Welcome to SWM's Fourth Quarter 2013 Earnings Conference Call. Hosting the call today from SWM is Frédéric Villoutreix, Chairman and Chief Executive Officer. He is joined by, Jeff Cook, Executive Vice President and Chief Financial Officer; Steve Dunmead, Executive Vice President and Chief Operating Officer; and Mark Chekanow, Director of Investor Relations. Today's call is being recorded and will be available for replay beginning at noon, Eastern standard time. The dial-in for the replay is 1 (800) 585-8367, and enter PIN number 48333402. [Operator Instructions] It is now my pleasure to turn the floor over to Mr. Chekanow. Sir, you may begin.

Thank you, Jackie. Good morning. I am Mark Chekanow, Director of Investor Relations at SWM. Thank you for joining us to discuss SWM's fourth quarter and full year 2013 earnings results. On today's call, Frédéric will share some high-level comments about our fourth quarter and full year performance and strategic priorities. Steve will provide details on our operations and Jeff will then take you through a more detailed review of our financial results and guidance, as reported in our release filed with the SEC yesterday and available on the SEC's website and at our investor relations website. We'll then take your questions. 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 report on Form 10-Q, our annual reports on Form 10-K and our 8-K filed last night. Certain financial measures during this call exclude restructuring and impairment expenses, results of discontinued operations, non-cash amortization expenses and valuation allowances and are, therefore, non-GAAP financial measures. Reconciliations of these measures to the closest GAAP measures are included in the appendix. I'll now turn the call over to Frédéric. Frédéric P. Villoutreix: Thank you, Mark, and good morning, everyone. Late yesterday we released our fourth quarter and full year 2013 earnings, and this morning we are pleased to present our results and update you on our more recent acquisition of DelStar, which was a key fourth quarter highlight and important milestone for Schweitzer-Mauduit. We have long been discussing our intention to carefully and selectively diversify the company, and believe our patience and financial discipline led us to the right…

Thank you, Frédéric. It's a pleasure to join the call. Referring to Slide 5, tobacco paper volumes in the fourth quarter including CTM, our joint venture of China, were down 8%, with LIP volumes up 1%. For the full year, tobacco paper volumes were down 2%, with LIP volumes up 3%. Strength in LIP and non-tobacco volumes were key in supporting our profit margin as we gain share in high-margin LIP paper, while backfilling the lower conventional cigarette paper volumes with higher levels of non-tobacco products. We believe this strategy paid off well in 2013, contributing to our ability to exceed our EPS guidance despite the higher than expected declines in smoking rates. While we have successfully gained share in 2013, it's difficult to assume further gains in 2014 that we work diligently to optimize our mix and drive as much profitable volume through our paper mills as possible. RTL volumes rebounded sequentially from an unusually low third quarter 2013, but still saw volume declines of approximately 7% versus last year's fourth quarter. Full-year 2013 Recon Segment volumes declined 10%, consistent with the expectations we communicated on our third quarter call. As anticipated, our customers with annual purchase commitments met those obligations during the fourth quarter that we believe it has left some of them with -- at some levels of excess inventory. Now turning to Slide 6. Regarding the LIP contract extensions referenced in our earnings release, we proactively worked with several key customers to extend our existing contracts. Here, our strategic focus is on the combination of share and term in exchange for some levels of price concession. Solidifying ourselves as the market leader for several years is strategically important. As we believe locking in shares is the best way to protect ourselves amidst tobacco industry volume declines.…

Thank you, Frédéric. Fourth quarter net sales increased 1% versus the prior year quarter. Currency continued to benefit us in the fourth quarter, and on a constant-currency basis, revenue is down 2%. The DelStar acquisition, which closed on December 12, 2013, contributed revenue of $4.2 million in the fourth quarter. For full-year 2013, consolidated revenues declined approximately 1%, and 2% on a constant-currency basis. Fourth quarter Paper Segment revenue, which includes non-tobacco paper, but excludes sales from our Chinese JV was down 3%. This decrease was driven by lower tobacco paper volume as LIP volume growth was offset by lower margin conventional cigarette paper volume declines. Our Recon Segment volumes declined 7%, but improved mix and a stronger euro drove a revenue increase of 2%. For the full-year 2013, Paper Segment revenue was essentially flat and Recon Segment revenue was down nearly 4%. As you can see on the chart on Slide 11, adjusted operating profit was essentially unchanged versus a year ago, but we did have several puts and takes. Volume was the biggest negative factor, mostly tobacco paper as well as some Recon products. Offsetting these declines, were profit lifts from nonmanufacturing costs as the fourth quarter of 2012 had some elevated expenses due to certain strategic initiatives and the currency benefits we continue to experience from a strong euro in the fourth quarter of 2013. Wood pulp prices continue to have a limited impact on profits, though they remain at high levels. In our 2014 outlook, we have assumed modest gains for a reduction in wood pulp prices. Paper Segment adjusted operating profits during the fourth quarter were down 7% versus the same period in 2012. The adjusted Paper Segment margin in the quarter was 17.8%, 90 basis points lower than the prior year quarter, in part…

[Operator Instructions] Our first question comes from the line of Alex Ovshey with Goldman Sachs.

On the RTL side, so you transferring 10% of the volume from the French facility into the Chinese joint venture. So you're essentially going from being the sole owner of the volume to having to split that with the joint venture partner. Are you getting reimbursed for that in anyway? Frédéric P. Villoutreix: Alex, let me correct this impression that we may have left with our prepared remarks, the amount of the volume transfer to China is in fact small. We are talking about incremental revenue growth in China out of the joint venture. And that was the plan all along in order to prime the pump if you are in terms of demand for the Chinese market, we served a few customers including the ones that our JV partners out at France. But the significant volume growth that we expect out of China is purely based on having the technology into place in China with CTS. There are very large import duties into China for RTL and other tobacco products that makes it cost-prohibitive to address the market, the domestic market from abroad. The effects really the volume drop our French mill is really the consequence of some number of factors and I will list the three of them by I would say degree of importance in terms of magnitude of the impact on volume. First one is, we are the inventory adjustments, excess inventories on the balance sheet of our customers at the end of 2013 that is being corrected in 2014. The second one is the challenging environment in terms of smoking attrition rates, in particularly in Europe that are leading our customers to be very prudent as we forecast 2014, in fact, it's fair to say that most customers see 2014 to be in line with '13. So no real improvement in terms of smoking attrition rates. And then the third factor which is somewhat unclear at this stage of how much it will impact our RTL segment. That's the information we got from a few customers of their intent to do reformulations of cigarette designs as they are struggling to either maintain share or in an environment where the demand is dropping, the smoking attrition rates are accelerating to gain market share at the expense of others through some marketing programs.

Shifting to the LIP side, and the contract extensions. So is the majority of your LIP business both in Europe and in North America now under the extent of contract and is there any risk to having to negotiate any of the business again in 2015?

Alex, this is Steve. Certainly we're not going to into specifics on the percentages but more than half of it is under contract. If we get the opportunity, quite honestly, to continue to extend contracts and protect share or grow share, we will certainly do that, but certainly it's more than half.

Is that more than half common, does it apply both to Europe and North America or is one region sort of above that level and 1 below? Frédéric P. Villoutreix: Applies to both.

Then on the DelStar front, you talked about some exciting projects that you guys are doing there with the legacy SWM business. Do you expect any financial benefit in terms of revenue than the profits in 2014 or is that all going to be potentially beneficial to the company beyond this year?

I think, Frédéric in his prepared remarks talked a little bit about the fact that we've got some operational excellence, things going on that should start to pay dividends this year. We may, on a couple of the more strategic synergistic projects toward the fourth quarter, see a little bit. But certainly it's mostly focused on 2015 and beyond. But really exciting work going on between the 2 teams.

And just 1 last question for me and I will turn it over. Just looking at the M&A pipeline in infiltration, is the expectation that you could potentially do another deal in 2014 or do you view 2014 as really a year where you really try to fully integrate DelStar and work on the organic growth profile of sort of the combined DelStar and legacy SWM business, how do you see that? Frédéric P. Villoutreix: Alex, clearly the #1 priority for us is to leverage the acquisition of DelStar. The integration, as Steve mentioned in his prepared remarks, is for most part behind us, and now we are really focusing on growing the core DelStar business and pushing hard for those synergies both commercial and industrial synergies, that frankly speaking, we see as an add-on in terms of the benefit of that investment and so it was not part of how we look at the business when we acquired it. And with our synergies having impact in '14 was clearly meaningful impact in 2015. In parallel, we are looking at ways to build on the platform, on this filtration platform with some bolt-on acquisition moves. And I think we are advanced enough at this stage to say that we could be acting in 2014 and as the could is moderated by the fact that we'll maintain the same financial discipline that we have used in the past. So we are not going to rush into anything, but we clearly see opportunities and will be exploring those opportunities during the course of the next several months.

Our next question comes from the line of Ann Gurkin with Davenport. Ann H. Gurkin - Davenport & Company, LLC, Research Division: I wanted to start with customer demand for your products. As you moved from Q3 into Q4, was there any change in customer's plans or order rates for 2014? Frédéric P. Villoutreix: Not really. I think on the RTL, we already commented that we probably we had a little spike due to the annual commitments. But I think on the paper side, we have experienced the same kind of a slower fourth quarter with machine downtime in December, which we experience every year due to customers making inventory adjustments, cigarettes then sales. I think this trend have been unchanged for the past 2 to 3 quarters, and I think it's also reflected in the forecast that customers add-on whether it's Europe, Russia, the rest of the world, which seems to unfortunately is at that stage does not see a lot of improvements from the challenging conditions of 2013, but for the most part no worsening either. Ann H. Gurkin - Davenport & Company, LLC, Research Division: Okay, that helps. And then you referenced share repurchase to date, is that -- is the share repurchase in your 3 40 guidance?

Yes. What we've done to date probably looking around $0.02 or $0.03, so pickup from what we've already done so that is in the 3 40. Ann H. Gurkin - Davenport & Company, LLC, Research Division: Okay, great. That helps. And then, maybe just get an update on potential LIP adoption in Russia. I know you commented that you don't see any kind of pick up in LIP sales in '14 in Russia, but can I just get an update on the status of that? Frédéric P. Villoutreix: Sure. I think the vote by the parliament in Russia and the common unions of 2 adjacent countries initially scheduled for December has been moved to May. And at this stage, I think there is still the same activity and on the discussions with customers is the same. The need to achieve a state of readiness, but just the shift of full norms and then how it would impact our color 2014, at this stage we don't, at least we have not included in our guidance any pick-up in demand in 2014, but obviously we will update the investment community as we know more about -- around the May period. Ann H. Gurkin - Davenport & Company, LLC, Research Division: Great, that helps. And then finally, as you integrate DelStar, I'm just curious -- positive surprise challenges kind of just get an update on how that integration progressing? Frédéric P. Villoutreix: Yes, I think so far, it's been going very smoothly. We have a great teamwork happening at the management level. We've been able to deploy our synergy teams and we they have already identified some short wins and longer-term opportunities. At this stage, we are encouraged by what we have seen, progress we have made, and again I think some of the synergies that we see ahead of us could be transformation.

Our next question comes from the line of Kenneth Smith with Lenox Equity Research.

Couple of years ago, you had forecasted a difficult RTL environment and then it turned out to be a much better year than you anticipated. Is there anything about the current environment that could cause your pessimistic outlook to really change for the better or is this much more a clearer situation than it was a couple of years ago? Frédéric P. Villoutreix: I would like to be wrong a second time. Let's see, but I think, what we know is that many of our customers have worked a balance sheet to reduce inventories of both those in tobacco and RTL. The magnitude of this correction is not necessarily clear and is somewhat related to the attrition rates in Europe, in Russia, based on excise taxes that are being implemented in Russia, which are really causing the market to shrink at a pace that has not being seen in many years. So I think this is probably the area to monitor whether or not the attrition rates remain in line with the forecast of our customers or whatever there is the improvements. I would say at this stage, we feel comfortable relying on this forecast of the customers they have given us to build our guidance, and obviously we are working hard, the teams are working hard to go after additional volumes.

Second question, more for Jeff. On the guidance on the tax rate and your ability to move more of your operating profit into cash flow, you said that the tax rate will be lower in the second half, later in the year than the first part. Where do you sort of see this settling out as a tax rate you'd expect to get to in, what is the overall impact going to be on your cash flow relative to the, say, 2013?

For 2014, there will be some improvement overall, but not significant because we are spending money to implement a lot of these changes, so -- but we will net-net have a benefit this year. But I'm talking maybe $1 million or $2. The important thing is going forward, when you get to 2015, then I would see our tax rate getting down to the mid-20s, if maybe not even a bit lower.

[Operator Instructions] At this time, it appears that we have no further questions. I'd like to turn the floor back over to management for any additional or closing remarks. Frédéric P. Villoutreix: Thank you, Jackie, and thank you all for attending the call. While disappointing the 2014 outlook, we remain confident in the strength of our business model and the ability to bounce back as evidenced by the 20% increase in our quarterly dividend we announced last quarter. I feel very good about our Paper Segment as performed in 2013, and the competitive strength of the -- of our paper business as we enter 2014. We obviously headwind on the RTL but we have this growth opportunity on DelStar. And so for me it's a balanced outlook if you want with some ups, some downs, some opportunities. But we will continue to work hard on execution as we have done for many years to generate some growth, and be diligent on the cost and capacity efficiencies of our units. So we appreciate your interest in the company. Mark, Jeff and I would be in our offices today, and if you have any further questions, please give us a call. And have an nice day. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.