Welcome to the SWM’s First Quarter 2016 Earnings Conference Call. Hosting the call today from SWM is Frederic Villoutreix, Chairman and Chief Executive Officer. He is joined by Don Meltzer, EVP of Advanced Materials and Structures; Allison Aden, Chief Financial Officer; and Mark Chekanow, Director of Investor Relations. Today’s call is being recorded and will be available for replay later this afternoon. The dial-in numbers are 855-859-2056 and 404-537-3406 with the access code of 91078175. [Operator Instructions] It is now my pleasure to turn the floor over to Mr. Chekanow. Sir, you may begin.

Thank you, Catherine. Good morning. I am Mark Chekanow, Director of Investor Relations at SWM. Thank you for joining us to discuss SWM’s first quarter 2016 earnings results. Before we begin, I would like to remind you that the comments included in today’s conference call include forward-looking statements. Actual results may differ materially from the results suggested by these comments for a number of reasons, which are discussed in more detail in our Securities and Exchange Commission filings, including our quarterly reports on Form 10-Q and our annual report on Form 10-K. Some financial measures discussed during this call are non-GAAP financial measures. Reconciliations of these measures to the closest GAAP measures are included in the appendix of this presentation and the earnings release. This presentation and the earnings release are available on the Investor Relations section of our website, www.swmintl.com. I will now turn the call over to Frederic.

Thank you, Mark and good morning everyone. Although we were pleased with our first quarter adjusted EPS of $0.80, we highlight that constant currency net sales and adjusted EPS were up 17.5% and 12% respectively. Consistent with the factors incorporated into our guidance, LIP volumes remain strong. RTL volumes were weak. Argotec performed well. DelStar’s top and bottom line reserves continue to be hampered by certain volume challenges. And currency had a negative impact across our business. Other key factors of first quarter earnings were a first quarter loss on our Chinese Recon joint venture due in part to sales signing and a gain on the sale of water rights. However, normalizing for these factors, first quarter adjusted EPS marked a solid start to the year and is consistent with assumptions we incorporated into our full year adjusted EPS guidance of $3.15. Broadly speaking, execution was strong across the business and we maintained our focus on the 2016 key strategic priorities that support our long-term transformation. Non-tobacco sales represented nearly 40% of our total net sales in the first quarter. Trailing 12-month free cash flow remains stable though we expect it to trend lower through the year reflecting our expected decline in earnings versus 2015. In our Engineered Paper segment, LIP momentum from 2015 continued through the first quarter. Though as we have discussed, we believe most of this trend is related to customer inventory builds which we expect to unwind in the coming quarters. In total, our cigarette paper volumes, including our Chinese joint venture, CTM, were up 8% in the first quarter driven by modest LIP growth and supported by growth in other cigarette paper products such as volume. Our non-tobacco paper volumes showed some strong growth though while our higher margin battery separator was up. The bulk…

Thank you, Frederic. AMS segment sales performed to our expectations in the first quarter. We had very strong performance from the newly acquired Argotec business, while DelStar experienced an organic sales decline of 5% or 4% on a constant currency basis. In addition to the currency in oil, gas and mining themes we have discussed in recent calls, important drivers of the organic revenue decline are the exit from some low margin industrial business and significant lumpiness in certain customer orders. For example, one particular industrial customer placed an unusually large order in the first quarter of 2015 and the quarter-over-quarter sales decline attributable both to this customer alone accounted for roughly half of the first quarter sales decline. Despite these sales challenges, DelStar delivered bottom line results consistent with our expectations in part due to effective SG&A management and manufacturing cost reductions implemented late in 2015. While Argotec is not part of our organic growth, first quarter sales showed quite healthy year-over-year growth with particular strength in high value surface protection products, which is positive for our mix. This strength was in part due to a first quarter customer inventory build that will likely result in softer second quarter from both a sales and margin perspective. Regarding execution of our 2016 strategic priorities, we remain highly focused on the achievement of Argotec’s financial plan and optimizing the AMS platform, which we expect to result in margin improvements within DelStar over time. 2015 was the year of significant growth investment for us, with the integration of two bolt-on acquisitions and the expansion in Poland. These investments were all strategic and support our long-term plans for the AMS segment, but admittedly consume much of management’s time and attention. With those activities behind us, our immediate focus is on driving improved margins…

Thank you, Don. I will now review the financial highlights from the first quarter. First quarter consolidated net sales grew 14.1%, or 17.5% on a constant currency basis, compared to the first quarter 2015. The quarter benefited from the customer driven LIP inventory build which begin late last year and the addition of Argotec. RTL volume, outside of our CTS JV, was weak on a percentage decline basis given the difficult comparison Frederic mentioned, but was generally in line with our expectation. First quarter 2015 EP segment net sales were down 2.6% versus first quarter of 2015, but increased 1.4% on a constant currency basis, driven largely by LIP. Recall that with the consolidation of the former engineered paper and Recon segment, engineered papers volume now consists of all cigarette volumes, non-tobacco papers and all of our reconstituted tobacco products. In general, LIP cigarette paper and reconstituted tobacco products are our highest margin products, followed by non-tobacco specialty papers such as battery separators and certain high value cigarette papers. Our lowest margin products are commodity grade cigarette papers and non-tobacco paper filler volume such as printing and writing and food service papers. With that context, EP segment volumes were flattish and price of mix were a net positive. Within the AMS segment, net sales were up significantly in the first quarter versus 2015. However, excluding the effects of the Argotec acquisition, sales declined about 5% for the reasons Don detailed. Consistent with EP trends of strong LIP and other cigarette paper volumes in general, we saw good EP segment margin performance, with adjusted segment margins up nearly 400 basis points – versus last year LIP growth and other positive factors and cost controls more than offset RTL headwinds, LIP pricing concessions and negative currency impact. The AMS segment adjusted margin…

Thank you, Allison. Although we were pleased with first quarter performance, it was consistent with our expectations and we made progress on our 2016 priorities as we drive our strategic transformation. With approximately 40% of our current revenue mix on non-tobacco areas, our transition from the tobacco driven paper company towards more growth oriented, diversified, industrial manufacturer of high value products has good momentum. We appreciate your continued interest and support. That concludes our remarks. Catherine, please open the line for questions.

Thank you. [Operator Instructions] And our first question comes from Dan Jacome with Sidoti. Your line is open.

Good morning, how is everybody.

Good. Good morning Dan.

I appreciate the time. Nice job overall. Just a couple questions here, I guess first the patent verdict – I know you probably can’t talk too much about it, but just overall are you guys looking for some sort of monetized – monetary stream or royalty or is this maybe to just kind of prevent that competitor from producing?

So as we said, we are pleased with the positive ruling. Nothing is final, since the decision has been stayed, pending a ruling on appeal. As it relates to the second part of your question, we can’t elaborate on the specifics, other than our view is that if we go back with the bigger picture, we have – they have lost a very strong position, both for direct selling and through our licensee therefore on the LIP market segment, we continue to we believe, gain incremental share all the time. And this rule in terms of infringement action is to really secure our position and also protect our margins.

Okay, totally understand. Wanted to turn, I think you mentioned that tobacco consumption in China had turned negative, was that correct?

Yes.

Okay. I mean, do you have any high level thoughts there of what’s driving that? Is that more macro-related or tied to some sort of regulatory change that I am not aware of?

I think part of that is linked to demographics.

Okay.

And a general higher sense of awareness both at the government level and within the population about health matters and also the healthcare cost for a country of having such a large population of smokers.

Okay. That makes sense as well. I wanted to turn, I guess to Europe or just LIP in general, I know there was a big packaging change that goes, I guess, into effect in May. Thinking longer term on the horizon, do you guys see or are you aware of any other changes like this that could positively or negatively impact your operations, I guess?

As we released to you all, I think this new tobacco product directly is going to set the agenda for the next several years.

Okay.

As you know, this may change in packaging, which is based on different levels of moving towards plain packaging and flexibility at the country level within the EU to adopt ever increased safety warnings or even a complete shift in plain packaging. So that’s, I would say, for our customers, it’s a continued battle beyond May as to whether countries will adopt the plain packaging definition. And then down the road, several years from now, there is a ban of menthol in cigarettes, the use of menthol in cigarettes, which obviously could reduce the amount of actual rate of attrition in smoking rates, but its years away. And in my mind, the main risk remains economy and excise tax increases that governments may decide which is unrelated to the tobacco product going into it.

Okay. I appreciate all that color. And then so why don’t you turn to DelStar. Two questions there. I know, I guess the oil and energy continues to be a headwind. Do you have any idea of when you might be able to cycle through that or is it really all dependent like on the spot price of commodities and oil and all that?

It appears to be dependent upon the market for oil and gas and minimal extraction.

Okay. So kind of like wait and see, but I am encouraged. I guess, you guys are continuing to reposition the portfolio to higher value products, which is obviously good. I was just wondering if you could give us a little flavor of like what end markets you are focusing mostly on, because I know these acquired businesses do play in a lot of different end markets verticals?

Sure. One that comes to mind is semiconductor manufacturing where the purity of the materials that are used in manufacturing a semiconductor has a direct relationship with the ability of the semiconductors to pack more computing power on to a single chip by decreasing the size of the space between the leads inside the computer chip. And so we are investing in products that will allow that to happen.

Okay, so like technology end markets, I wasn’t aware of that. Thanks. Thanks a lot.

If I may, Dan, I think the common theme across the markets that we see having the higher attractiveness is filtration. And so we are building for a base of water filtration and we are obviously getting the headwind on oil and gas, which uses hydraulic filtration media and so forth, but we are refocusing instead of moving to more commodity industrial or consumer products trying to reinvest and increase our pricing and seeing demanding filtration implications.

Okay, got it. And I guess last question just turning to acquisition, it looks like you still have the capacity on your balance sheet to execute some more. I was just wondering kind of what you are seeing out there in the middle-market for safe filtration media, how do the valuations look and just the opportunity set for you guys?

Yes. So, as we stated in February, our short-term priority is really integration of Argotec and building the AMS platform. Now, over the last several years, we have built what I would call a healthy pipeline of opportunities with the addition of film and surface protection through Argotec that obviously adds some additional fields, we are invested in, in terms of assessing opportunities. We have capacity with our credit facility, but we also have demonstrated – we continue to demonstrate patience focusing on quality assets and financial discipline as it relates to valuation. So, I mean, there is nothing fundamentally different when I look at the market or the transactions ahead of us right now and we continue to apply again the same patient and highly disciplined approach, with clearly a focus on how do we find synergistic acquisitions as we build the AMS platform it was to our businesses that we have put together over the last three years.

Okay, great. And then the last one just because I missed it, on the engineered paper side, you said price was flat, I think Allison talked about that.

You mentioned price was flat.

And engineered paper, what was the breakdown between volume and price?

Yes. What we said is the price mix was actually a little bit of a positive in the quarter and that has a lot to do with the strength of the LIP per se. But I think that the broader vision is obviously we see opportunities for a better environment, more favorable environment in terms of volume trying to limit the attrition to a minimum. And we have obviously good momentum. As we go into the second quarter, it relates to an improved mix of products within engineered papers that is obviously critical to our earnings guidance.

Okay, good. Alright. Thanks a lot for everything.

Thanks, Dan.

Thank you. [Operator Instructions] And I am showing no further questions at this time. I would like to turn the call back to Frederic Villoutreix for any closing remarks.

Thank you, Catherine and thank you all for attending the call. We certainly appreciate your interest in SWM. Allison, Mark and I will be in our offices today. And if you have any further questions, please give us a call. Have a nice day.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone, have a great day.