract at inception and is included in the assessment of the transaction price at the outset of the arrangement. The transaction price is allocated to the individual performance obligations due under the contract based on the relative stand-alone fair value of the performance obligations identified in the contract. The Company typically uses an observable price to determine the stand-alone selling price for separate performance obligations.

The Company does not typically include extended payment terms or significant financing components in its contracts with customers. Certain sales contracts may include cash-based incentives (volume rebates or credits), which are accounted for as variable consideration. We estimate these amounts at least quarterly based on the expected forecast quantities to be provided to customers and reduce revenues recognized accordingly. Incidental items that are immaterial in the context of the contract are recognized as expense in the period incurred. The Company generally expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within Selling expense. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less and contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. As a practical expedient, the Company treats shipping and handling activities that occur after control of the good transfers as fulfillment activities, and therefore, does not account for shipping and handling costs as a separate performance obligation.

Net sales are attributed to the following geographic locations of the Company’s direct customers (in millions):


	Three Months Ended September 30,
	2023						2022
	ATM		FBS		Total		ATM		FBS		Total
United States	$	209.9	$	89.0	$	298.9	$	219.1	$	102.2	$	321.3
Europe and the former Commonwealth of Independent States	114.6		4.7		119.3		121.1		6.4		127.5
Asia-Pacific	33.6		4.1		37.7		50.5		9.6		60.1
Americas (excluding U.S.)	25.8		5.8		31.6		22.3		6.2		28.5
Other foreign countries	9.9		0.8		10.7		13.1		1.0		14.1
Net sales	$	393.8	$	104.4	$	498.2	$	426.1	$	125.4	$	551.5


	Nine Months Ended September 30,
	2023						2022
	ATM		FBS		Total		ATM		FBS		Total
United States	$	605.5	$	272.2	$	877.7	$	545.7	$	102.2	$	647.9
Europe and the former Commonwealth of Independent States	407.7		16.7		424.4		250.6		6.4		257.0
Asia-Pacific	124.8		17.8		142.6		124.5		9.6		134.1
Americas (excluding U.S.)	78.1		16.2		94.3		40.0		6.2		46.2
Other foreign countries	31.9		2.8		34.7		26.3		1.0		27.3
Net sales	$	1,248.0	$	325.7	$	1,573.7	$	987.1	$	125.4	$	1,112.5

ATM is comprised of the legacy SWM Advanced Materials & Structures segment and certain legacy Neenah segments allocated to ATM based on performance, market focus, technologies, and reporting structure. FBS is comprised of the legacy Neenah Fine Paper and Packaging segment. As a result of the Engineered Papers Transaction, the EP business is presented as a discontinued operation and no longer reported in the FBS reportable segment. Refer to Note 15. Segment Information for additional information on our segments.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The ATM segment supplies customers serving generally high-growth end markets as follows:

Industrials – substrates for tape, industrial, construction, infrastructure, performance labels, cable wrapping, abrasives, and other specialty applications.

Protective solutions – paint protection films for transportation in aftermarket channel, interlayer lamination for ballistic resistant and security glass, high-performance graphics substrates, and emerging smart glass applications.

Filtration – advanced media for transportation applications (such as air intake, cabin air, fuel oil), reverse osmosis water filtration, industrial process air and liquid applications, air purification, and HVAC and life science/personal protective equipment.

Healthcare – advanced wound care, consumer wellness, device fixation, and finger bandages.

Release liners – substrates critical to adhesive separation for applications in the personal care, label, tape, industrial, graphic arts, composites, and medical categories.

Net sales as a percentage by end market for the ATM business were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Industrials	34	%	34	%	33	%	35	%
Protective solutions	15	%	17	%	15	%	23	%
Filtration	24	%	25	%	25	%	20	%
Healthcare	17	%	14	%	16	%	17	%
Release liners	10	%	10	%	11	%	5	%
Net sales	100	%	100	%	100	%	100	%

The FBS segment supplies customers serving generally both growing and mature end markets including sustainable premium packaging solutions, imaging and communication, home & office, consumer goods, and other applications.

Transfer of Receivables

On December 23, 2022, the Company entered into an accounts receivables sales agreement (the "Receivables Sales Agreement") to sell certain trade receivables arising from revenue transactions of the Company's U.S. subsidiaries on a revolving basis. The maximum funding commitment of the Receivables Sales Agreement is $175.0 million. The agreement has an initial term of three years and can be renewed.

In connection with the Receivables Sales Agreement, the Company formed a separate bankruptcy-remote special purpose entity (“SPE”), which is a wholly owned and controlled subsidiary. The Company continuously transfers receivables to the SPE and the SPE transfers ownership and control of certain receivables that meet certain qualifying conditions to a third-party financial institution in exchange for cash. Certain receivables are held by the SPE and are pledged to secure the collectability of the sold receivables. The amount of receivables pledged as collateral as of September 30, 2023 and December 31, 2022 was $33.0 million and $34.2 million, respectively. The SPE incurs fees due to the third-party financial institution related to accounts receivable sales transactions.

The Company has continuing involvement with the receivables transferred by the SPE to the third-party financial institution by providing collection services.

The Company also participates in uncommitted trade accounts receivable sales programs ("Reverse Receivables Programs") under which certain trade receivables are sold, without recourse, to a third-party financial institution in exchange for cash. The Company does not retain any interest in or continuing involvement with the invoices after they are sold. The invoices are sold at face value, less a transaction fee.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company accounts for transactions under the Receivables Sales Agreement and Reverse Receivables Programs as sales of financial assets, with the associated receivables derecognized from the Company’s unaudited Condensed Consolidated Balance Sheets. Total fees related to the Receivables Sales Agreement and Reverse Receivables Programs are considered to be a loss on the sale of financial assets. Total fees for the three months ended September 30, 2023 were $2.4 million and are recorded within General expense in the unaudited Condensed Consolidated Statements of Loss. Continuous cash activity related to the Receivables Sales Agreement and Reverse Receivables Programs is reflected in cash from operating activities in the unaudited Condensed Consolidated Statements of Cash Flows.

The following table summarizes the activity under the Receivables Sales Agreement and Reverse Receivables Programs (in millions):


	Nine Months Ended
	September 30, 2023
Trade accounts receivable sold to financial institutions	$	839.5
Cash proceeds from financial institutions	830.7

There were no material trade accounts receivable sales for the nine months ended September 30, 2022.

Note 3. Other Comprehensive Income

Comprehensive income includes Net income (loss), as well as items charged and credited directly to stockholders' equity, which are excluded from Net income (loss). The Company has presented Comprehensive income in the unaudited Condensed Consolidated Statements of Comprehensive Income (loss). Reclassification adjustments of derivative instruments from Accumulated other comprehensive loss, net of tax are presented in Other income (expense), net; or Interest expense in the unaudited Condensed Consolidated Statements of Loss. Refer to Note 11. Derivatives for additional information. Amortization of accumulated pension and other post-employment benefit ("OPEB") liabilities are included in the computation of net pension and OPEB costs, which are discussed in Note 13. Postretirement and Other Benefits.

Components of Accumulated other comprehensive loss, net of tax, were as follows (in millions):


	September 30, 2023		December 31, 2022


Accumulated pension and OPEB liability adjustments, net of income tax benefit of $1.8 million and $2.5 million at September 30, 2023 and December 31, 2022, respectively	$	(10.4)	$	(10.9)
Accumulated unrealized gain on derivative instruments, net of income tax expense of $15.6 million and $12.9 million at September 30, 2023 and December 31, 2022, respectively	48.4		44.4
Accumulated unrealized foreign currency translation adjustments, net of income tax benefit of $16.3 million and $17.0 million at September 30, 2023 and December 31, 2022, respectively	(125.0)		(128.9)
Accumulated other comprehensive loss, net of tax	$	(87.0)	$	(95.4)

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Changes in the components of Accumulated other comprehensive loss, net of tax, were as follows (in millions):




	Three Months Ended September 30,
	2023						2022
	Pre-tax		Tax		Net of Tax		Pre-tax		Tax		Net of Tax
Pension and OPEB liability adjustments	$	—	$	—	$	—	$	0.7	$	(0.9)	$	(0.2)
Derivative instrument adjustments	5.7		(1.6)		4.1		30.1		(7.2)		22.9
Unrealized foreign currency translation adjustments	(18.4)		0.7		(17.7)		(65.8)		(18.3)		(84.1)
Total	$	(12.7)	$	(0.9)	$	(13.6)	$	(35.0)	$	(26.4)	$	(61.4)




	Nine Months Ended September 30,
	2023						2022
	Pre-tax		Tax		Net of Tax		Pre-tax		Tax		Net of Tax
Pension and OPEB liability adjustments	$	1.2	$	(0.7)	$	0.5	$	3.5	$	(1.8)	$	1.7
Derivative instrument adjustments	6.7		(2.7)		4.0		65.0		(10.4)		54.6
Unrealized foreign currency translation adjustments	4.6		(0.7)		3.9		(93.4)		(1.8)		(95.2)
Total	$	12.5	$	(4.1)	$	8.4	$	(24.9)	$	(14.0)	$	(38.9)

Note 4. Business Acquisitions

Neenah

On March 28, 2022, the Company entered into an Agreement and Plan of Merger to combine with Neenah, a specialty materials company incorporated in Delaware, in an all-stock merger of equals (the "Merger Agreement"), to create a global leader in specialty materials, accelerate growth and innovation, as well as achieve cost synergies. The Merger was approved by the shareholders of both the Company and Neenah on June 29, 2022 and was consummated on July 6, 2022. Under the terms of the Merger Agreement, which was unanimously approved by the board of directors of both companies, Neenah merged into a directly owned subsidiary of the Company, with Neenah surviving the Merger as a direct, wholly-owned subsidiary of Mativ.

Pursuant to the Merger Agreement, each share of Neenah's common stock outstanding was exchanged for 1.358 shares of common stock in the Company. As such, the Company issued approximately 22.8 million shares of its common stock to Neenah's shareholders under the terms of the Merger Agreement. Based on the Company's closing stock price on July 5, 2022, the total value of shares issued to Neenah's shareholders was approximately $534.1 million. The total consideration transferred to merge with Neenah was $1,056.3 million, which included the equity portion consideration of $534.1 million, repayment of Neenah's debt of $504.9 million, repayment of acquisition costs incurred by Neenah of $13.5 million and the fair value of unvested stock awards allocated to the pre-merger period of $3.8 million.

The Company used the proceeds of the borrowings under the amended Credit Agreement to repay existing indebtedness of Neenah and to pay other costs and expenses in connection with the Merger.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The transaction was accounted for as a business combination with the Company being treated as the accounting acquirer in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. Under this method of accounting, the total consideration has been allocated to Neenah's assets acquired and liabilities assumed based upon fair values at the Merger date. The assets acquired and liabilities assumed were measured at fair value as of the Merger date primarily using Level 3 inputs. The excess of the total consideration over the net assets acquired was recorded as goodwill and has been allocated to the ATM segment. The goodwill recorded will not be deductible for tax purposes as it is primarily attributable to expected revenue and cost synergies. The estimated purchase price allocation disclosed as of September 30, 2022 was revised during the measurement period as new information was received and analyzed resulting in increases in Deferred income tax liabilities of $19.0 million, Intangible assets, net of $17.9 million, Property, plant and equipment, net of $9.6 million, Inventories, net of $2.7 million, as well as decreases in Goodwill of $12.0 million, Accounts payable and other current liabilities of $9.1 million, Accounts receivable, net of $8.5 million, and other immaterial changes, as presented in the table below.

The consideration paid to merge with Neenah, and the fair values of the assets acquired and liabilities assumed as of the Merger date were as follows (in millions):


	Final Fair Value as of September 30, 2023		Adjustments		Preliminary Allocation as of July 6, 2022
Cash and cash equivalents	$	55.9	$	—	$	55.9
Accounts receivable, net	198.1		(8.5)		206.6
Inventory, net	194.5		2.7		191.8

Other current assets	27.8		0.3		27.5
Property, plant and equipment, net	463.2		9.6		453.6
Intangible assets, net	236.9		17.9		219.0
Other assets	42.1		0.3		41.8
Total assets	$	1,218.5	$	22.3	$	1,196.2

Current debt	$	1.9	$	—	$	1.9
Accounts payable and other current liabilities	198.8		(9.1)		207.9
Long-term debt	22.8		—		22.8
Deferred income tax liabilities	86.7		19.0		67.7
Other liabilities	82.4		0.4		82.0
Net assets acquired	$	825.9	$	12.0	$	813.9
Goodwill	230.4		(12.0)		242.4
Total consideration	$	1,056.3	$	—	$	1,056.3

The fair value of receivables acquired approximates the gross contractual value. The contractual amount not expected to be collected is immaterial.

Acquired inventory was comprised of finished goods, work in process and raw materials. The fair value of finished goods was based on net realizable value adjusted for the costs of selling and manufacturing and a reasonable profit margin on selling effort and manufacturing costs. The fair value of work in process was based on net realizable value adjusted for the costs of selling and a reasonable profit margin on selling effort. The fair value of raw materials was determined to approximate book value.

Property, plant and equipment is comprised of land, buildings and leasehold improvements, machinery and equipment, furniture and fixtures, computer equipment and construction in progress. The fair value was primarily determined using a reproduction/replacement cost approach which measures the value of an asset by estimating the cost to acquire or construct comparable assets adjusted for age and condition of the asset.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Acquired intangible assets include customer relationships, trade names and developed technologies. Intangible assets were valued using the multi-period excess earnings and relief-from-royalty methods, both forms of the income approach which considers a forecast of future cash flows generated from the use of each asset.

The following table sets forth the components of identifiable intangible assets (in millions) and their estimated useful lives (in years):


	Fair Value		Weighted-Average Amortization Period (Years)
Amortizable intangible assets:
Customer relationships	$	202.3	14.3
Trade names	14.4		20
Developed technology	20.2		7
Total amortizable intangible assets	$	236.9

The deferred tax effects resulting from the Merger include the federal, state and foreign tax consequences associated with temporary differences between the fair values of the assets acquired, liabilities assumed and the respective tax basis.

During the three and nine months ended September 30, 2023, the Company did not recognize any direct and indirect merger-related costs. During the three and nine months ended September 30, 2022, the Company recognized direct and indirect merger-related costs of $32.7 million and $46.3 million, respectively, predominantly related to legal and other professional fees. Direct and indirect merger-related costs were expensed as incurred and are primarily included in the General expense line item in the Consolidated Statements of Income (Loss).

Pro Forma Financial Information (Unaudited)

The unaudited supplemental pro forma financial information presents the combined results of operations for the periods presented, as if the Merger had occurred on January 1, 2021. The unaudited supplemental pro forma financial information includes the following adjustments related to the Merger: incremental depreciation expense related to fair value adjustments to property, plant and equipment, amortization of intangible assets, interest expense for the additional indebtedness incurred to complete the Merger, and applicable tax adjustments based on statutory rates in the jurisdictions where the adjustments occurred.

The unaudited supplemental pro forma financial information presented below is not necessarily indicative of consolidated results of operations of the combined business had the Merger occurred as of January 1, 2021 (in millions):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022
Net sales	$	561.1	$	1,713.6
Net income	15.8		(0.9)

Note 5. Net Loss Per Share

The Company uses the two-class method to calculate Net loss per share. The Company has granted restricted stock that contains non-forfeitable rights to dividends on unvested shares. Since these unvested shares are considered participating securities under the two-class method, the Company allocates loss per share to common stock and participating securities according to dividends declared and participation rights in undistributed earnings.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Diluted net loss per common share is computed based on Net loss divided by the weighted average number of common and potential common shares outstanding. Potential common shares during the respective periods are those related to dilutive stock-based compensation, including long-term stock-based incentive compensation and directors’ accumulated deferred stock compensation, which may be received by the directors in the form of stock or cash. A reconciliation of the average number of common and potential common shares outstanding used in the calculations of basic and diluted net loss per share follows (in millions, shares in thousands):




	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator (basic and diluted):
Net loss	$	(455.0)	$	(22.5)	$	(467.2)	$	(9.1)
Less: Dividends to participating securities	(0.5)		(0.2)		(0.7)		(0.7)

Net loss attributable to Common Stockholders	$	(455.5)	$	(22.7)	$	(467.9)	$	(9.8)

Denominator:
Average number of common shares outstanding	54,659.1		52,593.9		54,600.1		38,415.9
Effect of dilutive stock-based compensation(1)	—		—		—		—
Average number of common and potential common shares outstanding	54,659.1		52,593.9		54,600.1		38,415.9

(1) Diluted loss per share excludes the weighted average potential common shares for the three and nine months ended September 30, 2023 and 2022 as their inclusion would be anti-dilutive.

Note 6. Inventories, Net

Inventories, net are valued at the lower of cost (using the first-in, first-out and weighted average methods) or net realizable value. The Company's costs included in inventory primarily include resins, pulp, chemicals, direct labor, utilities, maintenance, depreciation, finishing supplies and an allocation of certain overhead costs. Machine start-up costs or abnormal machine shutdowns are expensed in the period incurred and are not reflected in inventory. The Company reviews inventories at least quarterly to determine the necessity of write-offs for excess, obsolete or unsalable inventory. The Company estimates write-offs for inventory obsolescence and shrinkage based on its judgment of future realization. These reviews require the Company to assess customer and market demand. There were no material inventory write-offs during the three and nine months ended September 30, 2023.

The following table summarizes inventories by major class (in millions):




	September 30, 2023		December 31, 2022
Raw materials	$	145.9	$	162.1
Work in process	57.1		57.9
Finished goods	152.7		180.0
Supplies and other	8.9		14.6
Total inventories	$	364.6	$	414.6

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7. Goodwill

The changes in the carrying amount of goodwill by reportable segment were as follows (in millions):


	ATM		FBS		Total
Balance at December 31, 2022	$	842.6	$	1.6	$	844.2
Goodwill acquired during the period(1)	16.0		—		16.0
Goodwill impairment	(401.0)		—		(401.0)
Foreign currency translation	8.8		—		8.8
Balance at September 30, 2023	$	466.4	$	1.6	$	468.0

(1) Related to the measurement period adjustments for the Merger.

Accumulated impairment loss for the FBS segment was $2.7 million as of September 30, 2023 and December 31, 2022. Accumulated impairment loss for the ATM segment was $401.0 million as of September 30, 2023 and no accumulated impairment loss was recognized as of December 31, 2022.

Goodwill is not subject to amortization and is tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The first step in a goodwill impairment assessment is to evaluate qualitative factors, such as macroeconomic conditions and our overall financial performance by reporting unit to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. Otherwise, we proceed to the goodwill impairment test, where the fair value of the reporting unit is compared to its carrying value. The difference between the total fair value of the reporting unit and the carrying value is recognized as an impairment to the reporting unit's goodwill.

Effective July 1, 2023, and as a result of our ongoing integration efforts, we identified a change in our operating segments. While the ATM reportable segment remains as an aggregation of the Company’s highly engineered polymer, resin and fiber-based substrates, nets, films, adhesive tapes, and other non-woven products, the segment was disaggregated into five reporting units due to changes in internal reporting of operating results and related segment level management. See Note 15. Segment Information for additional information on our segments.

Further, during 2023, the sustained impact of macro-economic conditions, an increasingly global competitive environment, moderation in certain projected volume expectations, and a sustained decrease in our share price contributed to the decline in reporting unit fair value. Additionally, management completed a long term financial model, aligning with the new reporting unit structure during the third quarter. That model’s forecast reflects the higher relative allocation of corporate overhead costs to continuing operations as a result of the proposed sale of our EP business.

As a result, we performed an interim quantitative goodwill impairment test, which resulted in a non-cash impairment charge of $401.0 million.

The fair value of a reporting unit is based on an income approach, utilizing estimated future cash flows discounted at a rate commensurate with the risk involved and considers significant assumptions including projections of future performance, specifically our ability to sustain and grow market share at forecasted margins and significant assumptions around the rate a market participant would use to discount those cash flows. Changes in these assumptions can have a significant impact on the assessment of fair value. While the fair value of each reporting unit was ultimately estimated using the income approach, management also evaluated fair value under the market approach to evaluate the reasonableness of the estimated fair values.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8. Intangible Assets

At September 30, 2023 and December 31, 2022, the Company had $598.1 million and $652.5 million of intangible assets in its ATM segment and $38.5 million and $57.8 million in its FBS segment, respectively. The gross carrying amount and accumulated amortization for intangible assets consisted of the following (in millions):


	September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
Customer relationships	$	732.6	$	194.5	$	538.1
Developed technology	71.1		32.0		39.1
Trade names	32.7		6.6		26.1
Acquired technology	20.3		3.6		16.7
Non-compete agreements	2.9		2.8		0.1
Patents	1.9		0.9		1.0
Total(1)(2)	$	861.5	$	240.4	$	621.1

Unamortized Intangible Assets
Trade names	$	15.5	$	—	$	15.5

(1) Includes a decrease of $26.0 million related to measurement period adjustments for the Merger recognized during the nine months ended September 30, 2023.

(2) Includes $0.7 million intangible asset impairment for the three and nine months ended September 30, 2023.


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
Customer relationships	$	754.8	$	159.4	$	595.4
Developed technology	71.2		26.5		44.7
Trade names	35.8		4.4		31.4
Acquired technology	23.5		1.6		21.9
Non-compete agreements	2.9		2.7		0.2
Patents	1.9		0.7		1.2
Total	$	890.1	$	195.3	$	694.8

Unamortized Intangible Assets
Trade names(1)	$	15.5	$	—	$	15.5

(1) During the first quarter of 2022, indefinite-lived trade names and developed technology with net carrying amounts of $4.2 million and $0.5 million were allocated to the disposal group classified as held for sale and subsequently impaired.

Amortization expense of intangible assets was $15.5 million and $14.8 million for the three months ended September 30, 2023 and 2022, respectively, and $45.5 million and $37.0 million for the nine months ended September 30, 2023 and 2022, respectively. Finite-lived intangibles are expensed using the straight-line amortization method.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9. Restructuring and Other Impairment Activities

The Company incurred restructuring and other impairment expense of $16.3 million and $1.8 million for the three months ended September 30, 2023 and 2022, respectively, and $17.6 million and $17.3 million for the nine months ended September 30, 2023 and 2022, respectively.

Restructuring and other impairment expenses in the ATM segment were $6.8 million for the three months ended September 30, 2023. During the third quarter of 2023, we announced plans to close two facilities as a result of decisions to exit certain end markets amid ongoing manufacturing optimization efforts. The facilities are expected to close in 2024 and 2025. As a result of these planned closures, $5.5 million of fixed asset and certain other asset impairment was recognized.

In addition, the ATM segment recognized $0.5 million of restructuring expense for the three months ended September 30, 2023 related to facilities closed in prior years.

Restructuring and other impairment expenses in the ATM segment for the three months ended September 30, 2022 were $0.9 million, which included $0.7 million related to facilities closed in prior years.

In the ATM segment, restructuring and other impairment expenses for the nine months ended September 30, 2023 were $8.0 million primarily comprised of fixed asset and certain other asset impairment for our planned facility closures and $1.5 million related to facilities closed in prior years. Restructuring and other impairment expenses for the nine months ended September 30, 2022 were $14.9 million, primarily related to the impairment of certain assets in conjunction with the divestiture of a portion of the legacy SWM ATM segment. These assets were sold during the third quarter of 2022 for net proceeds of $4.6 million and a loss of $0.4 million.

Through September 30, 2023 the Company has recognized accumulated restructuring charges of $5.5 million related to the announced facility closures and $2.7 million related to facilities closed in prior years in the ATM segment. During the remainder of 2023, the Company expects to record additional restructuring related costs in the ATM segment of approximately $3.1 million related to the closing of these facilities.

In the FBS segment, restructuring and other impairment expenses for the nine months ended September 30, 2023 and 2022 were $9.6 million and $1.6 million, respectively. During the third quarter of 2023 the Company recognized impairment charges of $9.5 million related to long-lived assets at our Eerbeek, Netherlands facility. An impairment assessment was performed after significant changes in market conditions, including the entrance of new competitors and products caused management to revise our long-term view on pricing and volume recovery. The impairment reduced the carrying value of the assets to fair value, which was determined using management estimates for future cash flows. Restructuring and other impairment expenses for the nine months ended September 30, 2022 were $1.6 million related to closed facilities.

Other restructuring related inventory adjustments and acceleration of depreciation due to changes in the estimated lives of certain assets resulting from planned facility closures are included in Cost of products sold. We recorded $2.8 million and $3.1 million for the three and nine months ended September 30, 2023 primarily to write down inventory to estimated net realizable value. There were no other restructuring related inventory adjustments for the three and nine months ended September 30, 2022.

Other restructuring related charges are included in corporate General expense as other unallocated items as these costs are not included in management's evaluation of the segments' performance. There were no unallocated expenses included in corporate General expense in the three months ended September 30, 2023 and $1.1 million in the nine months ended September 30, 2023 related to the relocation of the corporate headquarters. Unallocated restructuring and other impairment expense for the three and nine months ended September 30, 2022 included $0.8 million related to the modification of leases resulting from the Merger.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table summarizes total restructuring, restructuring related, and other impairment expense (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Restructuring and other impairment expense:
Severance	$	—	$	0.3	$	0.1	$	1.5
Asset impairment	15.0		0.8		15.0		13.7
Other	1.3		0.7		2.5		2.1
Total restructuring and other impairment expense	$	16.3	$	1.8	$	17.6	$	17.3
Other restructuring related charges - Cost of products sold
Accelerated depreciation and amortization	$	—	$	—	$	0.3	$	—
Inventory write-downs to estimated net realizable value	$	2.8	$	—	$	2.8	—
Total other restructuring related charges - Cost of products sold	2.8		—		3.1		—
Other restructuring related charges - General expense
Accelerated depreciation and amortization	—		—		1.1		—
Total restructuring, restructuring related and other impairment expense	$	19.1	$	1.8	$	21.8	$	17.3

The following table summarizes changes in restructuring liabilities (in millions):


	Nine Months Ended September 30,
	2023		2022
Balance at beginning of period	$	4.0	$	3.8
Accruals for announced programs	(0.2)		0.3
Accruals assumed from Merger(1)	—		2.3
Cash payments	(0.5)		(1.5)
Foreign exchange impact	—		(0.1)
Balance at end of period	$	3.3	$	4.8

(1) Accrued liabilities primarily for severance related to an optimization program at facilities acquired through the Merger.

Restructuring liabilities were classified within Accrued expenses and other current liabilities and Other liabilities in the unaudited Condensed Consolidated Balance Sheets.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10. Debt

Total debt, net of debt issuance costs, is summarized in the following table (in millions):


	September 30, 2023		December 31, 2022
Revolving facility - U.S. dollar borrowings	$	266.0	$	191.0
Term loan A facility	190.5		192.0
Term loan B facility	342.1		344.8
Delayed draw term loan	617.5		641.9
6.875% Senior unsecured notes due October 1, 2026, net of discount of $3.5 million and $4.3 million at September 30, 2023 and December 31, 2022, respectively(1)	338.5		339.0

German loan agreement	9.9		10.7

Debt issuance costs	(26.0)		(29.4)
Total debt	1,738.5		1,690.0
Less: Current debt	(34.5)		(33.6)
Total long-term debt	$	1,704.0	$	1,656.4

(1) Amount includes a $8.0 million and $6.7 million decrease in fair value as of September 30, 2023 and December 31, 2022, respectively, due to changes in benchmark interest rates related to the senior unsecured notes. Refer to Note 11. Derivatives for additional information on our interest rate swaps designated as a fair value hedge.

Credit Facility

On September 25, 2018, the Company entered into a $700.0 million credit agreement (the “Credit Agreement”), which replaced the Company’s previous senior secured credit facilities and provides for a five-year $500.0 million revolving line of credit (the “Revolving Credit Facility”) and a seven-year $200.0 million bank term loan facility (the “Term Loan A Facility”). Subject to certain conditions, including the absence of a default or event of default under the Credit Agreement, the Company may request incremental loans to be extended under the Revolving Credit Facility or as additional Term Loan Facilities so long as the Company is in pro forma compliance with the financial covenants set forth in the Credit Agreement and the aggregate of such increases does not exceed $400.0 million.

On February 10, 2021, the Company amended its Credit Agreement to, among other things, add a new seven-year $350.0 million Term Loan B Facility (the “Term Loan B Facility”) and to decrease the incremental loans that may be extended at the Company’s request to $250.0 million. The amended Credit Agreement was further amended effective February 22, 2022 to adjust the step-down schedule for the maximum net debt to EBITDA ratio.

On May 6, 2022, the Company further amended its Credit Agreement in order to extend the maturity of the Revolving Credit Facility and the Term Loan A Facility to May 6, 2027, and to increase the availability under the Revolving Credit Facility, subject to consummation of the Merger, to $600.0 million. Additionally, the Company added a $650.0 million delayed draw term loan facility (the "Delayed Draw Term Loan Facility"), which the Company borrowed on July 5, 2022, in connection with the Merger. The Delayed Draw Term Loan Facility matures on May 6, 2027.

Effective July 1, 2023, pursuant to the amended Credit Agreement on June 5, 2023, borrowings under the Term Loan B Facility in U.S. dollar will bear interest equal to a forward-looking term rate based on Term SOFR (subject to a minimum floor of 0.75%) plus 2.75%. Borrowings under the Term Loan B Facility in Euros will bear interest equal to EURIBOR (subject to a minimum floor of 0%) plus 3.75%.

On September 29, 2023, the Company further amended its Credit Agreement to permit the consummation of the sale of the Company's Engineered Papers business to the buyer. Under the terms of the Amended Credit Agreement, Mativ will continue to be required to maintain certain financial ratios and comply with certain financial covenants consistent with the Prior Agreement, including a requirement to maintain a maximum net debt to EBITDA ratio of

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(a) 4.75 to 1.00 for the consecutive trailing four fiscal quarter period ended September 30, 2023, (b) (i) solely if the Transaction has not been consummated on or before December 31, 2023, 4.75 to 1.00, or (ii) otherwise, 4.50 to 1.00, for such period ended December 31, 2023, and (c) 4.50 to 1.00 for such period ended March 31, 2024 and thereafter.

Borrowings under the amended Term Loan A Facility ("Term Loan A Credit Facility") will bear interest, at a rate equal to either (1) a forward-looking term rate based on the Secured Overnight Financing Rate (“Term SOFR”), plus the applicable margin or (2) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as published by the Wall Street Journal as the “bank prime loan” rate, and (c) Term SOFR plus 1.0%, in each case plus the applicable margin. The applicable margin for borrowings under the Term Loan A Credit Facility is expected to range from 1.25% to 2.75% for SOFR loans and from 0.25% to 1.75% for base rate loans, in each case depending on the Company’s then current net debt to EBITDA ratio.

Borrowings under the amended Revolving Facility or the Delayed Draw Term Loan facility in U.S. dollars will bear interest, at the Company’s option, at a rate equal to either (1) a forward-looking term rate based on Term SOFR, plus the applicable margin or (2) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as published by the Wall Street Journal as the “bank prime loan” rate, and (c) one-month Term SOFR plus 1.0%, in each case plus the applicable margin. Borrowings under the Revolving Facility in Euros will bear interest at a rate equal to the reserve-adjusted Euro interbank offered rate, or EURIBOR, plus the applicable margin. The applicable margin for borrowings under the revolving credit agreement is expected to range from 1.00% to 2.50% for SOFR loans and EURIBOR loans, and from 0.00% to 1.50% for base rate loans, in each case, depending on the Company’s then current net debt to EBITDA ratio.

Borrowings under the Term Loan B Facility will bear interest, at the Company's option, at either (i) 3.75% in excess of a reserve adjusted LIBOR rate (subject to a minimum floor of 0.75%) or (ii) 2.75% in excess of an alternative base rate.

Under the terms of the amended Credit Agreement, the Company is required to maintain certain financial ratios and comply with certain financial covenants, including maintaining a net debt to EBITDA ratio, as defined in the amended Credit Agreement, calculated on a trailing four fiscal quarter basis, not greater than 4.75x and an interest coverage ratio, also as defined in the amended Credit Agreement, of not less than 3.00x. The maximum allowable net debt to EBITDA ratio will decrease returning to 4.50x no later than March 31, 2024, as defined in the amendment entered on September 29, 2023. In addition, borrowings and loans made under the amended Credit Agreement are secured by substantially all of the Company’s and the guarantors’ personal property, excluding certain customary items of collateral, and will be guaranteed by the Company’s existing and future wholly-owned direct material domestic subsidiaries and by SWM Luxembourg.

The Company was in compliance with all of its covenants under the amended Credit Agreement at September 30, 2023.

Indenture for 6.875% Senior Unsecured Notes Due 2026

On September 25, 2018, the Company closed a private offering of $350.0 million of 6.875% senior unsecured notes due 2026 (the “Notes”). The Notes were sold in a private placement in reliance on Rule 144A and Regulation S under the Securities Act of 1933, as amended, pursuant to a purchase agreement between the Company, certain subsidiaries of the Company and a third-party financial institution, as representative of the initial purchasers. The Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned subsidiaries that is a borrower under or that guarantees obligations under the amended Credit Agreement or that guarantees certain other indebtedness, subject to certain exceptions.

The Notes were issued pursuant to an Indenture, dated as of September 25, 2018 (the “Indenture”), by and among the Company, the guarantors listed therein and a third-party financial institution, as trustee. The Indenture provides that interest on the Notes will accrue from September 25, 2018 and is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2019, and the Notes mature on October 1, 2026.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company may redeem some or all of the Notes at any time on or after October 1, 2021, at the redemption prices set forth in the Indenture, together with accrued and unpaid interest, if any, to, but excluding, the redemption date. If the Company sells certain assets or consummates certain change of control transactions, the Company will be required to make an offer to repurchase the Notes, subject to certain conditions.

The Indenture contains certain covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to incur additional indebtedness, make certain dividends, repurchase Company stock or make other distributions, make certain investments, create liens, transfer or sell assets, merge or consolidate and enter into transactions with the Company’s affiliates. Such covenants are subject to a number of exceptions and qualifications set forth in the Indenture. The Indenture also contains certain customary events of default, including failure to make payments in respect of the principal amount of the Notes, failure to make payments of interest on the Notes when due and payable, failure to comply with certain covenants and agreements and certain events of bankruptcy or insolvency. The Company was in compliance with all of its covenants under the Indenture at September 30, 2023.

Other

On May 30, 2022, Neenah entered into a project financing agreement for the construction of a melt blown machine (the "German Loan Agreement"). This debt was assumed by the Company upon consummation of the Merger. The German Loan Agreement provided $10.7 million of construction financing which is secured by the melt blown machine. The loan matures in March 2027 and principal is repaid in equal quarterly installments beginning in June 2023. The interest rate on amounts outstanding is 1.75% and is payable quarterly.

As of September 30, 2023, the average interest rate was 8.25% on outstanding Revolving Facility borrowings, 8.17% on outstanding Term Loan A Credit Facility borrowings, 9.18% on outstanding Term Loan B Facility borrowings, and 7.92% on outstanding Delayed Draw Term Loan Facility borrowings. The effective rate on the 6.875% senior unsecured notes due 2026 was 7.248%. The weighted average effective interest rate on the Company's debt facilities, including the impact of interest rate hedges, was approximately 5.97% and 4.90% for the nine months ended September 30, 2023 and 2022, respectively.

Principal Repayments

The following is the expected maturities for the Company's debt obligations as of September 30, 2023 (in millions):


2023	$	10.8
2024	40.6
2025	40.6
2026	379.2
2027	966.0
Thereafter	327.3
Total	$	1,764.5

Fair Value of Debt

At September 30, 2023 and December 31, 2022, the fair market value of the Company's 6.875% senior unsecured notes was $319.4 million and $308.4 million, respectively. The fair market value for the senior unsecured notes was determined using quoted market prices, which are directly observable Level 1 inputs. The fair market value of all other debt as of September 30, 2023 and December 31, 2022 approximated the respective carrying amounts as the interest rates approximate current market indices.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 11. Derivatives

In the normal course of business, the Company is exposed to foreign currency exchange rate risk and interest rate risk on its variable-rate debt. To manage these risks, the Company utilizes a variety of practices including, where considered appropriate, derivative instruments. The Company has no derivative instruments for trading or speculative purposes or derivatives with credit risk-related contingent features. All derivative instruments used by the Company are either exchange traded or are entered into with major financial institutions to reduce credit risk and risk of nonperformance by third parties. The fair values of the Company’s derivative instruments are determined using observable inputs and are considered Level 2 assets or liabilities.

The Company utilizes currency forward, swap and, to a lesser extent, option contracts to selectively hedge its exposure to foreign currency risk when it is practical and economical to do so. The use of these contracts minimizes transactional exposure to exchange rate changes. We designate certain of our foreign currency hedges as cash flow hedges. Changes in the fair value of cash flow hedges are reported as a component of Accumulated other comprehensive loss, net of tax and reclassified into earnings when the forecasted transaction affects earnings. For foreign exchange contracts not designated as cash flow hedges, changes in the contracts’ fair values are recorded to Net income (loss) each period.

The Company selectively hedges its exposure to interest rate increases on variable-rate, long-term debt when it is practical and economical to do so. Changes in the fair value of interest rate contracts considered cash flow hedges are reported as a component of Accumulated other comprehensive loss, net of tax and reclassified into earnings when the forecasted transaction affects earnings. Interest rate contracts are also used to hedge changes in the fair value of a portion of our senior unsecured notes attributable to changes in the benchmark interest rate. Changes in the fair value of the interest rate contracts and corresponding portion of the hedged debt are recognized in Interest expense.

The Company also uses cross-currency swap contracts to selectively hedge its exposure to foreign currency related changes in our net investments in certain foreign operations. We designate these cross-currency swap contracts as net investment hedges. Changes in the fair value of these hedges are deferred within the foreign currency translation component of Accumulated other comprehensive loss, net of tax and reclassified into earnings when the foreign investment is sold or substantially liquidated.

During the second quarter of 2022, the Company entered into cross-currency swaps, with a combined notional value of €450.0 million ($478.2 million) maturing on April 1, 2024 and 2025 and October 1, 2026, designated as a hedge of a portion of the Company’s net investment in Euro-denominated subsidiaries. These contracts involve the periodic exchange of U.S. dollar fixed interest rate payments for fixed Euro-denominated payments over the respective contract terms, in addition to an exchange of notional amounts upon maturity. One cross-currency swap involves the periodic exchange of U.S. dollar variable interest rate payments for Euro-denominated variable payments.

During 2019 and 2021, the Company entered into a series of pay-fixed, receive-variable interest rate swaps, maturing on January 31, 2027 and December 31, 2027. During March 2022, the interest rate swaps, which had a combined notional value of $500.0 million were terminated and a total settlement of $23.6 million was received from the counterparties. The settlement amount, which represents the fair value of contracts at the time of termination, was recorded in Accumulated other comprehensive loss, net of tax and will be amortized as a component of Interest expense over the remaining term of the hedged forecasted transaction.

During March 2022, immediately following the termination of the aforementioned interest rate swaps, the Company entered into pay-fixed, receive-variable interest rate swaps, maturing on January 31, 2027 and December 31, 2027. The swaps have a combined notional value of $500.0 million which declines over the terms of the underlying contracts. The terms of the interest rate swaps mirror the terms of the underlying debt, including timing of the payments and interest rates.

During June 2022, the Company entered into a fixed to float interest rate swap with a notional amount of $173.4 million, maturing on October 1, 2026. The swap was designated as a fair value hedge for a portion of our

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6.875% senior unsecured notes due in 2026. The contract involves the periodic exchange of fixed interest rate payments for variable payments.

During September 2022, the Company entered into pay-fixed, receive-variable interest rate swaps, maturing on May 6, 2027 and April 20, 2028. The swaps have a combined notional value of $650.0 million which declines over the terms of the underlying contracts. The terms of the interest rate swaps mirror the terms of the underlying debt, including timing of the payments and interest rates.

The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations at September 30, 2023 (in millions):


	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedges:
Foreign exchange contracts - net investment hedge	Accounts receivable, net	$	2.9	Accrued expenses and other current liabilities	$	0.2
Foreign exchange contracts - net investment hedge	Other assets	3.6		Other liabilities	2.8
Interest rate contracts - cash flow hedge	Accounts receivable, net	0.4		Accrued expenses and other current liabilities	—
Interest rate contracts - cash flow hedge	Other assets	48.8		Other liabilities	—
Interest rate contracts - fair value hedge	Other assets	—		Other liabilities	8.0
Total derivatives designated as hedges		$	55.7		$	11.0

Derivatives not designated as hedges:
Foreign exchange contracts	Accounts receivable, net	1.2		Accrued expenses and other current liabilities	1.0
Total derivatives not designated as hedges		$	1.2		$	1.0
Total derivatives		$	56.9		$	12.0

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the fair value of asset and liability derivatives and the respective balance sheet locations at December 31, 2022 (in millions):


	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedges:
Foreign exchange contracts - net investment hedge	Accounts receivable, net	$	2.4	Accrued expenses and other current liabilities	$	0.2
Foreign exchange contracts - net investment hedge	Other assets	1.1		Other liabilities	4.7
Interest rate contracts - cash flow hedge	Accounts receivable, net	0.6		Accrued expenses and other current liabilities	—
Interest rate contracts - cash flow hedge	Other assets	38.1		Other liabilities	—
Interest rate contracts - fair value hedge	Other assets	—		Other liabilities	6.7
Total derivatives designated as hedges		$	42.2		$	11.6

Derivatives not designated as hedges:
Foreign exchange contracts	Accounts receivable, net	2.7		Accrued expenses and other current liabilities	2.1
Total derivatives not designated as hedges		$	2.7		$	2.1
Total derivatives		$	44.9		$	13.7

The following table presents the fair value of fixed-to-floating interest rate swaps designated as a fair value hedge of our Notes and the respective balance sheet location at September 30, 2023 (in millions):


	Balance Sheet Location	Carrying Amount of Hedged Item		Cumulative Amount of Adjustment Included in Carrying Amount
Interest rate contracts - fair value hedge	Long-term debt	$	338.5	$	(8.0)

Refer to Note 10. Debt for further information on the Notes.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the net effect that derivative instruments designated in hedging relationships had on Accumulated other comprehensive loss, net of tax and results of operations (in millions):


Derivatives Designated in Hedging Relationships	Unrealized Gain (Loss) Recognized in AOCL on Derivatives, Net of Tax								Location of Gain (Loss) Reclassified from AOCL	Gain (Loss) Reclassified from AOCL
	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022			2023		2022		2023		2022
Derivatives designated as cash flow hedge

Foreign exchange contracts	$	—	$	0.1	$	0.2	$	0.3	Other income,(expense) net	$	—	$	—	$	0.1	$	(0.1)
Interest rate contracts	(2.8)		19.7		(15.5)		47.8		Interest expense	(6.9)		(3.0)		(19.5)		(4.5)
Derivatives designated as net investment hedge
Foreign exchange contracts	11.2		0.1		2.9		43.7
Total gain (loss)	$	8.4	$	19.9	$	(12.4)	$	91.8		$	(6.9)	$	(3.0)	$	(19.4)	$	(4.6)

The Company's designated derivative instruments are highly effective. As such, there were no gains or losses recognized immediately in income related to the hedge ineffectiveness or amounts excluded from hedge effectiveness testing for the three and nine months ended September 30, 2023 and 2022, other than those related to the cross-currency swaps, noted below.

The Company’s net investment hedges were designated with terms based on the spot rate of the EUR. Future changes in the components related to the spot change on the notional will be recorded as a component of Accumulated other comprehensive loss, net of tax until the hedged subsidiaries are substantially liquidated. All coupon payments are recorded in earnings and the initial value of excluded components currently recorded in Accumulated other comprehensive loss, net of tax as an unrealized translation adjustment are amortized to Interest expense over the remaining term of the swap. For the three months ended September 30, 2023 and 2022, the Company recognized as income $3.4 million and $2.1 million, respectively, in Interest expense as derivative amounts excluded from effectiveness testing. For the nine months ended September 30, 2023 and 2022, the Company recognized as income $8.0 million and $6.9 million, respectively, in Interest expense as derivative amounts excluded from effectiveness testing.

The following table provides the effect the derivative instruments not designated as cash flow hedging instruments had on Net income (loss) (in millions):


Derivatives Not Designated as Cash Flow Hedging Instruments	Location of Gain (Loss) Recognized	Amount of Gain (Loss) Recognized
		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Foreign exchange contracts	Other income (expense), net	$	(5.1)	$	0.3	$	(6.2)	$	(0.2)

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 12. Commitments and Contingencies

Litigation

Brazil

SWM-Brazil ("SWM-B") received assessments from the tax authorities of the State of Rio de Janeiro (the "State") for unpaid Imposto sobre Circulação de Mercadorias e Serviços ("ICMS") and Fundo Estadual de Combate à Pobreza ("FECP") value-added taxes on interstate purchases of electricity. The State issued four sets of assessments against SWM-B for periods from May 2006 through December 2017 (collectively the "Electricity Assessments"). The first through fourth assessments were received in February 2008, June 2011, October 2013, and August 2018, respectively.

SWM-B challenged all Electricity Assessments in administrative proceedings before the State tax council (in the Junta de Revisão Fiscal “first-level administrative court” and the Conselho de Contribuintes “administrative appellate court”) based on Resolution 1.610/89, which defers these taxes on electricity purchased by an "electricity-intensive consumer." In 2014, a majority of the administrative appellate court sitting en banc ruled against SWM-B in each of the first and second Electricity Assessments ($11.9 million based on the foreign currency exchange rate at September 30, 2023), and SWM-B is now pursuing challenges to these assessments in the State judicial system where SWM-B obtained preliminary injunctions against enforcement of both assessments. In March 2020, the first-level judicial court ruled in favor of SWM-B in the second Electricity Assessment, a decision that is now on appeal. The third Electricity Assessment was dismissed on technical grounds in 2018. In August 2018, the State filed revised fourth Electricity Assessments for a combined amount of $9.9 million. SWM-B filed challenges to these 2018 assessments in the first-level administrative court on the same grounds as the older cases, receiving unfavorable rulings from the courts in 2019. Both 2019 decisions are being appealed. The State issued a new regulation effective January 1, 2018 that only specific industries are “electricity-intensive consumers,” a list that excludes paper manufacturers. SWM-B contends this regulation shows that paper manufacturers were electricity-intensive consumers eligible to defer ICMS before 2018. As SWM-B cannot determine the outcome of the Electricity Assessments matters, no loss has been accrued in our unaudited condensed consolidated financial statements.

Germany

In January 2015, the Company initiated patent infringement proceedings in Germany against Glatz under multiple low ignition propensity ("LIP") related patents. In December 2017, the Dusseldorf Appeal Court affirmed the German District Court judgment on infringement of EP1482815 against Glatz. The Company filed an action against Glatz in the German District Court to set the amount of damages for the infringement and Glatz filed a counterclaim. Glatz filed an action in the German Patent Court to invalidate the German part of EP1482815. The German Patent Court held that some of the patent claims at issue were invalid and also that another claim at issue was valid. The Company appealed the portion of the decision with respect to the claims held to be invalid. The German Supreme Court held that the claims of German counterpart of EP1482815 relevant to the Glatz infringement action were invalid. This ruling has the effect of nullifying the infringement decision and injunction against Glatz and the Company’s claim for damages against Glatz. Glatz’s counterclaim against the Company was settled in June 2023. The Company recognized a $4.9 million loss during the three months ended June 30, 2023, which was included in Other income (expense), net in the unaudited Condensed Consolidated Statements of Income (Loss). The settlement was paid in the three months ended September 30, 2023.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Environmental Matters

The Company's operations are subject to various nations' federal, state and local laws, regulations and ordinances relating to environmental matters. The nature of the Company's operations exposes it to the risk of claims with respect to various environmental matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. While the Company has incurred in the past several years, and will continue to incur, capital and operating expenditures in order to comply with environmental laws and regulations, it believes that its future cost of compliance with environmental laws, regulations and ordinances, and its exposure to liability for environmental claims and its obligation to participate in the remediation and monitoring of certain hazardous waste disposal sites, will not have a material effect on its financial condition or results of operations. However, future events, such as changes in existing laws and regulations, or unknown contamination or costs of remediation of sites owned, operated or used for waste disposal by the Company (including contamination caused by prior owners and operators of such sites or other waste generators) may give rise to additional costs which could have a material effect on its financial condition or results of operations.

Employees and Labor Relations

As of September 30, 2023, approximately 24% of the Company's U.S. workforce and 28% of its Non-U.S. workforce are under collective bargaining agreements. Approximately 0% of all U.S. employees and 9% of Non-U.S. employees are under collective bargaining agreements that will expire in the next 12 months.

For the Non-U.S. workforce, union membership is voluntary and does not need to be disclosed to the Company under local laws. As a result, the number of employees covered by the collective bargaining agreements in some countries cannot be determined.

General Matters

In the ordinary course of conducting business activities, the Company and its subsidiaries become involved in certain other judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured regulatory, employment, intellectual property, general and commercial liability, environmental and other matters. At this time, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial condition, results of operations or cash flows. However, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial condition, results of operations or cash flows.

Note 13. Postretirement and Other Benefits

The Company sponsors a number of different defined contribution retirement plans, alternative retirement plans and/or defined benefit pension plans across its operations. Defined benefit pension plans are sponsored in the United States, France, United Kingdom, Germany, Italy, Netherlands, and Canada and OPEB benefits related to post-employment healthcare and life insurance are sponsored in the United States, Germany, and Canada.

In connection with the Merger, the Company assumed Neenah's defined benefit pension and OPEB plans, as well as sponsorship of the defined contribution retirement plan. In addition, Neenah has a supplemental employee retirement plan ("SERP"), which is a non-qualified defined benefit plan, and a supplemental retirement contribution plan ("SRCP"), which is a non-qualified, unfunded defined contribution plan. The Company provides benefits under the non-qualified SERP and SRCP plans to the extent necessary to fulfill the intent of its retirement plans without regard to the limitations set by the Internal Revenue Code on qualified retirement benefit plans.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pension and Other Benefits

The components of net pension cost (benefit) were as follows (in millions):


	Pension Benefits								Other Post-employment Plans(1)
	U.S.				Non-U.S.				U.S.		Non-U.S.
	Three Months Ended September 30,
	2023		2022		2023		2022		2023
Service cost	$	0.4	$	0.5	$	0.3	$	0.2	$	—	$	0.3
Interest cost	4.4		4.1		2.1		1.4		0.3		—
Expected return on plan assets	(5.5)		(5.0)		(1.1)		(1.2)		—		—

Amortizations and other	—		0.5		0.1		—		—		—
Net pension cost (benefit)	$	(0.7)	$	0.1	$	1.4	$	0.4	$	0.3	$	0.3


	Pension Benefits								Other Post-employment Plans(1)
	U.S.				Non-U.S.				U.S.		Non-U.S.
	Nine Months Ended September 30,
	2023		2022		2023		2022		2023
Service cost	$	1.2	$	0.5	$	0.8	$	0.4	$	0.1	$	0.9
Interest cost	13.3		5.7		6.3		3.0		0.9		0.1
Expected return on plan assets	(16.6)		(7.0)		(3.3)		(3.1)		—		—

Amortizations and other	—		1.3		0.4		—		—		—
Net pension cost (benefit)	$	(2.1)	$	0.5	$	4.2	$	0.3	$	1.0	$	1.0

(1) As of September 30, 2022, the Company's U.S. and Non-U.S. OPEB liabilities were immaterial and therefore not included in these disclosures.

The components of net pension cost (benefit) other than the service cost component are included in Other income (expense), net in the unaudited Condensed Consolidated Statements of Loss.

The Company's cost under the qualified defined contribution retirement plans was $3.2 million and $3.6 million, respectively, for the three months ended September 30, 2023 and 2022 and $10.9 million and $8.3 million, respectively, for the nine months ended September 30, 2023 and 2022.

Note 14. Income Taxes

For interim financial reporting, the Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision in accordance with ASC 740-270, Accounting for Income Taxes in Interim Periods. These interim estimates are subject to variation due to several factors, including the ability of the Company to accurately forecast pre-tax and taxable income and loss by jurisdiction, changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Jurisdictions with a projected loss for the year or an actual year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of including these jurisdictions on the quarterly effective tax rate calculations could result in a higher or lower effective tax rate during a quarter, based upon the mix and timing of actual earnings versus annual projections.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Prior to the passage of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), the Company asserted that substantially all of the undistributed earnings of its foreign subsidiaries were considered indefinitely reinvested and accordingly, no deferred taxes were provided. Due to the Tax Act, the Company has significant previously taxed earnings and profits from its foreign subsidiaries, as a result of transition tax, that is generally able to be repatriated free of U. S. federal tax. In addition, future earnings of foreign subsidiaries are generally expected to be able to be repatriated free of U.S. federal income tax because these earnings were taxed in the U.S. under the GILTI regime or would be eligible for a 100% dividends received deduction. As a result of the Company’s treasury policy to simplify and expediate its intercompany cash flows, as evidenced by the use of cash pooling, and in light of the Company’s demonstrated goal of driving growth though inorganic/acquisitional means, the Company does not assert indefinite reinvestment to the extent of each controlled foreign corporation's earnings and profits and to the extent of any foreign partnership’s U.S. tax capital accounts. As a result, the Company has provided for non-U.S. withholding taxes, U.S. federal tax related to currency movement on previously taxed earnings and profits, and U.S. state taxes on unremitted earnings.

All unrecognized tax positions could impact the Company's effective tax rate if recognized. There have been no material changes to the Company’s unrecognized tax positions for the three and nine months ended September 30, 2023. With respect to penalties and interest incurred from income tax assessments or related to unrecognized tax benefits, the Company’s policy is to classify penalties as provision for income taxes and interest as interest expense in its unaudited Condensed Consolidated Statements of Loss. There were no material income tax penalties or interest accrued during the three and nine months ended September 30, 2023 or 2022.

The Company's effective tax rate from continuing operations was (6.2)% and 24.6% for the three months ended September 30, 2023 and 2022, respectively. The net change was primarily due to a $32.0 million valuation allowance expense in the current period. The Company's effective tax rate from continuing operations was (6.5)% and 17.8% for the nine months ended September 30, 2023 and 2022, respectively. The net change was primarily due to a $40.0 million valuation allowance expense in the current period.

Note 15. Segment Information

Prior to the completion of the Merger, we operated in two reportable segments: Advanced Materials & Structures and Engineered Papers. Effective with the Merger, the Company reassessed its reportable segments. Management concluded that it had two operating product line segments that are also the reportable segments for financial reporting purposes: Advanced Technical Materials and Fiber-Based Solutions. ATM was comprised of the legacy SWM Advanced Materials & Structures segment and certain legacy Neenah segments allocated to ATM based on performance, market focus, technologies, and reporting structure. FBS was comprised of the legacy Neenah Fine Paper and Packaging segment and the legacy Engineered Papers segment. As such, there were no changes to the historical results of these segments. The merged Neenah segments were allocated to ATM and FBS based on performance, market focus, technologies, and reporting structure. Effective July 1, 2023, and as a result of our ongoing integration efforts, we identified a change in our operating segments to align with our end markets due to changes in segment level management and the related internal review of operating results.

The ATM reportable segment remains an aggregation of the Company's Industrials, Protective Solutions, Filtration, Healthcare, and Release Liners operating segments. ATM's end markets provide solutions that filter and purify air and liquids, supports adhesive and protective applications, advances healing and wellness, and solves some of material science’s most demanding performance needs across a number of categories. The FBS reportable segment leverages the company’s extensive natural fiber capabilities to provide specialty solutions for various end-uses, including sustainable packaging, imaging and communications, home and office, consumer goods, and other applications. As a result of the Engineered Papers Transaction, the EP business is presented as a discontinued operation and no longer reported in the FBS reportable segment. The FBS segment is now comprised of Packaging and specialty papers end markets and prior year results have been recasted to reflect such adjustments.

The accounting policies of the reportable segments are the same as those described in Note 2. Summary of Significant Accounting Policies in the notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Information about Net Sales and Operating Profit

The Company primarily evaluates segment performance and allocates resources based on operating profit. General corporate expenses that do not directly support the operations of the business segments are unallocated expenses. Assets are managed on a total company basis and are therefore not disclosed at the segment level.

Net sales and operating profit by segments were (in millions):


	Net Sales


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022			2023		2022
ATM	$	393.8	$	426.1		$	1,248.0		$	987.1
FBS	104.4		125.4			325.7			125.4
Total Consolidated	$	498.2	$	551.5		$	1,573.7		$	1,112.5


	Operating Profit (Loss)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022			2023		2022
ATM	$	(378.8)	$	31.5		$	(306.1)		$	71.2
FBS	(4.4)		10.3			(1.1)			9.1
Unallocated	(36.7)		(73.4)			(104.5)			(122.6)
Total Consolidated	$	(419.9)	$	(31.6)		$	(411.7)		$	(42.3)

Note 16. Discontinued Operations

Upon entering into the Engineered Papers Offer agreement, the Engineered Papers business met the criteria set forth in Accounting Standards Codification 205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”), as the sale represents a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, the Company’s consolidated financial statements for all periods presented reflect the Engineered Papers business as a discontinued operation. The divested business was historically reported in the FBS reportable segment.

The Engineered Papers business was tested for recoverability as of each balance sheet date since meeting the discontinued operations criteria and the Company concluded that there is no impairment expense to be recognized.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Included within the unaudited condensed consolidated balance sheet are the following major classes of assets and liabilities, respectively, associated with the discontinued operations (in millions):


	September 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	19.0	$	23.3
Accounts receivable, net	95.3		88.6
Inventories, net	118.6		120.2
Income taxes receivable	2.8		0.4


Other current assets	2.6		1.3

Total current assets	238.3		233.8
Property, plant and equipment, net	177.5		183.5
Finance lease right-of-use assets	0.2		—
Operating lease right-of-use assets	4.6		5.2

Investment in equity affiliates	55.8		59.1
Goodwill	3.0		3.0

Other assets	5.5		5.3

Total assets of discontinued operations	$	484.9	$	489.9
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current debt	$	0.1	$	1.1
Finance lease liabilities	0.1		—
Operating lease liabilities	0.7		0.8
Accounts payable	43.0		45.1
Income taxes payable	1.4		1.2

Accrued expenses and other current liabilities	44.4		55.2

Total current liabilities	89.7		103.4
Long-term debt	3.2		2.9
Finance lease liabilities, noncurrent	0.1		—
Operating lease liabilities, noncurrent	4.2		4.6
Long-term income tax payable	0.6		0.6
Pension and other postretirement benefits	20.8		21.3
Deferred income tax liabilities	16.0		20.1
Other liabilities	18.1		17.4

Total liabilities of discontinued operations	152.7		170.3

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Summary financial results of discontinued operations were as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales	$	127.2	$	122.6	$	399.1	$	394.8
Cost of products sold	92.3		95.7		309.9		298.1
Gross profit	34.9		26.9		89.2		96.7

Selling expense	3.7		3.3		11.0		10.5
Research and development expense	2.2		1.8		7.1		5.6
General expense	3.7		4.3		10.9		13.6
Total nonmanufacturing expenses	9.6		9.4		29.0		29.7


Restructuring and other impairment expense	0.5		—		0.6		0.2
Operating income	24.8		17.5		59.6		66.8
Interest expense(1)	(12.3)		(8.9)		(35.1)		(15.0)
Other income, net	1.4		1.3		8.3		10.0
Income from discontinued operations before income taxes	13.9		9.9		32.8		61.8
Income tax expense	4.8		(0.4)		6.3		9.6
Income (loss) from equity affiliates, net of income taxes	0.2		1.2		0.4		5.1
Net income from discontinued operations	9.3		11.5		26.9		57.3

(1) Upon the close of the transaction, the Company plans to use a portion of the net proceeds to repay a portion of its outstanding debt amounting to approximately $575 million. This debt repayment is based on the triggering of a financial covenant in the loan agreement and interest expense has been allocated to discontinued operations on a pro-rata basis within the Condensed Consolidated Statement of Income (Loss) and the Condensed Consolidated Statement of Cash Flows based on the outstanding loan balances.

Note 17. Subsequent Events

On October 4, 2023, pursuant to the terms of the Offer Letter and following the conclusion of the French Consultation Process, the Company accepted Evergreen Hill Enterprise’s Offer and countersigned the Purchase Agreement, with respect to the Engineered Papers Transaction.

On October 20, 2023, the Company and the purchasers under the Company’s accounts receivable securitization facility entered into an amendment to the Company’s accounts receivable securitization facility (the “Amended A/R Facility”) to, among other things, facilitate the Engineered Papers Transaction. The documentation for the Amended A/R Facility included (i) Amendment No. 1 to the Receivables Purchase Agreement by and among the Company and the SPE (“Seller”), the persons from time to time party thereto as purchasers (the “Purchasers”), PNC Bank, National Association, as administrative agent (“PNC” or “Administrative Agent”), and PNC Capital Markets LLC, as structuring agent (the “Receivables Purchase Agreement Amendment”) and (ii) Amendment No. 1 to Sale and Contribution Agreement (the “Sale and Contribution Agreement Amendment”), by and among the Company, the originators party thereto, and the Seller.

MATIV HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Receivables Purchase Agreement Amendment amends the original Receivables Purchase Agreement, dated as of December 23, 2022 (as amended, the “Amended Receivables Purchase Agreement”) and the Sale and Contribution Agreement Amendment amends the original Sale and Contribution Agreement, dated as of December 23, 2022 (as amended, the “Amended Sale and Contribution Agreement”), in each case by, among other things, (i) reflecting the repurchase by the Company from Seller of all of its accounts receivable and certain related assets previously sold by Company to Seller (collectively, “Receivables”), (ii) reflecting that the Company is no longer an originator of Receivables under the Amended A/R Facility, but remains the servicer and performance guarantor, (iii) reflecting the Company’s assignment of 100% of the ownership interests in Seller to Neenah, Inc., a wholly-owned subsidiary of the Company (“Neenah”), such that Neenah will now be able to contribute Receivables to Seller on a go-forward basis pursuant to the terms of the Sale and Contribution Agreement, as so amended, and (iv) updating the maximum Net Debt to EBITDA Ratio to match the level set forth in the Company’s First Lien Credit Agreement as in effect on the date of such amendments.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition and results of operations. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and related notes and the selected financial data included in our Annual Report on Form 10-K for the year ended December 31, 2022. The discussion of our financial condition and results of operations includes various forward-looking statements about our markets, the demand for our products and our future prospects. These statements are based on certain assumptions we consider reasonable. For information about risks and exposures relating to us and our business, you should read the section entitled "Risk Factors" in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, the section entitled "Forward-Looking Statements" at the end of this Item 2 and the section entitled “Risk Factors” at Part II, Item 1A hereof. Unless the context indicates otherwise, references to "Mativ," "we," "us," "our," the "Company" or similar terms include Mativ Holdings, Inc. and our consolidated subsidiaries.

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our financial statements with an understanding of our recent performance, our financial condition and our prospects.

As discussed in Note 16. Discontinued Operations to the unaudited condensed consolidated financial statements, the results from continuing operations exclude the results of our EP Business for all periods presented. All information presented within this MD&A is on a continuing operations basis.

Merger

On July 6, 2022, the Company completed its previously announced merger with Neenah, Inc. ("Neenah") under the terms of an Agreement and Plan of Merger, pursuant to which a wholly-owned subsidiary merged with and into Neenah (the "Merger"), with Neenah surviving as a direct and wholly-owned subsidiary of the Company. Refer to Note 4. Business Acquisitions in the notes to the unaudited condensed consolidated financial statements for further information related to the Merger. Refer to Note 15. Segment Information in the notes to the unaudited condensed consolidated financial statements for information on our segments after the Merger.

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, 2023, which includes Neenah.

During the three month period ending September 30, 2022, the Company became aware of a cyber attack that had been made against certain systems within the Company’s network environment. The attack temporarily affected operations and caused delays in execution of sales transactions at some locations. In addition, the Company incurred financial costs to investigate and remediate the incident, some of which are expected to be mitigated by insurance. During the incident, the attackers accessed and exfiltrated Company data, including some personally identifying information of certain Company employees. The Company believes it has contained the incident, which only affected certain systems, and it has restored operations and notified affected individuals. The Company has put in place remediation measures designed to help prevent future similar attacks, and has proactively undertaken to implement certain other enhancements to its security system.

Liquidity & Debt Overview

As of September 30, 2023, the Company had $1,738.5 million of total debt, $84.7 million of cash, and undrawn capacity on its $600.0 million revolving line of credit facility (the "Revolving Facility") of $329.1 million. Per the terms of the Company's amended credit agreement (the "Amended Credit Agreement"), net leverage was 4.2x at the end of the third quarter, versus a current maximum covenant ratio of 4.75x. The Company’s nearest debt maturity is our 6.875% senior unsecured notes which are due in 2026. Refer to "Liquidity and Capital Resources" section for additional detail.

SUMMARY


	Three Months Ended								Nine Months Ended
	September 30,				Percent of Net Sales				September 30,				Percent of Net Sales
(in millions, except per share amounts)	2023		2022		2023		2022		2023		2022		2023		2022
Net sales	$	498.2	$	551.5	100.0	%	100.0	%	$	1,573.7	$	1,112.5	100.0	%	100.0	%
Gross profit	86.7		96.1		17.4	%	17.4	%	269.9		218.6		17.2	%	19.6	%
Restructuring & impairment expense	16.3		1.8		3.3	%	0.3	%	17.6		17.3		1.1	%	1.6	%
Operating loss	(419.9)		(31.6)		(84.3)	%	(5.7)	%	(411.7)		(42.3)		(26.2)	%	(3.8)	%
Interest expense	16.8		14.9		3.4	%	2.7	%	48.8		43.7		3.1	%	3.9	%


Net loss from continuing operations	$	(464.3)	$	(34.0)	(93.2)	%	(6.2)	%	$	(494.1)	$	(66.4)	(31.4)	%	(6.0)	%


Diluted loss per share from continuing operations	$	(8.50)	$	(0.65)					$	(9.06)	$	(1.74)
Cash provided by operations	$	32.3	$	(19.0)					$	37.8	$	(44.6)
Capital spending	$	7.4	$	9.3					$	49.4	$	27.1

RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2023 and 2022

Net Sales

The following table presents net sales by segment for the three months ended September 30, 2023 and 2022 (in millions):


	Three Months Ended
	September 30, 2023		September 30, 2022		Change		Percent Change
Advanced Technical Materials	$	393.8	$	426.1	$	(32.3)	(7.6)	%
Fiber-Based Solutions	104.4		125.4		(21.0)		(16.7)	%
Total	$	498.2	$	551.5	$	(53.3)	(9.7)	%

Consolidated net sales of $498.2 million during the three months ended September 30, 2023 decreased $53.3 million or 9.7%, compared to the prior-year quarter.

ATM segment net sales of $393.8 million during the three months ended September 30, 2023 decreased $32.3 million, or 7.6%, compared to the prior-year quarter. ATM sales decline reflected lower volume partly offset by higher selling price and favorable currency translation. Lower volumes across the segment reflect increased customer caution in the current uncertain economic environment, as well as impacts from seasonal slowing, particularly in Europe. Healthcare was a top performer, with double-digit growth for the quarter.

FBS segment net sales of $104.4 million during the three months ended September 30, 2023 decreased $21.0 million, or 16.7%, compared to the prior-year quarter, and are now comprised solely of Packaging and Specialty Papers. The FBS sales decline reflected lower volume compared to prior year when significant industry-wide customer inventory builds occurred. Lower demand for premium business papers and packaging, along with continued customer destocking, offset benefits from increased sales of consumer papers and higher selling prices.

Gross Profit

The following table presents gross profit for the three months ended September 30, 2023 and 2022 (in millions):


	Three Months Ended						Percent Change		Percent of Net Sales
	September 30, 2023		September 30, 2022		Change				2023		2022
Net sales	$	498.2	$	551.5	$	(53.3)	(9.7)	%	100.0	%	100.0	%
Cost of products sold	411.5		455.4		(43.9)		(9.6)	%	82.6	%	82.6	%
Gross profit	$	86.7	$	96.1	$	(9.4)	(9.8)	%	17.4	%	17.4	%

Gross profit of $86.7 million during the three months ended September 30, 2023 decreased $9.4 million, or 9.8%, compared to the prior-year quarter. The decrease in gross profit reflected lower volume impacts, and associated manufacturing inefficiencies and fixed cost absorption, partly offset by benefits of selling prices net of input costs and favorable currency translation. The Company monitors and continues to adjust staffing levels of manufacturing labor relative to volumes.

Non-manufacturing Expenses

The following table presents non-manufacturing expenses for the three months ended September 30, 2023 and 2022 (in millions):


	Three Months Ended						Percent Change		Percent of Net Sales
	September 30, 2023		September 30, 2022		Change				2023		2022
Selling expense	$	20.5	$	19.1	$	1.4	7.3	%	4.1	%	3.5	%
Research expense	5.4		5.9		(0.5)		(8.5)	%	1.1	%	1.1	%
General expense	63.4		100.9		(37.5)		(37.2)	%	12.8	%	18.3	%
Non-manufacturing expenses	$	89.3	$	125.9	$	(36.6)	(29.1)	%	17.9	%	22.8	%

Non-manufacturing expenses of $89.3 million during the three months ended September 30, 2023 decreased $36.6 million, or 29.1%, compared to the prior-year quarter. The decrease is primarily due to higher costs in 2022 including direct and indirect merger acquisition and integration costs of $46.7 million, and $5.7 million to resolve the cybersecurity incident in the prior year quarter, partially offset by $17.3 million of costs related to the merger, planned divestiture of the EP business and financing fees in the current quarter.

Restructuring and Other Impairment Expense

The following table presents restructuring and other impairment expense for the three months ended September 30, 2023 and 2022 (in millions):


	Three Months Ended							Percent of Net Sales
	September 30, 2023		September 30, 2022		Change		2023			2022
Advanced Technical Materials	$	6.8	$	0.9	$	5.9		0.5	%		0.2	%
Fiber-Based Solutions	9.5		0.1		9.4			2.9	%		0.1	%
Unallocated expenses	—		0.8		(0.8)
Total	$	16.3	$	1.8	$	14.5		1.0	%		0.3	%

The Company incurred total restructuring and other impairment expense of $16.3 million and $1.8 million in the three months ended September 30, 2023 and 2022, respectively. In the current year period, restructuring and other impairment expense in the ATM segment was driven by plans to close two facilities as a result of decisions to exit certain end markets, ongoing manufacturing optimization efforts and facilities closed in prior years. In the FBS segment, restructuring and impairment expense in the current year period was driven by impairment of long-lived assets, predominantly equipment at our Eerbeek, Netherlands facility.

In the prior year period, restructuring and impairment expense in the ATM segment was related to facilities closed in prior years.

Restructuring and impairment costs related to the Merger are included in corporate expenses as other unallocated items as these costs are not included in management's evaluation of the segments' performance. Unallocated restructuring expenses for the three months ended September 30, 2022 included $0.8 million related to the modification of leases resulting from the Merger.

Operating Loss

The following table presents operating profit/(loss) by segment for the three months ended September 30, 2023 and 2022 (in millions):


	Three Months Ended						Percent Change		Return on Net Sales
	September 30, 2023		September 30, 2022		Change				2023		2022
Advanced Technical Materials	$	(378.8)	$	31.5	$	(410.3)	(1,302.5)	%	(96.2)	%	7.4	%
Fiber-Based Solutions	(4.4)		10.3		(14.7)		(142.7)	%	(4.2)	%	8.2	%
Unallocated expenses	(36.7)		(73.4)		36.7		(50.0)	%
Total	$	(419.9)	$	(31.6)	$	(388.3)	1,228.8	%	(84.3)	%	(5.7)	%

Operating loss of $419.9 million during the three months ended September 30, 2023, increased $388.3 million, or 1,228.8%, compared to the prior year period. Both periods included unusual costs as previously described and related to an impairment charge in 2023 and the merger in 2022.

In the ATM segment, operating loss was $378.8 million during the three months ended September 30, 2023 reflecting a $410.3 million, or 1,302.5% change, compared to the prior year period primarily due to the goodwill impairment recorded of $401.0 million. For more information on the goodwill impairment, see Note 7. Goodwill. In the FBS segment, operating loss of $4.4 million during the three months ended September 30, 2023 decreased $14.7 million, or 142.7%, compared to the prior year period. In both segments, operating profit reflects lower volumes offsetting favorable impacts of net selling price/input cost increases. Unallocated expenses of $36.7 million during the three months ended September 30, 2023 decreased $36.7 million, or 50.0%, compared to the prior year period primarily due to the merger and integration related costs incurred in the prior year period.

Interest Expense

Interest expense of $16.8 million during the three months ended September 30, 2023 increased $1.9 million, or 12.8%, compared to the prior year period. Interest expense increased primarily due to higher average interest rates.

Other Income (Expense), Net

Other income (expense), net was $(0.3) million during the three months ended September 30, 2023, compared to the prior year period income of $1.4 million. The net change was primarily driven by losses on foreign exchange contracts.

Income Taxes

A $27.3 million income tax expense in the three months ended September 30, 2023 resulted in an effective tax rate of (6.2)% compared with 24.6% in the prior year period. The net change was primarily due to a $32.0 million valuation allowance expense in the current period.

Net Loss and Net Loss per Share

Net loss during the three months ended September 30, 2023 was $464.3 million, or $8.50 per diluted share, compared with net loss of $34.0 million, or $0.65 per diluted share, during the prior-year quarter.

RESULTS OF OPERATIONS

Comparison of the Nine Months Ended September 30, 2023 and 2022

Net Sales

The following table presents net sales by segment (in millions):


	Nine Months Ended September 30,
	2023		2022		Change		Percent Change
Advanced Technical Materials	$	1,248.0	$	987.1	$	260.9	26.4	%
Fiber-Based Solutions	325.7		125.4		200.3		159.7	%
Total	$	1,573.7	$	1,112.5	$	461.2	41.5	%

Consolidated net sales of $1,573.7 million during the nine months ended September 30, 2023 increased $461.2 million, or 41.5%, compared to the prior year period.

ATM segment net sales of $1,248.0 million during the nine months ended September 30, 2023 increased $260.9 million, or 26.4%, compared to the prior year period. ATM sales growth was due to the addition of the Neenah operations. Price increases across the product lines, in response to higher input costs were offset by volume declines. The decreased volume was caused by customer de-stocking trends and an uncertain macro environment.

FBS segment net sales of $325.7 million during the nine months ended September 30, 2023 increased $200.3 million, or 159.7%, compared to the prior year period. FBS sales growth was due to the addition of the Neenah operations. Consistent with trends in ATM, price increases across the FBS product lines in response to higher input costs were offset by volume declines which were mostly driven by customer de-stocking in packaging and specialty paper.

Gross Profit

The following table presents gross profit (in millions):


	Nine Months Ended September 30,						Percent Change		Percent of Net Sales
	2023		2022		Change				2023		2022
Net sales	$	1,573.7	$	1,112.5	$	461.2	41.5	%	100.0	%	100.0	%

Cost of products sold	1,303.8		893.9		409.9		45.9	%	82.8	%	80.4	%
Gross profit	$	269.9	$	218.6	$	51.3	23.5	%	17.2	%	19.6	%

Gross profit of $269.9 million during the nine months ended September 30, 2023 increased $51.3 million, or 23.5%, compared to the prior year period. The increase in gross profit reflected the addition of the Neenah operations. While price increases more than offset higher input costs across both segments, lower volume impacts, along with manufacturing inefficiencies negatively impacted results. The Company addressed production performance across several facilities, primarily in FBS, which have been impacted by high manufacturing labor turnover and resulted in less efficient operations. Profitability in both segments was also impacted by staffing levels of manufacturing labor relative to volumes, and the Company has adjusted staffing levels to be in line with demand requirements.

Non-manufacturing Expenses

The following table presents non-manufacturing expenses (in millions):


	Nine Months Ended September 30,						Percent Change		Percent of Net Sales
	2023		2022		Change				2023		2022
Selling expense	$	60.6	$	41.1	$	19.5	47.4	%	3.9	%	3.7	%
Research and development expense	16.6		12.7		3.9		30.7	%	1.1	%	1.1	%
General expense	185.8		189.8		(4.0)		(2.1)	%	11.8	%	17.1	%
Non-manufacturing expenses	$	263.0	$	243.6	$	19.4	8.0	%	16.8	%	21.9	%

Non-manufacturing expenses of $263.0 million during the nine months ended September 30, 2023 increased by $19.4 million, or 8.0%, compared to the prior year period. The increase is primarily due to the addition of Neenah's non-manufacturing expenses which includes an increase in amortization expenses related to Neenah's intangible assets, partially offset by lower integration related expenses in 2023.

Restructuring and Other Impairment Expense

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


	Nine Months Ended September 30,							Percent of Net Sales
	2023		2022		Change		2023			2022
Advanced Technical Materials	$	8.0	$	14.9	$	(6.9)		0.6	%		1.5	%
Fiber-Based Solutions	9.6		1.6		8.0			2.9	%		1.3	%
Unallocated expenses	—		0.8		(0.8)
Total	$	17.6	$	17.3	$	0.3		1.1	%		1.6	%

The Company incurred total restructuring and other impairment expense of $17.6 million in the nine months ended September 30, 2023 compared with $17.3 million in the prior year period. In the current year period, restructuring and other impairment expense in the ATM segment was primarily comprised of fixed asset and certain other asset impairment for our announced planned facility closures and facilities closed in prior years. Restructuring and other impairment expense in the FBS segment was primarily driven by impairment of long-lived assets, predominantly equipment at our Eerbeek, Netherlands facility.

The Company incurred total restructuring and other impairment expense of $17.3 million in the nine months ended September 30, 2022. In the ATM segment, restructuring and impairment expense for the prior year period were primarily related to the impairment of certain assets in conjunction with the divestiture of a portion of the legacy SWM ATM segment serving the industrials end market. These assets were sold during the third quarter of 2022 for net proceeds of $4.6 million and a loss of $0.4 million. In the prior-year period restructuring and other impairment expense in the FBS segment included $1.5 million primarily related to closed facilities.

Operating Loss

The following table presents operating profit (loss) by segment (in millions):


	Nine Months Ended September 30,						Percent Change		Return on Net Sales
	2023		2022		Change				2023		2022
Advanced Technical Materials	$	(306.1)	$	71.2	$	(377.3)	(529.9)	%	(24.5)	%	7.2	%
Fiber-Based Solutions	(1.1)		9.1		(10.2)		(112.1)	%	(0.3)	%	7.3	%
Unallocated expenses	(104.5)		(122.6)		(18.1)		(14.8)	%
Total	$	(411.7)	$	(42.3)	$	(369.4)	873.3	%	(26.2)	%	(3.8)	%

Operating loss of $411.7 million during the nine months ended September 30, 2023 increased $369.4 million, or 873.3%, compared to the prior year period.

In the ATM segment, operating loss was $306.1 million during the nine months ended September 30, 2023 reflecting a $377.3 million, or 529.9% change, compared to the prior year period operating profit primarily attributed to a goodwill impairment recorded of $401.0 million. In the FBS segment, operating loss of $1.1 million during the nine months ended September 30, 2023 decreased $10.2 million, or 112.1%, compared to the prior year period. In both segments, operating profit reflects the addition of the Neenah operations and the benefit of price increases more than offsetting higher input costs, which were offset by declining volumes across most products. The decline in FBS operating profits was largely driven by manufacturing inefficiencies at several facilities, as well as intangible asset amortization expenses associated with the Merger, and $9.5 million of costs related to the impairment of long-lived assets, predominantly equipment at our Eerbeek, Netherlands facility. Unallocated expenses of $104.5 million during the nine months ended September 30, 2023 decreased $18.1 million, or 14.8% compared to the prior year period primarily due to the merger and integration related costs incurred in the prior year period, offset by the addition of Neenah's unallocated expenses and integration and divestiture related costs in the current period.

Interest Expense

Interest expense of $48.8 million during the nine months ended September 30, 2023 increased $5.1 million, or 11.7%, compared to the prior year period. Interest expense increased primarily due to incremental debt related to the Merger, the incremental expense of assuming Neenah's debt, and higher average interest rates.

Other Income (Expense), Net

Other income (expense), net of $3.6 million during the nine months ended September 30, 2023 decreased $8.8 million, or 169.2% compared to the prior year period. The net change was primarily driven by the gain on the sale of equipment at the Winkler facility in the prior period, partially offset by legal and tax settlement expenses in the current period.

Income Taxes

A $30.0 million income tax expense in the nine months ended September 30, 2023 resulted in an effective tax rate of (6.5)% compared with 17.8% in the prior year period. The net change was primarily due to a $40.0 million valuation allowance expense in the current period.

Net Income (Loss) and Net Income (Loss) per Share

Net loss during the nine months ended September 30, 2023 was $467.2 million, or $8.57 per diluted share, compared to net income of $9.1 million, or $0.25 per diluted share, during the prior year period.

LIQUIDITY AND CAPITAL RESOURCES

A major factor in our liquidity and capital resource planning is our generation of cash flow from operations, which is sensitive to changes in the mix of products sold, volume and pricing of our products, as well as changes in our production volumes, costs and working capital. Our liquidity is supplemented by funds available under our Revolving Facility with a syndicate of banks that is used as either operating conditions or strategic opportunities warrant.

Cash Requirements

As of September 30, 2023, $59.5 million of the Company's $84.7 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 existing credit facilities, will be sufficient to finance our continued operations, our current and long-term growth plan, and dividend payments.

Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $37.8 million during the nine months ended September 30, 2023 compared to net cash used of $44.6 million during the prior year period. Compared to the prior year period, cash inflows from working capital increased by $65.9 million, due to a reduction in inventories in the current period.

Working Capital

As of September 30, 2023, the Company had net working capital of $546.3 million, including cash and cash equivalents of $84.7 million, compared to net working capital of $538.5 million, including cash and cash equivalents of $101.1 million as of December 31, 2022. During the nine months ended September 30, 2023, net changes in operating working capital resulted in a cash inflow of $13.4 million, an increase from $79.3 million of outflows during the prior year period largely due to decreases in receivables and inventory.

Cash Used in Investing Activities

Cash used in investing activities during the nine months ended September 30, 2023 was $49.4 million, compared to cash outflows of $453.4 million during the prior year period, which were mainly attributable to capital spending, and reflected the addition of the Neenah operations and repayment of Neenah's outstanding debt. Within investing cash flows, capital spending was $49.4 million compared to $27.1 million in the prior year period, reflecting the addition of Neenah operations and capacity expansion projects for filtration and release liner products. Investing cash flows in the prior year period also included $35.8 million inflow from cash received in the settlement of cross-currency swaps contracts.

Cash Provided by (Used in) Financing Activities

Cash used in financing activities during the nine months ended September 30, 2023 was $13.2 million, compared to cash provided of $461.5 million during the prior year period. During the nine months ended September 30, 2023, financing activities primarily consisted of $180.0 million of borrowings under the revolving credit facility, $49.8 million of dividends paid to the Company's stockholders, and payments on our long-term debt of $134.2 million.

During the prior year period, financing activities primarily consisted of $179.5 million of payments on our long-term debt, $720.4 million of proceeds from borrowings under the revolving credit facility, the proceeds of which were primarily used to repay Neenah's debt upon consummation of the Merger, $50.1 million in cash paid for dividends paid to the Company's stockholders, and $22.6 million of payments for debt issuance costs associated with the amendment of our Credit Agreement as discussed in Note 10. Debt of the notes to the unaudited condensed consolidated financial statements.

The Company presently believes the sources of liquidity discussed above are sufficient to meet our anticipated funding needs for the foreseeable future.

Dividends and Share Repurchases

On November 8, 2023, we announced a cash dividend of $0.10 per share payable on December 15, 2023 to stockholders of record as of November 24, 2023. The covenants contained in our Indenture and amended Credit Agreement require that we maintain certain financial ratios as disclosed in Note 10. Debt of the notes to the unaudited condensed consolidated financial statements, none of which under normal business conditions materially limit our ability to pay such dividends. We will continue to assess our dividend policy in light of our overall strategy, cash generation, debt levels and ongoing requirements for cash to fund operations and to pursue possible strategic opportunities.

During the nine months ended September 30, 2023, the company repurchased $7.0 million of outstanding shares of which $4.4 million were repurchased as part of the share buyback program authorized by the Board of Directors in August 2023. The Company intends to repurchase shares periodically and opportunistically to offset dilution due to stock compensation. During the quarter ended September 30, 2022, the company repurchased $6.4 million of outstanding shares.

Debt Instruments and Related Covenants

The following table presents activity related to our debt instruments for the nine months ended September 30, 2023 and 2022 (in millions):




	Nine Months Ended September 30,
	2023		2022
Proceeds from long-term debt	$	180.0	$	720.4
Payments on long-term debt	(134.2)		(179.5)

Net proceeds from borrowings	$	45.8	$	540.9

Net proceeds from borrowings were $45.8 million during the nine months ended September 30, 2023, compared to net repayments of $540.9 million during the prior year period.

On June 5, 2023, the Company amended its Credit Agreement to replace LIBOR-based rates with term-SOFR for the Term Loan B Facility. Effective July 1, 2023, borrowings under the Term Loan B Facility in U.S. dollar will bear interest equal to a forward-looking term rate based on Term SOFR (subject to a minimum floor of 0.75%) plus 2.75%. Borrowings under the Term Loan B Facility in Euros will bear interest equal to EURIBOR (subject to a minimum floor of 0.00%) plus 3.75%.

Unused borrowing capacity under the amended Credit Agreement was $329.1 million as of September 30, 2023.

The Company was in compliance with all of its covenants under the Indenture and amended Credit Agreement at September 30, 2023. With the current level of borrowing and forecasted results, we expect to remain in compliance with financial covenants under the amended Credit Agreement.

Our total debt to capital ratios, as calculated under the amended Credit Agreement, at September 30, 2023 and December 31, 2022 were 72.1% and 58.9%, respectively.

Critical Accounting Policies and Estimates

The preparation of our unaudited condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported. There have been no material changes in our critical accounting policies and estimates since December 31, 2022 other than the below item related to goodwill.

Effective July 1, 2023, and as a result of our ongoing integration efforts, we identified a change in our operating segments. While the ATM reportable segment remains as an aggregation of the Company’s highly engineered polymer, resin and fiber-based substrates, nets, films, adhesive tapes, and other nonwoven products, the segment was disaggregated into five reporting units due to changes in segment level management and the related internal reporting of operating results (refer to Note 15. Segment Information for additional information on our segments).

Further, during 2023, the sustained impact of macro-economic conditions, an increasingly global competitive environment, moderation in certain projected volume expectations, and a sustained decrease in our share price contributed to the decline in reporting unit fair value. Additionally, management completed a long term financial model, aligning with the new reporting unit structure during the third quarter. That plan’s forecast reflects the higher relative allocation of corporate overhead costs to continuing operations as a result of the proposed sale of our EP business.

For further information about our critical accounting policies, please see the discussion of critical accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2022 in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates.”

Off-Balance Sheet Arrangements

As of September 30, 2023, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act") that are subject to the safe harbor created by the Act and other legal protections. Forward-looking statements include, without limitation, those regarding the incurrence of additional debt and expected maturities of the Company’s debt obligations, the adequacy of our sources of liquidity and capital, acquisition integration and growth prospects (including international growth), the cost and timing of our restructuring actions, the impact of ongoing litigation matters and environmental claims, the amount of capital spending and/or common stock repurchases, future cash flows, purchase accounting impacts, impacts and timing of our ongoing operational excellence and other cost-reduction and cost-optimization initiatives, any lingering impact of the COVID-19 pandemic on our operations, profitability, and cash flow, the expected benefits and accretion of the Neenah merger and Scapa acquisition and integration and other statements generally identified by words such as "believe," "expect," "intend," "guidance," "plan," "forecast," "potential," "anticipate," "confident," "project," "appear," "future," "should," "likely," "could," "may," "will," "typically" and similar words.

These forward-looking statements are prospective in nature and not based on historical facts, but rather on current expectations and on numerous assumptions regarding the business strategies and the environment in which the Company’s business shall operate in the future and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that may cause actual results to differ materially from our expectations as of the date of this report. These risks include, among other things, those set forth in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022, the Risk Factors set forth in the section entitled "Risk Factors" at Part II - Item 1A hereof, as well as the following factors:

•Risks associated with the implementation of our strategic growth initiatives, including diversification, and the Company's understanding of, and entry into, new industries and technologies;

•Risks associated with acquisitions, dispositions, strategic transactions and global asset realignment initiatives of Mativ, including the pending Engineered Papers Transaction;

•Adverse changes in the filtration, release liners, protective solutions, industrials and healthcare sectors impacting key ATM segment customers;

•Changes in the source and intensity of competition in our commercial end-markets: filtration, protective solutions, release liners, healthcare, and industrials for ATM, and packaging and specialty papers for FBS;

•Adverse changes in sales or production volumes, pricing and/or manufacturing costs in our ATM or FBS operating segments;

•Seasonal or cyclical market and industry fluctuations which may result in reduced net sales and operating profits during certain periods;

•Risks associated with our technological advantages in our intellectual property and the likelihood that our current technological advantages are unable to continue indefinitely;

•Supply chain disruptions, including the failure of one or more material suppliers, including energy, resin, fiber, and chemical suppliers, to supply materials as needed to maintain our product plans and cost structure;

•Increases in operating costs due to inflation and continuing increases in the inflation rate or otherwise, such as labor expense, compensation and benefits costs;

•Business disruptions from the Merger that will harm the Company's business, including current plans and operations;

•The possibility that Mativ may be unable to successfully integrate Neenah's operations with those of Mativ and achieve expected synergies and operating efficiencies within the expected time-frames or at all;

•Potential adverse reactions or changes to business relationships resulting from the Merger, including as it relates to the Company's ability to successfully renew existing client contracts on favorable terms or at all and obtain new clients;

•Our ability to attract and retain key personnel, including as a result of the Merger, labor shortages, labor strikes, stoppages or other disruptions;

•The substantial indebtedness Mativ has incurred and assumed in connection with the Merger and the need to generate sufficient cash flows to service and repay such debt;

•Changes in general economic, financial and credit conditions in the U.S., Europe, China and elsewhere, including the impact thereof on currency exchange rates (including any weakening of the Euro and Real) and on interest rates;

•A failure in our risk management and/or currency or interest rate swaps and hedging programs, including the failures of any insurance company or counterparty;

•Changes in the manner in which we finance our debt and future capital needs, including potential acquisitions;

•Changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities;

•Uncertainty as to the long-term value of the common stock of Mativ, including the dilution caused by Mativ’s issuance of additional shares of its common stock in connection with the Merger;

•Changes in employment, wage and hour laws and regulations in the U.S., France and elsewhere, including the loi de Securisation de l'emploi in France, unionization rules and regulations by the National Labor Relations Board in the U.S., equal pay initiatives, additional anti-discrimination rules or tests and different interpretations of exemptions from overtime laws;

•The impact of tariffs, and the imposition of any future additional tariffs and other trade barriers, and the effects of retaliatory trade measures;

•Existing and future governmental regulation and the enforcement thereof that may materially restrict or adversely affect how we conduct business and our financial results;

•Weather conditions, including potential impacts, if any, from climate change, known and unknown, and natural disasters or unusual weather events;

•International conflicts and disputes, such as the ongoing conflict between Russia and Ukraine, which restrict our ability to supply products into affected regions, due to the corresponding effects on demand, the application of international sanctions, or practical consequences on transportation, banking transactions, and other commercial activities in troubled regions;

•Compliance with the FCPA and other anti-corruption laws or trade control laws, as well as other laws governing our operations;

•The continued evolution of COVID-19, or new public health crises that may arise in the future, could have adverse and disparate impacts on the Company, our employees and customers;

•The number, type, outcomes (by judgment or settlement) and costs of legal, tax, regulatory or administrative proceedings, litigation and/or amnesty programs, including those in Brazil, France and Germany;

•Increased scrutiny from stakeholders related to environmental, social and governance ("ESG") matters, particularly our sales of combustible products business within the tobacco industry, as well as our ability to achieve our broader ESG goals and objectives;

•Costs and timing of implementation of any upgrades or changes to our information technology systems;

•Failure by us to comply with any privacy or data security laws or to protect against theft of customer, employee and corporate sensitive information;

•The impact of cybersecurity risks related to breaches of security pertaining to sensitive Company, customer, or vendor information, as well as breaches in the technology that manages operations and other business processes; and

•Other factors described elsewhere in this document and from time to time in documents that we file with the SEC.

All forward-looking statements made in this document are qualified by these cautionary statements. Forward-looking statements herein are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance unless expressed as such and should only be viewed as historical data.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risk exposure at September 30, 2023 is consistent with, and not materially different than, the market risk and discussion of exposure presented under the caption “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We currently have in place systems relating to disclosure controls and procedures designed to ensure the timely recording, processing, summarizing and reporting of information required to be disclosed in periodic reports under the Securities Exchange Act of 1934, as amended. These disclosure controls and procedures include those designed to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions about required disclosure. Upon completing our review and evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2023, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective as of September 30, 2023.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting were identified as having occurred in the fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various legal proceedings and disputes. Refer to Note 20. Commitments and Contingencies of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 and Note 12. Commitments and Contingencies of the notes to the unaudited condensed consolidated financial statements included in this report. Except as may have been referenced elsewhere in this report, there have been no material developments with regard to these matters.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, "Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The following table indicates the cost of and number of shares of our Common Stock we have repurchased during 2023 and the remaining amount of share repurchases currently authorized by our Board of Directors as of September 30, 2023:


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs			Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs
				(# of shares)	(in millions)		(in millions)


January 1 - March 31, 2023	54,435	$	24.37	—	$	—	$	—
April 1 - June 30, 2023	64,344	20.37		—	—		—
July 1 - July 31, 2023	981	15.01		—	—		—
August 1 - August 31, 2023	71,124	16.86		71,124	1.2		28.8
September 1 - September 30, 2023	209,815	$	15.49	209,815	$	3.2	$	25.6
Total Year-to-Date 2023	400,699	$	17.72	280,939	$	4.4	$	25.6

Transactions represent the purchase of vested restricted shares from employees to satisfy minimum tax withholding requirements upon vesting of stock-based awards and shares purchased as part of our repurchase program approved in July 2023 and announced on August 2, 2023.

In August 2023, the Board of Directors authorized the repurchase of shares of Mativ Common Stock in an amount not to exceed $30.0 million. Under the current $30.0 million authorization for the share repurchases, the Company purchased 539, 386 shares for $8.0 million as of November 6, 2023.

From time to time, the Company uses corporate 10b5-1 plans to allow for share repurchases to be made at predetermined stock price levels, without restricting such repurchases to specific windows of time. Any future common stock repurchases will be dependent upon various factors, including the stock price of our Common Stock,

strategic opportunities, strategic outlook, and cash availability. From time-to-time, certain of our officers and directors may sell shares pursuant to personal 10b5-1 plans.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Short-Term Incentive Plan

On June 14, 2023, the Compensation Committee (the “Committee”) of the Board of Directors of the Company approved the Company’s Short-Term Cash Incentive Plan for Eligible Employees (the “STIP”). The STIP provides for annual cash incentive opportunities for certain designated regular full-time and part-time employees of the Company and its wholly-owned subsidiaries, including “executive officers” and “officers” of the Company for purposes of Rule 3b-7 and Section 16, respectively, of the Securities Exchange Act of 1934, as amended (the “Executives”).

On September 1, 2023, upon joining the Company, the Committee designated that Mark Johnson, Chief Legal Officer, General Counsel and Secretary, shall be eligible to participate in the STIP, effective as of January 1, 2023.

Rule 10b5-1 Trading Plans

During the three months ended September 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 6. Exhibits


Exhibit Number						Exhibit
2.1						Offer Letter, dated August 1, 2023, by and between Mativ Holdings, Inc. and Evergreen Hill Enterprise Pte. Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 1, 2023).
3.1						Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009).
3.2						Certificate of Amendment to the Certificate of Incorporation of the Company (filed on August 21, 1995), effective as of July 6, 2022 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on July 6, 2022).
3.3						Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on September 22, 2023).
10.1						Separation Waiver and Release Agreement, by and between Andrew Wamser and the Company, dated as of April 3, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2023).
10.2						Seventh Amendment, effective as of September 19, 2023, to the Credit Agreement, dated September 25, 2018 (as amended as of February 9, 2021, March 8, 2021, April 20, 2021, February 22, 2022, May 6, 2022 and June 5, 2023), by and among Mativ Holdings, Inc. (f/k/a Schweitzer-Mauduit International, Inc.), SWM Luxembourg, the other loan parties party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 29, 2023).
10.3						Short-Term Incentive Plan for Eligible Employees effective as of January 1, 2023 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2023).
*10.4						Separation Waiver and Release Agreement, by and between Ricardo Nuñez and the Company, dated as of September 1 , 2023.
21.1						Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2023).
*31.1						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
*31.2						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
*32						Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the unaudited condensed consolidated statements of income (loss), (ii) the unaudited condensed consolidated statements of comprehensive income (loss), (iii) the unaudited condensed consolidated balance sheets, (iv) the unaudited condensed consolidated statements of changes in stockholders' equity, (v) the unaudited condensed consolidated statements of cash flow, and (vi) notes to unaudited condensed consolidated financial statements.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Mativ Holdings, Inc.

(Registrant)

By:

/s/ Julie Schertell

Julie Schertell
President and Chief Executive Officer
(duly authorized officer and principal executive officer)

November 9, 2023

By:

/s/ Greg Weitzel

Greg Weitzel
Executive Vice President and
Chief Financial Officer
(duly authorized officer and principal financial officer)

November 9, 2023