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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K


(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
OR
o		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)

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		62-1612879 (I.R.S. Employer Identification No.)
100 North Point Center East, Suite 600 Alpharetta, Georgia (Address of principal executive offices)		30022-8246 (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		Name of exchange on which registered

Common stock, par value $0.10 per share (together with associated preferred stock purchase rights)		New York Stock Exchange, Inc.

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ý No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ý No o

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 ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12-b2 of the Exchange Act. (Check One):


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o

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

The aggregate market value of the outstanding common stock, par value $0.10 per share (the "Common Stock"), held by non-affiliates of the registrant as of June 30, 2008 (the last business day of the registrant's most recently completed second fiscal quarter) was $258.3 million, based on the last sale price for the Common Stock of $16.85 per share as reported on the New York Stock Exchange on said date. For purposes of the foregoing sentence only, all directors and executive officers are assumed to be affiliates.

There were 15,344,452 shares of Common Stock issued and outstanding as of February 27, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement relating to its 2009 Annual Meeting of Stockholders scheduled to be held on April 23, 2009 ("the 2009 Proxy Statement") and filed pursuant to Regulation 14A are incorporated by reference into Part III of this Form 10-K.

PART I.

Item 1. Business

GENERAL

Schweitzer-Mauduit International, Inc. (referred to, with its consolidated subsidiaries, as "we", "us", "our", the "Company", "Schweitzer-Mauduit" or "SWM" unless the context indicates otherwise) is a multinational diversified producer of premium specialty papers headquartered in the United States of America and is the world's largest supplier of fine papers to the tobacco industry. We manufacture and sell paper and reconstituted tobacco products to the tobacco industry as well as specialized paper products for use in other applications. Tobacco industry products comprised approximately 90 percent of our consolidated net sales in each of the years 2006 through 2008. The primary products in the group include cigarette, plug wrap and tipping papers, or Cigarette Papers, used to wrap various parts of a cigarette and reconstituted tobacco leaf, or RTL, which is used as a blend with virgin tobacco in cigarettes, reconstituted tobacco wrappers and binders for cigars. These products are sold directly to the major tobacco companies or their designated converters in the Americas, Europe, Asia and elsewhere. Non-tobacco products are a diverse mix of products that includes low volume, high-value engineered papers as well as commodity paper grades produced to maximize machine utilization.

We are a manufacturer of high porosity papers, which are used in manufacturing ventilated cigarettes, banded papers for the production of lower ignition propensity, or LIP, cigarettes and the leading independent producer of RTL used in producing blended cigarettes. We conduct business in over 90 countries and currently operate 11 production locations worldwide, with mills in the United States, France, the Philippines, Indonesia and Brazil. We also have a 50 percent equity interest in a paper mill in China that produces cigarette and porous plug wrap papers.

Our manufacturing facilities have a long history of producing paper dating back to 1545. Our domestic mills led the development of the North American tobacco-related papers manufacturing industry, which was originated by Peter J. Schweitzer, Inc. that began as an importer of cigarette papers from France in 1908.

Our Securities and Exchange Commission, or SEC, filings, which include this Annual Report on Form 10-K, Definitive Proxy Statements on Form DEF-14A, quarterly reports on Form 10-Q, current reports on Form 8-K and all related amendments, are available, free of charge, on the Investor Relations section of our web site at www.schweitzer-mauduit.com. Information from our web site is not incorporated by reference into this Form 10-K. These reports are available soon after they are filed electronically with the SEC. The web site allows access to historical financial information, press releases and quarterly earnings conference calls, our Code of Conduct, corporate governance guidelines, Board of Directors committee charters, as well as disclosure of any amendment to or waivers of our Code of Conduct granted to any of the principal executive officer, principal financial officer or principal accounting officer. The web site provides additional background information about us including information on our history, products and locations. Requests for information or to contact the audit committee chair, lead non-management director or to report concerns about accounting or other issues can be made in writing and sent to the Investor Relations Department at our principal executive office address listed below.

Our quarterly earnings conference calls are typically held on the same dates as our quarterly earnings releases and are available through our web site via a webcast. The tentative dates for our quarterly earnings conference calls related to 2009 financial results are May 7, 2009, August 6, 2009, November 5, 2009 and February 4, 2010. These dates are subject to change. Instructions on how to listen to the webcasts and updated information on times and actual dates are available through our web site.

Our wholly-owned, majority-owned and controlled subsidiaries are Schweitzer-Mauduit Canada, Inc., or SM-Canada, Schweitzer-Mauduit Spain, S.L., or SM-Spain, a holding company organized under the Spanish holding company regime and the primary foreign investment holding company for SWM, and

Schweitzer-Mauduit International China, Limited, or SM-China, a holding company incorporated in Hong Kong which owns 50 percent of the equity interest in China Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd., a Sino-Foreign Equity Joint Venture with China National Tobacco Corporation, or CNTC, to manufacture and sell tobacco-related papers in China, our only unconsolidated subsidiary. We indirectly through SM-Spain have subsidiaries in France, the Philippines, Indonesia and Brazil. SM-Spain owns directly 100 percent of Schweitzer-Mauduit Holding S.A.S., a French holding company, or SMH, and SMH owns 100 percent of Schweitzer-Mauduit Industries S.A.S., a French corporation, or SMI, which, together with SM Spain, holds 100 percent of a second holding company Schweitzer-Mauduit France S.A.S., a French corporation, or SMF, which holds our French, Philippine and Indonesian paper operations. SMF also owns 100 percent of SM Developpement S.A.S., a French corporation, or SMD, and SMD owns 100 percent of LTR Industries S.A., a French corporation, or LTRI, our French RTL operation. SMF, directly or indirectly, owns 100 percent of 3 principal French operating subsidiaries, Papeteries de Mauduit S.A.S., or PdM, Papeteries de Malaucène S.A.S., or PdMal, and Papeteries de Saint-Girons S.A.S., or PdStG, 100 percent of PDM Philippines Industries, Inc., or PPI, and 95 percent of P.T. PDM Indonesia, or PT PDM. SM-Spain also owns directly 99.99 percent of the issued and outstanding shares of Schweitzer-Mauduit do Brasil S.A., our Brazilian paper operations, or SWM-B. We had no special purpose entities as of December 31, 2008.

Our principal executive office is located at 100 North Point Center East, Suite 600, Alpharetta, Georgia 30022-8246 and our telephone number at that address is 1-800-514-0186. Our stock is traded on the New York Stock Exchange, or NYSE, under the symbol "SWM."

We have provided a Glossary of Terms at the end of this Annual Report on Form 10-K.

DESCRIPTION OF BUSINESS

Segment Financial Information. We operate and manage 3 reportable segments: United States, or U.S., France and Brazil. These segments are based on the geographical location of our manufacturing operations. These business segments manufacture and sell Cigarette Papers, reconstituted tobacco products (France and U.S. only) and certain non-tobacco industry products. While the products are similar in each segment, they vary based on customer requirements and the manufacturing capabilities of each of the operations. The Philippine and Indonesian financial results are included in the French business segment because the results of these 2 units are not material for segment reporting purposes and since their products are coordinated with sales of our French operations in southeast Asia. Sales by a segment into markets primarily served by a different segment occur where specific product needs cannot be cost-effectively met by the manufacturing operations domiciled in that segment.

Additional information regarding "Segment Performance" is included in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operation. In addition, selected financial data for our segments is available in Note 17, Segment Information, of the Notes to Consolidated Financial Statements. Reference is also made to Part I, Item 1A, Risk Factors, Market Risk, for a discussion regarding the risks associated with foreign operations.

Financial information about foreign and domestic operations, contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operation" appearing in Part II, Item 7 herein and in Notes 9, 10, 12, 16 and 17 ("Restructuring Activities," "Debt," "Income Taxes," "Acquisition" and "Segment Information," respectively) to the Consolidated Financial Statements contained in "Financial Statements and Supplementary Data" appearing in Part II, Item 8 herein, are incorporated in this Item 1 by reference.

PRODUCTS

We manufacture and sell paper and reconstituted tobacco products to the tobacco industry as well as specialized paper products for use in other applications.

Tobacco industry products include Cigarette Papers and RTL used as a tobacco blend with virgin tobacco in cigarettes and reconstituted tobacco wrappers and binders for cigars. These products are sold directly to tobacco companies or their designated converters in the Americas, Europe, Asia and elsewhere.

Each of the 3 principal types of Cigarette Papers—cigarette, plug wrap and tipping papers—serves a distinct purpose in the function of a cigarette.

Cigarette paper wraps the column of tobacco in a cigarette. Certain properties of cigarette paper, such as control of ignition propensity, basis weight, porosity, opacity, tensile strength, texture and burn rate must be controlled to tight tolerances. Many of these characteristics are critical to meet the requirements of high-speed production processes utilized by cigarette manufacturers as well as their desired attributes of finished cigarettes such as reduced deliveries of tobacco-related smoke constituents. In addition to the attributes and functional requirements of conventional cigarette papers, certain of our products enable lower ignition propensity, or LIP, cigarettes to self-extinguish to regulatory standards when not being actively smoked.

Plug wrap paper forms the outer layer of a cigarette filter and is used to hold the filter materials in a cylindrical form. Conventional plug wrap is manufactured on flat wire paper machines using wood pulp. Porous plug wrap, a highly air permeable paper, is manufactured on inclined wire paper machines using a furnish consisting of "long-fibers," such as abaca, and wood pulp. Porosity, a measure of air flow permeability, ranges from a typical level of less than 100 Coresta on conventional plug wrap to 35,000 Coresta on high porosity papers. High porosity plug wrap is sold under the registered trademark POROWRAP® and is used on filter-ventilated cigarettes.

Tipping paper, produced in white or tan/cork color, joins the filter element to the tobacco-filled column of the cigarette. The ability to produce tipping paper, which is both printable and glueable at high speeds, is critical to producing a cigarette with a distinctive finished appearance.

Reconstituted tobacco is used by manufacturers of cigarettes and other tobacco products. We currently produce reconstituted tobacco in 2 forms: leaf, or RTL, in France, which is manufactured by LTRI, and wrapper and binder in the United States. RTL is used by cigarette manufacturers primarily to blend with virgin tobacco as a design aid to achieve certain attributes of finished cigarettes, such as taste characteristics and reduced deliveries of tobacco-related smoke constituents, and to cost-effectively utilize tobacco leaf by-products. Wrapper and binder are reconstituted tobacco products used by manufacturers of machine-made cigars. Binder is used to hold the tobacco leaves in a cylindrical shape during the production process. Wrapper is used to cover the outside of the cigar, providing a uniform, finished appearance.

Commercial and industrial products include lightweight printing and writing papers, battery separator paper, drinking straw wrap, filter papers and other specialized papers primarily for the western European and Brazilian markets. Like porous plug wrap, certain of these non-tobacco industry products use a fiber blend consisting of long-fibers. These products are generally sold directly to converters and other end-users in North America and western Europe and through brokers in Brazil. The non-tobacco industry products are a diverse mix that includes low volume, high-value engineered papers as well as commodity paper grades produced to maximize machine utilization.

MARKETS AND CUSTOMERS

Our U.S. segment primarily supplies the major, and many of the smaller, cigarette manufacturers in North America, and also has significant sales in South America and Japan. The customer base for the U.S. operations consists of more than 160 customers in approximately 40 countries. Our French segment relies predominantly on worldwide exports, primarily to western Europe, Asia (in part through our Philippine and Indonesian manufacturing facilities), eastern Europe and, in lesser but substantial amounts, to Africa, the Middle East and Australia. The customer base for the French operations consists of a diverse group of

approximately 200 customers in more than 70 countries. Our Brazilian segment primarily supplies customers in Latin and South American countries with expanding sales to North America and other export locations. The current customer base of the Brazilian operations consists of the cigarette manufacturers in Brazil, as well as approximately 50 customers in approximately 20 countries outside Brazil. Customers of all 3 business segments include international tobacco companies, regional tobacco manufacturers and government monopolies. Consolidation of the industry by certain major cigarette manufacturers continued in 2008 increasing the market leverage held by these customers.

Altria Group, Inc., including Philip Morris USA Inc. (Philip Morris USA), Philip Morris International Inc. (PMI), which was spun off Altria Group effective March 28, 2008, British American Tobacco p.l.c., or BAT, including its Brazilian subsidiary Souza Cruz S.A., or Souza Cruz, Imperial Tobacco Group PLC, or Imperial, and Japan Tobacco Inc., or JTI, are our 5 largest customers. Philip Morris USA, PMI, BAT, Imperial and JTI together with their respective affiliates and designated converters, accounted for 60 percent, 50 percent and 47 percent of the Company's 2008, 2007 and 2006 consolidated net sales, respectively. Although the total loss of 1 or more of these large customers could have a material adverse effect on our results of operations, this is not considered likely given the significant share that our capacity represents of the total worldwide supply available to meet the demand for cigarette-related fine papers. A material variation in demand from 1 or more of these customers or due to external factors such as government legislation or changes in consumer behavior, however, could result in a significant decline in demand for our products.

SALES AND DISTRIBUTION

Essentially all tobacco-related products manufactured by the U.S., French and Brazilian segments are sold by our marketing, sales and customer service organizations directly to cigarette manufacturers or their designated converters. Most of our U.S. and French segments' non-tobacco related products, which represent approximately 5 to 7 percent of each of their respective net sales, are sold on a direct basis. The Brazilian segments' non-tobacco related products comprise approximately 7 percent of its net sales, substantially all of which are sold through agents.

The typical modes of transportation we utilize in the delivery of product to our customers include truck, rail and ocean-going vessels. As is typical in our industry, ownership of the product generally transfers to our customer upon shipment from our mills, except for certain export sales where ownership typically transfers at the foreign port or customer facility.

COMPETITION

We are the largest producer of Cigarette Papers in the world. LTRI is the leading independent producer of RTL for use in cigarettes. We do not sell our products directly to consumers or advertise our products in consumer media. The specialized nature of these tobacco-related papers requires unique research and development capability and special papermaking equipment and skills to meet exacting customer specifications. These factors have limited the number of competitors in each of the tobacco-related paper categories discussed separately below.

Cigarette Paper — Our estimated worldwide share of the cigarette paper market is 26 percent, and excluding China which is largely self-sufficient, our estimated global market share is 35 percent. As the sole domestic producer of Cigarette Papers in North America, we believe that we have the majority supply position, estimated at 70 to 75 percent of the North American cigarette paper market. PdM and PdStG, indirect wholly-owned subsidiaries in France, sell 65 to 70 percent of their products in western Europe and Asia. SWM-B has over 85 percent of the cigarette paper market in Brazil and an estimated 70 to 75 percent share of the cigarette paper market in South America. Our principal competitors include European suppliers Delfort Group AG, or Delfort, an Austrian corporation, Miquel y Costas & Miquel S.A., or Miquel y Costas, a Spanish corporation, and Julius Glatz GmbH, an independent German company. The

principal competitors of our Indonesian cigarette paper business are PT Surya Zig Zag and PT Bukit Muria Jaya, or PT BMJ, which are owned by Indonesian cigarette production companies and account for 65 to 70 percent of the cigarette paper market in Indonesia. We believe that the bases of cigarette paper competition are price, consistent quality, security of supply, level of technical service and performance requirements of the customer's cigarette-making equipment.

We have developed individually or in conjunction with customers, technologies to address the emerging market for cigarette paper for LIP cigarettes in the United States and Canada. We are currently the leading producer of commercially proven cigarette paper for LIP cigarettes and continue to actively develop the technologies for such products. We formed a "Center of Excellence" platform at our Newberry, South Carolina facility dedicated to the development, production and distribution of cigarette papers for LIP cigarettes. To date, the cigarette papers for LIP cigarettes offered by Schweitzer-Mauduit's competitors, have not achieved broad commercial success.

Plug Wrap Paper — We believe that our U.S. segment has an estimated 75 to 80 percent share of the North American market for plug wrap papers. The remainder of the North American market is shared by 2 competitors: Miquel y Costas and Delfort. Our French businesses hold an estimated 70 to 75 percent of the western European high porosity plug wrap market. Delfort is our principal competitor in that market. Through the Brazilian business' supply of conventional plug wrap papers and the U.S. business' supply of porous plug wrap papers, we have an estimated 65 to 70 percent share of the South American market for plug wrap papers. Miquel y Costas and Delfort are our principal competitors in that market.

Tipping Paper — We believe that our U.S. segment has an estimated 75 to 80 percent share of the North American market for base tipping paper, which is subsequently printed by converters. Our principal competitor in this market is Delfort. Our Brazilian segment has an estimated 75 to 80 percent share of the South American market for base tipping paper, which is subsequently printed by converters. Our principal competitor in Latin America is Miquel y Costas. We believe that the bases for competition are consistent quality, price and, most importantly, the ability to meet the runnability and printability requirements of converting equipment and high-speed cigarette-making machines.

PdMal holds an estimated 15 to 20 percent market share in western Europe. PdMal's principal European competitors are Tann-Papier, a subsidiary of Trierenberg Holdings, Benkert GmbH and Miquel y Costas. We believe that the bases of competition for perforated tipping paper in Europe are price, perforation technology and consistent quality.

Reconstituted Tobacco — LTRI is the leading independent producer of RTL in the world. We believe that the basis of competition in this market is primarily quality. However, sales volumes are influenced by worldwide virgin tobacco prices and cigarette producers' various in-house tobacco reconstitution processes, as lower prices of virgin tobacco or other RTL forms may compete against reconstituted tobacco sales volumes.

LTRI's principal competitors are cigarette companies such as Philip Morris, BAT, Elets, an affiliate of Japan Tobacco Inc. which operates in Russia, and STMA (China), which produce RTL primarily for internal use.

We estimate that approximately 40 percent of reconstituted cigar wrapper and binder used in the U.S. market is produced internally by domestic cigar manufacturers. Our U.S. segment's Ancram mill and Nuway Tobacco, a privately-held cast process manufacturer, produce the balance.

Other Products — We produce papers for lightweight printing and writing, battery separator papers, wrapping paper for drinking straws, filter papers and other specialized papers. We believe that price is the primary basis of competition for drinking straw wrap, printing and writing and filter papers, while consistent quality and customer service are believed to be the primary competitive factors for battery separator paper. We discontinued the sale of the majority of our commercial and industrial papers.

RAW MATERIALS AND ENERGY

Wood pulp is the primary fiber used in our operations. Our operations consumed 91,000 and 104,000 metric tons of wood pulp in 2008 and 2007, respectively, all of which was purchased. Our operations also use other cellulose fibers, the most significant of which are in the form of flax fiber and tobacco leaf by-products, as the primary raw materials for Cigarette Papers and reconstituted tobacco products, respectively. While tobacco leaf by-products are generally the property of the cigarette manufacturer for whom the reconstitution is contracted, we purchase some tobacco leaf by-products for use in the production of RTL and wrapper and binder products.

Flax straw is purchased and subsequently processed into flax tow at processing facilities in Canada and France. The flax tow is then converted into flax pulp at pulping facilities in the United States and France. Certain specialty papers are manufactured by our operations in France, requiring small amounts of other cellulose fibers, all of which are purchased.

In addition to cellulose fibers, our operations use calcium carbonate as another significant raw material in the production of many of our paper products. Calcium carbonate, or chalk, is used in the production of Cigarette Papers, as well as in certain of our other paper products, to provide desired qualities and characteristics, such as opacity, as well as end-product performance attributes. All of our needs for calcium carbonate are purchased. Our Quimperlé mill in France and Pirahy mill in Brazil have on-site, vendor-operated calcium carbonate plants which supply significant quantities toward the needs of those mills. For the balance of their needs, our mills also purchase calcium carbonate manufactured elsewhere. Our calcium carbonate purchase commitments are discussed in Note 15, Commitments and Contingencies, of the Notes to Consolidated Financial Statements.

We believe that our purchased raw materials are readily available from several sources and that the loss of a single supplier would not have a material adverse effect on our ability to procure needed raw materials from other suppliers.

The papermaking processes use significant amounts of energy, primarily electricity, natural gas and fuel oil to run the paper machines and other equipment used in the manufacture of pulp and paper. In France and in the United States, availability of energy is generally not expected to be an issue, although prices can fluctuate significantly. We enter into agreements to procure a portion of our energy requirements for future periods in order to reduce the uncertainty of future energy costs.

In France, we have entered into agreements with an energy cogeneration supplier whereby the supplier constructed and operates cogeneration facilities at our Spay and Quimperlé Mills and supply steam that is used in the operation of our mills. The Spay cogeneration facility was completed in late 2005 and the Quimperlé cogeneration facility was placed in service during the fourth quarter 2007. These cogeneration facilities are expected to provide energy cost savings and improved security of supply.

In Brazil, where production of electricity is heavily reliant upon hydroelectric plants, availability of electricity has been affected in the past by rain variations. Our Brazilian business currently has a sufficient supply of energy to continue its current level of operation.

Additional information regarding agreements for the supply of energy is included in Note 15, Commitments and Contingencies, of the Notes to Consolidated Financial Statements.

BACKLOG AND SEASONALITY

We have historically experienced a steady flow of orders. Our mills typically receive and ship orders within a 30-day period, except for RTL where orders are generally placed well in advance of delivery. We plan our manufacturing schedules and raw material purchases based on our evaluation of customer forecasts and current market conditions.

The U.S. segment does not calculate or maintain records of order backlogs. Its largest customer Philip Morris USA provides forecasts of future demand, but actual orders for Cigarette Papers are typically placed 2 weeks in advance of shipment.

Our French segment does maintain records of order backlogs. For Cigarette Papers, the order backlog was approximately $33 million and $37 million on December 31, 2008 and 2007, respectively. This represented approximately 43 and 50 days of Cigarette Paper sales for the French segment in 2008 and 2007, respectively. LTRI's RTL business operates under a number of annual supply agreements. The order backlog for RTL was approximately $147 million and $98 million on December 31, 2008 and 2007, respectively.

The Brazilian segment does not calculate or maintain records of order backlogs. Souza Cruz, its largest customer, provides forecasts of its future demand, typically 8 weeks in advance, in order for the Brazilian operations to manage production and ensure a sufficient supply to meet this customer's anticipated requirements.

Sales of our products are not subject to significant seasonal fluctuations, except in the United States where customer shutdowns of 1 to 2 weeks in duration typically occur in July and December, and in Brazil where customer orders are typically lower in December due to a January and February holiday season.

RESEARCH AND DEVELOPMENT

We employ approximately 50 research personnel in research and laboratory facilities in Spay, France, Santanésia, Brazil, San Pedro, Philippines and Alpharetta, Georgia. We are dedicated to developing Cigarette Papers, reconstituted tobacco and non-tobacco paper product innovations and improvements to meet the needs of individual customers. The development of new components for tobacco products and the development of new non-tobacco paper products are the primary focuses of these research and development functions, including several development projects for our major customers. We expensed $8.3 million in 2008, $8.0 million in 2007 and $7.3 million in 2006 on research and development. We believe that our research and product development capabilities are unsurpassed in the industry and have played an important role in establishing our reputation for high quality, superior products.

Our commitment to research and development has enabled us, for example, to (i) produce high-performance papers designed to run on the high-speed manufacturing machines of our customers, (ii) produce papers to exacting specifications with very high uniformity, (iii) produce cigarette paper with extremely low basis weights, (iv) develop cigarette paper for LIP cigarettes, (v) produce highly porous cigarette and plug wrap papers, (vi) produce wrapper and binder tobacco reconstituted products, in a paper process, matching the specifications of machine-made cigars and (vii) produce papers and reconstituted tobacco products with other specifically engineered properties required for end-product performance attributes. We believe we are in the forefront of the specialty paper manufacturing process, having invested heavily in modern technology, including on-line banding and off-line printing capabilities for LIP cigarette papers, laser technology and modern paper-slitting equipment. We believe that our commitment to research and development, coupled with our investment in new technology and equipment, has positioned us to take advantage of growth opportunities all around the world.

PATENTS AND TRADEMARKS

As of December 31, 2008, we owned 137 patents and had pending 65 patent applications covering a variety of Cigarette Papers, RTL and cigar wrapper and binder products and processes in the United States, western Europe and several other countries. We believe that such patents, together with our papermaking expertise and technical sales support, have been instrumental in establishing us as the leading worldwide supplier of Cigarette Papers, RTL and reconstituted wrapper and binder made by the papermaking process. Patents have played a central role in establishing us as the world's leading independent producer of papers used for LIP cigarettes.

Management believes that our "ALGINEX™" water based technology trademark for use in banded papers for the production of LIP cigarettes, "POROWRAP®" trademark for highly porous plug wrap paper, the "PDM" and "SWM" logos and the "JOB PAPIER A CIGARETTES", "PAPETERIES DE MAUDUIT" and "SCHWEITZER" trade names also have been important contributors to the marketing of our products.

EMPLOYEES

As of December 31, 2008, we had 3,190 regular, full-time, active employees of whom 388 hourly employees and 210 salaried employees were located in the United States and Canada, 1,011 hourly employees and 611 salaried employees were located in France, 179 hourly and 66 salaried employees were located in the Philippines, 130 hourly employees and 54 salaried employees were located in Indonesia and 476 hourly employees and 65 salaried employees were located in Brazil.

North American Operations — Hourly employees at the Spotswood, New Jersey, and Ancram, New York mills are represented by locals of the United Steel Workers Union. The collective bargaining agreement at our Spotswood mill is a 3-year agreement which is effective through July 28, 2010. A new 3-year collective bargaining agreement was ratified at our Ancram mill on, December 15, 2008, which is effective through September 30, 2011. As part of the new agreement, benefits related to the defined benefit pension plan for hourly employees at the Ancram Mill were frozen as of December 31, 2008. We believe employee and union relations continue to be positive at the Spotswood, and Ancram mills.

The fiber operations of our Canadian subsidiary and our Newberry, South Carolina facility are non-union. We believe that employee relations are positive.

French Operations — Hourly employees at our Quimperlé, Malaucène, Saint-Girons and Spay, France mills are union represented. Our Quimperlé and Malaucène mills are operating pursuant to an employment agreement that expired effective December 31, 2008. Our Spay mill collective bargaining agreement expired February 28, 2009. Negotiations are being held at these locations regarding compensation issues. The collective bargaining agreement at our Saint-Girons mill is effective through June 5, 2009. We believe our employee relations are positive and comparable to similar French manufacturing operations.

Employees of our Philippine operations are non-union. We believe that employee relations are positive.

Our mill in Medan, Indonesia is operating pursuant to a collective bargaining agreement that is effective through April 30, 2009. We believe that employee relations are positive.

Brazilian Operations — Hourly employees at the Pirahy mill are represented by a union. The 1-year collective bargaining agreement at SWM-B was renewed through May 31, 2009. We believe that employee relations are positive and comparable to similar Brazilian manufacturing operations.

ENVIRONMENTAL MATTERS

Capital expenditures for environmental controls to meet legal requirements and otherwise relating to the protection of the environment at our facilities in the United States, France, the Philippines, Indonesia, Brazil and Canada were $0.3 million in 2008 and are expected to total less than $1 million in each of 2009 and 2010, of which no material amounts were or are expected to be the result of environmental fines or settlements. These expenditures are not expected to have a material adverse effect on our financial condition, results of operations or competitive position; however, these estimates could be modified as a result of changes in our plans, changes in legal requirements or other factors.

WORKING CAPITAL

We normally maintain approximately 30 to 60 days of inventories to support our operations. Our sales terms average between 15 and 60 days for payment by our customers, dependent upon the products and markets served. For a portion of our business, particularly our French segment export sales, extended terms are provided. With respect to our accounts payable, we typically carry approximately a 30 to 60 day level, in accordance with our purchasing terms, which vary by business segment. The accounts payable balance varies in relationship to changes in our manufacturing operations, particularly due to changes in prices of wood pulp and purchased energy and the level and timing of capital expenditures related to projects in progress.

EXECUTIVE OFFICERS

The names and ages of the executive officers as of February 27, 2009, together with certain biographical information, are as follows:

Name		Position

Frédéric P. Villoutreix	44	Chairman of the Board and Chief Executive Officer
Otto R. Herbst	49	Chief Operating Officer
Michel Fievez	51	President—European Operations
Wilfred A. Martinez	55	President—the Americas
Peter J. Thompson	46	Treasurer, Chief Financial and Strategic Planning Officer
John W. Rumely, Jr.	55	General Counsel and Secretary
Mark A. Spears	46	Controller

There are no family relationships between any of the directors, or any of our executive officers. None of our officers were selected pursuant to any arrangement or understanding between the officer and any person other than the Company. Our executive officers serve at the discretion of the Board of Directors and are elected annually by the Board.

Frédéric P. Villoutreix was elected Chairman of the Board and Chief Executive Officer effective January 1, 2009. Mr. Villoutreix joined the Company on December 7, 2005, was elected Chief Operating Officer on February 1, 2006, and served as interim President, French Operations from December 2006 to June 2007. Mr. Villoutreix joined us in December 2005 from Compagnie de Saint-Gobain, a leading French multi-national manufacturer of engineered materials and products, where he worked since 1990. From 2001 to 2005, Mr. Villoutreix held key manufacturing positions in Europe and the United States with Saint-Gobain, including General Manager, World Construction Products and Stone, Luxemburg and Vice President, Abrasives Europe and Coated Abrasives World with 33 operating locations.

Otto R. Herbst became Chief Operating Officer effective January 1, 2009. Previously, Mr. Herbst was President of the Americas beginning in August 2006 with responsibility for the U.S. and Brazilian business units. Mr. Herbst served as our President—Brazilian Operations from April 1999 to July 2006. Prior to April 1999, he served as General Manager for New Business and Services from 1997 through March 1999 for Interprint, a manufacturer of security documents, telephone cards and business forms. From 1990 through 1997, Mr. Herbst served as Director of Agaprint, a manufacturer of packaging materials, business forms, commercial printing papers, personalized documents and envelopes.

Michel Fievez has served as our President—French Operations since June 2007. From 2003 to May 2007, Mr. Fievez served as General Manager One Side Coated Papers and then Vice President and General Manager Packaging, Metalizing and Office and Graphic with Ahlstrom Corporation. From 1998 to 2003, he held key manufacturing positions, including Managing Director, with Chesapeake Display and Packaging in Europe, and from 1994 to 1998, held the position of Vice President Manufacturing and Technology with Mead Packaging Europe.

Wilfred A. Martinez replaced Otto R. Herbst as President, the Americas, on January 1, 2009. Mr. Martinez previously served as Corporate Executive Vice President and Strategy Officer, President, International Division and Senior Vice President, Worldwide Operations from 1996 to 2008 with Laticrete International, Inc., a world leader of tile and stone installation systems. From 1995 to 1996, he was General Manager, Monolithic Refractories, for Harbison-Walker Refractories, Inc., a leading global manufacturer of high temperature refractory products, and from 1979 to 1995 he served as Vice-President, International Operations, Vice-President, Technology and Director, Research and Development for Minteq International, Inc., a technology based multi-national sales and manufacturing refractory company.

Peter J. Thompson became Treasurer, Chief Financial and Strategic Planning Officer on January 21, 2009. He served as Vice-President—Strategic Planning since August 2008. From August 2006 to August 2008, Mr. Thompson was our Chief Financial Officer and Treasurer. Mr. Thompson served as our President—U.S. Operations from 1998 to July 2006. During 1998, Mr. Thompson was Director—Sales and Marketing for the U.S. Operations. Mr. Thompson joined us in 1997 as a Marketing Manager in the U.S. Operations. Prior to joining us, he was employed by Tape, Inc. from 1995 to 1997, where he held several senior management positions in marketing, sales and finance. Mr. Thompson was employed by Kimberly-Clark from 1984 to 1995 in a variety of financial positions.

John W. Rumely, Jr. has served as our General Counsel and Secretary since January 2000. From March 1998 through December 1999, he served as Associate General Counsel. From May 1989 through February 1998, Mr. Rumely was Assistant General Counsel of Alumax Inc., an international integrated producer of aluminum products that was subsequently acquired by Alcoa Inc.

Mark A. Spears became our Controller in March 2008. Mr. Spears joined the Company in 1995 as Corporate Reporting Manager and subsequently served in progressive roles in the Controller department including Director of Corporate Reporting and Assistant Controller. Prior to joining Schweitzer-Mauduit, Mr. Spears was an audit manager with Coopers and Lybrand LLP (now PricewaterhouseCoopers) from 1984 to 1995.

Item 1A. Risk Factors

Factors That May Affect Future Results

Many factors outside of our control could impact future financial results. While not an exhaustive list, the following important factors could cause our actual results for 2009 and beyond to differ materially from those expressed in any forward-looking statements we have made.

International Business Risks

We have manufacturing facilities in 6 countries spread across 4 hemispheres and we market and sell products in over 90 countries, many of which are third-world markets. Both our manufacturing operations and our sales, depending on their location, are subject to 1 or more of the following international business risks, including unsettled political and economic conditions; expropriation; import and export tariffs; regulatory controls and restrictions; monetary exchange controls; inflationary and deflationary economies; changes in currency value; changes in business and income tax regulations and risks related to restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries.

Tax and Repatriation Matters

We are subject to various business and income tax laws in each of the countries in which we do business through wholly-owned subsidiaries and through affiliates. Although we believe we comply with the many business and income tax requirements of each of our operations, we are exposed to the possibility of changes in enacted laws and interpretations of laws which could have a material adverse impact on our financial condition or results of operations. Also, we evaluate our overall financing plans in the various jurisdictions in which we operate and manage international movements of cash from and amongst our

foreign subsidiaries in a tax-efficient manner; however, an unanticipated international movement of funds due to unexpected changes in our business or in needs of the business could result in a material adverse impact on our financial condition or results of operations.

Market Risk

As a multinational entity, we are exposed to changes in foreign currency exchange rates, interest rates and commodity prices. We utilize a variety of practices to manage these market risks, including operating and financing activities and, where considered appropriate, derivative instruments. We use derivative instruments only for risk management purposes and not for trading or speculation. All derivative instruments we use are either exchange traded or are entered into with major financial institutions in order to reduce credit risk and risk of nonperformance by third parties. Similarly, we are exposed to global as well as regional macro economic and micro economic factors, which can affect demand and pricing for our products.

Foreign Currency Risk

Changes in foreign currency exchange rates may have an impact on our operating profit. Since we transact business in many countries, some of our sale and purchase transactions are denominated in a currency other than the local currency of our operations. As a result, changes in exchange rates between the currencies in which the transaction is denominated versus the local currency of our operation into which the transaction is being recorded can impact the amount of local currency recorded for such transaction. This can result in more or less local currency revenue or cost related to such transaction and thus have an effect on our operating profit. Currency transaction risk is mitigated partially in France since some of the revenue and expense transactions of our French subsidiaries are denominated in U.S. dollars, providing a degree of natural hedging. Our Brazilian operations are more fully exposed to currency transaction risk.

Additionally, changes in foreign currency exchange rates may have an impact on the amount reported in other income (expense), net. Once the above-indicated receivables and payables from the sale and purchase transactions have been recorded, to the extent currency exchange rates change prior to settlement of the balance, a gain or loss on the non-local currency denominated asset or liability balance may be experienced, in which case such gain or loss is included in other income (expense), net.

We utilize forward and swap contracts and, to a lesser extent, option contracts to selectively hedge our exposure to foreign currency transaction risk when it is practical and economical to do so. The use of these contracts minimizes transactional exposure to exchange rate changes because the gains or losses incurred on the derivative instrument will offset, in whole or in part, the loss or gain on the underlying foreign currency exposure. These instruments are entered into with money center banks, insurance companies or government agencies, collectively known as counterparties. Usually, these contracts extend for no more than 12 months. We expect to continue to apply forward currency hedging in our Brazilian operations through 2009. As of December 31, 2008, a 10 percent unfavorable change in the exchange rate of our functional currencies and those of our subsidiaries against the prevailing market rates of non-local currencies involving our transactional exposures would have resulted in a net pre-tax loss of approximately $0.3 million. These hypothetical gains or losses on foreign currency contracts and transactional exposures are defined as the difference between the contract rates and the hypothetical exchange rates. While we believe the above loss resulting from the hypothetical unfavorable changes in foreign currency exchange rates could be material to our results of operations, we reduce this risk by selectively hedging our exposure when it is practical and economical to do so.

In addition to currency transaction risks, we are also exposed to currency translation risk. Since the financial results of our foreign subsidiaries are determined in the local currency of each foreign subsidiary, these financial results are translated into U.S. dollars on a monthly basis to determine our consolidated financial results. A weakening of the U.S. dollar versus the local currency of the foreign subsidiary will have a favorable currency translation impact when positive financial results of that foreign subsidiary are

translated to U.S. dollars. Our foreign currency translation effects typically offset to a significant degree the foreign currency transaction impacts in our operating results.

Interest Rate Risk

We hold a combination of variable- and fixed-rate debt consisting of short-term and long-term instruments. We selectively hedge our exposure to interest rate increases on our variable rate long-term debt when it is practical and economical to do so. We utilize various forms of interest rate hedge agreements, including interest rate swap agreements and forward rate agreements. We utilize variable-to-fixed interest rate swap agreements, typically with contractual terms no longer than 24 months. Our strategy to manage exposure to interest rate changes did not change during 2008, and we do not expect any significant changes in our exposure to interest rate changes or in how such exposure is managed in the near future. Various outstanding interest-bearing instruments are sensitive to changes in interest rates. Interest rate changes would result in gains or losses in fair market value of fixed-rate debt due to differences between current market interest rates and the rates governing these instruments. With respect to our fixed-rate debt outstanding at December 31, 2008, a 10 percent change in interest rates would not result in a material change in the fair market value of such debt and with respect to our variable-rate debt outstanding at December 31, 2008, a 10 percent change in interest rates would result in a $0.7 million impact to our future annual pre-tax earnings.

Commodity Price Risk

We are subject to commodity price risks, the most significant of which relates to the price of wood pulp, which is our largest single component of raw material cost. The per ton cost of wood pulp is cyclical in nature and more volatile than general inflation. During the period from January 2006 through December 2008, the U.S. list price of northern bleached softwood kraft pulp, or NBSK, a representative pulp grade that we use, ranged from a low of $655 per metric ton in January 2006 to a high of $885 per metric ton in August 2008. We normally maintain approximately 30 to 60 days of inventories to support our operations. As a result, there is a lag in the impact of changes in the per ton list price of wood pulp on our cost of products sold. Selling prices of our paper products are influenced, in part, by the market price for wood pulp, which is determined by worldwide industry supply and demand. Generally, over time, we have been able to increase our selling prices in response to increased per ton wood pulp costs and have generally reduced our selling prices when wood pulp costs have significantly declined. Increases in prices of wood pulp could adversely impact our earnings if selling prices are not increased or if such increases do not fully compensate for or trail the increases in wood pulp prices. We have not utilized derivative instruments to manage this risk. With respect to our commodity price risk, a hypothetical 10 percent change in per ton wood pulp prices would impact our future annual pre-tax earnings by approximately $7 million, assuming no compensating change in our selling prices. We believe that, while our exposure to commodity price risk is material to our results of operations, our customers understand such risk and over time changes in the price of wood pulp are typically reflected in selling prices.

Energy Supply and Cost Volatility

In France and in the United States, availability of energy is generally not expected to be an issue, although prices can fluctuate significantly based on variations in demand. In Brazil, where that country's production of electricity is heavily reliant upon hydroelectric plants, availability of electricity has been affected in the past by rain variations. Our Brazilian business currently has a sufficient supply of energy to continue its current level of operation.

Due to the competitive pricing in the markets for most of our products, we are typically unable to fully pass through higher energy costs to our customers. With respect to our purchased energy price risk, a hypothetical 10 percent change in per unit prices would impact our future annual pre-tax earnings by approximately $10 million, assuming no compensating change in our selling prices.

Periodically, when we believe it is appropriate to do so, we enter into agreements to procure a portion of our energy for future periods in order to reduce the uncertainty of future energy costs. However, in recent years this has only marginally slowed the increase in energy costs due to the volatile changes in energy prices we have experienced.

General Inflation and Selling Prices

In addition to changes in wood pulp and energy costs discussed above, costs of our operations are also impacted by general inflation. Our main costs impacted by general inflation are wages and salaries, chemicals, employee benefit costs, primarily medical and pension expenses, and costs of insurance. Due to competitive pressures, we are not always able to pass along our cost increases through increased selling prices.

Seasonality

Sales of our products in the United States and Brazil are subject to seasonal fluctuations. In the United States, customer shutdowns typically occur in July and December and historically have resulted in reduced net sales and operating profit during those 2 months. Additionally, the U.S. mills shut down equipment to perform additional maintenance during these months, resulting in higher product costs and reduced operating profit. In Brazil, customer orders are typically lower in December due to a holiday season during much of January and February.

Environmental Matters

We are subject to federal, state, local and foreign environmental protection laws and regulations with respect to the environmental impact of air, water and other emissions from our mills as well as the disposal of solid waste generated by our operations. We believe we are operating in compliance with, or are taking action aimed at ensuring compliance with, such laws and regulations. While we have incurred in the past several years, and will continue to incur, capital and operating expenditures in order to comply with these laws and regulations, such costs are not expected to materially affect our business or results of operations. However, there can be no assurance that a material adverse effect on our financial statements will not occur at some future time as a result of environmental matters. Additional information concerning environmental matters is disclosed in Note 15, Commitments and Contingencies, of the Notes to Consolidated Financial Statements and in Part I, Item 3 "Legal Proceedings—Environmental Matters."

Legal Proceedings

Information concerning legal proceedings is disclosed in Note 15, Commitments and Contingencies, of the Notes to Consolidated Financial Statements and in Part I, Item 3 "Legal Proceedings." In addition, we are involved in legal actions and claims arising in the ordinary course of business. Litigation is subject to many uncertainties and, while it is not possible to predict the outcome of the litigation pending against us, management believes that such actions and claims will be resolved without a material adverse effect on our financial statements.

Reliance on Significant Customers

Most of our customers are manufacturers of tobacco products located in more than 90 countries around the world. Due to consolidation among cigarette manufacturers, our customers' negotiating leverage is increasing. Five such customers have accounted for a significant portion of our net sales in 2008, and the loss of one or more of these customers, or a significant reduction in their purchases, could have a material adverse effect on our results of operations. During periods of excess supply in our industry, a significant loss of business is an increased risk. On March 28, 2008, our largest customer, Philip Morris, a subsidiary of Altria Group, completed a restructuring which separated its domestic and international cigarette businesses between Philip Morris USA and Philip Morris International Inc.

We periodically enter into agreements with significant customers under which we are obligated to supply certain products at fixed prices. Due to our fixed selling prices under these agreements, increases in input costs such as energy and wood pulp could have an adverse effect on our results of operations.

Credit Availability

Severe disruption in worldwide credit markets could limit our access to available credit. To operate our business and continue to fund our capital resource needs, we supplement operating cash flow with bank borrowings. Our Credit Agreement is with a syndicate of banks led by Societe Generale Group. We have been able to access these funds when needed; however, continued deterioration of credit markets could have an adverse impact on our banks' ability to fund our borrowings. Constraints on the availability of credit, or of credit at reasonable interest rates, could adversely impact our ability to execute strategic initiatives that could provide future benefits to the Company and/or delay other capital intensive projects.

Tobacco Products and Governmental Actions

In recent years, governmental entities around the world, particularly in the United States and western Europe, have taken or have proposed actions that may have the effect of reducing consumption of tobacco products. Reports and speculation with respect to the possible harmful physical effects of cigarette smoking and use of tobacco products have been publicized for many years and, together with actions to restrict or prohibit advertising and promotion of cigarettes or other tobacco products, to limit smoking in public places and to increase taxes on such products, are intended to discourage the consumption of cigarettes and other such products. Domestic and western European cigarette consumption has declined, in part due to these actions, which, in turn, decreases demand for our products. In addition, litigation is pending against the major manufacturers of consumer tobacco products seeking damages for health problems allegedly resulting from the use of tobacco in various forms. It is not possible to predict the outcome of such litigation or what effect adverse developments in pending or future litigation may have on the tobacco industry, our financial liquidity or relationships with our suppliers.

U.S. healthcare legislation, the U.S. State Children's Health Insurance Program, known as SCHIP legislation, which was passed into law in January 2009, will significantly raise federal excise taxes on all tobacco products. Our sales volumes of cigarette papers and cigar wrapper and binder products could be negatively impacted by increased federal excise taxes.

In each of the years 2006 through 2008, approximately 90 percent of our net sales were from products used by the tobacco industry in the making and packaging of cigarettes or other tobacco products. We are unable to predict the effects that the above-described legal and governmental actions might have on our results of operations and financial condition.

Restructuring Activities

We began restructuring activities in 2006 and 2007 in France and the United States and during 2007 in Brazil that have become part of an overall effort to improve an imbalance between demand for our products and our paper production capacity as well as improve our profitability and the quality of our products. Restructuring of our existing operations involves issues that are complex, time-consuming and expensive and could significantly disrupt our business.

The challenges involved in executing these restructuring plans include:

•: demonstrating to customers that the restructuring activities will not result in adverse changes in service standards or business focus;
•: consolidating administrative infrastructure and manufacturing operations and maintaining adequate controls throughout the execution of the restructuring;

•: preserving distribution, sales and other important relationships and resolving potential conflicts that may arise;
•: minimizing the diversion of management attention from ongoing business activities;
•: maintaining employee morale and retaining key employees while implementing restructuring programs;
•: coordinating and combining operations, which may be subject to additional constraints imposed by collective bargaining agreements and local law and regulations; and
•: achieving the anticipated levels of cost savings and efficiency as a result of the restructuring.

Single Site Production Facility.

Sales of reconstituted tobacco leaf products represent a substantial portion of our revenues. We presently produce reconstituted tobacco leaf at only one facility located in France. Although reasonable measures have been taken to minimize the risk of a casualty event at this facility, its loss or the interruption of operations for a significant length of time could have a material adverse effect on our business.

Sensitivity of Demand for Our Products

Demand for our products is sensitive to prices charged for cigarettes and tobacco-related products and the level of disposable income available to consumers. Poor credit and economic conditions could, if protracted, adversely impact our customers' demand for our products. World-wide, governments may seek to increase tobacco-related taxes to offset declining revenue from other tax sources. Also, lower levels of income among smokers, especially in developing countries, could decrease demand.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

As of December 31, 2008, we operated 11 production facilities (which include 4 fiber pulping operations) on 4 continents.

We have approximately 142,000 metric tons of annual paper production capacity and approximately 80,000 metric tons of annual reconstituted tobacco products production capacity, dependent upon the production mix. Paper production capacity has declined from our 2007 levels due to restructuring activities. Capacity utilization decreased in 2008 to 88 percent for paper products and increased to 100 percent for reconstituted tobacco products compared with 90 percent and 80 percent, respectively, in 2007. We also operate flax fiber processing operations in France and Canada. We own each of these facilities and the associated operating equipment except for a flax tow storage facility in Winkler, Manitoba, which is leased.

We maintain administrative and sales offices in Alpharetta, Georgia, in Quimperlé and Spay, France, in Shanghai, China, in Piraí and Rio de Janeiro, Brazil, in Madrid, Spain, in San Pedro, Philippines, in Medan, Indonesia and in Moscow, Russia. Our world headquarters are also located in Alpharetta. All of these offices are owned except for those located in Alpharetta, Shanghai, Rio de Janeiro, Madrid and Moscow.

We consider all of our facilities to be well-maintained, suitable for conducting our operations and business, and adequately insured.

The following are locations of our principal production facilities, all of which are owned as of December 31, 2008:

French Segment	U.S. Segment	Brazil Segment

Production Locations	Production Locations	Production Locations
Papeteries de Mauduit Mill	Spotswood Mill	Pirahy Mill
Quimperlé, France	Spotswood, New Jersey	Piraí, Brazil
Papeteries de Malaucène Mill	Ancram Mill
Malaucène, France	Ancram, New York
Papeteries de Saint-Girons Mill	Newberry Operation
Saint-Girons, France	Newberry, South Carolina
LTR Industries Mill	Fiber Operation
Spay, France	Manitoba, Canada
PDM Philippines Industries
San Pedro, Philippines
P.T. PDM Indonesia
Medan, Indonesia

Item 3. Legal Proceedings

General

We are involved in various legal proceedings relating to contracts, commercial disputes, taxes, environmental issues, employment and workers' compensation claims, product liability and other matters. We periodically review the status of these proceedings with both inside and outside counsel. We believe that the ultimate disposition of these matters will not have a material adverse effect on the results of operations in a given quarter or year. Below is a summary of our major outstanding litigation.

Imposto sobre Circulação de Mercadorias e Serviços, or ICMS, a form of value-added tax in Brazil, was assessed to SWM-B in December of 2000. SWM-B received 2 assessments from the tax authorities of the State of Rio de Janeiro for unpaid ICMS taxes from January 1995 through November 2000, which together with interest and penalties totaled approximately $14 million based on the foreign currency exchange rate at December 31, 2000, collectively the Assessment.

The Assessment concerned the accrual and use by SWM-B of ICMS tax credits generated from the production and sale of certain non-tobacco related grades of paper sold domestically that are immune from the tax to offset ICMS taxes otherwise owed on the sale of products that are not immune. One of the 2 assessments related in part to tax periods that predated our acquisition of Pirahy and is covered in part by an indemnification from the sellers of Pirahy, or Assessment 1 (case number 2001.001.115144-5). The second assessment pertains exclusively to periods that SWM-B owned the Pirahy mill, or Assessment 2 (case number 2001.001.064544-6). While SWM-B is primarily responsible for the full payment of the Assessment in the event of an ultimate unfavorable outcome, SWM-B is not aware of any difficulties that would be encountered in obtaining reimbursement of that portion of any payment resulting from Assessment 1 from the previous owner under the indemnification.

Presently, part of the Assessment, for which we have received favorable lower court rulings, is pending on appeal before the Federal Supreme Court under case number A1588187 and another part of the

Assessment, for which we have primarily received unfavorable lower court rulings, is pending on appeal before the Third Vice Presidency under case no. 2005.134.05319.

SWM-B continues to vigorously contest the Assessment and believes that the Assessment will ultimately be resolved in its favor. However, since the final resolution involves presentation of the matter to the Supreme Court of Brazil, it is not likely to be finally resolved in the near future. Based on the foreign currency exchange rate at December 31, 2008, the Assessment totaled approximately $20 to $21 million as of December 31, 2008, of which approximately $10 million is covered by the above-discussed indemnification. No liability has been recorded in our consolidated financial statements for the Assessment based on our evaluation that SWM-B is more likely than not to prevail in its challenge of the Assessment under the facts and law as presently understood.

In February 2004, SWM-B filed suit against the State of Rio de Janeiro in the 11 ^th Court of Public sitting in Rio de Janeiro, case number 2004.001.022063-6, to recover ICMS credits previously reversed in 2000 following receipt of the Assessment. After the Assessment was filed against us, SWM-B changed its procedures and did not utilize ICMS tax credits through the end of production and sale of immune papers during 2001. As a result of having received favorable lower court rulings to the Assessment, SWM-B petitioned the court for permission to offset overpaid ICMS taxes against current tax liabilities. The amount of the claim totals approximately $2 million, based on the foreign currency exchange rate at December 31, 2008. In August 2006, SWM-B filed an interlocutory appeal, which has not yet been ruled upon. As of December 31, 2008, no asset has been recorded for this potential recovery.

Imposto sobre Produtos Industrializados, or IPI, a form of federal value-added tax in Brazil. Schweitzer-Mauduit do Brasil v. Federal Union, Federal Regional Tribunal sitting in Rio de Janeiro, case number 2004.51.04.000502-4 (March 5, 2004).

SWM-B instituted action in March 2004 to recover credits on past and future purchases of raw materials that are exempt from IPI taxes or that carry an IPI tax rate of zero, for which a favorable ruling was received at the first court level. The recovery would be in the form of presumed credits that could be applied to offset other IPI tax liabilities. The action for recovery is based on the principle in Brazilian law of non-cumulative taxes. The potential recovery of IPI credits, depending upon several contested factors, could be in the range of $10 to $20 million, which amounts we consider a gain contingency and have not recorded in the Company's consolidated financial statements. During March 2007, we received an unfavorable ruling on appeal in the Second Degree and we have appealed that ruling to the Supreme Court of Justice where the matter is still pending. The final resolution of this matter will likely entail judicial proceedings up to and including presentation of the matter to the Supreme Court of Brazil and is not likely to be resolved for several years.

Indemnification Matters

In connection with our spin-off from Kimberly-Clark in 1995, we undertook to indemnify and hold Kimberly-Clark harmless from claims and liabilities related to the businesses transferred to us that were not identified as excluded liabilities in the related agreements. As of December 31, 2008, there are no material claims pending under this indemnification.

Environmental Matters

We believe that our future cost of compliance with environmental laws, regulations and ordinances and our exposure to liability for environmental claims and our obligation to participate in the remediation and monitoring of certain hazardous waste disposal sites will not have a material adverse effect on our financial condition or results of operations. However, future events, such as changes in existing laws and regulations, or unknown contamination of sites owned, operated or used for waste disposal by us (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 adverse effect on our financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable. There were no matters submitted to a vote of our security holders during the fourth quarter of 2008.

PART II.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Since November 30, 1995, our common stock, $0.10 par value, or Common Stock, has been listed on the New York Stock Exchange, trading under the symbol "SWM." On February 27, 2009, our stock closed at $15.20 per share.

The table below presents the high, low and close sales prices of our Common Stock on the New York Stock Exchange—Composite Transactions reporting system for the periods indicated.

	High		Low		Close

2009
First Quarter (through February 27, 2009)	$	23.22	$	14.95	$	15.20
	High		Low		Close
2008
Fourth Quarter	$	20.53	$	13.08	$	20.02
Third Quarter		21.63		14.83		18.99
Second Quarter		24.50		16.22		16.85
First Quarter		26.55		21.81		23.14
	High		Low		Close
2007
Fourth Quarter	$	28.76	$	23.59	$	25.91
Third Quarter		31.74		20.57		23.30
Second Quarter		31.92		25.65		31.00
First Quarter		27.13		22.85		24.85

Performance Graph

The following graph compares the total cumulative stockholder return on our Common Stock during the period from December 31, 2003 through December 31, 2008, with the comparable cumulative total returns of the Dow Jones Wilshire 5000 Index and a self-constructed peer group which reflects, but is not exactly comparable to, the Dow Jones Paper Products Index. Due to consolidation within our industry, we have selected the following companies as a new peer group, or New Peer Group, in 2008: Neenah Paper Inc., P.H. Glatfelter Co., Wausau-Mosinee Paper Corp., and Buckeye Technologies Inc. Prior to 2008, our previous peer group, Old Peer Group, consisted of Abitibi Bowater Inc., Domtar Inc., International Paper Co., P.H. Glatfelter Co. and Wausau-Mosinee Paper Corp.

The graph assumes that the value of the investments in the Common Stock and each index were $100 on December 31, 2003 and that all dividends were reinvested. The stock price performance shown on the graph below is not necessarily indicative of future price performance.

Holders

As of February 27, 2009, there were 3,096 stockholders of record.

Dividends

We have declared and paid cash dividends of $0.15 per share of our Common Stock every fiscal quarter since the second quarter of 1996. We currently expect to continue this level of quarterly dividend. Our Credit Agreement covenants require that we maintain certain financial ratios, as disclosed in Note 10, Debt, of the Notes to 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 cash generation, debt levels and ongoing requirements for cash to fund operations and to pursue possible strategic opportunities.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information, as of December 31, 2008, with respect to the shares of our Common Stock that may be issued under our existing equity compensation plans:

Plan Category				Number of Securities To be Issued Upon Exercise of Outstanding Options	Weighted-Average Exercise Price of Outstanding Options

Equity Compensation Plans approved by stockholders:
	Equity Participation Plan(1)			803,635	$26.84	—
	Outside Directors Stock Plan(2)			N/A	N/A	74,710
	Restricted Stock Plan(3)			N/A	N/A	628,019

		Total approved by stockholders		N/A	N/A	702,729
Equity Compensation Plans not approved by stockholders:				—	—	—

			Grand Total	N/A	N/A	702,729

N/A—Not applicable.

(1): The Equity Participation Plan is described in Note 14, Stockholders' Equity, of the Notes to Consolidated Financial Statements appearing in Part II, Item 8 herein.
(2): The Outside Directors Stock Plan consists of shares registered for the purpose of issuance to our outside Directors for payment of their retainer fees quarterly in advance. Director's retainer fees in 2008 were $11,750 quarterly which are payable in our Common Stock. The number of shares issued each quarter is determined based on the then fair market value of the shares, which is determined in accordance with the plan as closing price on the date one day prior to the date of distribution. Certain Directors have elected to defer receipt of quarterly retainer fees under the terms of our Deferred Compensation Plan for Non-Employee Directors, resulting in an accumulation of stock unit credits. The Director has the option, upon retirement or earlier termination from the Board of Directors, to have these stock unit credits distributed in the form of our Common Stock or cash. While held in the deferred compensation plan account, these stock unit credits carry no voting rights and cannot be traded as Common Stock, although declared dividends create additional stock unit credits. As of December 31, 2008, deferred retainer fees have resulted in 28,462 accumulated stock unit credits, excluding credited dividends (31,773 accumulated stock unit credits including credited dividends).
(3): The Restricted Stock Plan is described in Note 14, Stockholders' Equity, of the Notes to Consolidated Financial Statements appearing in Part II, Item 8 herein. Shares awarded under the terms of this plan are both subject to forfeiture and cannot be sold or otherwise transferred until fully vested or such restrictions are otherwise lifted. Such shares are deemed by us to be issued and outstanding and are subject to all other financial interests, including our declared dividends. As of December 31, 2008, 260,218 shares issued under this plan remained restricted.

Recent Sales of Unregistered Securities

We had no unregistered sales of equity securities during the fiscal year ended December 31, 2008.

Repurchases of Equity Securities

The following table indicates the number of shares and amount of our Common Stock repurchased during 2008 and the remaining number of shares and amount of share repurchases currently authorized by our Board of Directors as of December 31, 2008:

				Average Price Paid Per Share		Total Number of Shares Repurchased As Part of Publicly Announced Programs				Maximum Amount Of Shares that May Yet be Repurchased Under the Program

						(# shares)		($ in millions)		($ in millions)
First Quarter			48,900	$	24.51		48,900	$	1.2
Second Quarter			—		—		—		—
Third Quarter			—		—		—		—
October			272,809		15.32		272,809		4.2
November			66,600		14.37		66,600		0.9
December			—		—		—		—

	Fourth Quarter		339,409		15.13		339,409		5.1

		Full Year 2008	388,309	$	16.31		388,309	$	6.3	$	20.0	*

*: On December 4, 2008, our Board of Directors authorized the repurchase of shares of our Common Stock during the period January 1, 2009 to December 31, 2010 in an amount not to exceed $20.0 million.

We have used corporate 10b5-1 plans so that share repurchases can be made at predetermined stock price levels, without restricting such repurchases to specific windows of time. Future Common Stock repurchases will be dependent upon various factors, including the stock price, strategic opportunities and cash availability.

Item 6. Selected Financial Data

The following selected financial data should be read in conjunction with Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operation ," and the consolidated financial statements and related notes within this Annual Report on Form 10-K. All dollar amounts are in millions except per share amounts, statistical data and ratios.

			For the Years Ended December 31,

			2008			2007			2006			2005			2004
Results of Operations
	Net Sales		$	767.9		$	714.8		$	655.2		$	669.8		$	657.5
	Cost of products sold			664.7			606.7			571.1			572.5			535.4
	Gross Profit			103.2			108.1			84.1			97.3			122.1
	Nonmanufacturing expenses			64.2			66.2			57.7			58.0			64.4
	Restructuring & impairment expense(1)			22.1			24.0			21.1			—			—
	Operating Profit(1)			16.9			17.9			5.3			39.3			57.7
	Net Income (Loss)(1)			0.7			3.4			(0.8	)		19.4			36.4
	Net Income (Loss) Per Share:
		Basic(1)	$	0.05		$	0.22		$	(0.05	)	$	1.28		$	2.45
		Diluted(1)	$	0.04		$	0.22		$	(0.05	)	$	1.26		$	2.36
	Cash Dividends Declared and Paid Per Share		$	0.60		$	0.60		$	0.60		$	0.60		$	0.60
	Earnings before interest, taxes, depreciation and amortization(2)		$	51.1		$	51.0		$	36.9		$	73.9		$	90.0
Percent of Net Sales
	Gross Profit			13.4	%		15.1	%		12.8	%		14.5	%		18.6	%
	Nonmanufacturing expenses			8.4	%		9.3	%		8.8	%		8.7	%		9.8	%
Financial Position
	Capital spending		$	35.3		$	47.7		$	9.6		$	18.8		$	46.7
	Depreciation			41.0			39.9			40.7			35.9			32.4
	Total Assets			728.7			775.0			697.1			691.3			717.6
	Total Debt			179.8			100.9			97.3			113.7			113.9
Total debt to capital ratio				39.3	%		21.5	%		23.4	%		27.1	%		27.1	%

(1): 2008, 2007 and 2006 operating profit included $22.1 million, $24.0 million and $21.1 million, respectively, for pre-tax restructuring and impairment charges incurred in the United States, France and Brazil. These restructuring charges reduced 2008, 2007 and 2006 net income by $14.5 million, or $0.93 per share, $15.5 million, or $0.98 per share and $13.7 million, or $0.88 per share, respectively.
(2): Earnings before interest, taxes, depreciation and amortization is a non-GAAP financial measure that is calculated by adding interest expense, income tax provision, minority interest in earnings of subsidiaries, depreciation and amortization expense to net income. Reconciliations to net income for the years ended December 31 are as follows (dollars in millions):

	2008			2007			2006			2005			2004

Net Income (Loss)	$	0.7		$	3.4		$	(0.8	)	$	19.4		$	36.4
Plus: Interest expense		10.5			5.9			5.5			6.2			3.7
Plus: Tax provision (benefit)		(1.9	)		0.5			(4.2	)		10.4			12.1
Plus: Depreciation and amortization		47.4			39.2			38.2			39.5			36.5
Less: Amortization of deferred revenue		(5.8	)		(6.0	)		(5.9	)		(7.4	)		(5.7	)
Plus: Minority interest in earnings of subsidiaries		0.2			8.0			4.1			5.8			7.0

Earnings for interest, taxes, depreciation and amortization	$	51.1		$	51.0		$	36.9		$	73.9		$	90.0

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation

The following is a discussion of our results of operations and financial condition. This discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report and the selected financial data included in Item 6. The discussion of our results of operations and financial condition includes various forward-looking statements about our markets, the demand for our products and our future prospects. These statements are based on certain assumptions that we consider reasonable. For information about risks and exposures relating to us and our business, you should read the section entitled "Factors That May Affect Future Results," in Part I, Item 1A of this Form 10-K.

The Management's Discussion and Analysis of Financial Condition and Results of Operation is designed to provide a reader of our financial statements with an understanding of our recent performance, our financial condition and our prospects. The following will be discussed and analyzed:

•: Chief Executive Officer's Summary
•: Recent Developments
•: Critical Accounting Policies and Estimates
•: Prior Period Restatement
•: Recent Accounting Pronouncements
•: Results of Operations
•: Liquidity and Capital Resources
•: Other Factors Affecting Liquidity and Capital Resources
•: Outlook
•: Forward-Looking Statements

Chief Executive Officer's Summary

2008 Financial Results

The Company's 2008 net sales totaled $767.9 million, a 7.4 percent increase compared to 2007. The increase was the result of higher average selling prices, from an improved sales mix and changes in currency rates.

Compared to 2007, sales volumes declined 1.2 percent due to closure of the Lee, Massachusetts mills and our exiting the coated papers business in Brazil by mid year. In the French segment, volumes increased 8.8 percent due to higher sales of reconstituted tobacco leaf products. Sales volumes of cigarette paper for lower ignition propensity, or LIP, cigarettes also increased in the U.S. during 2008.

Restructuring and impairment expenses were $22.1 million in 2008 compared with $24.0 million in 2007. The 2008 expenses mostly related to French paper group asset impairments of $13.5 million recorded in the fourth quarter given continuing losses. The announced restructuring actions, which have been substantially completed, will benefit annual pre-tax earnings by approximately $25 million.

Operating profit excluding restructuring and impairment expenses was $39.0 million for the year compared with $41.9 million in 2007. The decline in operating profit was attributable to higher inflationary costs and to the difficult start-up in early 2008 of a rebuilt paper machine at our Papeteries de Mauduit mill, or PdM, in France.

After a difficult first quarter of 2008, earnings excluding restructuring and impairment expenses gradually improved over the course of the year. Net income for 2008 was $0.7 million, down from $3.4 million in

2007. Excluding restructuring and impairment expenses, diluted earnings per share would have been $0.97 compared to $1.20 in 2007.

Looking Ahead

We are encouraged by the future of our Company. Our goal to reduce costs and increase sales includes revitalizing our strongest base paper operations while aggressively growing our high-value products, LIP papers and reconstituted tobacco leaf products. The January 2008 purchase of the minority interest in LTR Industries gives us sole ownership of that reconstituted tobacco leaf business. Growth in reconstituted tobacco leaf products and LIP papers is expected to continue during 2009.

Operational performance has improved on the rebuilt PdM paper machine. Our Brazilian operation improved to a slight operating profit during the fourth quarter of 2008 as a result of a better currency situation as well as the benefits of restructuring and pricing actions. This location is expected to generate an improvement in operating profit during 2009.

We have completed global customer negotiations and achieved results in line with our expectations and goals for 2009. After a longer than expected period of customer qualifications, we are gaining sales volume at our joint venture in China and expect to narrow losses progressively through 2009. Finally, inflationary cost increases are expected to moderate given world-wide recessionary impacts. Lower purchased wood pulp costs already provided a benefit to earnings during the fourth quarter.

We will pursue the necessary restructuring of our operations to balance our capacity for traditional paper products in France and the U.S. to available demand and further reduce costs. In 2009, plans to improve productivity and mill efficiencies will be expanded with a focus on operating excellence.

The year ahead will be decisive. The global economic environment is difficult. Even though our industry is one that historically has been less reactive to economic fluctuation, we are not immune. However, the on-going transformation of Schweitzer-Mauduit puts us in a better position to meet these challenges.

We are acutely focused on executing with a sense of urgency across the company. We expect our per share earnings in 2009 excluding restructuring and impairment expenses to improve over 2008 levels.

Recent Developments

Price Increases

During 2008, we completed substantial price negotiations. These price increases were necessary to partially recover significant acceleration in costs due to higher purchase prices for wood pulp, energy, chemicals and transportation along with the negative earnings impact of foreign currency changes.

Operational Changes—Brazil

On July 1, 2008, we announced the exit of the coated papers business in the Brazilian market and a resulting decrease of approximately 100 employees, or 16 percent, of the current workforce in Brazil, both effective immediately. Our Brazilian coated papers business had experienced increased inflationary cost pressures that we were not able to offset with selling price increases. Due to the devaluation of the U.S. dollar against the Brazilian real, lower cost imported coated papers gained a substantial share of the local market. As a result of these factors, we decided to exit the coated papers business in Brazil and to concentrate on our core tobacco-related fine papers business. These actions resulted in $1.9 million of asset impairment charges in the second quarter of 2008 and $1.4 million of severance and other employee related costs in the third quarter of 2008.

Management continues to evaluate how to optimize the efficiency and cost competitiveness of our worldwide production facilities as demand for our products continues to undergo volume and geographic changes.

Lower Ignition Propensity Cigarette Papers

Based upon the states that have passed LIP regulations, demand for these products is expected to grow from the current level of approximately 44 percent of North American cigarette consumption to approximately 84 percent by early 2010. Additionally, jurisdictions representing essentially all of North American consumption have either passed or proposed LIP regulations, and several cigarette producers have announced voluntary national distribution of this technology, supporting the likelihood that LIP cigarettes will be sold nationwide in the United States by late 2009 or early 2010. As a result, we expect to realize continued growth in demand for cigarette paper used in LIP cigarettes, which we expect will continue to benefit our U.S. business unit's results.

International LIP efforts continue, especially in the European Union, or EU. In late 2007, the EU's 27 member states approved its Product Safety Commission to mandate the CEN (Standardization European Committee) to define standards for reduced ignition propensity for cigarettes. In June 2008, the CEN received this mandate as planned, which directed it to develop an ignition propensity standard for use in the EU, with possible implementation of the legislation by 2012. In November 2008, Finland approved legislation effective April 2010 requiring that all the cigarettes sold in Finland comply with the ignition propensity standard in use in the U.S., Canada and Australia. Australia has enacted LIP legislation with an effective date of March 2010. These actions indicate that it is increasingly likely that LIP cigarette regulations outside of North America will become effective in the next 2 to 4 years, thus increasing demand for cigarette paper used in these cigarettes.

These legislative developments involving LIP cigarettes are positive for us given the current level of commercial acceptance of our Alginex™ banded papers and our ability to provide 1 or more commercially proven alternative solutions to cigarette manufacturers in addressing LIP requirements.

China Joint Venture

The construction of a new state-of-the-art paper mill by our joint venture with the China National Tobacco Corporation to produce tobacco-related papers in China was completed during the second quarter of 2008 and the mill is currently operational. Sales of locally produced paper began in October 2008.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported and disclosure of contingencies. Changes in these estimates could have a significant impact on our results of operations, financial position, or cash flows. We discussed with the Audit Committee of the Board of Directors the estimates and judgments made for each of the following items and our accounting for and presentation of these items in the accompanying financial statements:

Accounting for Income Taxes

We must make assumptions, judgments and estimates to determine our current provision for income taxes and also our deferred income tax assets and liabilities and any valuation allowance to be recorded against a deferred income tax asset. Our judgments, assumptions and estimates take into account our interpretation of current tax laws. Changes in tax law or our interpretation of tax laws could significantly impact the amounts provided for income taxes in our consolidated financial statements. Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account projections of the amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future years could render our current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause

our actual income tax obligations to differ from our estimates, thus materially impacting our financial position and results of operations.

We record and maintain income tax valuation allowances to reduce deferred tax assets to an amount we estimate will be realizable more likely than not in accordance with Statement of Financial Accounting Standards, or SFAS, No. 109, " Accounting for Income Taxes ." We have available net operating loss carryforwards, or NOLs, alternative minimum tax credit carryforwards and other various tax credits in the jurisdictions in which we operate, for which we have recorded deferred tax assets totaling $74.2 million as of December 31, 2008. Certain of these potential future benefits are not expected to be utilized prior to their expiration. As a result, at December 31, 2008, we have $5.8 million of valuation allowances against certain of the deferred tax assets, as follows (dollars in millions):

	Total Asset		Valuation Allowance			Net Asset

Net operating loss carryforwards	$	69.3	$	(4.0	)	$	65.3
Foreign tax credit, federal research and U.S. states tax credit carryforwards		2.2		(1.8	)		0.4
Federal AMT credit carryforwards		2.7		—			2.7

	$	74.2	$	(5.8	)	$	68.4

Expiration periods vary for our NOLs depending on the tax laws governing the jurisdiction where the NOL was generated. Under current tax laws, remaining NOLs in France and Brazil carry forward indefinitely, and NOLs in the Philippines and Spain expire in 3 years and 15 years, respectively, subsequent to the year generated. Valuation allowances related to NOLs in Spain totaled $4.0 million as of December 31, 2008, fully reserving the related deferred tax asset in Spain, since we believe that it is reasonably likely that we will not generate taxable income in Spain prior to the expiration of these NOLs, as SM-Spain only functions as our primary foreign investment holding company. The remaining NOLs at December 31, 2008, in Spain will fully expire in 2023 if not utilized against taxable income in Spain. We expect sufficient future taxable income in the Philippines to fully utilize the Philippine NOL carryforward deferred tax asset of $0.7 million and have not recorded a related valuation allowance as of December 31, 2008. We also expect sufficient future taxable income in France and Brazil to fully utilize the respective French and Brazilian NOL carryforward deferred tax assets of $55.2 million and $9.4 million, respectively. However, operating losses have been incurred in recent periods in Brazil and France as a result of lower operating earnings together with substantial restructuring expenses incurred. The Company's assumptions, judgments and estimates relative to the valuation of these net deferred tax assets take into account available positive and negative evidence of realizability, including recent financial performance, the ability to realize benefits of restructuring and other recent actions, projections of the amount and category of future taxable income and tax planning strategies. Actual future operating results and the underlying amount and category of income in future periods could differ from the Company's current assumptions, judgments and estimates. Although realization is not assured, the Company believes it is more likely than not that these net deferred tax assets at December 31, 2008, will be realized. The operating losses in Brazil and the Company's paper operations in France could result in recording a valuation allowance in a future period which could be material to our results of operations in the period that such valuation allowance was recorded. If at a future date the Company determines that the weight of the positive evidence is not sufficient to overcome the negative evidence, a valuation allowance against these deferred tax assets to reduce the net deferred tax asset to an amount we believe will more likely than not be realizable would be recorded in the period such determination is made.

We receive credits in our U.S. federal income tax return for income taxes paid in foreign jurisdictions. Income from foreign sources, including dividend income from foreign subsidiaries, is included in taxable income of the U.S. parent. In some cases, the amount of credits realized in the tax return is more or less than the tax owed on the foreign source income. When the amount of credits exceeds the amount of taxes

owed on that foreign source income, foreign tax credit carryforwards are generated. When the credits are less than the tax owed, unexpired credit carryforwards from prior years can be utilized in certain circumstances. These circumstances are dependent upon both foreign source and domestic taxable income. At December 31, 2008, we expect to fully utilize current year foreign tax credits generated and all unexpired credit carryforwards from prior years. Depending on the U.S. business unit's profitability, we may implement certain income tax elections to accelerate taxable income or to delay deductions in order to maintain positive domestic taxable income or to minimize a domestic taxable loss (e.g., our election for U.S. income tax purposes to capitalize research costs in the year incurred and amortize over a 10 year life, as opposed to taking the income tax deduction in the year incurred). However, many such actions cannot be repeated in future years and certain of those elections may make it more difficult to have positive domestic taxable income in future periods. The profitability of our U.S. business operations must be maintained to provide us an opportunity to utilize any foreign tax credit carryforwards in the future in a manner that will be beneficial to our financial results. Under current tax law, the carryforward period of foreign tax credits is 10 years. Based on the 10 year carryforward period, together with the current and forecasted profitability of our U.S. business operations and the requirements of the foreign source income and credit calculations, we would evaluate whether it is more likely than not that we could fully utilize any foreign tax credit carryforwards in a beneficial manner prior to their expiration and reduce a net deferred tax asset to an estimated realizable amount. We regularly update our estimates of domestic taxable income in order to evaluate whether the facts and circumstances have changed such that we must change our expected utilization of foreign tax credits and valuation allowances on these deferred tax assets.

Our carryforwards of federal research credits and U.S. state tax credits require applicable taxable income in the respective tax returns in order to be utilized prior to their expirations. We expect to fully utilize our federal research credits, which have a 20 year carryforward period, prior to their expiration. However, we do not currently expect sufficient future taxable income in our U.S. state income tax returns to utilize all of our state tax credits prior to their expiration. In Massachusetts, where we have substantially completed plant shut-down activities, New York and New Jersey, the carryforward periods are 15, 15 and 7 years, respectively, and credit utilization is limited to 50 percent of the income tax liability. At December 31, 2008, we have $1.8 million of valuation allowances reducing these deferred tax assets to our estimated realizable amounts. We regularly update these estimates in order to evaluate whether the facts and circumstances have changed such that we must change our valuation allowances on these deferred tax assets.

Since federal alternative minimum tax, or AMT, credit carryforwards have no expiration under current tax laws, we believe it is more likely than not that we will realize the full benefit of these credits in future years as profitability improves in our U.S. operations in future years. Thus, we do not believe any valuation allowance against these deferred tax assets is appropriate as of December 31, 2008.

While we believe it is more likely than not that we will be able to realize the $68.4 million of estimated net deferred income tax benefits, it is possible that the facts and circumstances on which our estimates and judgments are based could change, which could result in additional income tax expense in the future to increase the associated valuation allowances. Our estimates of future profitability could change from our current estimates based on business results or actions taken by us which effect taxable income. While we currently do not believe it likely that a material change will occur, changes in these factors could result in an adjustment of our valuation allowances in future periods. We continue to evaluate methods to utilize those assets that are reserved. Therefore, it is also possible that changes in the facts and circumstances on which our estimates and judgments are based could benefit us in the future.

We adopted the provisions of Financial Accounting Standard Board's, or FASB, Interpretation No. 48, or FIN 48, " Accounting for Uncertainty in Income Taxes" effective January 1, 2007. Adoption of FIN 48 had no cumulative effect on our consolidated financial position at January 1, 2007. At December 31, 2007 and December 31, 2008, we had no significant unrecognized tax benefits related to income taxes at January 1, 2007, December 31, 2007 and December 31, 2008. Changes in tax laws or interpretations of tax laws, as

well as outcomes of current and future audits conducted by foreign and domestic tax authorities, could materially impact the amounts provided for income taxes in our consolidated financial statements.

For additional information regarding income taxes and valuation allowances, see Note 12, Income Taxes, of the Notes to Consolidated Financial Statements.

Accounting for Contingencies

In accordance with SFAS No. 5, " Accounting for Contingencies ," we accrue an estimated loss by taking a charge to income when the likelihood that a future event, such as a legal proceeding, will result in a loss or the incurrence of a liability is probable and the amount of loss can be reasonably estimated. We disclose material contingencies if there is at least a reasonable possibility that a loss has been incurred. In determining whether a loss should be accrued, we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our results of operations, financial position, or our cash flows.

For further information, please see "Litigation" in Part I, Item 3, "Legal Proceedings" and Note 15, Commitments and Contingencies, of the Notes to Consolidated Financial Statements.

Property, Plant and Equipment Valuation

Paper manufacturing, which is our primary manufacturing process, is a capital intensive process. As a result, we make substantial investments in property, plant and equipment which are recorded at cost. Net property, plant and equipment comprised 56 percent of our total assets as of December 31, 2008. Property, plant and equipment is depreciated on the straight-line method over the useful lives of the assets for financial reporting purposes. Paper machines and related equipment are not subject to substantial technological changes rendering them obsolete and are generally depreciated over estimated useful lives of 20 years. In the United States, banded cigarette paper production assets at the Spotswood Mill are generally depreciated over estimated useful lives of 10 years. We periodically assess the likelihood of recovering the cost of long-lived assets based on our expectation of future profitability and undiscounted cash flow of the related operations. These factors, along with management's plans with respect to the operations, are considered in assessing the recoverability of property, plant and equipment. Changes in management's estimates and plans could significantly impact our results of operations, financial position or cash flows.

As a result of excess capacity in the tobacco-related papers industry and increased purchased material and operating costs experienced in the last several years, competitive selling prices for certain of our products are not sufficient to cover our costs with a reasonable margin. Such competitive pressures have resulted in downtime of certain paper machines and, in some cases, accelerated depreciation or impairment of certain equipment. We initiated restructuring activities during 2006 in France and the United States and during 2007 in Brazil to improve our competitiveness and profitability. Restructuring activities at the Lee Mills facility resulted in $0.5 million and $11.3 million of asset impairment charges and accelerated depreciation in 2008 and 2007, respectively, and $4.2 million of accelerated depreciation in 2006. In 2008 and 2007 in France, we incurred capital expenditures of approximately $26 million to improve the cost competitiveness in our paper operations and quality of our products manufactured at PdM. The shutdown of certain older equipment at PdM and PdMal resulted in accelerated depreciation of $1.5 million $2.1 million and $1.0 million in 2008, 2007 and 2006, respectively.

In conjunction with the preparation of the Company's financial statements for the year ended December 31, 2008, management determined the recent and projected losses at its Malaucene facility and the shut-down of a paper machine at PdM constituted events requiring tests be performed for the recoverability of these long-lived assets. Based on the analyses of the net book values and the fair market values, the Company recorded pre-tax, non-cash charges totaling $13.5 million for fixed asset impairments in the fourth quarter ended December 31, 2008.

Certain of our Spotswood Mill's banded cigarette paper production assets remain underutilized and likely would otherwise be shut down except that we have a contractual commitment to stand ready to produce commercial quantities of that product for our customer. Partially offsetting the net book value of these assets is $18.3 million of unamortized deferred revenue as of December 31, 2008, which is being amortized to revenue as product is being purchased by that customer through 2011. Further, certain of the infrastructure improvements and other assets installed to be able to produce commercial quantities of banded cigarette paper would still be used by a scaled down operation even if we stopped manufacture of that product. As of December 31, 2008, the net book value of Spotswood Mill property, plant and equipment was $67.4 million, of which $8.9 million related to 10-year-life banded cigarette paper specific assets and $7.0 million related to 3 paper machines capable of producing banded cigarette paper, but not currently in operation.

Management continues to evaluate how to operate our production facilities more effectively with reduced tobacco-related papers volumes. Further restructuring actions are possible that might require additional write-offs or accelerated depreciation of some equipment.

Recent Accounting Pronouncements

For a discussion regarding recent accounting pronouncements, see "Recent Accounting Pronouncements" included in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements.

Results of Operations

			For the Years Ended December 31,

			2008			2007		2006
			(dollars in millions, except per share amounts)
Net Sales			$	767.9		$	714.8	$	655.2
	Cost of products sold			664.7			606.7		571.1

Gross Profit				103.2			108.1		84.1
	Selling expense			23.1			22.8		22.7
	Research expense			8.3			8.0		7.3
	General expense			32.8			35.4		27.7

		Total nonmanufacturing expenses		64.2			66.2		57.7
	Restructuring and impairment expense			22.1			24.0		21.1

Operating Profit				16.9			17.9		5.3
	Interest expense			10.5			5.9		5.5
	Other expense, net			3.4			0.1		0.5

Income (Loss) Before Income Taxes, Minority Interest and Loss from Equity Affiliates				3.0			11.9		(0.7	)
	Provision (benefit) for income taxes			(1.9	)		0.5		(4.2	)
	Minority interest in earnings of subsidiaries			0.2			8.0		4.1
	Loss from equity affiliates			4.0			—		0.2

Net Income (Loss)			$	0.7		$	3.4	$	(0.8	)

Net Income (Loss) Per Share:
	Basic		$	0.05		$	0.22	$	(0.05	)

	Diluted		$	0.04		$	0.22	$	(0.05	)

Year Ended December 31, 2008 Compared with the Year Ended December 31, 2007

Net Sales

		2008			2007

		(dollars in millions)
France		$	495.4		$	435.0		13.9	%	8.8	%
United States			226.7			226.0		0.3		(25.5	)
Brazil			70.5			73.0		(3.4	)	(10.2	)

	Subtotal		792.6			734.0
Intersegment			(24.7	)		(19.2	)

	Total	$	767.9		$	714.8		7.4	%	(1.2	)%

Net sales were $767.9 million, a 7.4 percent increase compared with $714.8 million in 2007. The increase of $53.1 million consisted of the following (dollars in millions):

		Amount

Changes in selling price and product mix		$	43.9		6.1	%
Changes in currency exchange rates			26.4		3.7
Changes in sales volumes			(17.2	)	(2.4	)

	Total	$	53.1		7.4	%

•

Higher average selling prices in 2008 had a favorable $43.9 million, or 6.1 percent, impact on the net sales comparison. The increase in average selling prices reflected an improved mix of products sold, primarily due to increased sales of cigarette paper for LIP cigarettes in the United States and RTL products in France and higher average selling prices in Brazil.

•

Changes in currency exchange rates in 2008 had a favorable impact on net sales of $26.4 million, or 3.7 percent, and primarily reflected the impact of a stronger euro compared with the U.S. dollar. The euro was 6.7 percent and the Brazilian real was 6.8 percent stronger against the U.S. dollar.

•

Changes in unit sales volumes in 2008 versus 2007 resulted in an unfavorable effect on net sales of $17.2 million, or 2.4 percent.

•: Sales volumes for the French segment increased by 8.8 percent, primarily due to higher sales volumes of RTL products, partially offset by decreased sales of tobacco-related papers sales volumes.
•: Sales volumes in the United States decreased by 25.5 percent, reflecting reduced sales of commercial and industrial products associated with the shutdown of the Lee Mills, and reduced sales volumes of certain tobacco-related products.
•: The Brazil segment's sales volumes decreased by 10.2 percent, primarily due to our mid-year exit of the coated papers business, partially offset by continued growth in tobacco-related paper sales volumes.

The French segment 2008 net sales of $495.4 million increased by $60.4 million, or 13.9 percent, versus $435.0 million in 2007. The increase in net sales was primarily the result of a stronger euro, increased sales volumes and, to a lesser extent, higher average selling prices mainly as a result of an improved mix of products sold.

The U.S. segment 2008 net sales of $226.7 million for 2008 increased by $0.7 million, or 0.3 percent, compared with $226.0 million in 2007. The effect of higher average selling prices, primarily due to an improved mix of products sold, was mostly offset by lower commercial and industrial sales volumes as a result of the shut-down of the Lee Mills.

The Brazil segment 2008 net sales of $70.5 million in 2008 decreased by $2.5 million, or 3.4 percent, from $73.0 million for the prior-year period. The decrease was due to lower sales volumes due to the exit of the coated papers market and weaker Brazilian real, partially offset by higher average selling prices.

Operating Expenses

												Percent of Net Sales

									Percent Change			Percent of Net Sales
		2008		2007		Change			Percent Change			2008			2007
		(dollars in millions)
Net Sales		$	767.9	$	714.8	$	53.1			7.4	%
	Cost of products sold		664.7		606.7		58.0			9.6			86.6	%		84.9	%

Gross Profit		$	103.2	$	108.1	$	(4.9	)		(4.5	)%		13.4	%		15.1	%

Gross profit in 2008 was $103.2 million, a decrease of $4.9 million, or 4.5 percent, from $108.1 million for 2007. The gross profit margin in 2008 was 13.4 percent of net sales, decreasing from 15.1 percent in 2007. Gross profit decreased due to inflationary cost increases of $30.4 million, start-up costs of $12.7 million related to the rebuild of PdM's paper machine, unfavorable foreign currency impacts of $4.4 million and unfavorable fixed cost absorption of $2.7 million. These negative impacts were partially offset by higher average selling prices as well as changes in sales volumes of $33.2 million, primarily due to an improved mix of products sold, and improved manufacturing costs of $6.2 million.

Inflationary cost increases during 2008, related to higher energy rates, per ton wood pulp prices, other purchased materials costs and labor rates combined to unfavorably impact operating results by $30.4 million. Higher purchased energy costs in 2008 unfavorably impacted operating results by $17.1 million, primarily in France. Changes in per ton wood pulp prices in 2008, primarily in France and Brazil, increased operating expenses by $5.7 million compared with 2007. The average per ton list price of northern bleached softwood kraft pulp in the United States was $860 in 2008 compared with $825 per metric ton in 2007.

During the first quarter of 2008, the rebuilt paper machine at PdM initiated operations as part of the plan to restructure the PdM operation. The longer than expected start-up negatively impacted 2008 operating profit by $12.7 million.

Lower production volumes for tobacco-related papers and commercial and industrial products in all 3 segments were partially offset by increased production volumes in the French RTL operation.

Higher average selling prices, resulting primarily from an improved mix of products sold primarily in the United States, increased operating results during 2008 by $28.3 million versus 2007.

Nonmanufacturing Expenses

											Percent of Net Sales

								Percent Change			Percent of Net Sales
	2008		2007		Change			Percent Change			2008			2007
	(dollars in millions)
Selling expense	$	23.1	$	22.8	$	0.3			1.3	%		3.0	%		3.2	%
Research expense		8.3		8.0		0.3			3.8			1.1			1.1
General expense		32.8		35.4		(2.6	)		(7.3	)		4.3			5.0

Nonmanufacturing expenses	$	64.2	$	66.2	$	(2.0	)		(3.0	)%		8.4	%		9.3	%

Nonmanufacturing expenses in 2008 decreased by $2.0. million, or 3.0 percent, to $64.2 million from $66.2 million in 2007, primarily due to lower accruals for incentive expenses. Nonmanufacturing expenses were 8.4 percent and 9.3 percent of net sales in 2008 and 2007, respectively.

Restructuring and Impairment Expense

Total restructuring and impairment expense of $22.1 million was recognized in 2008, including $4.7 million for employee severance and other cash costs, $14.0 million for asset impairment charges and $3.4 million for accelerated depreciation and other non-cash charges. Total restructuring expense of $24.0 million was recognized during 2007, including $10.7 million for asset impairment charges, $10.2 million for employee severance and $3.1 for accelerated depreciation.

Operating Profit (Loss)

											Return on Net Sales

								Percent Change			Return on Net Sales
		2008			2007			Percent Change			2008			2007
		(dollars in millions)
France		$	17.1		$	27.1			(36.9	)%		3.5	%		6.2	%
United States			19.3			5.0			N.M.			8.5			2.2
Brazil			(9.7	)		(3.3	)		N.M.			(13.8	)		(4.5	)

	Subtotal		26.7			28.8			(7.3	)
Unallocated expenses			(9.8	)		(10.9	)		(10.1	)

Total		$	16.9		$	17.9			(5.6	)%		2.2	%		2.5	%

N.M. Not Meaningful

Operating profit in 2008 was $16.9 million compared with an operating profit of $17.9 million in 2007. Operating profit was higher in our U.S. segment and lower in our Brazilian and French segments.

The French segment's operating profit in 2008 was $17.1 million, a decrease of $10.0 million, or 36.9 percent, from an operating profit of $27.1 million in 2007. The decrease was primarily due to:

•: Inflationary cost increases of $19.9 million, mainly due to increased energy rates of $10.3 million and higher wood pulp and materials prices of $7.5 million.
•: Start-up costs of the rebuilt paper machine at PdM of $12.7 million.
•: Increased restructuring and impairment expenses of $6.6 million.
•: The unfavorable effects of foreign currency translation of $1.4 million.

The negative factors were partially offset by:

•: The benefits of cost savings programs.
•: Increased sales volumes, primarily in RTL products, which improved operating results by $8.5 million.
•: Favorable fixed cost absorption of $3.8 million.
•: Higher average selling prices of $7.4 million, primarily due to an improved mix of products sold.
•: Decreased nonmanufacturing expenses.

The U.S. segment's operating profit in 2008 was $19.3 million, a $14.3 million increase from an operating profit of $5.0 million in 2007. The increase was primarily due to:

•: The favorable combined effect of higher average selling prices, primarily due to increased sales of cigarette paper for LIP cigarettes and lower sales of commercial and industrial papers of $17.9 million.

•: Decreased restructuring expenses of $11.3 million.
•: The benefits of costs savings programs.
•: Reduced nonmanufacturing expenses.

These positive factors were partially offset by:

•: Inflationary cost increases of $6.1 million, mainly due to higher energy rates.
•: Unfavorable fixed cost absorption of $6.5 million as a result of reduced machine production schedules.

Brazil's operating loss in 2008 was $9.7 million, compared with an operating loss of $3.3 million in 2007. The increased operating loss was primarily due to:

•: The stronger Brazilian real versus the U.S. dollar for a portion of the year, which had a $3.0 million unfavorable impact.
•: Inflationary cost increases of $4.4 million, mainly due to increased wood pulp prices and higher energy rates.
•: Increased restructuring expenses of $2.8 million.

These negative factors were partially offset by:

•: Benefits of cost savings programs and improved mill operations.
•: Higher average selling prices, which had a favorable impact on operating profit of $3.0 million.
•: Lower nonmanufacturing expenses.

Non-Operating Expenses

Interest expense of $10.5 million in 2008 increased from $5.9 million for 2007. Average debt levels increased significantly during 2008 versus 2007, mainly due to the acquisition of the LTRI minority interest in the first quarter of 2008, which was partially offset by lower weighted average effective interest rates. The weighted average effective interest rates on our revolving debt facilities were approximately 3.9 percent and 5.4 percent for 2008 and 2007, respectively.

Other expense, net was $3.4 million and $0.1 million in 2008 and 2007, respectively, primarily due to net foreign currency transaction losses of $4.0 million and $1.1 million in 2008 and 2007, respectively.

Income Taxes

A $1.9 million income tax benefit was recognized for 2008 compared with a $0.5 million income tax provision recognized in 2007. Both periods were impacted by tax benefits from substantial restructuring and impairment expenses and our foreign holding company structure. In 2008, we incurred $1.2 million in deferred tax expense as a result of a legal reorganization during 2008 and a decision by management to consider the undistributed earnings of LTRI to be permanently reinvested.

Minority Interest

Minority interest decreased to $0.2 million in 2008 from $8.0 million in 2007. This $7.8 million decrease was due to our acquisition of the LTRI minority interest in January 2008.

Loss from Equity Affiliates

The loss from equity affiliates in 2008 was $4.0 million compared with $0.2 million in 2007 and represents our 50 percent share of the net loss associated with our joint venture paper mill in China. The loss in 2008 includes operations start-up costs.

Net Income and Net Income per Share

Net income in 2008 was $0.7 million, or $0.05 and $0.04 per basic and diluted share, respectively, compared with $3.4 million of net income, or $0.22 per basic and diluted share in 2007. The decrease in net income in 2008 was primarily due to decreased gross profit as a result of higher inflationary and manufacturing costs partially offset by the benefit of the LTRI minority interest acquisition and higher average selling prices.

Year Ended December 31, 2007 Compared with the Year Ended December 31, 2006

Net Sales

		2007			2006

		(dollars in millions)
France		$	435.0		$	385.0		13.0	%	3.6	%
United States			226.0			221.8		1.9		(9.9	)
Brazil			73.0			67.3		8.5		1.7

	Subtotal		734.0			674.1
Intersegment			(19.2	)		(18.9	)

	Total	$	714.8		$	655.2		9.1	%	0.4	%

Net sales in 2007 were $714.8 million, a 9.1 percent increase compared with $655.2 million in 2006. The increase of $59.6 million consisted of the following (dollars in millions):

		Amount

Changes in currency exchange rates		$	30.6		4.7	%
Changes in selling price and product mix			29.7		4.5
Changes in sales volumes			(0.7	)	(0.1	)

	Total	$	59.6		9.1	%

•

Changes in currency exchange rates favorably impacted the net sales comparison by $30.6 million in 2007 compared with 2006. The euro, Brazilian real and the Philippine peso were all stronger against the U.S. dollar in 2007 by 9.1 percent, 12.8 percent and 11.9 percent, respectively.

•

Higher average selling prices had a favorable $29.7 million, or 4.5 percent, impact on the net sales comparison, primarily reflecting an improved mix of products sold in both France and the United States.

•

Unit sales volumes increased by 0.4 percent despite having an unfavorable $0.7 million impact on net sales dollars.

•: Sales volumes of the French segment increased by 3.6 percent reflecting increased RTL product sales, partially offset by lower sales volumes of tobacco-related papers.
•: Sales volumes in Brazil increased by 1.7 percent due to increased tobacco-related papers sales, partially offset by decreased non-tobacco paper sales.
•: Sales volumes in the United States decreased by 9.9 percent due to both tobacco-related and commercial and industrial papers sales volumes.

Sales of tobacco-related products accounted for approximately 90 percent of net sales in both 2007 and 2006.

French segment 2007 net sales of $435.0 million increased $50.0 million, or 13.0 percent, from $385.0 million in 2006. The increase was primarily the result of the stronger euro, and to a lesser extent, a more favorable mix of products sold and increased sales volumes.

The U.S. segment 2007 net sales of $226.0 million represented an increase of $4.2 million, or 1.9 percent, compared with $221.8 million in 2006. The increase in net sales of the U.S. segment primarily resulted from an improved mix of products sold, partially offset by lower sales volumes.

The Brazil segment realized an increase in net sales in 2007 of $5.7 million, or 8.5 percent, to $73.0 million from $67.3 million in 2006. The Brazilian segment's net sales increase was due to the stronger Brazilian real, an improved mix of products sold and increased sales volumes.

Operating Expenses

											Percent of Net Sales

								Percent Change			Percent of Net Sales
		2007		2006		Change		Percent Change			2007			2006
		(dollars in millions)
Net Sales		$	714.8	$	655.2	$	59.6		9.1	%
	Cost of products sold		606.7		571.1		35.6		6.2			84.9	%		87.2	%

Gross Profit		$	108.1	$	84.1	$	24.0		28.5	%		15.1	%		12.8	%

Gross profit was $108.1 million in 2007, an increase of $24.0 million, or 28.5 percent, versus $84.1 million in 2006. The gross profit margin was 15.1 percent in 2007, increasing from 12.8 percent in 2006. Gross profit in 2007 was favorably impacted by an improved mix of products sold, improved mill operations including cost reduction activities and favorable fixed cost absorption, and was unfavorably impacted by inflationary cost increases.

Increased average selling prices, primarily caused by an improved mix of products sold in both France and the United States, combined with the impact of changes in sales volumes, to increase 2007 operating results by $24.6 million compared with 2006.

Improved mill operations and cost reduction activities in all business segments significantly benefited 2007 results. Increased machine operating schedules in the French reconstituted tobacco leaf operation offset decreased machine schedules and lower production volumes for tobacco-related and commercial and industrial papers primarily in the United States and France and caused an overall improved absorption of mill fixed costs, positively impacting operating profit by $3.4 million during 2007 compared with 2006.

Inflationary cost increases unfavorably impacted operating results by $13.0 million in 2007 versus 2006, due to higher per ton wood pulp costs, other purchased material costs and labor rates. For the full year of 2007, purchased energy costs were essentially unchanged compared with 2006 despite rising markedly during the fourth quarter of 2007. Higher per ton wood pulp costs increased operating expenses by $7.8 million in 2007 versus 2006. The average list price of NBSK was $825 per metric ton in 2007, an increase of 13.8 percent compared with $725 per metric ton in 2006. Higher other purchased materials prices and higher labor rates combined to increase operating expenses by $5.0 million in 2007 compared with 2006.

The weaker U.S. dollar versus the Brazilian real and euro had a $5.0 million unfavorable impact on 2007 operating results compared with 2006. Restructuring expenses increased by $2.9 million during 2007 compared with 2006.

Nonmanufacturing Expenses

											Percent of Net Sales

								Percent Change			Percent of Net Sales
		2007		2006		Change		Percent Change			2007			2006
		(dollars in millions)
Selling expense		$	22.8	$	22.7	$	0.1		0.4	%		3.2	%		3.5	%
Research expense			8.0		7.3		0.7		9.6			1.1			1.1
General expense			35.4		27.7		7.7		27.8			5.0			4.2

	Nonmanufacturing expenses	$	66.2	$	57.7	$	8.5		14.7	%		9.3	%		8.8	%

Nonmanufacturing expenses increased $8.5 million, or 14.7 percent, to $66.2 million in 2007 from $57.7 million in 2006, primarily due to increased general expense, which was primarily attributable to higher employee incentive compensation and legal fees. Only minimal incentive compensation was incurred in 2006 due to lower overall financial performance whereas 2007 expenses reflected more normal levels of incentive achievement. Additional legal expenses were incurred in 2007 for compliance, intellectual property and due diligence activities. Nonmanufacturing expenses were 9.3 percent and 8.8 percent of net sales in 2007 and 2006, respectively.

Restructuring Expense

Total restructuring expense of $24.0 million was recognized in 2007, including $10.7 million for asset impairment charges, $10.2 million for severance related costs and $3.1 million for accelerated depreciation. Total restructuring expense of $21.1 million was recognized in 2006, including $15.4 million for severance related and other cash costs and $5.7 million for accelerated depreciation and other non-cash costs.

Operating Profit (Loss)

											Return on Net Sales

								Percent Change			Return on Net Sales
		2007			2006			Percent Change			2007			2006
		(dollars in millions)
France		$	27.1		$	8.1			N.M	%		6.2	%		2.1	%
United States			5.0			5.2			(3.8	)		2.2			2.3
Brazil			(3.3	)		(0.7	)		N.M.			(4.5	)		(1.0	)

	Subtotal		28.8			12.6			N.M.
Unallocated expenses			(10.9	)		(7.3	)		49.3

Total		$	17.9		$	5.3			N.M.	%		2.5	%		0.8	%

N.M. Not Meaningful

Operating profit was $17.9 million in 2007, which was higher than 2006 by $12.6 million. Operating profit as a percent of net sales was 2.5 percent and 0.8 percent during 2007 and 2006, respectively. Increased average selling prices, primarily due to an improved mix of products sold, combined with the impact of changes in sales volumes to increase operating profit by $24.6 million during 2007 versus 2006. Cost reduction activities contributed favorably to operating results across all segments. Increases in paper machine operating schedules in France, primarily due to increased production volumes at LTRI, caused higher absorption of mill fixed costs and positively impacted operating profit by $3.4 million during 2007 versus 2006. Inflation unfavorably impacted 2007 operating results by $13.0 million compared with 2006, primarily due to higher wood pulp prices, other purchased materials prices and labor rates in 2007. Restructuring expenses increased $2.9 million during 2007 compared with 2006.

The French segment's operating profit was $27.1 million in 2007, an increase of $19.0 million from an operating profit of $8.1 million in 2006. The improvement was primarily due to:

•: Improved mill operations, in part reflecting the benefits of restructuring activities.
•: Higher average selling prices, primarily as a result of an improved mix of products sold, improved operating results by $7.4 million.
•: Favorable fixed cost absorption from improved machine utilization of $6.0 million.
•: A $5.4 million reduction in restructuring expenses.
•: Increased sales volumes that improved operating results by $3.7 million.

These improvements were partially offset by inflationary cost increases of $5.8 million in 2007 versus 2006, primarily due to higher per ton wood pulp costs.

The U.S. segment's operating profit was $5.0 million in 2007, a $0.2 million decrease from an operating profit of $5.2 million in 2006. This decrease was primarily related to:

•: Increased restructuring expenses of $7.9 million.
•: Inflationary cost increases of $4.9 million, primarily due to higher per ton wood pulp costs and higher energy rates.
•: Unfavorable fixed cost absorption of $2.6 million.

These decreases were partially offset by:

•: Changes in sales volumes and higher average selling prices, primarily as a result of an improved mix of products sold, improved operating results by $12.3 million in 2007.
•: Improved mill operations, including cost reduction activities.

Brazil's operating loss was $3.3 million in 2007 versus an operating loss of $0.7 million in 2006, primarily due to a $4.5 million unfavorable impact of the stronger Brazilian real versus the U.S. dollar.

Non-Operating Expenses

Interest expense was $5.9 million and $5.5 million in 2007 and 2006, respectively. The increase in interest expense was primarily due to higher average debt levels during 2007 versus 2006. The weighted average effective interest rates on our 5-year revolving debt facilities were approximately 5.4 percent for 2007 and 5.6 percent during 2006.

Other expense, net in both 2007 and 2006 included interest income and foreign currency transaction gains and losses. Other expense, net was $0.1 million in 2007 compared with $0.5 million in 2006, primarily due to foreign currency transaction losses of $1.1 million and $1.3 million in 2007 and 2006, respectively.

Income Taxes

The provision for income taxes reflected an effective income tax rate of 4.2 percent in 2007 compared with a negative effective income tax rate in 2006. The difference in effective tax rates was primarily attributable to differences in the level of earnings between the 2 years, changes in the geographic mix of taxable earnings and the tax impact of our foreign holding company structure.

Minority Interest

Minority interest in 2007 increased to $8.0 million from $4.1 million in 2006. This $3.9 million, or 95.1 percent, increase reflected higher earnings of LTRI, which during 2007 had a 28 percent minority owner.

Loss from Equity Affiliates

The loss from equity affiliates was zero in 2007 compared with $0.2 million in 2006 and represents our 50 percent share of the pre-operating expenses associated with our recently formed joint venture in China.

Net Income (Loss) and Earnings (Loss) Per Share

Net income increased to $3.4 million in 2007 from a net loss of $0.8 million in 2006, primarily due to improved results for reconstituted tobacco products and LIP cigarette papers as well as significant savings from cost reduction activities. Diluted earnings per share in 2007 increased to $0.22 per share from a diluted loss per share of $0.05 per share in 2006. Substantial pre-tax restructuring expenses of $24.0 million and $21.1 million were included in the results for 2007 and 2006, respectively.

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 sales mix, volume and pricing of our products, as well as changes in our production volumes, costs and working capital. Our liquidity is supplemented by funds contractually available under our revolving credit facility with a syndicate of banks that is used as either operating conditions or strategic opportunities warrant. Our ability to access contractually available funds depends on the continued performance by our lenders. Capital spending for 2009 is projected to range between $20 and $30 million. Other cash needs, including pension funding and capitalized software spending, are projected to range between $20 and $30 million. As previously noted, we completed the acquisition of the 28 percent minority share in LTRI in January 2008 at a cost of $51.3 million and have been engaged in substantial restructuring activities since 2006 in the United States, Brazil and France. Each of these activities is expected to contribute to improved earnings and a more competitive production base over the longer-term. However, in order to implement these initiatives, we incurred higher levels of debt than we traditionally have carried, while at the same time we experienced less favorable earnings from operations undergoing restructuring activities. However, by year-end 2008 we had reduced debt levels and experienced improving results from operations such that we are now closer to our historical debt to equity levels. We continue to monitor our cash flows and debt levels closely while the credit markets and macro economic conditions remain in an unsettled state.

Cash Requirements

As of December 31, 2008, we had net operating working capital of $54.0 million and cash and cash equivalents of $11.9 million, compared with net operating working capital of $41.6 million and cash and cash equivalents of $4.0 million as of December 31, 2007. Changes in these absolute amounts include the impacts of changes in currency exchange rates which are not included in the changes in operating working capital presented on the consolidated statements of cash flow. Based upon our existing cash and operating working capital levels, expected operating cash flows and capital spending, contractual availability of borrowings under our existing credit facilities and continued performance by our lenders, we believe we have the necessary financial resources to satisfy our current and future liquidity needs.

Cash Flows from Operating Activities

			For the Years Ended December 31,

			2008			2007			2006
			(dollars in millions)
Net income (loss)			$	0.7		$	3.4		$	(0.8	)
Non-cash items included in net income
	Depreciation and amortization			47.4			39.2			38.2
	Asset impairment charges and restructuring-related accelerated depreciation			17.6			13.8			5.2
	Amortization of deferred revenue			(5.8	)		(6.0	)		(5.9	)
	Deferred income tax provision (benefit)			(22.3	)		(13.6	)		(10.6	)
	Minority interest in earnings of subsidiaries			0.2			8.0			4.1
	Loss from equity affiliates			4.0			—			0.2
	Pension and other postretirement benefits			(2.5	)		(3.8	)		(0.7	)
	Stock-based employee compensation			0.8			4.7			1.1
Other items				—			0.2			0.6
Net changes in operating working capital				(6.8	)		25.4			20.4

		Cash Provided by Operations	$	33.3		$	71.3		$	51.8

Net cash provided by operations was $33.3 million in 2008 compared with $71.3 million in 2007. Since the first quarter of 2008, we have generated $41.3 million in cash from operations compared with $8.0 million cash used by operations during the first quarter of the year.

Prior to 2002, our cash provided by operations included advance payments from customers for future product purchases. We recorded these advance payments as deferred revenue, which is now being amortized into net sales as earned and credited to customers based upon a mutually agreed-upon amount per unit of product sales. We had $18.3 million of deferred revenue on our December 31, 2008 consolidated balance sheet. At the current volume levels, we expect to fully amortize this amount by recognizing amortization of approximately $6 million per year through 2011.

Operating Working Capital

			For the Years Ended December 31,

			2008			2007			2006
			(dollars in millions)
Changes in operating working capital:
	Accounts receivable		$	3.3		$	(2.7	)	$	20.3
	Inventories			5.5			(3.8	)		11.9
	Prepaid expenses			0.3			3.3			(0.6	)
	Accounts payable			(3.4	)		9.4			(11.5	)
	Accrued expenses			(8.7	)		9.7			0.9
	Accrued income taxes			(3.8	)		9.5			(0.6	)

		Net changes in operating working capital	$	(6.8	)	$	25.4		$	20.4

In 2008, net changes in operating working capital contributed unfavorably to cash flow by $6.8 million, primarily due to decreased accrued expenses and accrued income taxes resulting from payments of prior period accruals for restructuring, incentive compensation, and income taxes. These increases in net working capital were partially offset by lower inventories due primarily to sales of inventories built up in advance of the Lee Mills shutdown.

During 2007, changes in operating working capital contributed favorably to cash flow by $25.4 million, primarily due to increased accounts payable, accrued incentive compensation costs and accrued income taxes from improved LTRI earnings, partially offset by increased inventories and accounts receivable.

In 2006, changes in operating working capital contributed favorably to cash flow by $20.4 million, primarily due to lower accounts receivable and inventories, partially offset by lower accounts payable. The decrease in operating working capital was due to a concerted effort by us to improve performance in this area. The decrease in accounts payable was primarily due to reduced purchasing activity, especially in France where mill production levels have decreased. During 2006, we occasionally sold receivables without recourse to improve liquidity and shorten the collection cycle when it was economical to do so.

Cash Flows from Investing Activities

		For the Years Ended December 31,

		2008			2007			2006
		(dollars in millions)
Capital spending		$	(35.3	)	$	(47.7	)	$	(9.6	)
Capitalized software costs			(6.4	)		(8.9	)		(3.8	)
Acquisitions, net of cash acquired			(51.3	)		—			—
Investment in equity affiliates			(1.9	)		(12.8	)		(2.9	)
Other			(0.2	)		(3.5	)		4.0

	Cash Used for Investing	$	(95.1	)	$	(72.9	)	$	(12.3	)

Cash used for investing activities increased in 2008 by $22.2 million versus 2007 primarily due to the $51.3 million acquisition of the LTRI minority interest partially offset by lower capital spending and lower investments in equity affiliates. We made our final contractual equity contribution in January 2008 of $1.9 million to the China paper joint venture.

Cash used for investing activities increased in 2007 by $60.6 million versus 2006 primarily due to increases in capital spending, China joint venture funding and capitalized software costs. Equity investments for our tobacco-related papers joint venture in China totaled $12.8 million during 2007.

Capital Spending

Capital spending was $35.3 million, $47.7 million and $9.6 million in 2008, 2007 and 2006, respectively. The decrease in capital spending during 2008 compared with 2007 was primarily due to lower restructuring-related projects. Significant capital spending in 2008 included $5.3 million at PdM for a paper machine rebuild and improvements to the bobbin slitting process, $3.8 million for a new coating machine at the Newberry, South Carolina facility and $2.1 million for improvements at LTRI.

In 2007, spending for capital projects included the following: $15.3 million for a paper machine rebuild and additional robotization of converting units at PdM, $9.2 million for a paper machine rebuild in Brazil and $3.6 million for a production facility and related equipment in Newberry, South Carolina for the processing of cigarette paper for LIP cigarettes.

We incur spending necessary to meet legal requirements and otherwise relating to the protection of the environment at our facilities in the United States, France, the Philippines, Indonesia, Brazil and Canada. For these purposes, we incurred total capital expenditures of $0.3 million in 2008, and expect to incur less than $1 million in each of 2009 and 2010, of which no material amount was the result of environmental fines or settlements. Including expenditures associated with environmental matters, as of December 31, 2008, we had no material unrecorded outstanding commitments for capital expenditures. The foregoing capital expenditures to protect the environment are not expected to have a material adverse effect on our financial condition or results of operation.

Capital spending for 2009 is expected to be in the range of $20 million to $30 million.

Capitalized software costs totaled $6.4 million, $8.9 million and $3.8 million in 2008, 2007 and 2006, respectively. Capitalized software costs included an enterprise-wide information system in France. During the period of 2005 to 2008, we spent a total of $18.0 million on this project, primarily $6.3 million in 2008, $7.3 million in 2007 and $3.8 million in 2006. A portion of the system became operational during the first quarter of 2008 triggering $2.3 million in amortization expense in 2008.

Acquisitions

We purchased the minority interest in LTRI in January 2008 as described in Note 16, Acquisition, of the Notes to Consolidated Financial Statements.

Cash Flows from Financing Activities

		For the Years Ended December 31,

		2008			2007			2006
		(dollars in millions)
Cash dividends paid to SWM stockholders		$	(9.4	)	$	(9.4	)	$	(9.4	)
Cash dividends paid to minority owners			—			—			(3.7	)
Net changes in debt			85.5			1.5			(20.7	)
Purchases of treasury stock			(6.3	)		(5.8	)		—
Proceeds from exercise of stock options			0.2			4.4			2.2
Excess tax benefits of stock-based awards			—			0.4			0.5

	Cash Provided by (Used for) Financing	$	70.0		$	(8.9	)	$	(31.1	)

Financing activities during 2008 included net borrowings of $129.8 million and repayments of $44.3 million. Other 2008 financing activities included cash dividends of $9.4 million paid to SWM stockholders as well as purchases of 388,309 shares of common stock for $6.3 million.

Financing activities during 2007 included debt borrowings of $32.7 million and debt repayments of $31.2 million for a net debt increase of $1.5 million, cash dividends paid to SWM stockholders of $9.4 million and purchases of 249,016 shares of common stock for $5.8 million. We issued 206,307 common shares from treasury stock for options exercised in 2007 with proceeds of $4.4 million.

Financing activities in 2006 included borrowings of $105.8 million and repayments of $126.5 million, for a net decrease in debt of $20.7 million corresponding to a decrease in operating working capital. Other 2006 financing activities included dividends paid to SWM stockholders and minority owners as well as proceeds from stock option exercises.

Dividend Payments

We have declared and paid cash dividends of $0.15 per share of our Common Stock every fiscal quarter since the second quarter of 1996. We currently expect to continue this level of quarterly dividend. Our Credit Agreement covenants require us to maintain certain financial ratios, as disclosed in Note 10, Debt, of the Notes to Consolidated Financial Statements, none of which under normal business conditions materially limit our ability to pay such dividends.

On February 5, 2009, we announced that the Board of Directors had declared a quarterly cash dividend of $0.15 per share of Common Stock. The dividend will be payable on March 23, 2009 to stockholders of record on February 23, 2009.

Cash dividends paid to minority owners in 2006 related to the minority owners' share of dividends paid by LTRI before we purchased the minority interest in LTRI in January 2008.

Share Repurchases

We repurchased a total of 388,309 shares of our common stock during 2008 at a cost of $6.3 million. See Part II, Item 5, Repurchases of Equity Securities. Corporate repurchases are effected during open trading windows or pursuant to 10b5-1 plans that permit share repurchases to be made at predetermined stock price levels, without restricting such repurchases to specific windows of time. Future common stock repurchases will be dependent upon various factors, including the stock price, strategic opportunities and cash availability.

Debt Instruments

		For the Years Ended December 31,

		2008			2007			2006
		(dollars in millions)
Changes in short-term debt		$	18.9		$	(4.4	)	$	(13.7	)
Proceeds from issuances of long-term debt			110.9			32.7			105.8
Payments on long-term debt			(44.3	)		(26.8	)		(112.8	)

	Net changes in debt	$	85.5		$	1.5		$	(20.7	)

Primarily due to the LTRI minority interest acquisition, machine start-up costs for restructuring-related activities, reduced cash generated from operations and higher capital spending, our net proceeds from long-term debt were $110.9 million and from short-term debt were $18.9 million during 2008. We anticipate additional borrowings in the range of approximately $10 to $20 million during 2009. With this level of borrowing and forecasted operating results, we expect to remain in compliance with our Credit Agreement financial covenants.

As of December 31, 2008, we had $3.0 million available on our U.S. Revolver and $66.7 million available on our Euro Revolver. We also had contractual availability under our bank overdraft facilities and lines of credit of $12.1 million as of December 31, 2008. The Credit Agreement contains covenants that are customary for facilities of this type that, among other things, require the Company to maintain (a) a net debt to equity ratio not to exceed 1.0 and (b) a net debt to adjusted EBITDA ratio not to exceed 3.0. As of December 31, 2008, the net debt to equity ratio was 0.61, and the net debt to adjusted EBITDA ratio was 1.97. Based on our debt covenant restrictions as of December 31, 2008, we could have borrowed an additional $76.5 million from our Credit Agreement and bank overdraft facilities without violating the most restrictive of those covenants.

Our total debt to capital ratios at December 31, 2008 and December 31, 2007 were 39.3 percent and 21.5 percent, respectively.

Other Factors Affecting Liquidity and Capital Resources

The following table represents our future contractual cash requirements for the next 5 years and thereafter for our long-term debt obligations and other commitments (dollars in millions):

			Payments due for the periods ended

			Total		2009		2010		2011		2012		2013		Thereafter
Contractual Obligations
	Current debt(1)		$	34.9	$	34.9	$	—	$	—	$	—	$	—	$	—
	Long-term debt(2)			144.9		—		9.3		2.2		130.6		2.6		0.2
	Debt interest(3)			15.9		4.8		4.3		4.2		2.5		0.1		—
	Restructuring obligations(4)			5.4		5.4		—		—		—		—		—
	Minimum operating lease payments(5)			4.7		1.2		1.2		1.1		0.8		0.4		—
	Purchase obligations—raw materials(6)			49.1		22.8		19.1		1.8		1.8		1.8		1.8
	Purchase obligations—energy(7)			99.7		35.4		20.5		4.2		4.2		4.2		31.2
	Other long-term liabilities(8)(9)(10)			3.3		3.3		—		—		—		—		—

		Total	$	357.9	$	107.8	$	54.4	$	13.5	$	139.9	$	9.1	$	33.2

(1): Current debt includes borrowings against bank overdraft facilities; see Note 10, Debt, of the Notes to Consolidated Financial Statements.
(2): See additional information regarding long-term debt in Note 10, Debt, of the Notes to Consolidated Financial Statements.
(3): The amounts reflected in debt interest are based upon the short-term and long-term scheduled principal maturities and interest rates in effect as of December 31, 2008. Where specific maturities are not stated, such as for an overdraft line-of-credit, a repayment date coinciding with the end of the year was used for purposes of these calculations. Since our debt is largely variable interest rate debt, applicable market interest rates were assumed to be the same as at December 31, 2008 for purposes of these calculations. With respect to our variable-rate debt outstanding at December 31, 2008, a 1 percentage point increase in interest rates would increase our debt interest obligation by $1.5 million in 2009. For more information regarding our outstanding debt and associated interest rates, see Note 10, Debt, of the Notes to Consolidated Financial Statements.
(4): Restructuring obligations are more fully discussed in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operation, Recent Developments, and Note 9, Restructuring Activities, of the Notes to Consolidated Financial Statements.
(5): Minimum operating lease payments relate to our future minimum obligations under non-cancelable operating leases having an initial or remaining term in excess of 1 year as of December 31, 2008. In addition, our total future minimum obligations under non-cancelable operating leases having an initial or remaining term in excess of 1 year as of December 31, 2008 are $1.2 million or less annually over each of the next 5 years.
(6): Purchase obligations for raw materials include our calcium carbonate purchase agreement at our mill in Quimperlè, France, in which a vendor operates an on-site calcium carbonate plant and our mill has minimum purchase quantities. See Note 15, Commitments and Contingencies, of the Notes to Consolidated Financial Statements for additional information.
(7): Purchase obligations for energy include obligations under agreements with (1) an energy cogeneration supplier at our mills in Quimperle and Spay, France, to supply steam and our mills have minimum purchase commitments (2) a natural gas supplier to supply and distribute 100 percent of the natural gas needs of our Quimperlè mill in France and (3) an energy supplier to supply a constant supply of

electricity for our Pirahy mill in Brazil. See Note 15, Commitments and Contingencies, of the Notes to Consolidated Financial Statements for additional information.

(8): In 2008, we amended our supplemental employee retirement plan to allow participants the option to receive a lump sum payment of their benefits. All participants elected to receive a lump sum which will be paid in 2009. We have a recorded liability of $3.3 million at December 31, 2008, for this obligation.
(9): The amounts reflected in other long-term liabilities do not include any amounts for our pension obligations except for the supplemental employee retirement plan as indicated in note 8 above. The pension obligations are funded by our separate pension trusts, which held $86.3 million in assets at December 31, 2008. The combined projected benefit obligation, or PBO, of our U.S. and French pension plans was underfunded by $62.3 million and $27.1 million as of December 31, 2008 and 2007, respectively. We make contributions to our pension trusts based on many factors including regulatory guidelines, investment returns of the trusts and availability of cash for pension contributions versus other priorities. We made pension contributions of $5.2 million to our U.S. and French pension plans during 2008. We expect to contribute $12 to $15 million during 2009. We expect 2009 funding to be in compliance with the Pension Protection Act of 2006. For information regarding our long-term pension obligations and trust assets, see Note 13, Postretirement and Other Benefits, of the Notes to Consolidated Financial Statements.
(10): The amounts reflected in other long-term liabilities do not include any amounts for our postretirement healthcare and life insurance benefits. Such payments are dependent upon the incurrence of costs and filing of claims by our retirees and thus the amounts of such future payments are uncertain. Our net payments under these plans were $1.6 million and $1.9 million in the years ended December 31, 2008 and 2007, respectively. Based on this past experience, we currently expect our share of the net payments to be approximately $1 to $2 million during 2009 for these benefits. For more information regarding our retiree healthcare and life insurance benefit obligations, see Note 13, Postretirement and Other Benefits, of the Notes to Consolidated Financial Statements.

Outlook

We expect to realize earnings improvement from increased sales of RTL and cigarette paper for LIP cigarettes during 2009, especially as the U.S. market implements what is now essentially 100 percent lower ignition propensity regulation by January 2010. Additional earnings improvement is expected from operational performance improvements in France on the PdM paper machine rebuilt as part of the restructuring plan for that location coupled with expected continued improvement in our Brazilian operation as a result of a better currency situation as well as the benefits of restructuring and pricing actions implemented since mid-2008. We have completed global customer negotiations and achieved results in line with our expectations and goals for 2009. After a longer than expected period of customer qualifications, we are now gaining sales volume at our new paper joint venture in China and expect to narrow losses progressively through 2009. Finally, inflationary cost increases are expected to continue to moderate given world-wide recessionary impacts, with lower purchased wood pulp already having provided a benefit to earnings during the fourth quarter of 2008.

Poor world-wide economic conditions may negatively effect our earnings growth during 2009. Likely increases in cigarette taxation to mitigate government revenue declines and lower levels of disposable income among smokers, especially in developing countries, could decrease demand. The U.S. federal government passed legislation for child health care programs funded by a significant increase in cigarette and other tobacco product excise taxes. Further, we continue to evaluate how best to balance our capacity for traditional paper products in France and the United States to available demand and will likely announce additional restructuring actions during 2009.

The expected earnings and cash generation improvement during 2009, coupled with our existing debt capacity, supports our strategies to transform Schweitzer-Mauduit through growth of our high-value franchises for reconstituted tobacco leaf and cigarette paper for lower ignition propensity cigarettes. Also, we will continue the necessary restructuring of our operations to balance capacity between our western and developing country locations.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the safe harbor created by that Act. These statements include those in the "Outlook" and "Critical Accounting Policies and Estimates" sections and our expectations elsewhere in Management's Discussion and Analysis of Financial Condition and Results of Operation, and in "Factors That May Affect Future Results" under "Risk Factors" in Item 1A. They also include statements containing "expect," "anticipate," "project," "appears," "should," "could," "may," "typically" and similar words. Actual results may differ materially from the results suggested by these statements for a number of reasons, including the following:

•: We have manufacturing facilities in 6 countries and sell products in over 90 countries. As a result, we are subject to a variety of import and export, tax, foreign currency, labor and other regulations within these countries. Changes in these regulations, or adverse interpretations or applications, as well as changes in currency exchange rates, could adversely impact our business in a variety of ways, including increasing expenses, decreasing sales, limiting our ability to repatriate funds and generally limiting our ability to conduct business.
•: Our financial performance is dependent upon the cost of raw materials, particularly wood pulp, purchased energy, chemicals and labor. Recently, the cost of some of these items has increased significantly, and the nature of our agreements with our customers may make it difficult to pass changes in these costs on to our customers in a timely and effective manner.
•: Our sales are concentrated to a limited number of customers. In 2008, 60 percent of our sales were to our 5 largest customers. The loss of 1 or more such customers, or a significant reduction in 1 or more of these customers' purchases, could have a material adverse effect on our results of operations.
•: Our financial performance is materially impacted by sales of both RTL products and cigarette paper for LIP cigarettes. A significant change in the sales or production volumes, pricing or manufacturing costs of these products could have a material impact on future financial results.
•: As a result of excess capacity in the tobacco-related papers industry and increased purchased material and operating costs experienced in the last several years, competitive levels of selling prices for certain of our products are not sufficient to cover those costs with a margin that we consider reasonable. Such competitive pressures have resulted in downtime of certain paper machines and, in some cases, accelerated depreciation or impairment charges for certain equipment and employee severance expenses associated with downsizing activities. Management continues to evaluate how to operate our production facilities more effectively with reduced production volumes and additional restructuring activities are possible in the future. Management also continues to evaluate the recoverability of the property, plant and equipment, deferred tax assets and other assets of the business.
•: Our Credit Agreement contains certain financial covenants including, but not limited to, a net debt to adjusted EBITDA ratio. While we currently project that we will not fail to comply with any of these covenants, changes from the expected results of operations, higher than expected capital spending, an unanticipated need for additional borrowing or other factors could cause us to violate 1 or more of the covenants in our Credit Agreement. In the event we breach the net debt to

adjusted EBITDA covenant, we believe that we could obtain a temporary waiver of that covenant, obtain an amendment of our Credit Agreement or access the markets for additional capital. However, there is no assurance that the required bank consents could be obtained for a temporary waiver or an amendment, that a temporary waiver or amendment of our credit facilities would be adequate to fully resolve the condition giving rise to the default or that we could successfully access the markets for additional capital.

•: In recent years, governmental entities around the world, particularly in the United States and western Europe, have taken or have proposed actions that may have the effect of reducing consumption of tobacco products. Reports with respect to the possible harmful physical effects of cigarette smoking and use of tobacco products have been publicized for many years and, together with actions to restrict or prohibit advertising and promotion of cigarettes or other tobacco products, to limit smoking in public places and to increase taxes on such products, are intended to discourage the consumption of cigarettes and other such products. Also in recent years, certain governmental entities, particularly in North America and Europe, have enacted, considered or proposed actions that would require cigarettes to meet specifications aimed at reducing their likelihood of igniting fires when the cigarettes are not actively being smoked. Furthermore, it is not possible to predict what additional legislation or regulations relating to tobacco products will be enacted, or to what extent, if any, such legislation or regulations might affect our business.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information with respect to our market risk is contained under the caption "Market Risk" in "Risk Factors" appearing in Part I, Item 1A.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

		Page

Consolidated Financial Statements
	Consolidated Statements of Income (Loss) for the years ended December 31, 2008, 2007 and 2006	49
	Consolidated Balance Sheets as of December 31, 2008 and 2007	50
	Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income (Loss) for the years ended December 31, 2008, 2007 and 2006	51
	Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	52
Notes to Consolidated Financial Statements		53
Report of Independent Registered Public Accounting Firm		90

Schedules have been omitted because they are either not required, not applicable or the required information is included in the consolidated financial statements or notes thereto.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(dollars in millions, except per share and share amounts)

				For the Years Ended December 31,

				2008			2007		2006
Net Sales				$	767.9		$	714.8	$	655.2
	Cost of products sold				664.7			606.7		571.1

Gross Profit					103.2			108.1		84.1
		Selling expense			23.1			22.8		22.7
		Research expense			8.3			8.0		7.3
		General expense			32.8			35.4		27.7

			Total nonmanufacturing expenses		64.2			66.2		57.7
		Restructuring and impairment expense (Notes 5 & 9)			22.1			24.0		21.1

Operating Profit					16.9			17.9		5.3
	Interest expense				10.5			5.9		5.5
	Other expense, net				3.4			0.1		0.5

Income (Loss) Before Income Taxes, Minority Interest and Loss from Equity Affiliates					3.0			11.9		(0.7	)
	Provision (benefit) for income taxes (Note 12)				(1.9	)		0.5		(4.2	)
	Minority interest in earnings of subsidiaries				0.2			8.0		4.1
	Loss from equity affiliates				4.0			—		0.2

Net Income (Loss)				$	0.7		$	3.4	$	(0.8	)

Net Income (Loss) Per Share:
	Basic			$	0.05		$	0.22	$	(0.05	)

	Diluted			$	0.04		$	0.22	$	(0.05	)

Weighted Average Shares Outstanding:
	Basic				15,339,700			15,529,400		15,393,500
	Diluted				15,544,100			15,741,600		15,393,500

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in millions, except per share and share amounts)

			December 31, 2008			December 31, 2007

ASSETS
Current Assets
	Cash and cash equivalents		$	11.9		$	4.0
	Accounts receivable			87.0			100.6
	Inventories			118.4			131.2
	Other current assets			11.1			11.4

		Total Current Assets		228.4			247.2
Property, Plant and Equipment, net				407.8			456.0
Deferred Income Tax Benefits				26.4			15.2
Goodwill and Intangible Assets				15.6			2.8
Investment in Equity Affiliates				15.4			15.4
Other Assets				35.1			38.4

		Total Assets	$	728.7		$	775.0

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Current debt		$	34.9		$	13.6
	Accounts payable			64.5			84.3
	Accrued expenses			91.7			111.3
	Current deferred revenue			6.0			6.0

		Total Current Liabilities		197.1			215.2
Long-Term Debt				144.9			87.3
Pension and Other Postretirement Benefits				67.3			38.9
Deferred Income Tax Liabilities				11.0			25.0
Deferred Revenue				12.3			18.1
Other Liabilities				18.7			22.7

		Total Liabilities		451.3			407.2
Minority Interest				—			26.0

Stockholders' Equity:
	Preferred stock, $0.10 par value; 10,000,000 shares authorized; none issued			—			—
	Common stock, $0.10 par value; 100,000,000 shares authorized; 16,078,733 shares issued; 15,329,780 and 15,508,397 shares outstanding at December 31, 2008 and 2007, respectively			1.6			1.6
	Additional paid-in-capital			64.6			68.0
	Common stock in treasury, at cost, 748,953 and 570,336 shares at December 31, 2008 and 2007, respectively			(14.1	)		(12.3	)
	Retained earnings			255.9			264.6
	Accumulated other comprehensive income (loss), net of tax			(30.6	)		19.9

		Total Stockholders' Equity		277.4			341.8

		Total Liabilities and Stockholders' Equity	$	728.7		$	775.0

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

AND COMPREHENSIVE INCOME (LOSS)

(dollars in millions, except per share amounts)

	For the Years Ended December 31, 2008, 2007 and 2006

	Common Stock Issued							Treasury Stock												Accumulated Other Comprehensive Income (Loss)
	Common Stock Issued				Additional Paid-In Capital			Treasury Stock						Retained Earnings			Unearned Compensation
	Shares		Amount		Additional Paid-In Capital			Shares			Amount			Retained Earnings			Unearned Compensation						Total
Balance, December 31, 2005		16,078,733		1.6		63.8			770,977			(15.6	)		280.8			(0.3	)		(38.4	)		291.9
Net loss												(0.8	)											(0.8	)
Adjustments to unrealized foreign currency translation, net of tax																					23.4			23.4
Adjustments to minimum pension liability, net of tax																					2.6			2.6

Comprehensive income, net of tax																								25.2

Effect of adoption of SFAS No. 123R						(0.3	)											0.3						—
Effect of adoption of SFAS No. 158																					(8.7	)		(8.7	)
Dividends declared ($0.60 per share)															(9.4	)								(9.4	)
Restricted stock issuances, net						(1.2	)		(67,803	)		1.3												0.1
Return of shares									13															—
Stock-based employee compensation expense						1.1																		1.1
Stock issued to directors as compensation									(6,644	)		0.1												0.1
Excess tax benefits of stock-based awards						0.5																		0.5
Issuance of shares for options exercised		—		—		(0.6	)		(135,200	)		2.8			—			—			—			2.2

Balance, December 31, 2006		16,078,733		1.6		63.3			561,343			(11.4	)		270.6			—			(21.1	)		303.0
Net income															3.4									3.4
Adjustments to unrealized foreign currency translation, net of tax																					32.8			32.8
Amortization of postretirement benefit plans' costs, net of tax																					5.9			5.9
Net gain on postretirement benefit plans, net of tax																					2.3			2.3

Comprehensive income, net of tax																								44.4

Dividends declared ($0.60 per share)															(9.4	)								(9.4	)
Restricted stock issuances, net						(0.7	)		(28,032	)		0.6												(0.1	)
Stock-based employee compensation expense						4.8																		4.8
Stock issued to directors as compensation									(5,684	)		0.1												0.1
Excess tax benefits of stock-based awards						0.4																		0.4
Purchases of treasury stock									249,016			(5.8	)											(5.8	)
Issuance of shares for options exercised		—		—		0.2			(206,307	)		4.2			—			—			—			4.4

Balance, December 31, 2007		16,078,733		1.6		68.0			570,336			(12.3	)		264.6			—			19.9			341.8
Net income															0.7									0.7
Adjustments to unrealized foreign currency translation, net of tax																					(28.7	)		(28.7	)
Adjustments to minimum pension liability, net of tax																					(21.8	)		(21.8	)

Comprehensive loss, net of tax																								(49.8	)

Dividends declared ($0.60 per share)															(9.4	)								(9.4	)
Restricted stock issuances, net						(4.2	)		(189,646	)		4.2												—
Stock-based employee compensation expense						0.8																		0.8
Stock issued to directors as compensation						0.1			(6,096	)														0.1
Purchases of treasury stock									388,309			(6.3	)											(6.3	)
Issuance of shares for options exercised		—		—		(0.1	)		(13,950	)		0.3			—			—			—			0.2

Balance, December 31, 2008		16,078,733	$	1.6	$	64.6			748,953		$	(14.1	)	$	255.9		$	—		$	(30.6	)	$	277.4

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

					For the Years Ended December 31,

					2008			2007			2006
Operations
	Net income (loss)				$	0.7		$	3.4		$	(0.8	)
	Non-cash items included in net income
		Depreciation and amortization				47.4			39.2			38.2
		Asset impairments and restructuring-related accelerated depreciation				17.6			13.8			5.2
		Amortization of deferred revenue				(5.8	)		(6.0	)		(5.9	)
		Deferred income tax benefit				(22.3	)		(13.6	)		(10.6	)
		Minority interest in earnings of subsidiaries				0.2			8.0			4.1
		Loss from equity affiliate				4.0			—			0.2
		Pension and other postretirement benefits				(2.5	)		(3.8	)		(0.7	)
		Stock-based employee compensation				0.8			4.7			1.1
	Other items					—			0.2			0.6
	Changes in operating working capital
		Accounts receivable				3.3			(2.7	)		20.3
		Inventories				5.5			(3.8	)		11.9
		Prepaid expenses				0.3			3.3			(0.6	)
		Accounts payable				(3.4	)		9.4			(11.5	)
		Accrued expenses				(8.7	)		9.7			0.9
		Accrued income taxes				(3.8	)		9.5			(0.6	)

			Net changes in operating working capital			(6.8	)		25.4			20.4

				Cash Provided by Operations		33.3			71.3			51.8

	Investing
		Capital spending				(35.3	)		(47.7	)		(9.6	)
		Capitalized software costs				(6.4	)		(8.9	)		(3.8	)
		Acquisitions, net of cash acquired				(51.3	)		—			—
		Investment in equity affiliates				(1.9	)		(12.8	)		(2.9	)
		Other				(0.2	)		(3.5	)		4.0

				Cash Used for Investing		(95.1	)		(72.9	)		(12.3	)

	Financing
		Cash dividends paid to SWM stockholders				(9.4	)		(9.4	)		(9.4	)
		Cash dividends paid to minority owners				—			—			(3.7	)
		Changes in short-term debt				18.9			(4.4	)		(13.7	)
		Proceeds from issuances of long-term debt				110.9			32.7			105.8
		Payments on long-term debt				(44.3	)		(26.8	)		(112.8	)
		Purchases of treasury stock				(6.3	)		(5.8	)		—
		Proceeds from exercise of stock options				0.2			4.4			2.2
		Excess tax benefits of stock-based awards				—			0.4			0.5

				Cash Provided by (Used for) Financing		70.0			(8.9	)		(31.1	)

				Effect of Exchange Rate Changes on Cash		(0.3	)		0.8			0.2

	Increase (Decrease) in Cash and Cash Equivalents					7.9			(9.7	)		8.6
	Cash and Cash Equivalents at beginning of year					4.0			13.7			5.1

	Cash and Cash Equivalents at end of year				$	11.9		$	4.0		$	13.7

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

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business

Schweitzer-Mauduit International, Inc., or the Company, is a multinational diversified producer of premium specialty papers headquartered in the United States of America and is the world's largest supplier of fine papers to the tobacco industry. The Company manufactures and sells paper and reconstituted tobacco products to the tobacco industry as well as specialized paper products for use in other applications. Tobacco industry products comprised approximately 90 percent of the Company's consolidated net sales in each of the years 2006 through 2008. The primary products in the group include Cigarette Papers, used to wrap various parts of a cigarette, reconstituted tobacco leaf, or RTL, which is used as a blend with virgin tobacco in cigarettes and reconstituted tobacco wrappers and binders for machine-made cigars. These products are sold directly to the major tobacco companies or their designated converters in the Americas, Europe, Asia and elsewhere. Non-tobacco industry products are a diverse mix of products, certain of which represent commodity paper grades produced to maximize machine operations.

The Company is a manufacturer of high porosity papers, which are used in manufacturing ventilated cigarettes, banded papers for the production of lower ignition propensity, or LIP, cigarettes and the leading independent producer of RTL used in producing blended cigarettes. The Company conducts business in over 90 countries and currently operates 11 production locations worldwide, with mills in the United States, France, the Philippines, Indonesia and Brazil. The Company also has a 50 percent equity interest in a paper mill in China.

The Company's manufacturing facilities have a long history of producing paper dating back to 1545. The Company's domestic mills led the development of the North American tobacco-related papers manufacturing industry, which was originated by Peter J. Schweitzer, Inc. that began as an importer of cigarette papers from France in 1908.

As used in this 2008 Annual report on Form 10-K, unless the context indicates otherwise, references to "we," "us," "our," "SWM," "Schweitzer-Mauduit" or similar terms include Schweitzer-Mauduit International, Inc. and its consolidated subsidiaries.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements and the notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. The Company believes the estimates and assumptions used in the preparation of these consolidated financial statements are reasonable, based upon currently available facts and known circumstances. Actual results may differ from those estimates and assumptions as a result of a number of factors, including those discussed elsewhere in this report and in its other public filings from time to time.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned, majority-owned and controlled subsidiaries. Minority interest represents minority stockholders'

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

proportionate share of the equity in SWM-B, the Company's Brazilian paper operations, and LTRI, the Company's French RTL operations. In January 2008, the Company acquired the minority interest in LTRI, and now owns 100 percent of LTRI (see Note 16, Acquisition). The Company's share of the net loss of its 50 percent owned joint venture in China is included in the consolidated statements of income (loss) as loss from equity affiliates. All significant intercompany balances and transactions have been eliminated. The Company did not have any special purpose entities during 2008, 2007 or 2006.

In July 2005, the Company formed a joint venture with China National Tobacco Corporation, or CNTC, to produce tobacco-related papers in China. CNTC is the principal operating company under China's State Tobacco Monopoly Administration. CNTC and SM-China each own 50 percent of the joint venture. The Company uses the equity method to account for this joint venture (see Note 7, Joint Venture with CNTC). Investment in equity affiliates represents the Company's investment in its China joint venture.

Revenue Recognition

The Company recognizes revenue and the related accounts receivable when the following 4 criteria are met: (1) persuasive evidence of an arrangement exists; (2) ownership has transferred to the customer; (3) the selling price is fixed or determinable; and (4) collectibility is reasonably assured based on the Company's judgment regarding the collectibility of its accounts receivable. Generally, the Company recognizes revenue when it ships its manufactured product and title and risk of loss passes to its customer in accordance with the terms of sale of the product. Revenue is recorded at the time of shipment for terms designated f.o.b., or free on board, shipping point. For sales transactions designated f.o.b. destination, revenue is recorded when the product is delivered to the customer's delivery site, at which time title and risk of loss are transferred. Provisions for discounts, returns, allowances, customer rebates and other adjustments are provided for in the same period the related revenue is recorded. Deferred revenue represents advance payments from customers which are earned based upon a mutually agreed-upon amount per unit of future product sales.

Freight Costs

The cost of delivering finished goods to the Company's customers is recorded as a component of cost of products sold. Those costs include the amounts paid to a third party to deliver the finished goods. Any freight costs billed to and paid by a customer are included in revenue.

Foreign Currency Translation

The income statements of foreign entities are translated into U.S. dollars at average exchange rates prevailing during the periods in accordance with Statement of Financial Accounting Standards, or SFAS, No. 52, " Foreign Currency Translation ." The balance sheets of these entities are translated at period-end exchange rates, and the differences from historical exchange rates are reflected in a separate component of accumulated other comprehensive income (loss) as unrealized foreign currency translation adjustments.

Foreign currency risks arise from transactions and balances denominated in non-local currencies. Losses resulting from remeasurement and settlement of such transactions and balances, included in other expense, net, were $4.0 million, $1.1 million and $1.3 million in 2008, 2007 and 2006, respectively.

Derivative Instruments

As a multinational entity, the Company is exposed to changes in foreign currency exchange rates, interest rates and commodity prices. The Company utilizes a variety of practices to manage these market risks, including where considered appropriate, derivative instruments. The Company uses derivative instruments

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

only for risk management purposes and not for trading or speculation. All derivative instruments the Company uses are either exchange traded or are entered into with major financial institutions in order to reduce credit risk and risk of nonperformance by third parties. As of December 31, 2008, the Company had $38 million of its variable-rate long-term debt fixed under interest rate swap agreements. Usually the contracts extend for no more than 12 months, although their contractual term has been as long as 24 months. The Company believes the credit risks with respect to the counterparties, and the foreign currency risks that would not be hedged if the counterparties fail to fulfill their obligations under the contracts, are not material in view of its understanding of the financial strength of the counterparties.

Gains and losses on instruments that hedge firm commitments are deferred and included in the basis of the underlying hedged items. Premiums paid for options are amortized ratably over the life of the option. All other hedging gains and losses are included in period income or expense based on the period-end market price of the instrument.

The Company had outstanding forward contracts, which were held for purposes other than trading, maturing at various dates in 2008, 2009 and 2010, to purchase approximately $42 million and $16 million of various foreign currencies at December 31, 2008 and December 31, 2007, respectively. These contracts were designated as cash flow hedges of foreign currency transactions to fix the Company's local currency cash flow. These contracts had not given rise to any significant net deferred gains or losses as of December 31, 2008 and December 31, 2007, and their fair values approximated their carrying value.

Cash and Cash Equivalents

The Company considers all highly liquid, unrestricted investments with remaining maturities of 3 months or less to be cash equivalents.

Impairment of Long-Lived Assets, Goodwill and Intangible Assets

The Company evaluates the carrying value of long-lived assets, including property and equipment, goodwill and non-amortizable intangible assets, when events and circumstances warrant a review. Goodwill is also tested for impairment annually during the fourth quarter. Goodwill is evaluated using a two-step test at the reporting unit level. The first step compares the book value of the reporting unit to its fair value. If the book value of a reporting unit exceeds its fair value, we perform the second step. In the second step, we determine an implied fair value of the reporting unit's goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill. The difference between the total fair value of the reporting unit and the fair value of all the assets and liabilities other than goodwill is the implied fair value of that goodwill. Any impairment loss is measured as the excess of the book value of the goodwill over the implied fair value of that goodwill. For the years ended December 31, 2008, 2007 and 2006, no goodwill impairment charges resulted from our required annual impairment tests.

The carrying value of long-lived assets is reviewed periodically to determine if events or circumstances have changed which may indicate that the assets may be impaired or the useful life may need to be changed. The Company considers internal and external factors relating to each asset, including expectation of future profitability, undiscounted cash flows and its plans with respect to the operations. An impairment loss is measured by the amount the estimated fair value of the asset exceeds its net carrying value.

Environmental Spending

Environmental spending is capitalized if such spending qualifies as property, plant and equipment, substantially increases the economic value or extends the useful life of an asset. All other such spending is expensed as incurred, including fines and penalties incurred in connection with environmental violations.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Environmental spending relating to an existing condition caused by past operations is expensed. Liabilities are accrued when environmental assessments are probable, and the costs can be reasonably estimated. Generally, timing of these accruals coincides with completion of a feasibility study or commitment to a formal plan of action.

Capitalized Software Costs

The Company capitalizes certain purchases of software and software development and installation costs in connection with major projects of software development for internal use. These costs are included in other assets on the consolidated balance sheets and are amortized using the straight-line method over the estimated useful life not to exceed 7 years. Costs associated with business process redesign, end-user training, system start-up and ongoing software maintenance are expensed as incurred. Amortization of capitalized software was $3.8 million, $2.4 million and $2.7 million for the years ended December 31, 2008, 2007 and 2006, respectively. Accumulated amortization of capitalized software costs was $33.4 million and $31.7 million at December 31, 2008 and 2007, respectively.

Business Tax Credits

Business tax credits represent value added tax credits receivable and similar assets, such as Imposto sobre Circulação de Mercadorias e Serviços, or ICMS, in Brazil. Business tax credits are generated when value-added taxes, or VAT, are paid on purchases. VAT and similar taxes are collected from customers on certain sales. In some jurisdictions, export sales do not require VAT tax collection. The Company currently expects the business tax credits recorded at December 31, 2008, to be fully recoverable.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, " Accounting for Income Taxes ," which requires an asset and liability approach to financial accounting and reporting for income taxes. In accordance with SFAS No. 109, deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense (benefit) is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Valuation allowances are recognized to reduce deferred tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, the Company considers estimates of future taxable income.

In connection with income tax assessments or unrecognized tax benefits, the Company classifies penalties as provision for income taxes and interest as interest expense in its consolidated statements of income (loss).

The Company files income tax returns in the U.S. Federal and several state jurisdictions as well as in many foreign jurisdictions. With certain exceptions, the Company is no longer subject to U.S. Federal, state and local, or foreign income tax examinations for years before 2004. In France, SMF and its subsidiaries form a consolidated income tax group, and SMH and SMI form a separate consolidated income tax group, while LTRI has separately filed its own income tax return. Following a legal reorganization during 2008, LTRI joined the SMF tax group effective January 1, 2009.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Pension and Other Postretirement Benefits Accounting

The Company recognizes the estimated compensation cost of employees' pension and other postretirement benefits over their approximate period of service in accordance with SFAS No. 87, " Employers' Accounting for Pensions " and SFAS No. 106, " Employers' Accounting for Postretirement Benefits Other than Pensions ." The Company's earnings are impacted by amounts of expense recorded related to these benefits, which primarily consist of U.S. and French pension benefits and U.S. other postretirement benefits, or OPEBs. Each year's recorded expenses are estimates based on actuarial calculations of the Company's accumulated and projected benefit obligations, or PBOs, for the Company's various plans.

Suspension of additional benefits for future service is considered a curtailment under SFAS No. 88, " Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans for Termination Benefits ," and if material, necessitates a remeasurement of plan assets and PBO. As part of a remeasurement, the Company adjusts its discount rates and other actuarial assumptions, such as retirement, turnover and mortality table assumptions, as appropriate.

The Company recognized the unfunded status of its postretirement plans, measured as the difference between the PBO and plan assets at fair value, in its consolidated balance sheet as of December 31, 2006 upon its adoption of SFAS No. 158, "Employers Accounting for Defined Benefit Pension and Other Postretirement Plans."

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss), as well as charges and credits directly to stockholders' equity, which are excluded from net income (loss). The Company has presented comprehensive income (loss) in the consolidated statements of changes in stockholders' equity and comprehensive income (loss).

Components of accumulated other comprehensive income (loss) were as follows (dollars in millions):

		December 31,

		2008			2007
Accumulated pension and OPEB liability adjustments, net of income tax of $25.0 million and $12.0 million at December 31, 2008 and 2007, respectively		$	(42.5	)	$	(20.7	)
Accumulated unrealized foreign currency translation adjustments			11.9			40.6

	Accumulated other comprehensive income (loss)	$	(30.6	)	$	19.9

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in the components of accumulated other comprehensive income (loss) were as follows (dollars in millions):

		For the Years Ended December 31,

		2008								2007								2006
		Pre-tax			Tax		Net of Tax			Pre-tax			Tax			Net of Tax		Pre-tax			Tax			Net of Tax
Pension and OPEB liability adjustments		$	(34.9	)	$	13.1	$	13.2		$	(21.8	)	$	(5.0	)	$	8.2	$	4.2		$	(1.6	)	$	2.6
Effect of adoption of SFAS No. 158			—			—		—			—			—			—		(13.7	)		5.0			(8.7	)
Unrealized foreign currency translation adjustments			(29.3	)		0.6		(28.7	)		32.8			—			32.8		23.4			—			23.4

	Total	$	(64.2	)	$	13.7	$	(50.5	)	$	46.0		$	(5.0	)	$	41.0	$	13.9		$	3.4		$	17.3

Treasury Stock

Common Stock purchased for treasury is recorded at cost. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on the weighted-average cost basis.

Employee Stock Options

The Company calculates stock option expense based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123 (revised 2004), "Share Based Payment," or SFAS No. 123R. Stock options have not been granted since 2005 and are not expected to be utilized by the Company in the future.

A summary of the status of stock options outstanding as of December 31, 2008 and changes during the 3 years then ended is presented in Note 14, Stockholders' Equity.

Restricted Stock

The Company's restricted stock grants generally vest upon completion of a specified period of time. The fair value of each award is equal to the share price of the Company's stock on the date of the grant as defined in SFAS No. 123R. This cost is recognized over the vesting period of the respective award. As of December 31, 2008, there was $0.8 million of unrecognized compensation cost related to outstanding restricted stock awards, the balance for which is included as an offset to additional paid-in-capital on the consolidated balance sheet. A summary of outstanding restricted stock awards as of December 31, 2008 and 2007 is included in Note 14, Stockholders' Equity.

Restricted Stock Plan Performance Based Shares

The Company's Long-Term Incentive Plan, or LTIP, for key executives includes an equity-based award component that is provided through its Restricted Stock Plan, or RSP. The objectives under the LTIP are established for multiple years at the beginning of a performance cycle and are intended to focus management on longer-term strategic goals. The Compensation Committee of the Board of Directors designates participants in the LTIP and RSP and determines the equity-based award opportunity in the form of restricted stock for each performance cycle, which is generally measured on the basis of a 2 or 3-year performance period. Performance is measured on a cumulative basis and a portion of each performance cycle's restricted stock award opportunity may be earned annually. The restricted shares are issued and outstanding when the number of shares becomes fixed, after the annual performance is

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

determined, and such awards vest at the end of the performance cycle. The Company recognizes compensation expense with an offsetting credit to additional paid-in-capital over the performance period based on the fair value of the award at the date of grant, with compensation expense being adjusted cumulatively based on the number of shares expected to be earned according to the level of achievement of performance goals.

Fair Value Option

The Company has elected not to measure any of its financial instruments or certain commitments at fair value in accordance with SFAS No. 159, " The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS No. 115."

Recent Accounting Pronouncements

Effective January 1, 2008, the Company adopted the provisions related to financial assets and liabilities of Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 157, " Fair Value Measurement." SFAS No. 157 defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Adoption of SFAS No. 157 related to financial assets and liabilities on January 1, 2008 had no effect on the Company's consolidated financial position. The provisions of SFAS No. 157 related to non-financial assets and liabilities will become effective for fiscal years beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 157 related to non-financial assets and liabilities to have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 141R, which is a revision of SFAS No. 141, " Business Combinations ." SFAS No. 141R applies prospectively to business combinations after the beginning of the first annual reporting period beginning on or after December 15, 2008. The objective of SFAS No. 141R is to improve the reporting requirements of business combinations and their effects. To accomplish this, SFAS No. 141R establishes the principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and noncontrolling interest in the acquiree, (b) recognizes and measures goodwill in the business combination or a gain from a bargain purchase and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The impact of this standard on the Company's consolidated financial statements will depend on the nature, terms and size of acquisitions entered into on or after January 1, 2009.

During December 2007, the FASB issued SFAS No. 160, " Noncontrolling Interests in Consolidated Financial Statements," an amendment of Accounting Research Bulletin No. 51," Consolidated Financial Statements, " effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The objective of SFAS No. 160 is to improve the reporting requirements for noncontrolling or minority interests by requiring: (a) the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent's equity, (b) the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated income statement, (c) changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, (d) when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value and (e) sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The Company does not expect the adoption of SFAS 160 to have a material impact on its consolidated financial position and results of operation.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In March 2008, the FASB issued SFAS No. 161, " Disclosures About Derivative Instruments and Hedging Activities ," an amendment of SFAS No. 133, " Accounting for Derivative Instruments and Hedging Activities ." SFAS No. 161 is effective for fiscal years and interim periods beginning on or after November 15, 2008. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. The Company is evaluating the impact of the adoption of SFAS No. 161.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, " Employers' Disclosures about Postretirement Benefit Plan Assets ," or FSP 132R-1. FSP 132R-1 enhances the required disclosures about plan assets in an employer's defined benefit pension or other postretirement plan, including investment allocations decisions, inputs and valuation techniques used to measure the fair value of plan assets and significant concentrations of risks within plan assets. FSP 132R-1 is effective for financial statements issued for fiscal years ending after December 15, 2009. The Company is evaluating the impact of the adoption of FSP 132R-1.

Note 3. Accounts Receivable

Accounts receivable are summarized as follows (dollars in millions):

		December 31,

		2008			2007
Trade receivables		$	72.3		$	75.3
Business tax credits, including VAT and ICMS			10.7			20.2
Other receivables			4.9			5.7
Less allowance for doubtful accounts and sales discounts			(0.9	)		(0.6	)

	Total	$	87.0		$	100.6

Note 4. Inventories

Inventories are valued at the lower of cost using the First-In, First-Out, or FIFO, and weighted average methods, or market. The Company's inventoriable costs primarily include pulp, chemicals, direct labor, utilities, maintenance, depreciation, finishing supplies and an allocation of mill overhead costs. Machine start-up costs or abnormal machine shut downs are expensed in the period incurred and are not inventoried. The definition of market value, with respect to all inventories, is replacement cost or net realizable value. The Company reviews inventories at least quarterly to determine the necessity of write-offs for excess, obsolete or unsaleable inventory. The Company estimates reserves for inventory obsolescence and shrinkage based on its judgment of future realization. These reviews require the Company to assess customer and market demand. At December 31, 2008 and 2007, the Company had inventory reserves of $5.2 million and $5.9 million, respectively.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following schedule details inventories by major class (dollars in millions):

		December 31,

		2008		2007
Raw materials		$	34.7	$	39.5
Work in process			25.7		25.4
Finished goods			35.3		44.8
Supplies and other			22.7		21.5

	Total	$	118.4	$	131.2

Note 5. Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Interest is capitalized as a component of the cost of construction for large projects. Expenditures for betterments are capitalized whereas normal repairs and maintenance are expensed as incurred. Property, other than land, is depreciated on the straight-line method for financial reporting purposes. When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the balance sheet, and any gain or loss on the transaction is normally included in cost of products sold.

Property, plant and equipment (and related depreciable lives) consisted of the following (dollars in millions):

			December 31,

			2008		2007
Land and improvements			$	18.1	$	20.0
Buildings and improvements (20 to 40 years or remaining life of relevant lease)				128.7		142.9
Machinery and equipment (5 to 20 years)				650.4		672.9
Construction in progress				7.4		32.2

	Gross Property			804.6		868.0
	Less: Accumulated Depreciation			396.8		412.0

		Property, Plant and Equipment, net	$	407.8	$	456.0

Depreciation expense was $41.0 million, $39.9 million and $40.7 million for the years ended December 31, 2008, 2007 and 2006, respectively.

As of December 31, 2008, management determined the recent and projected losses at its Malaucene facility in France and the shut-down of a paper machine at PdM constituted events requiring tests be performed for the recoverability of these long-lived assets. Based on analyses of the net book values and the fair market values, the Company's French segment recorded pre-tax, non-cash impairment charges totaling $13.5 million, of which $5.9 million was for buildings and improvements and $7.6 million was for machinery and equipment. In 2008, the company also recognized $0.5 million in impairment charges for buildings at its Lee Mills in Lee, Massachusetts due to lower estimated fair value as of December 31, 2008. Fair values were estimated using discounted cash flows, market values or salvage value depending on the asset. These impairment charges are presented in restructuring and impairment expense on the consolidated statements of income (loss).

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The U.S. segment recognized $10.7 million of impairment charges during 2007 related to land, buildings and machinery and equipment located at the Lee Mills. This impairment charge was recorded in conjunction with restructuring activities in the United States. See Note 9, Restructuring Activities, for more information.

Note 6. Goodwill and Intangible Assets

The Company evaluates goodwill for impairment as least once per year during the fourth quarter. Tests during the fourth quarters of 2008 and 2007 resulted in no impairment. The changes in the carrying amount of goodwill for each segment for the year ended December 31, 2008, were as follows (dollars in millions):

	France			Brazil		Total

Balance as of January 1, 2008	$	1.7		$	1.1	$	2.8
Goodwill acquired during the year		6.4			—		6.4
Foreign currency translation adjustments		(0.7	)		—		(0.7	)

Balance as of December 31, 2008	$	7.4		$	1.1	$	8.5

The gross carrying amount and accumulated amortization for amortizable intangible assets consisted of the following (dollars in million):

	December 31, 2008

	Gross Carrying Amount		Accumulated Amortization*		Net Carrying Amount
Customer-related intangibles (French Segment)	$	10.0	$	2.9	$	7.1

*: Accumulated amortization also includes adjustments for foreign currency translation.

Amortization expense of intangible assets was $2.5 million for the year ended December 31, 2008. The company had no intangible assets other than goodwill prior to 2008. The Company's customer-related intangibles are amortized to expense using the 150 percent declining balance method over a 6-year life. Estimated amortization expense for the next 5 years is as follows (in millions of dollars): 2009—$2.1 million, 2010—$1.9 million, 2011—$1.6 million, 2012—$1.2 million, and 2013—$0.4 million.

Note 7. Joint Venture with CNTC

The Company's joint venture with CNTC, China Tobacco Mauduit (Jiangmen) Paper Industry Co. LTD, or CTM, completed construction of a paper mill in the second quarter of 2008. The mill has 2 paper machines which produce cigarette paper and porous plug wrap. CTM pays to each the Company and CNTC a 1 percent royalty on gross sales of cigarette and porous plug wrap papers. CTM sells its products to CNTC and its subsidiaries. During mill construction in the three years ended December 31, 2008, the Company provided technical consulting services to CTM for $2.0 million, $2.0 million and $1.4 million for 2008, 2007 and 2006, respectively.

The Company uses the equity method to account for its 50 percent ownership interest in CTM. At both December 31, 2008 and 2007, the Company's equity investment in CTM was $15.4 million. The Company's share of the net loss was included in loss from equity affiliates within the consolidated statements of income (loss). Below is summarized balance sheet information as of December 31, 2008 and 2007, and

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

income statement information of the China joint venture for the years ended December 31, 2008, 2007 and 2006 (dollars in millions):

Balance Sheet Information

	December 31,

	2008		2007
			(unaudited)
Current assets	$	11.3	$	5.6
Noncurrent assets		90.2		65.6
Current debt		13.8		14.2
Other current liabilities		4.4		5.7
Long-term debt		52.0		19.0
Other long term liabilities		0.4		—
Stockholders' equity	$	30.9	$	32.3

Statement of Operations Information

	For the Year Ended December 31,

	2008			2007			2006
				(unaudited)			(unaudited)
Net sales	$	3.3		$	—		$	—
Gross loss		(5.7	)		—			—
Net loss	$	(7.9	)	$	(0.2	)	$	(0.3	)

Schweitzer-Mauduit made capital contributions to CTM of $1.9 million, $12.8 million and $2.9 million in 2008, 2007 and 2006, respectively.

Note 8. Other Assets

Other assets consisted of the following (dollars in millions):

		December 31,

		2008		2007
Capitalized software costs, net of accumulated amortization		$	18.6	$	17.0
Businesses tax credits, including VAT and ICMS			8.2		8.0
Grantor trust assets			3.6		5.4
Assets held for sale			2.9		2.9
Other assets			1.8		5.1

	Total	$	35.1	$	38.4

Grantor trust assets consist primarily of cash surrender values in company-owned life insurance policies held by a trust to be used for the eventual payment of employee deferred compensation.

As a result of the Company's decision to close the Lee Mills, the U.S. segment began to market certain properties not used in production. As a result, the Company reclassified $2.9 million related to those properties to assets held for sale, reported within other assets, from property, plant and equipment on the consolidated balance sheet as of December 31, 2008 and 2007.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9. Restructuring Activities

The Company initiated restructuring activities during 2006 and 2007 in France and the United States and during 2007 and 2008 in Brazil. Restructuring expenses related to all these actions totaled $8.6 million, $24.0 million and $21.1 million for 2008, 2007 and 2006, respectively. Restructuring and impairment expenses are presented on the consolidated statements of income (loss) and include non-restructuring impairments of $13.5 million in 2008. See Note 5, Property, Plant and Equipment for more information.

The following table summarizes the associated cash and non-cash pretax restructuring expense for 2008, 2007 and 2006 (dollars in millions):

			For the Years Ended December 31,

			2008			2007		2006		Total
France
Cash Expense
	Severance and other employee related costs		$	2.0		$	8.3	$	13.9	$	24.2
	Other			—			—		0.9		0.9
Non-cash Expense
	Accelerated depreciation			1.5			2.1		1.0		4.6

Total France Restructuring Expense				3.5			10.4		15.8		29.7

United States
Cash Expense
	Severance and other employee related costs			0.9			1.5		0.5		2.9
	Other			0.5			—		0.1		0.6
Non-cash Expense
	Asset impairment charges			0.8			10.7		0.5		12.0
	Accelerated depreciation			—			1.0		4.2		5.2
	(Gain) Loss on disposal of assets			(0.3	)		—		—		(0.3	)

Total United States Restructuring Expense				1.9			13.2		5.3		20.4

Brazil
Cash Expense
	Severance and other employee related costs			1.3			0.4		—		1.7
Non-cash Expense
	Asset impairment charges			1.9			—		—		1.9

Total Brazil Restructuring Expense				3.2			0.4		—		3.6

Summary
Total Cash Expense				4.7			10.2		15.4		30.3
Total Non-cash Expense.				3.9			13.8		5.7		23.4

		Total Restructuring Expense	$	8.6		$	24.0	$	21.1	$	53.7

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restructuring liabilities were classified within accrued expenses in each of the December 31, 2008 and December 31, 2007 consolidated balance sheets. Changes in the restructuring liabilities during 2008 and 2007 are summarized as follows (dollars in millions):

	2008			2007

Balance at beginning of year	$	16.4		$	13.9
Accruals for announced programs		4.7			10.2
Cash payments		(16.0	)		(9.5	)
Exchange rate impacts		0.3			1.8

Balance at end of year	$	5.4		$	16.4

On July 1, 2008, the Company announced the exit of the coated papers business in the Brazilian market and a resulting decrease of approximately 100 employees, or 16 percent, of the current workforce in Brazil, both effective July 2008. These actions resulted in $1.3 million of severance and other employee related costs during the third quarter of 2008 and $1.9 million of asset impairment charges during the second quarter of 2008.

In October 2007, the Company initiated a 3-part restructuring plan to reduce production capacity for tobacco-related papers in both France and the United States as well as to reduce employment levels in Brazil. The 3-part plan included the expected idling of a base tipping paper machine at Papeteries de Malaucène S.A.S., or PdMal, in Malaucène, France and the shutdown of the Company's entire operation in Lee, Massachusetts which began in May 2008 and has been completed. The PdMal base tipping paper machine was originally projected to be shutdown in 2008, but this has been postponed pending ongoing customer qualifications. The Company is in the process of transferring production from the Lee Mills to other facilities, primarily in Brazil, and has discontinued the sale of the majority of commercial and industrial papers formerly produced at the Lee Mills.

As a result of these restructuring actions, including the latest action in Brazil announced July 1, 2008, employment at the affected locations decreased by approximately 800 employees, over 20 percent from 2006 levels. The announced restructuring activities were substantially completed during 2008, except for the postponed shutdown of the PdMal base tipping paper machine which has been delayed pending ongoing customer negotiations.

Note 10. Debt

Total debt is summarized in the following table (dollars in millions):

			December 31,

			2008		2007
Credit Agreement
	U. S. Revolver		$	92.0	$	69.0
	Euro Revolver			44.6		—
French Employee Profit Sharing				11.4		17.0
Bank Overdrafts				23.6		6.7
Other				8.2		8.2

		Total Debt		179.8		100.9
		Less: Current debt		34.9		13.6

		Long-Term Debt	$	144.9	$	87.3

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2008, the Company had availability under its Credit Agreement, of $69.7 million plus availability under bank overdraft facilities of $12.1 million for a total availability of $81.8 million; however, based on its debt covenant restrictions as of December 31, 2008, the Company was limited to borrowing only $76.5 million from its Credit Agreement, bank overdraft facilities or other sources without violating the most restrictive of those covenants.

Credit Agreement

The Company's Credit Agreement, which expires July 31, 2012, provides for a $95 million U.S. dollar revolving credit facility, or U.S. Revolver, and an 80 million euro revolving credit facility, or Euro Revolver. Borrowings under the U.S. Revolver increased to $92.0 million as of December 31, 2008 from $69.0 million as of December 31, 2007. Contractual availability under the U.S. Revolver decreased to $3.0 million as of December 31, 2008 from $26.0 million as of December 31, 2007. Borrowings under the Euro Revolver increased to 32.1 million euros, or $44.6 million, as of December 31, 2008 from zero as of December 31, 2007. Contractual availability under the Euro Revolver decreased to 47.9 million euros, or $66.6 million, as of December 31, 2008 from 80.0 million euros, or $111.3 million, as of December 31, 2007.

Under the Credit Agreement, interest rates are at market rates, based on the London Interbank Offered Rate, or LIBOR, for U.S. dollar borrowings and the Euro Interbank Offered Rate, or EURIBOR, for euro borrowings, plus an applicable margin that varies from 0.35 percent to 0.75 percent per annum depending on the Net Debt to Adjusted EBITDA Ratio, as defined in the Credit Agreement. As of December 31, 2008 and 2007, the applicable interest rate was 3.2% and 5.5%, respectively on its U.S. dollar borrowings under the Credit Agreement. As of December 31, 2008, the interest rate on Euro borrowings under the Credit Agreement was 5.4%. The Company incurs commitment fees at an annual rate of either 0.30 or 0.35 percent of the applicable margin on the committed amounts not drawn, depending on the Net Debt to Adjusted EBITDA Ratio as defined in the Credit Agreement. The Company also incurs utilization fees of 0.25 percent per annum when outstanding borrowings exceed 50 percent of the total credit facility.

The Credit Agreement contains representations and warranties which are customary for facilities of this type and covenants and provisions that, among other things, require the Company to maintain (a) a net debt to equity ratio not to exceed 1.0 and (b) a net debt to adjusted EBITDA ratio not to exceed 3.0. The Company was in compliance with all the financial covenants of the Credit Agreement as of December 31, 2008.

French Employee Profit Sharing

At both December 31, 2008 and 2007, long-term debt other than the U.S. Revolver and the Euro Revolver primarily consisted of obligations of the French operations related to government-mandated profit sharing. Each year, representatives of the workers at each of the French businesses can make an election for the profit sharing amounts from the most recent year ended to invest the funds in a financial institution or to invest the funds with their respective employer. To the extent that funds are invested with the Company, these amounts bear interest at the 5-year treasury note rate in France, 4.57 percent and 4.52 percent at December 31, 2008 and 2007, respectively, and are generally payable in the fifth year subsequent to the year the profit sharing is accrued.

Bank Overdraft and Other

The Company also has bank overdraft facilities totaling $35.7 million, of which $23.6 million was outstanding at December 31, 2008 and reported as current debt on the consolidated balance sheet. Interest

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

is incurred on outstanding amounts at market rates and was 2.9% at December 31, 2008. No commitment fees are paid on the unused portion of these facilities.

Other debt consists of non-interest bearing French segment debt with deferred capital repayment from governmental and commercial institutions primarily related to environmental capital improvements and debt in Brazil from governmental financing programs and bank institution's advances on secured receivables. The Brazilian segment debt has market interest rates in Brazil ranging from 5 to 11 percent.

Interest Rate Swap Agreements

The Company maintains interest rate swap agreements on a portion of its long-term debt. As of December 31, 2008, the LIBOR rate component on $30.0 million and $8.0 million of the Company's variable-rate long-term debt was effectively fixed at 5.28 percent and 5.44 percent, respectively. The $30.0 million interest swap agreement expires on May 30, 2009, and the $8.0 million interest swap agreement expires on March 16, 2009. In January 2009, the Company entered into a 1-year agreement, effective March 16, 2009, to replace its $8 million swap agreement with a $17 million swap agreement with a fixed interest rate of 1.38 percent. Effective May 29, 2009, the Company's $30 million swap agreement will be fixed at 1.60 percent until May 30, 2010. The impact of the swap agreements on the consolidated financial statements was not material for the year ended December 31, 2008.

Principal Repayments

Under the Credit Agreement, the Company selects an "interest period" for each of its borrowings under the U.S. Revolver and Euro Revolver. The Company can repay such borrowings and borrow again at a subsequent date if it chooses to do so, providing it flexibility and efficient use of any excess cash. The Company expects to continue to file notices of continuation related to its U.S. and Euro Revolver borrowings outstanding at December 31, 2008 such that those amounts are not expected to be repaid prior to the July 2012 expiration of the Credit Agreement. Following are the expected maturities for the Company's debt obligations as of December 31, 2008 (dollars in millions):


2009	$	34.9
2010		9.3
2011		2.2
2012		130.6
2013		2.6
Thereafter		0.2

	$	179.8

Fair Value of Debt

At December 31, 2008 and 2007, the estimated fair value of the Company's current and long-term debt approximated the carrying amount. The carrying value of substantially all of the Company's outstanding debt approximated fair value since the interest rates were variable and based on current market indices.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11. Accrued Expenses

Accrued expenses consisted of the following (dollars in millions):

		December 31,

		2008		2007
Accrued salaries, wages and employee benefits		$	46.7	$	42.8
Accrued restructuring expenses			5.4		16.4
Accrued income taxes			5.5		8.4
Other accrued expenses			34.1		43.7

	Total	$	91.7	$	111.3

Note 12. Income Taxes

An analysis of the provision (benefit) for income taxes follows (dollars in millions):

		For the Years Ended December 31,

		2008			2007			2006
Current income taxes:
	U.S. Federal	$	0.6		$	1.1		$	0.9
	U.S. State		0.1			0.1			0.1
	Foreign		19.7			12.9			5.4

			20.4			14.1			6.4

Deferred income taxes:
	U.S. Federal		4.8			(3.2	)		(1.5	)
	U.S. State		0.6			(0.4	)		(0.2	)
	Foreign		(27.7	)		(10.0	)		(8.9	)

			(22.3	)		(13.6	)		(10.6	)

	Total	$	(1.9	)	$	0.5		$	(4.2	)

Income (loss) before income taxes, minority interest and loss from equity affiliates included income (loss) of $(25.9) million in 2008, $6.7 million in 2007 and $0.8 million in 2006 from operations outside the United States.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of income taxes computed at the U.S. federal statutory income tax rate to the provision for income taxes is as follows (dollars in millions):

		For the Years Ended December 31,

		2008						2007						2006
		Amount			Percent			Amount			Percent			Amount			Percent
Tax at U.S. statutory rate		.$	1.1			35.0	%	$	4.2			35.0	%	$	(0.2	)		35.0	%
Tax benefits of foreign legal structure.			(4.2	)		(138.3	)		(3.2	)		(26.6	)		(3.1	)		442.9
Net deferred tax expense from legal entity reorganization			1.2			40.0			—			—			—			—
Adjustments of U.S. foreign tax credits and corresponding valuation allowances			—			—			—			—			0.2			(35.0	)
Other foreign taxes, net			0.8			26.7			(0.1	)		(0.8	)		(0.6	)		85.7
Other, net			(0.8	)		(26.7	)		(0.4	)		(3.4	)		(0.5	)		71.4

	Provision (benefit) for income taxes.	$	(1.9	)		63.3	%	$	0.5			4.2	%	$	(4.2	)		600.0	%

Tax benefits of foreign legal structure result from net foreign tax deductions from the restructuring of the Company's foreign operations in 2003. The proportionate effect of this item on the overall effective income tax rate decreases as earnings increase.

The Company considers the undistributed earnings of certain foreign subsidiaries to be indefinitely reinvested or plans to repatriate such earnings only when tax-effective to do so. Accordingly, no provision for U.S. federal and state income taxes has been made thereon. Upon distribution of those earnings in the form of dividends, loans to the U.S. parent, or otherwise, the Company could be liable for both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to foreign tax authorities. Determination of the amount of unrecognized deferred U.S. tax liability is not practicable because of the complexities associated with its hypothetical calculation.

The Company reorganized its legal entity structure in 2008. In conjunction with this reorganization, the Company decided that the undistributed earnings of LTRI will be permanently reinvested resulting in a net deferred income tax charge of $1.2 million.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred income tax assets (liabilities) were comprised of the following (dollars in millions):

			December 31,

			2008			2007
Current deferred income tax assets attributable to:
	Inventories		$	(0.1	)	$	0.8
	Postretirement and other employee benefits.			1.7			4.4
	Other accrued liabilities			3.8			1.3
	Valuation allowances			—			(0.1	)
	Other			0.9			(0.3	)

		Net current deferred income tax assets	$	6.3		$	6.1

Noncurrent deferred income tax assets attributable to:
	Operating loss and tax credit carryforwards		$	19.0		$	11.4
	Postretirement and other employee benefits			20.2			9.4
	Accumulated depreciation and amortization			(10.6	)		(3.6	)
	Valuation allowances			(5.8	)		(6.3	)
	Other			3.6			4.3

		Net noncurrent deferred income tax assets	$	26.4		$	15.2

Noncurrent deferred income tax liabilities attributable to:
	Accumulated depreciation and amortization		$	(61.9	)	$	(73.5	)
	Operating loss and tax credit carryforwards			55.2			45.5
	Postretirement and other employee benefits			6.1			5.4
	Other			(10.4	)		(2.4	)

		Net noncurrent deferred income tax liabilities	$	(11.0	)	$	(25.0	)

The net noncurrent deferred income tax assets relate to the U.S., Spanish, and Brazilian and Philippine tax jurisdictions and the net noncurrent deferred income tax liabilities relate to the French, Indonesian and Canadian tax jurisdictions. Total deferred income tax assets were $117.2 million and $86.4 million at December 31, 2008 and 2007, respectively. Total deferred income tax liabilities were $95.5 million and $90.1 million at December 31, 2008 and 2007, respectively.

Under French tax law, NOLs incurred through 1994 by SMF subsidiaries unrelated to the Company's businesses were retained by SMF as of January 1, 1995 following SMF's distribution of those subsidiaries to Kimberly-Clark Corporation in the 1995 spin-off of Schweitzer-Mauduit. Additional NOLs have been generated due to operating losses incurred in recent periods in Brazil, France and the Philippines as a result of lower operating earnings together with substantial restructuring expenses incurred in Brazil and France. Also, NOLs have been generated since 2003 by the SMH tax group in France and by SM-Spain since its formation in 1997.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following summarizes the changes in the Company's NOLs and the related noncurrent deferred income tax asset and valuation allowance for the years ended December 31, 2008, 2007 and 2006 (dollars in millions):

	NOLs			Total Asset			Valuation Allowance			Net Asset

Amount at December 31, 2005	$	54.2		$	18.4		$	(2.5	)	$	15.9
2006 generated, net of utilization		39.8			13.5			(0.2	)		13.3
Currency translation effect		7.7			2.6			(0.3	)		2.3

Amount at December 31, 2006		101.7			34.5			(3.0	)		31.5
2007 generated, net of utilization		31.6			10.8			(0.5	)		10.3
Currency translation effect		14.6			5.1			(0.4	)		4.7

Amount at December 31, 2007		147.9			50.4			(3.9	)		46.5
2008 generated, net of utilization		74.0			25.4			(0.4	)		25.0
Currency translation effect		(18.4	)		(6.5	)		0.3			(6.2	)

Amount at December 31, 2008	$	203.5		$	69.3		$	(4.0	)	$	65.3

Under current tax laws, remaining NOLs in France and Brazil carry forward indefinitely, NOLs in the Philippines expire 3 years subsequent to the year generated and NOLs in Spain expire the later of 15 years subsequent to the year generated or 15 years subsequent to the first year of taxable income in Spain (which was 2000). Of the $203.5 million of NOLs available at December 31, 2008, $0.6 million and $1.5 million will expire in 2009 and 2010, respectively, if not utilized against taxable income in the Philippines, and $11.3 million will expire from 2015 to 2023 if not utilized against taxable income in Spain. Valuation allowances related to NOLs in Spain totaled $4.0 million as of December 31, 2008, fully reserving the related deferred tax asset in Spain. The remaining $190.1 million of NOLs are in France and Brazil and have no expiration date. Although realization is not assured, the Company believes it is more likely than not that the net deferred tax asset of $65.3 million, all of which relates to the NOLs in France, Brazil and the Philippines, will be realized. The Company's assumptions, judgments and estimates relative to the valuation of these net deferred tax assets take into account available positive and negative evidence of realizability, including recent financial performance, the ability to realize benefits of restructuring and other recent actions, projections of the amount and category of future taxable income and tax planning strategies. Actual future operating results and the underlying amount and category of income in future periods could differ from the Company's current assumptions, judgments and estimates. However, continued or future operating losses, particularly in Brazil and the Company's paper operations in France, could result in recording a valuation allowance in a future period. If at a future date the Company determines that the weight of the positive evidence is not sufficient to overcome the negative evidence, a valuation allowance against the Company's deferred tax assets to reduce these net deferred tax assets to an amount we believe will more likely than not be realizable would be recorded in the period such determination is made.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the deferred income tax assets related to operating loss and tax credit carryforwards and associated valuation allowances as of December 31, 2008 (dollars in millions):

	Total Asset		Valuation Allowance			Net Asset

Net operating loss carryforwards	$	69.3	$	(4.0	)	$	65.3
Foreign tax credits, federal research and U.S. states tax credit carryforwards		2.2		(1.8	)		0.4
Federal AMT credit carryforwards		2.7		—			2.7

	$	74.2	$	(5.8	)	$	68.4

In addition to the NOLs above, the Company has federal research credits, certain state credits, primarily for investments in fixed assets in those states, and AMT credits at December 31, 2008. The Company expects to fully utilize all foreign tax credits generated in the current year and unexpired foreign tax credit carryfowards from prior years. Foreign tax credits carryforward 10 years from the date generated. Estimated federal research credits and various U.S. state credits totaled $2.2 million as of December 31, 2008, of which the Company has estimated that $0.4 million of these credits will be realized prior to their expiration and thus have a valuation allowance of $1.8 million at December 31, 2008. The Company's U.S. federal AMT credits carry forward indefinitely and no valuation allowance has been recorded on the related $2.7 million deferred tax asset at December 31, 2008.

The Company adopted the provisions of FIN 48 effective January 1, 2007. Adoption of FIN 48 had no cumulative effect on the Company's consolidated financial position at January 1, 2007. At January 1, 2007, December 31, 2007 and December 31, 2008, the Company had no significant unrecognized tax benefits related to income taxes.

Note 13. Postretirement and Other Benefits

North American Pension and Postretirement Healthcare and Life Insurance Benefits

The U.S. segment has defined benefit retirement plans that cover substantially all full-time employees. Retirement benefits are based on either a cash balance benefit formula or a final average pay formula for certain employees who were "grandfathered" and retained retirement benefits under the terms of the plan prior to amendment of the plan to include a cash balance benefit formula. For employees under the cash balance formula, the Company annually credits to the employee's account balance a retirement contribution credit, which is a percentage of the employee's earnings based on age and years of vesting service in the plan, and an interest credit, based on the average yield for 30-year treasury bills. For employees under the final average pay formula, retirement benefits are based on years of service and generally on the average compensation earned in the highest 5 of the last 15 years of service.

In May 2006, all affected hourly employees at the Lee Mills were notified that the further accrual of benefits under their defined benefit pension plan would be frozen as of July 17, 2006. The Lee Mills action necessitated a remeasurement of the Company's accumulated benefit obligation, or ABO, under the U.S. pension plan and resulted in a curtailment gain of $0.1 million during the second quarter of 2006. During July 2007, benefits related to the defined benefit pension plan for hourly employees at the Spotswood mill were frozen effective as of December 31, 2007. During December 2008, benefits related to the defined benefit and pension plan for hourly employees at the Ancram mill were frozen effective December 31, 2008.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The U.S. segment also has unfunded healthcare and life insurance benefit plans, or OPEB plans, which cover substantially all of its retirees. Certain employees, who were "grandfathered" and retained benefits under the terms of the Company's plans prior to certain past amendments, receive retiree healthcare coverage at rates subsidized by the Company. For other eligible employees, retiree healthcare coverage access is offered at full cost to the retiree. The postretirement healthcare plans include a limit on the U.S. segment's share of costs for current and future retirees. The U.S. segment's retiree life insurance plans are noncontributory. The Company's Canadian postretirement benefits liability is immaterial and therefore is not included in these disclosures.

French Pension Benefits

In France, employees are covered under a government-administered program. Also, the Company's French operations sponsor retirement indemnity plans, which pay a lump sum retirement benefit to all of its permanent employees who retire. In addition, the Company's French operations sponsor a supplemental executive pension plan, which is designed to provide a retirement benefit up to 65 percent of final earnings, depending upon years of service, and the formula for which the employee is eligible. Plan assets are principally invested in the general asset portfolio of a French insurance company.

Restructuring activities in the French segment necessitated a remeasurement of the ABO under the French pension plan and resulted in a curtailment gain of $0.4 million in 2007, which was recorded as a reduction in 2007 restructuring expense.

U.S. and French Pension and U.S. Other Postretirement Benefit Disclosures

The U.S. pension and OPEB plans and French pension plans accounted for approximately 97 percent of the Company's total plan assets and approximately 99 percent of the Company's total ABO at December 31, 2008 for the Company and all of its consolidated subsidiaries.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company uses a measurement date of December 31 for its pension plans in the United States and France and other postretirement healthcare and life insurance benefit plans in the United States. The funded status of these plans as of December 31, 2008 and 2007 was as follows (dollars in millions):

			Pension Benefits												OPEB Benefits

			United States						France						United States
			2008			2007			2008			2007			2008			2007
Change in Projected Benefit Obligation, or PBO:
	PBO at beginning of year		$	107.0		$	111.9		$	46.2		$	43.6		$	12.7		$	13.2
		Service cost		0.3			1.0			1.7			1.7			0.2			0.2
		Interest cost		6.7			6.6			2.2			1.8			0.8			0.8
		Actuarial (gain) loss		1.1			(4.0	)		1.3			0.2			(0.5	)		0.4
		Participant contributions		—			—			—			—			0.9			0.7
		Curtailment benefit		—			(3.2	)		(0.3	)		(1.4	)		—			—
		Gross benefits paid		(6.4	)		(5.3	)		(9.4	)		(4.4	)		(2.5	)		(2.6	)
		Currency translation effect		—			—			(1.8	)		4.7			—			—

		PBO at end of year	$	108.7		$	107.0		$	39.9		$	46.2		$	11.6		$	12.7

Change in Plan Assets:
	Fair value of plan assets at beginning of year		$	94.8		$	84.2		$	31.3		$	30.3		$	—		$	—
		Actual return on plan assets		(27.4	)		8.9			(0.5	)		2.6			—			—
		Employer contributions		4.9			7.0			(0.3	)		(0.4	)		1.6			1.9
		Participant contributions		—			—			—			—			0.9			0.7
		Gross benefits paid		(6.4	)		(5.3	)		(9.4	)		(4.4	)		(2.5	)		(2.6	)
		Currency translation effect		—			—			(0.7	)		3.2			—			—

	Fair value of plan assets at end of year		$	65.9		$	94.8		$	20.4		$	31.3		$	—		$	—

Funded status at end of year			$	(42.8	)	$	(12.2	)	$	(19.5	)	$	(14.9	)	$	(11.6	)	$	(12.7	)

The PBO and ABO exceeded the fair value of pension plan assets for the Company's U.S. and French defined benefit pension plans as of December 31, 2008 and 2007, as follows (dollars in millions):

	United States				France

	2008		2007		2008		2007
PBO	$	108.7	$	107.0	$	39.9	$	46.2
ABO		108.7		106.0		34.0		37.3
Fair value of plan assets		65.9		94.8		20.4		31.3

As of December 31, 2008, the pre-tax amounts in accumulated other comprehensive loss that have not been recognized as components of net periodic benefit cost for the U.S. and French pension plans and other postretirement benefit plans in the United States are as follows (dollars in millions):

	Pension Benefits				OPEB Benefits

	United States		France		United States
Accumulated loss	$	57.7	$	15.0	$	2.3
Prior service credit		—		0.5		(0.8	)

Accumulated other comprehensive loss	$	57.7	$	15.5	$	1.5

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The amounts in accumulated other comprehensive loss at December 31, 2008, which are expected to be recognized as components of U.S. and French net periodic benefit cost in 2009 are as follows (dollars in millions):

	Pension Benefits				OPEB Benefits

	United States		France		United States
Amortization of accumulated loss	$	3.6	$	0.7	$	(0.2	)
Amortization of prior service credit		—		0.1		0.1

Total	$	3.6	$	0.8	$	(0.1	)

Assumptions are used to determine the Company's benefit obligations. The rate used to discount the Company's PBO back to a present value is called the discount rate. The discount rate fluctuates from year to year based on current market interest rates for high-quality fixed-income investments. The Company also evaluates the expected average duration of its pension obligations in determining its discount rate. A change in the discount rate assumption of 25 basis points would change the Company's estimated 2009 U.S. pension expense by approximately $0.2 million and have a nominal effect on the Company's estimated 2009 French pension expense. An assumed long-term rate of compensation increase is also used to determine the PBO. The weighted average assumptions used to determine benefit obligations as of December 31, 2008 and 2007 were as follows:

	Pension Benefits												OPEB Benefits

	United States						France						United States
	2008			2007			2008			2007			2008			2007
Discount rate		6.30	%		6.40	%		5.75	%		5.20	%		6.30	%		6.40	%
Rate of compensation increase		N/A			3.50	%		2.25	%		2.25	%		—			—

To measure the U.S. postretirement healthcare benefit obligation, the following assumptions were used at December 31, 2008 and 2007:



Health care cost trend assumed for next year	8.00	%	8.25	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2014		2013

A 100 basis point increase or decrease in the healthcare cost trend rate would have a nominal effect on the total of the service and interest cost components of the postretirement benefit obligation, as well as the total postretirement benefit obligation, at December 31, 2008.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of net pension and postretirement healthcare and life insurance benefit costs for U.S. employees and net pension benefit costs for French employees for the years ended December 31, 2008, 2007 and 2006 were as follows (dollars in millions):

		Pension Benefits																		OPEB Benefits

		United States									France									United States
		2008			2007			2006			2008			2007			2006			2008		2007		2006
Service cost		$	0.3		$	1.0		$	1.5		$	1.7		$	1.7		$	1.9		$	0.2	$	0.2	$	0.3
Interest cost			6.7			6.6			6.6			2.2			1.8			1.7			0.8		0.8		0.7
Expected return on plan assets			(8.1	)		(7.6	)		(7.0	)		(1.3	)		(1.4	)		(1.3	)		—		—		—
Amortizations and other			1.3			1.9			2.0			0.7			0.9			0.7			—		—		—
Curtailment credit			—			(0.1	)		(0.1	)		(0.3	)		(0.4	)		—			—		—		—

	Net periodic benefit cost	$	0.2		$	1.8		$	3.0		$	3.0		$	2.6		$	3.0		$	1.0	$	1.0	$	1.0

Assumptions are used to determine net periodic benefit costs. In addition to the discount rate and rate of compensation increase, which are used to determine benefit obligations, an expected long-term rate of return on plan assets is also used to determine net periodic pension benefit costs. The expected long-term rate of return on plan assets is used to reduce the expected gross periodic cost of the Company's benefits by that amount expected to be earned on assets of the plan. The expected long-term target rate of return on plan assets is based upon the Company's projected investment mix of plan assets, the assumption that future returns will be close to the historical long-term rate of return experienced for equity and fixed income securities and a 10 to 15 year investment horizon, so that fluctuations in the interim should be viewed with appropriate perspective. A change in the long-term rate of return assumption of 25 basis points would change the Company's estimated 2009 U.S. pension expense by approximately $0.2 million and have a nominal effect on French pension expense. The weighted average assumptions used to determine net periodic benefit costs for the years ended December 31, 2008, 2007 and 2006 were as follows:

	Pension Benefits																		OPEB Benefits

	United States									France									United States
	2008			2007			2006			2008			2007			2006			2008			2007			2006
Discount rate		6.40	%		6.40	%(1)		6.50	%(2)		5.75	%		5.20	%		4.30	%		6.40	%		6.0	%		5.75	%
Expected long-term rate of return on plan assets		8.00	%		8.75	%		9.00	%		4.75	%		4.75	%		4.75	%		—			—			—
Rate of compensation increase		3.50	%		3.50	%		3.50	%		2.25	%		2.25	%		3.00	%		—			—			—

(1): For the period of August 1, 2007 to December 31, 2007, the discount rate was increased to 6.40 percent from 6.00 percent.
(2): For the period of June 1, 2006 to December 31, 2006, the discount rate was increased to 6.50 percent from 5.75 percent.

The Company's investment strategy with respect to its U.S. pension plan assets is to maximize the return on investment of plan assets at an acceptable level of risk and to assure the plans' fiscal health. The Company's investment strategy with respect to its French pension plan assets is to invest plan assets at a low level of risk. The primary goal of the Company's pension plans is to maintain the highest probability of assuring future benefit payments to participants while providing growth of capital in real terms. To achieve this goal, the investment philosophy is to protect plan assets from large investment losses, particularly over

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

time, while growing the assets as fast as prudently possible. While there cannot be complete assurance that the objectives will be realized, the Company believes that the likelihood of realizing the objectives are reasonable based upon this investment philosophy. The Company has an investment committee that meets formally on a periodic basis to review the portfolio returns and to determine asset mix targets. The U.S. and French pension plan's asset target allocation by asset category for 2009 and actual allocation by asset category at December 31, 2008 and 2007 were as follows:

		United States									France

		2009 Target			December 31, 2008			December 31, 2007			2009 Target			December 31, 2008			December 31, 2007
Asset Category
Cash and cash equivalents			—	%		2	%		2	%		5	%		16	%		25	%
Equity securities*			60			58			60			25			26			25
Fixed income securities			15			14			18			65			55			50
Alternative investments**			25			26			20			5			3			—

	Total		100	%		100	%		100	%		100	%		100	%		100	%

*: Target allocation for equity securities under the U.S. pension plan only for 2009 includes 15 percent in international equity securities and 10 percent in domestic small company equity securities with the balance of the allocation in domestic large company equity securities. None of the Company's pension plan assets are targeted for investment in SWM stock, except that it is possible that 1 or more mutual funds held by the plan could hold shares of SWM.
**: Investments in this category under the U.S. pension plan only may include hedge funds, and may include real estate under the French pension plan.

The Company expects the following estimated undiscounted future pension benefit payments for the United States and France and future postretirement healthcare and life insurance benefit payments for the United States, which are to be made from pension plan and employer assets, net of amounts that will be funded from retiree contributions, and which reflect expected future service, as appropriate (dollars in millions):

	United States

	Pension Benefits		Healthcare and Life Insurance Benefits		France Pension Benefits
2009	$	9.6	$	1.0	$	2.0
2010		6.6		1.0		3.1
2011		6.9		1.0		3.2
2012		7.2		0.9		4.1
2013		7.6		0.9		0.9
2014-2018		41.7		4.8		24.0

The Company currently expects to contribute approximately $12 to $15 million during 2009 to its U.S. and French pension plans in order to help improve the funded status of these plans. The Company expects to pay $1 to $2 million during 2009 to cover its net U.S. postretirement healthcare and life insurance benefit payments.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Foreign Pension Benefits

In Brazil and Indonesia, employees are covered under government-administered programs. In the Philippines, the employee pension benefits are not significant and therefore are not included in the above disclosures.

Other Benefits

We sponsor a qualified defined contribution plan covering substantially all U.S. employees. Under the plan, the Company matches a portion of employee contributions. The Company's cost under the plan was $1.9 million, $1.6 million, and $1.5 million for the years ended December 31, 2008, 2007, and 2006, respectively.

The Company provides U.S. executives, certain other key personnel and its directors the opportunity to participate in deferred compensation plans. Participating employees can elect to defer a portion of their salaries and certain other compensation. Participating directors can elect to defer their meeting fees, as a cash deferral, as well as their quarterly retainer fees, as deferred stock unit credits. The Company's liability balance under these plans totaled $3.7 million and $5.6 million at December 31, 2008 and 2007, respectively, which were included on the consolidated balance sheet in other liabilities. In connection with these plans, as well as the Company's supplemental retirement and severance plans, the Company has a grantor trust into which it has contributed funds toward its future obligations under the various plans (See Note 8, Other Assets). The balance of grantor trust assets totaled $3.6 million and $5.4 million at December 31, 2008 and 2007, respectively, which were included in other assets on the consolidated balance sheet.

In accordance with French law, certain salaried employees in France may accumulate unused regular vacation and supplemental hours of paid leave that can be credited to an individual's Compte Epargne Temps, or CET. The CET account may grow over an individual's career and the hours accumulated may be withdrawn upon retirement or under other special circumstances at the individual's then current rate of pay. The balance of the Company's liability for this program reflected in the accompanying consolidated balance sheet in other liabilities was $7.3 million and $6.7 million at December 31, 2008 and 2007, respectively.

Note 14. Stockholders' Equity

Equity Participation Plan

The following table presents stock option activity for the years 2008, 2007 and 2006:

		2008					2007					2006

		Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price
Outstanding at beginning of year		$	821,085		$	26.68		1,027,392		$	25.59		1,162,592		$	24.48
	Forfeited		(3,500	)		34.00		—			—		—			—
	Exercised		(13,950	)		15.69		(206,307	)		21.24		(135,200	)		16.01

Outstanding at end of year			803,635			26.84		821,085			26.68		1,027,392			25.59

Options exercisable at year-end			803,635		$	26.84		813,085		$	26.69		1,013,392		$	25.59

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes information about stock options outstanding at December 31, 2008:

	Options Outstanding

	Options Outstanding						Options Exercisable
			Weighted Average Remaining Contractual Life				Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$13.00 to $19.35		93,714		1.7 years	$	18.62		93,714	$	18.62
$23.05 to $28.02		354,621		3.7		23.97		354,621		23.97
$30.17 to $34.55		355,300		5.5		31.87		355,300		31.87

$13.00 to $34.55		803,635		4.3 years	$	26.84		803,635	$	26.84

Restricted Stock Plan

Effective December 1999, the Company established a Restricted Stock Plan, or RSP, which is intended to promote its long-term financial success by attracting and retaining outstanding executive personnel and to motivate such personnel by means of restricted stock grants. The Compensation Committee of the Company's Board of Directors selects participants and establishes the terms of any grant of restricted stock. The Company's RSP provides that issuance of restricted stock immediately transfers ownership rights in shares of its Common Stock to the recipient of the grant, including the right to vote the shares and to receive dividends thereon, at a share price established by the Compensation Committee in its discretion. The recipient's continued ownership of and right to freely transfer the restricted stock is subject to such conditions on transferability and to such risks of forfeiture as are established by the Compensation Committee at the time of the grant, which may include continued employment with the Company for a defined period, achievement of specified management performance objectives or other conditions established by the Compensation Committee. The number of shares, which may be issued under this RSP, is limited to the lesser of 1,000,000 shares or the number of treasury shares held by the Company as of the date of any grant. No single participant may be awarded, in the aggregate, more than 50 percent of the shares authorized to be issued under the RSP. As of December 31, 2008, 371,981 restricted shares had been issued under the RSP of which 260,218 shares of issued restricted stock were not yet vested. The following table presents restricted stock activity for the years 2008 and 2007:

		2008					2007

		# of Shares			Weighted-Average Fair Value at Date of Grant		# of Shares			Weighted-Average Fair Value at Date of Grant
Nonvested restricted shares outstanding at January 1			77,572		$	25.88		80,303		$	25.62
	Granted		203,965			24.06		33,000			26.56
	Forfeited		(14,319	)		23.84		(4,968	)		26.16
	Vested		(7,000	)		27.83		(30,763	)		22.84

Nonvested restricted shares outstanding at December 31			260,218		$	24.44		77,572		$	25.88

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Plan Performance Based Shares

The Company recognized $0.1 million and $4.1 million of compensation expense during 2008 and 2007, respectively, for 171,830 shares, net of forfeitures, of restricted stock awards that were earned under the 2007-2008 award opportunity under the Restricted Stock Plan, with an offsetting credit to additional paid-in-capital.

Basic and Diluted Shares Reconciliation

A reconciliation of the average number of common shares outstanding used in the calculations of basic and diluted net income (loss) per share follows (in thousands). There was no dilutive effect for potential common shares outstanding in 2006 because the Company had a net loss.

	For the Years Ended December 31,

	2008		2007		2006
Average number of common shares outstanding		15,339.7		15,529.4		15,393.5
Dilutive effect of:
—stock options		8.8		45.5		—
—restricted stock		171.7		146.0		—
—directors' deferred stock compensation		23.9		20.7		—

Average number of common and potential common shares outstanding		15,544.1		15,741.6		15,393.5

In 2008 and 2007, certain stock options outstanding during the periods presented were not included in the calculations of diluted net income per share because the exercise prices of the options were greater than the average market prices of the Company's common shares during the respective periods, as summarized below (shares in thousands).

	For the Years Ended December 31,

	2008		2007
Average number of share equivalents not included		712.2		277.4
Weighted-average option price per share	$	27.08	$	31.79
Expiration date of options		2009- 2015		2008- 2015
Options outstanding at year-end not included		787.1		368.8

Note 15. Commitments and Contingencies

Leases

Future minimum obligations under non-cancelable operating leases having an initial or remaining term in excess of 1 year as of December 31, 2008 are less than $1.2 million annually over each of the next 5 years and none thereafter. Rental expense under operating leases was $6.5 million for 2008, $5.7 million for 2007 and $5.5 million for 2006.

Other Commitments

The French segment has a minimum purchase agreement for wood pulp of $17.3 million during each of 2009 and 2010. The U.S. segment has an agreement to purchase $3.3 million in tobacco stems in 2009.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PdM has a minimum annual commitment for calcium carbonate purchases, a raw material used in the manufacturing of some paper products, which totals approximately $2 million per year through 2014. PdM's future purchases at this mill are expected to be at levels that exceed such minimum levels under the contract.

The Company enters into certain other immaterial contracts from time to time for the purchase of certain raw materials. The Company also enters into certain contracts for the purchase of equipment and related costs in connection with its ongoing capital projects, for which there were no material commitments at December 31, 2008.

During 2004, LTRI and PdM both entered into agreements with an energy cogeneration supplier whereby the supplier constructed and operates a cogeneration facility at the mills and supplies steam that is used in the operation of the mills. The construction phase of the LTRI cogeneration facility was completed in late 2005 and the PdM cogeneration facility was placed in service during the fourth quarter of 2007, with the supplier bearing the entire capital cost of both projects. Following start-up of these facilities, LTRI and PdM are committed to purchasing minimum annual amounts of steam generated by each of these facilities for a period of 15 years under the agreements. These minimum annual commitments together total approximately $4 to $5 million. LTRI's and PdM's current and expected requirements for steam are at levels that exceed the minimum levels under the respective contracts.

During 2006, our Brazil segment, or SWM-B, and PdM separately entered into agreements for the transmission and distribution of energy. The SWM-B contract for the electrical energy supply is for the period May 1, 2006 to December 31, 2010 covering 100 percent of the mill's consumption of electrical energy. The value of the electric energy being provided under this contract is approximately $5 million annually. The PdM agreement provides for the supply of 100 percent of its requirements for natural gas and associated distribution to service its paper mill. The value of the natural gas and distribution to be provided under this contract is estimated at approximately $24.9 million and $11.5 million in 2009 and 2010, respectively.

As of December 31, 2008, the Company had issued guarantee instruments in connection with certain agreements and as required by regulatory agencies in connection with certain of its ongoing obligations, as follows: (i) The Company has a letter of credit to a standby trust of which the State of Massachusetts is the beneficiary in the principal amount of $1.5 million related to its ongoing obligation for post-closure monitoring and maintenance of a landfill site. The Company has a liability recorded at December 31, 2008 of $0.5 million based on its current estimate of the remaining costs to perform such post-closure care. (ii) Since 1995, the Company has issued an annual letter of credit to an insurance company, the current principal amount of which was $1.0 million as of December 31, 2008, in connection with its administration of its workers compensation claims in the United States, for which it has recorded a liability of $2.1 million at December 31, 2008. (iii) The Company has certain other letters of credit and surety bonds outstanding at December 31, 2008, which are not material either individually or in the aggregate.

Litigation

The Assessment concerned the accrual and use by SWM-B of ICMS tax credits generated from the production and sale of certain non-tobacco related grades of paper sold domestically that are immune

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

from the tax to offset ICMS taxes otherwise owed on the sale of products that are not immune. One of the 2 assessments related in part to tax periods that predated the Company's acquisition of Pirahy and is covered in part by an indemnification from the sellers of Pirahy, or Assessment 1 (case number 2001.001.115144-5). The second assessment pertains exclusively to periods that SWM-B owned the Pirahy mill, or Assessment 2 (case number 2001.001.064544-6). While SWM-B is primarily responsible for the full payment of the Assessment in the event of an ultimate unfavorable outcome, SWM-B is not aware of any difficulties that would be encountered in obtaining reimbursement of that portion of any payment resulting from Assessment 1 from the previous owner under the indemnification.

SWM-B has contested the Assessment based on Article 150, VI of the Brazilian Federal Constitution of 1988, which grants immunity from ICMS taxes to papers used in the production of books, newspapers and periodicals, or immune papers, and the raw material inputs used to produce immune papers. Presently, part of the Assessment, for which SWM-B has received favorable lower court rulings, is pending on appeal before the Federal Supreme Court under case number A1588187 and another part of the Assessment, for which SWM-B has primarily received unfavorable lower court rulings, is pending on appeal before the Third Vice Presidency under case no. 2005.134.05319.

SWM-B continues to vigorously contest the Assessment and believes that the Assessment will ultimately be resolved in its favor. However, since the final resolution involves presentation of the matter to the Supreme Court of Brazil, it is not likely to be finally resolved in the near future. Based on the foreign currency exchange rate at December 31, 2008, the Assessment totaled approximately $20 to $21 million as of December 31, 2008, of which approximately $10 million is covered by the above-discussed indemnification. No liability has been recorded in the Company's consolidated financial statements for the Assessment based on its evaluation that SWM-B is more likely than not to prevail in its challenge of the Assessment under the facts and law as presently understood.

In February 2004, SWM-B filed suit against the State of Rio de Janeiro in the 11 ^th Court of Public sitting in Rio de Janeiro, case number 2004.001.022063-6, to recover ICMS credits previously reversed in 2000 following receipt of the Assessment. After the Assessment was filed against SWM-B, it changed its procedures and did not utilize ICMS tax credits through the end of production and sale of immune papers during 2001. As a result of having received favorable lower court rulings to the Assessment, SWM-B petitioned the court for permission to offset overpaid ICMS taxes against current tax liabilities. The amount of the claim totals approximately $2 million, based on the foreign currency exchange rate at December 31, 2008. In August 2006, SWM-B filed an interlocutory appeal, which has not yet been ruled upon. As of December 31, 2008, no asset has been recorded for this potential recovery.

SWM-B instituted action in March 2004 to recover credits on past and future purchases of raw materials that are exempt from IPI taxes or that carry an IPI tax rate of zero. The recovery would be in the form of presumed credits that could be applied to offset other IPI tax liabilities. The action for recovery is based on the principle in Brazilian law of non-cumulative taxes. The potential recovery of IPI credits, depending upon several contested factors, could be in the range of $10 to $20 million, which amounts the Company considers a gain contingency and has not recorded in its consolidated financial statements. While a favorable ruling was received at the first court level during March 2007, the Company received an unfavorable ruling on appeal in the Second Degree and the Company has appealed that ruling to the Superior Court of Justice where the matter is still pending. The final resolution of this matter will likely

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

entail judicial proceedings up to and including presentation of the matter to the Supreme Court of Brazil and is not likely to be resolved for several years.

Indemnification Matters

In connection with its spin-off from Kimberly-Clark in 1995, the Company undertook to indemnify and hold Kimberly-Clark harmless from claims and liabilities related to the businesses transferred to it that were not identified as excluded liabilities in the related agreements. As of December 31, 2008, there are no claims pending under this indemnification that the Company deems to be material.

General Matters

The Company is involved in certain other legal actions and claims arising in the ordinary course of business. Management believes that such litigation and claims will be resolved without a material adverse effect on the Company's consolidated financial statements.

Environmental Matters

The Company's operations are subject to federal, state and local laws, regulations and ordinances relating to various environmental matters. The nature of the Company's operations exposes it to the risk of claims with respect to 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 adverse effect on its financial condition or results of operations. However, future events, such as changes in existing laws and regulations, or unknown contamination 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 adverse effect on its financial condition or results of operations.

The Company incurs spending necessary to meet legal requirements and otherwise relating to the protection of the environment at its facilities in the United States, France, the Philippines, Indonesia, Brazil and Canada. For these purposes, the Company incurred total capital expenditures of $0.3 million in 2008, and expects to incur less than $1 million in each of 2009 and 2010, of which no material amount is the result of environmental fines or settlements. The foregoing capital expenditures are not expected to reduce the Company's ability to invest in other appropriate and necessary capital projects and are not expected to have a material adverse effect on its financial condition or results of operations.

Note 16. Acquisition

In January 2008, 2 of the Company's French subsidiaries purchased the 28 percent minority interest in LTRI owned by Société Nationale d'Exploitation Industrielle des Tabacs et Allumettes, S.A., a subsidiary of Altadis, S.A., subsequent to which the Company owns 100 percent of LTRI's outstanding shares. Sole ownership of LTRI is expected to provide enhanced strategic flexibility and improved earnings and cash flow. The purchase price of 35.0 million euros, funded by borrowings under the Company's Euro Revolver, was allocated to the fair value of the assets acquired and liabilities assumed, including an allocation of $10 million to identifiable intangible assets. The excess of the purchase price over the fair value of the net

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

assets acquired resulted in goodwill of $6.4 million. The following table summarizes the final allocation, of the 35.0 million euros, or $51.3 million, purchase price for the acquisition (dollars in millions):


Purchase Price (35 million euros)					$	51.3
Carrying Value						26.2

	Step-Up in Basis				$	25.1

Allocation of Step-Up in Basis:
	Inventories	$	0.1
	Land		2.1
	Tangible depreciable assets		16.2
	Amortizable customer-related intangibles		10.0
	Goodwill		6.4
	Deferred income tax liability		(9.7	)

	Total Step-Up in Basis				$	25.1

The Company is amortizing LTRI's customer-related intangibles using the 150 percent declining balance method over a 6-year amortizable life. The Company recorded amortization expense of $2.5 million during 2008. Additionally, the Company recorded $1.6 million of incremental depreciation expense as a result of the stepped-up bases in depreciable property, plant and equipment during 2008.

The increased bases in the LTRI assets are not tax deductible in France. In accordance with SFAS No. 109, a deferred income tax liability was recorded for the nondeductible purchase allocations to inventories, land, tangible depreciable assets and amortizable intangibles, but no deferred income tax balance was recorded related to goodwill.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following unaudited pro forma condensed consolidated statement of income data for the year ended December 31, 2007 is presented for illustrative purposes only as a comparison versus the actual 2008 period reported herein. This pro forma data was prepared as though the minority interest acquisition had occurred on January 1, 2007, the beginning of the period presented. It is not necessarily indicative of the operating results that would have been achieved if the LTRI minority interest acquisition had occurred on January 1, 2007, nor is it indicative of future operating results. Pro forma financial information for 2008 is not presented since such pro forma income statement information is not materially different from the actual reported statements of income included herein.

	For the Year Ended December 31, 2007

(dollars in millions, except per share amounts)	Historical		Pro Forma Adjustments*			Pro Forma Results
Net sales	$	714.8	$	—		$	714.8
Gross profit		108.1		(3.9	)		104.2
Operating profit		17.9		(3.9	)		14.0
Interest expense		5.9		2.3			8.2
Income Before Income Taxes, Minority Interest and Loss from Equity Affiliates		11.9		(6.2	)		5.7
Provision (benefit) for income taxes		0.5		(2.1	)		(1.6	)
Minority interest in earnings of subsidiaries		8.0		(8.0	)		—
Net Income	$	3.4	$	3.9		$	7.3
Basic Net Income Per Share	$	0.22	$	0.25		$	0.47
Diluted Net Income Per Share	$	0.22	$	0.24		$	0.46

*: Pro forma adjustments primarily consist of incremental depreciation expense, amortization expense on intangible assets, interest expense, related income tax effects of these expenses and reversal of minority interest in earnings of subsidiaries.

Note 17. Segment Information

General Information

The Company operates and manages 3 reportable segments: United States, or U.S., France and Brazil. These segments are based on the geographical location of the Company's manufacturing operations. These business segments manufacture and sell cigarette, plug wrap and tipping papers used to wrap various parts of a cigarette, reconstituted tobacco products and paper products used in cigarette packaging, as well as certain non-tobacco industry products. While the products are similar in each segment, they vary based on customer requirements and the manufacturing capabilities of each of the operations. The Philippine and Indonesian financial results are included in the French business segment because the results of the Philippine and Indonesian operations are not material for segment reporting purposes and since the products of the Philippine and Indonesian businesses are coordinated with sales of the Company's French operations in southeast Asia. Sales by a segment into markets primarily served by a different segment occur where specific product needs cannot be cost-effectively met by the manufacturing operations domiciled in that segment.

Tobacco industry products comprised approximately 90 percent of the Company's consolidated net sales in each of the years 2006 through 2008. Non-tobacco industry products are a diverse mix of products, certain of which represent commodity paper grades produced to maximize machine operations.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Information about Sales, Profit and Assets

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (see Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements). The Company primarily evaluates segment performance and allocates resources based on operating profit (loss) and cash flow.

For purposes of the segment disclosure in the following tables, the term "United States" includes operations in the United States and Canada. The Canadian operations only produce flax fiber used as a raw material in the U.S. operations. The term "France" includes operations in France, Indonesia and the Philippines. Sales of products between segments are made at market prices and elimination of these sales is referred to in the following tables as intersegment sales. Expense amounts not associated with segments are referred to as unallocated expenses. Assets reported by segment represent assets which are directly used by that segment. Unallocated items and eliminations, net include immaterial balances of the Company's holding company in Spain.

(dollars in millions)

			Net Sales

			2008					2007					2006
France			$	495.4		64.5	%	$	435.0		60.9	%	$	385.0		58.8	%
United States				226.7		29.5			226.0		31.6			221.8		33.8
Brazil				70.5		9.2			73.0		10.2			67.3		10.3

		Subtotal		792.6		103.2			734.0		102.7			674.1		102.9

Intersegment sales by:
	France			(3.5	)	(0.5	)		(4.2	)	(0.6	)		(9.8	)	(1.5	)
	United States			(4.9	)	(0.6	)		(2.8	)	(0.4	)		(1.2	)	(0.2	)
	Brazil			(16.3	)	(2.1	)		(12.2	)	(1.7	)		(7.9	)	(1.2	)

		Subtotal		(24.7	)	(3.2	)		(19.2	)	(2.7	)		(18.9	)	(2.9	)

Consolidated			$	767.9		100.0	%	$	714.8		100.0	%	$	655.2		100.0	%

		Operating Profit (Loss)															Total Assets

		2008					2007					2006					2008				2007
France		$	17.1		101.2	%	$	27.1		151.4	%	$	8.1		152.8	%	$	462.6	63.5	%	$	482.8	62.3	%
United States			19.3		114.2			5.0		27.9			5.2		98.1			194.2	26.7			199.9	25.8
Brazil			(9.7	)	(57.4	)		(3.3	)	(18.4	)		(0.7	)	(13.2	)		71.9	9.8			92.3	11.9

	Subtotal		26.7		158.0			28.8		160.9			12.6		237.7			728.7	100.0			775.0	100.0
Unallocated items and eliminations, net			(9.8	)	(58.0	)		(10.9	)	(60.9	)		(7.3	)	(137.7	)		—	—			—	—

Consolidated		$	16.9		100	%	$	17.9		100.0	%	$	5.3		100.0	%	$	728.7	100.0	%	$	775.0	100.0	%

	Capital Spending												Depreciation and Amortization

	2008				2007				2006				2008				2007				2006
France	$	25.0	70.8	%	$	27.1	56.8	%	$	5.2	54.2	%	$	17.9	61.0	%	$	22.8	53.9	%	$	21.2	48.8	%
United States		9.0	25.5			9.6	20.1			3.3	34.4			12.4	25.0			15.5	36.6			17.8	41.0
Brazil		1.3	3.7			11.0	23.1			1.1	11.4			7.2	14.0			4.0	9.5			4.4	10.2

Consolidated	$	35.3	100.0	%	$	47.7	100.0	%	$	9.6	100.0	%	$	37.5	100.0	%	$	42.3	100.0	%	$	43.4	100.0	%

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Information about Geographic Areas

Long-lived assets, excluding deferred income tax assets and certain other deferred charges, were $284.4 million, $98.7 million and $43.1 million in France, the United States and Brazil, respectively, as of December 31, 2008, and $304.8 million, $105.0 million and $63.2 million in France, the United States and Brazil, respectively, at December 31, 2007.

For purposes of the geographic disclosure in the following table, net sales are attributed to geographic locations based on the location of the Company's direct customers (dollars in millions):

			Net Sales

			2008		2007		2006
Europe and the former
	Commonwealth of Independent States		$	352.5	$	302.5	$	255.1
United States				181.7		178.8		159.6
Asia/Pacific (including China)				138.4		130.6		108.7
Latin America				61.2		69.9		80.3
Other foreign countries				34.1		33.0		51.5

		Consolidated	$	767.9	$	714.8	$	655.2

Note 18. Major Customers

Philip Morris USA Inc., Philip Morris International, BAT, JTI, and Imperial together with their respective affiliates and designated converters, accounted for 60 percent, 50 percent and 47 percent of the Company's 2008, 2007 and 2006 consolidated net sales, respectively. The loss of 1 or more such customers, or a significant reduction in 1 or more of these customers' purchases, could have a material adverse effect on the Company's results of operations.

Since January 1, 1993, the Company has been the single source of supply of Cigarette Papers to Altria Group's U.S. cigarette manufacturing operations, or Philip Morris USA. During December 2006, the Company provided Philip Morris USA with a notice of phase-out of the Second Amended and Restated Agreement for Fine Paper Supply, or SSA, between the 2 companies, effective December 31, 2006. Under the phase-out terms of the SSA, the Company was obligated to supply up to 100 percent of Philip Morris USA's annual cigarette, base tipping and plug wrap paper requirements for 2008 at current selling prices, which was subject to potential increases. Philip Morris USA was obligated to purchase from the Company at least 50 percent of its annual cigarette, base tipping and plug wrap paper requirements for 2008. The phase-out expired on December 31, 2008, and neither company has any further obligation under the SSA.

The Company also has an exclusive supply arrangement with Philip Morris USA for a jointly-developed banded cigarette paper that is used in lower ignition propensity, or LIP, cigarettes. The Company produces banded cigarette paper in sufficient quantities to support Philip Morris USA's commercial sales of LIP cigarettes. The notification of phase-out of the SSA does not affect the supply agreement between the Company and Philip Morris USA concerning banded cigarette paper used to produce LIP cigarettes. Under this agreement, Philip Morris USA is obligated to purchase 100 percent of its requirements for banded cigarette papers for a minimum period of 7 years, and the Company is obligated to supply such product for a minimum of 13 years.

In January 2008, we acquired the minority interest of LTRI. The Company had sales to the former minority shareholder of LTRI of $27.9 million and $21.6 million in 2007 and 2006, respectively.

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Philip Morris USA, Phillip Morris International, BAT, JTI, and Imperial, together with their respective affiliates and designated converters accounted for 55 percent and 38 percent of consolidated trade accounts receivable at December 31, 2008 and 2007, respectively. Trade receivables due from China Tobacco accounted for 8 percent and 4 percent of consolidated trade receivables at December 31, 2008 and 2007, respectively.

The Company performs ongoing credit evaluations on all of its customers' financial condition and generally does not require collateral or other security to support customer receivables. Substantial portions of the Company's consolidated accounts receivable are due from companies in the tobacco industry, which has been and continues to be under substantial pressure from legal, regulatory and tax developments. It is not possible to predict the outcome of such litigation or what effect adverse developments in pending or future litigation, regulatory actions and additional taxes may have on the tobacco industry, its financial liquidity or relationships with its suppliers. Nor is it possible to predict what additional legislation or regulations relating to tobacco products will be enacted, or to what extent, if any, such legislation or regulations might affect the tobacco products industry in general.

Note 19. Supplemental Disclosures

Analysis of Allowances for Doubtful Accounts and Sales Discounts:
(dollars in millions)

		Balance at Beginning of Year		Charged to Expense		Write-offs and Discounts			Currency Translation			Balance at End of Year

For the Year Ended December 31, 2008
Allowance for doubtful accounts		$	0.6	$	0.7	$	(0.2	)	$	(0.2	)	$	0.9

For the Year Ended December 31, 2007
Allowance for doubtful accounts		$	0.5	$	0.2	$	(0.2	)	$	0.1		$	0.6

For the Year Ended December 31, 2006
Allowance for doubtful accounts		$	0.5	$	0.2	$	(0.2	)	$	—		$	0.5
Allowance for sales discounts			—		0.1		(0.1	)		—			—

	Total	$	0.5	$	0.3	$	(0.3	)	$	—		$	0.5

Supplemental Cash Flow Information
(dollars in millions)

	For the Years Ended December 31,

	2008		2007		2006
Interest paid	$	10.1	$	6.6	$	6.6
Interest capitalized		0.3		—		0.1
Income taxes paid		23.8		4.2		6.1
	At December 31,
	2008		2007		2006
Capital spending in accounts payable and accrued liabilities	$	1.9	$	7.4	$	5.3

SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 20. Quarterly Financial Information (Unaudited)

The following tables summarize the Company's unaudited quarterly financial data for the years ended December 31, 2008 and 2007 (dollars in millions, except per share amounts):

		2008

		First Quarter			Second Quarter		Third Quarter			Fourth Quarter			Year
Net Sales		$	189.8		$	202.0	$	199.2		$	176.9		$	767.9
Gross Profit			20.0			24.2		32.5			26.5			103.2
Restructuring and Impairment Expense			2.0			3.7		2.6			13.8			22.1
Operating Profit (Loss)			—			4.8		14.6			(2.5	)		16.9
Net Income (Loss)		$	(1.2	)	$	2.0	$	6.7		$	(6.8	)	$	0.7
Net Income (Loss) Per Share:
	Basic	$	(0.08	)	$	0.13	$	0.44		$	(0.44	)	$	0.05
	Diluted	$	(0.08	)	$	0.13	$	0.43		$	(0.44	)	$	0.04
		2007
		First Quarter			Second Quarter		Third Quarter			Fourth Quarter			Year
Net Sales		$	170.3		$	171.8	$	184.2		$	188.5		$	714.8
Gross Profit			28.3			26.0		30.4			23.4			108.1
Restructuring Expense (Income)			2.7			3.4		18.2			(0.3	)		24.0
Operating Profit (Loss)			9.1			6.0		(3.0	)		5.8			17.9
Net Income (Loss)		$	4.2		$	1.0	$	(4.3	)	$	2.5		$	3.4
Net Income (Loss) Per Share:
	Basic	$	0.27		$	0.06	$	(0.27	)	$	0.16		$	0.22
	Diluted	$	0.27		$	0.06	$	(0.27	)	$	0.16		$	0.22

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Schweitzer-Mauduit International, Inc. and Subsidiaries
Alpharetta, Georgia

We have audited the accompanying consolidated balance sheets of Schweitzer-Mauduit International, Inc. and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the related consolidated statements of income (loss), changes in stockholders' equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Schweitzer-Mauduit International, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 as of December 31, 2006, the Company changed its method of accounting for defined benefit pension and other postretirement plans to conform to Statement of Financial Accounting Standards No. 158, " Employer's Accounting for Defined Benefit Pension and Other Post Retirement Plans ."

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 6, 2009 expressed an unqualified opinion on the Company's internal control over financial reporting.

Deloitte & Touche LLP
Atlanta, Georgia
March 6, 2009

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors.

Based on their evaluation as of December 31, 2008, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at a reasonable assurance level to ensure that the information required to be disclosed by us in this Annual Report on Form 10-K was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and instructions for Form 10-K. Last year the Chief Executive Officer submitted a Section 12(a) CEO Certification to the NYSE and the Chief Executive Officer and Chief Financial Officer submitted the certification required under Section 302 of the Sarbanes-Oxley Act as Exhibits 31.1 and 31.2 to the Form 10-K filed on March 7, 2008.

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, is designed to provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Schweitzer-Mauduit International, Inc. have been detected. As of December 31, 2008, we had no material weaknesses based on our tests using the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, our management used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company's evaluation under the framework in Internal Control—Integrated Framework, our management has concluded that, as of December 31, 2008, our internal control over financial reporting is effective based on these criteria. Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an audit report on its assessment of our internal control over financial reporting, which is included herein.

Item 9B. Other Information

Not applicable.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Schweitzer Mauduit International, Inc. and Subsidiaries
Alpharetta, Georgia

We have audited the internal control over financial reporting of Schweitzer-Mauduit International, Inc. and subsidiaries (the "Company") as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Schweitzer-Mauduit International, Inc. and subsidiaries as of and for the year ended December 31, 2008 and our report dated March 6, 2009 expressed an unqualified opinion on those financial statements.

Deloitte & Touche LLP
Atlanta, Georgia
March 6, 2009

PART III.

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

Information concerning our directors is hereby incorporated by reference to our 2009 Proxy Statement. Information with respect to our executive officers is set forth in Part I of this Form 10-K under the caption, "Executive Officers." Executive officers of Schweitzer-Mauduit are elected to hold office until the next annual meeting of the Board of Directors following the annual meeting of stockholders and until election of successors, subject to removal by the Board. There are no family relationships between any of the directors, or any of our executive officers.

Audit Committee Financial Expert

We have a standing audit committee, or the Audit Committee, in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee is comprised of Messrs. McCullough (Chairman), Caldabaugh, and Finn. The Board of Directors has determined that Messrs. McCullough, Caldabaugh and Finn are "independent" as defined by the requirements of the New York Stock Exchange. The Board of Directors has also determined that Messrs. McCullough and Caldabaugh each qualify as an "audit committee financial expert" as defined under Item 407(d)(5)(ii) of Regulation S-K.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who own more than 10 percent of a registered class of its equity securities to file reports with the Securities and Exchange Commission regarding beneficial ownership of Common Stock and other equity securities of the Corporation. Officers, directors and greater than 10 percent stockholders are required by Securities and Exchange Commission regulations to furnish us with copies of all forms they file pursuant to Section 16(a). Information concerning Section 16(a) beneficial ownership reporting is hereby incorporated by reference to our 2009 Proxy Statement.

Code of Conduct

We have adopted a code of conduct, or the Code of Conduct, that applies to all of our directors, officers and U.S. employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The Code of Conduct is posted on our web site at www.schweitzer-mauduit.com. Any waivers of, or changes to, the Code of Conduct will be posted on our web site.

Corporate Governance Documents

We make available free of charge on our Internet web site at www.schweitzer-mauduit.com, and in print to any shareholder who requests, our Code of Conduct, Corporate Governance Guidelines, Independence Standards for Directors, Nominating and Corporate Governance Committee Charter, Audit Committee Charter and Compensation Committee Charter. Requests for copies may be directed to the Investor Relations Department at our corporate headquarters.

Item 11. Executive Compensation

The information in the section of the 2009 Proxy Statement captioned "Executive Compensation," including the item captioned "Comprehensive Compensation Discussion and Analysis," is incorporated in this Item 11 by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information in the sections of the 2009 Proxy Statement captioned "Security Ownership of Management" and "Security Ownership of Certain Beneficial Holders" is incorporated in this Item 12 by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information in the section of the 2009 Proxy Statement captioned "Certain Transactions and Business Relationships" is incorporated in this Item 13 by reference.

Item 14. Principal Accountant Fees and Services

The information in the section of the 2009 Proxy Statement captioned "Audit Committee Report" is incorporated in this Item 14 by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report:

1. Consolidated Financial Statements

The following reports and financial statements are filed herewith on the pages indicated:

		Page

Consolidated Statements of Income (Loss) for the years ended December 31, 2008, 2007 and 2006			49
Consolidated Balance Sheets as of December 31, 2008 and 2007			50
Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income (Loss) for the years ended December 31, 2008, 2007 and 2006			51
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006			52
Notes to Consolidated Financial Statements			53
Report of Independent Registered Public Accounting Firm			90

2. Financial Statement Schedules

The financial statements of China Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd. are filed as Exhibit 99.1 as part of this Form 10-K pursuant to Regulation S-X Rule 3-09.

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable, and, therefore, have been omitted.

3. Exhibits

Exhibit Number		Exhibit

	3.1	Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Form 10, dated September 12, 1995).
	3.2	By-Laws, as amended on and through April 24, 2003 (incorporated by reference to Exhibit 3.2 to Form 10-Q for the quarter ended June 30, 2003).
	4.1	Form of Common Stock Certificate as of October 1, 2000 (incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended September 30, 2000).
	4.2	Rights Agreement Amended and Restated as of October 1, 2000 (incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarter ended September 30, 2000).
	10.4	Outside Directors' Stock Plan Amended and Restated as of April 24, 2003 (incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended June 30, 2003).
	10.5	Annual Incentive Plan effective January 1, 2009, Amended and Restated (incorporated by reference to Exhibit 10.24 to Form 10-Q for the quarter ended June 30, 2008).
	10.6	Equity Participation Plan Amended and Restated as of April 26, 2001 (incorporated by reference to Exhibit 10.6 to Form 10-K for the year ended December 31, 2000).
*	10.7	Long-Term Incentive Plan Amended and Restated effective as of January 1, 2009.
	10.8.1	Deferred Compensation Plan, Amended and Restated as of April 21, 2000 (incorporated by reference to Exhibit 10.8.1 to Form 10-Q for the quarter ended March 31, 2000).
	10.8.2	Deferred Compensation Plan for Non-Employee Directors, effective April 1, 2000 (incorporated by reference to Exhibit 10.8.2 to Form 10-Q for the quarter ended March 31, 2000).

Exhibit Number		Exhibit

	10.9	Restricted Stock Plan Amended and Restated effective as of January 1, 2009 (incorporated by reference to Exhibit 10.25 to Form 10-Q for the quarter ended June 30, 2008).
*	10.10	Supplemental Benefit Plan Amended and Restated as of December 4, 2008.
*	10.11	Executive Severance Plan Amended and Restated as of December 4, 2008.
	10.12.1	Second Amended and Restated Agreement between Philip Morris Incorporated and Schweitzer-Mauduit International, Inc. for Fine Paper Supply, effective as of July 1, 2000† (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2000).
	10.12.2	Amended and Restated Technology Ownership, Technical Assistance and Technology License Agreement by and among Philip Morris Incorporated, Philip Morris Products, Inc. and Schweitzer-Mauduit International, Inc., effective as of July 1, 2000† (incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2000).
	10.12.3	Amended and Restated Addendum to Second Amended and Restated Agreement between Philip Morris Incorporated and Schweitzer- Mauduit International, Inc. for Fine Paper Supply effective as of July 1, 2000† (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended June 30, 2000).
	10.12.4	Amendment No. 1 to the Second Amended and Restated Agreement between Philip Morris Incorporated and Schweitzer-Mauduit International, Inc. for Fine Paper Supply, effective as of May 23, 2002† (incorporated by reference to Exhibit 10 to Form 10-Q for the quarter ended June 30, 2002).
	10.12.5	Amendment No. 2 to the Second Amended and Restated Agreement between Philip Morris USA Inc. and Schweitzer-Mauduit International, Inc. for Fine Paper Supply, effective as of April 28, 2003† (incorporated by reference to Exhibit 10.12.5 to Form 10-Q for the quarter ended June 30, 2003).
	10.12.6	Amendment No. 3 to the Second Amended and Restated Agreement between Philip Morris USA Inc. and Schweitzer-Mauduit International, Inc. for Fine Paper Supply, effective as of August 11, 2003† (incorporated by reference to Exhibit 10.12.6 to Form 10-K for the year ended December 31, 2003).
	10.12.7	Amendment No. 6 to the Second Amended and Restated Agreement between Philip Morris USA Inc. and Schweitzer-Mauduit International, Inc. for Fine Paper Supply, effective as of December 31, 2004† (incorporated by reference to Exhibit 10.12.7 to Form 10-K for the year ended December 31, 2004).
	10.12.8	Amendment No. 5 to the Amended and Restated Addendum to Fine Papers Supply Agreement between Philip Morris USA Inc. and Schweitzer-Mauduit International, Inc., effective as of December 31, 2004† (incorporated by reference to Exhibit 10.12.8 to Form 10-K for the year ended December 31, 2004).
	10.12.9	Amendment No. 7 to the Second Amended and Restated Agreement between Philip Morris USA Inc. and Schweitzer-Mauduit International, Inc. for Fine Paper Supply, effective as of December 31, 2005†.
	10.12.10	Amendment No. 6 to the Amended and Restated Addendum to Fine Papers Supply Agreement between Philip Morris USA Inc. and Schweitzer-Mauduit International, Inc., effective as of December 31, 2005†.
	10.13	Natural Gas Supply Agreement, dated October 5, 2006, by and among Papeteries de Mauduit S.A.S. and ENI S.p.A. (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2006).

Exhibit Number		Exhibit

	10.14	Credit Agreement, dated July 31, 2006, by and among, Schweitzer-Mauduit International, Inc., Schweitzer-Mauduit France S.A.R.L. and a group of banks (incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2006).
*	10.15	Deferred Compensation Plan No. 2 for Non-Employee Directors Amended and Restated as of December 4, 2008.
*	10.16	Deferred Compensation Plan No. 2 Amended and Restated as of December 4, 2008.
*	10.17	Summary of Non-Management Director Compensation.
*	10.18	Summary of Executive Officer Compensation.
	10.19	Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.19 to Form 10-K for the year ended December 31, 2004).
	10.20	Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.20 to Form 10-K for the year ended December 31, 2004).
	10.21	Stock Option Agreement (incorporated by reference to Exhibit 10.21 to Form 10-K for the year ended December 31, 2004).
*	10.22	Restricted Stock Agreement effective January 1, 2009.
	10.23	Electricity Supply Agreement, dated May 24, 2006, by and among, Schweitzer-Mauduit do Brasil, S.A. and Companhia Energetica do Sao Paulo, or CESP (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2006).
	14.1	Code of Conduct (incorporated by reference to Exhibit 14.1 to Form 10-K for the year ended December 31, 2003).
*	21	Subsidiaries of the Company.
*	23.1	Consent of Independent Registered Public Accounting Firm.
*	23.2	Consent of Independent Registered Public Accounting Firm
*	24	Powers of Attorney.
*	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*	32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. F
*	99.1	Financial statements of China Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd. for the years ended December 31, 2008, 2007 (unaudited) and 2006 (unaudited).

*: Filed herewith.
†: Exhibit has been redacted pursuant to a Confidentiality Request under Rule 24(b)-2 of the Securities Exchange Act of 1934.
F: These Section 906 certifications are not being incorporated by reference into the Form 10-K filing or otherwise deemed to be filed with the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
	By:	/s/ FREDERIC P. VILLOUTREIX Frédéric P. Villoutreix Chairman of the Board and Chief Executive Officer
Dated: March 6, 2009		(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Position	Date


/s/ FREDERIC P. VILLOUTREIX Frédéric P. Villoutreix	Chairman of the Board and Chief Executive Officer (principal executive officer)	March 6, 2009
/s/ PETER J. THOMPSON Peter J. Thompson	Treasurer, Chief Financial and Strategic Planning Officer (principal financial officer)	March 6, 2009
/s/ MARK A. SPEARS Mark A. Spears	Controller (principal accounting officer)	March 6, 2009
* Claire L. Arnold	Director	March 6, 2009
* K.C. Caldabaugh	Director	March 6, 2009
* William A. Finn	Director	March 6, 2009
* Richard D. Jackson	Director	March 6, 2009
* Robert F. McCullough	Director	March 6, 2009


*By:		/s/ JOHN W. RUMELY, JR. John W. Rumely, Jr. Attorney-In-Fact				March 6, 2009

GLOSSARY OF TERMS

The following are definitions of certain terms used in this Form 10-K filing:

•: " Banded cigarette paper " is a type of paper, used to produce lower ignition propensity cigarettes, by applying bands to the paper during the papermaking process.
•: " Binder " is used to hold the tobacco leaves in a cylindrical shape during the production process of cigars.
•: " Cigarette paper " wraps the column of tobacco within a cigarette and has varying properties such as basis weight, porosity, opacity, tensile strength, texture and burn rate.
•: " Commercial and industrial products " include lightweight printing and writing papers, coated papers for packaging and labeling applications, business forms, battery separator paper, drinking straw wrap and other specialized papers.
•: " Flax " is a cellulose fiber from a flax plant used as a raw material in the production of certain cigarette papers.
•: " Lower ignition propensity cigarette paper " includes banded and print banded cigarette paper, both of which contain bands, which increase the likelihood that an unattended cigarette will self-extinguish.
•: " Net debt to adjusted EBITDA ratio " is a financial measurement used in bank covenants where " Net Debt " is defined as the current portion of long term debt plus other short term debt plus long term debt less cash and cash equivalents, and
•: " Adjusted EBITDA " is defined as net income excluding extraordinary or 1-time items, minority interest in earnings, loss from equity of affiliates, interest expense, income taxes and depreciation and amortization less amortization of deferred revenue.
•: "Net debt to capital ratio" is current and long term debt less cash and cash equivalents, divided by the sum of current debt, long term debt, minority interest and total stockholders' equity.
•: " Net debt to equity ratio " is current and long term debt less cash and cash equivalents, divided by minority interest and total stockholders' equity.
•: "Net operating working capital" is accounts receivable, inventory, current income tax refunds receivable and prepaid expense, less accounts payable, accrued liabilities and accrued income taxes payable.
•: "Opacity" is a measure of the extent to which light is allowed to pass through a given material.
•: "Operating profit return on assets" is operating profit divided by average total assets.
•: " Plug wrap paper " wraps the outer layer of a cigarette filter and is used to hold the filter materials in a cylindrical form.
•: " Porosity " is a measure of air flow permeability.
•: " Print banded cigarette paper " is a type of paper, used to produce lower ignition propensity cigarettes, with bands added to the paper during a printing process, subsequent to the papermaking process.
•: " Reconstituted tobacco " is produced in 2 forms: leaf, or reconstituted tobacco leaf, and wrapper and binder products. Reconstituted tobacco leaf is blended with virgin tobacco as a design aid to achieve certain attributes of finished cigarettes. Wrapper and binder are reconstituted tobacco products used by manufacturers of machine-made cigars.

•: " Restructuring expense " represents expenses incurred in connection with unusual or infrequently occurring activities intended to significantly change the size or nature of the business operations, including significantly reduced utilization of operating equipment, exit of a product or market or a significant workforce reduction.
•: " Tipping paper " joins the filter element to the tobacco-filled column of the cigarette and is both printable and glueable at high speeds.
•: " Wrapper " covers the outside of cigars providing a uniform, finished appearance.

100


BOARD OF DIRECTORS Claire L. Arnold ^3,4 Chief Executive Officer Leapfrog Services, Inc. K.C. Caldabaugh ^1,2,4 Principal Heritage Capital Group William A. Finn ^2,3 Chairman AstenJohnson Holding Ltd. Richard D. Jackson ^3,4 Self-Employed Private Investor Robert F. McCullough ² Self-Employed Private Investor Frédéric P. Villoutreix Chairman of the Board and Chief Executive Officer Schweitzer-Mauduit International Inc.		OFFICERS Michel Fievez President — European Operations William R. Foust Vice President — Administration Otto R. Herbst Chief Operating Officer Wilfred A. Martinez President — the Americas John W. Rumely, Jr. General Counsel and Secretary Mark A. Spears Controller Peter J. Thompson Treasurer, Chief Financial and Strategic Planning Officer Frédéric P. Villoutreix Chief Executive Officer

¹: Lead Non-Management Director
²: Audit Committee
(Chairman — Robert F. McCullough)
³: Compensation Committee
(Chairman — Richard D. Jackson)
⁴: Nominating and Governance Committee
(Chairman — K.C. Caldabaugh)

101

CORPORATE INFORMATION


Corporate Headquarters 100 North Point Center East Suite 600 Alpharetta, GA 30022-8246 Phone — 800-514-0186 or 770-569-4200 Facsimile — 770-569-4275 http://www.schweitzer-mauduit.com		Transfer Agent and Registrar American Stock Transfer & Trust Company 59 Maiden Lane New York, NY 10038 Phone — 800-937-5449 or 718-921-8200 http://www.amstock.com
Independent Registered Public Accounting Firm Deloitte & Touche LLP 191 Peachtree Street Atlanta, GA 30303		Stockholder Inquiries We welcome inquiries from stockholders and other interested parties. We do not mail quarterly reports to our stockholders although our quarterly earnings and other press releases and quarterly and annual reports are accessible on our web site. Alternatively, requests for information, including the e-mailing of quarterly earnings press releases, corporate governance guidelines and Board of Directors' committee charters can be made through the Investor Relations/Information Requests section of our web site or can be made in writing and sent to the Investor Relations Department at the Corporate Headquarters address listed above.
Stock Exchange The Common Stock of Schweitzer-Mauduit International, Inc. is listed on the New York Stock Exchange. The ticker symbol is SWM.		Annual Meeting The Annual Meeting of Stockholders will be held on April 23, 2009 at 11:00 a.m. at our Corporate Headquarters located at 100 North Point Center East, Suite 600, Alpharetta, Georgia.

102

QuickLinks

PART I.

Item 1. Business

GENERAL
DESCRIPTION OF BUSINESS
PRODUCTS
MARKETS AND CUSTOMERS
SALES AND DISTRIBUTION
COMPETITION
RAW MATERIALS AND ENERGY
BACKLOG AND SEASONALITY
RESEARCH AND DEVELOPMENT
PATENTS AND TRADEMARKS
EMPLOYEES
ENVIRONMENTAL MATTERS
WORKING CAPITAL
EXECUTIVE OFFICERS

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Dividends

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (dollars in millions, except per share and share amounts)
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in millions, except per share and share amounts)
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) (dollars in millions, except per share amounts)
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in millions)
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PART III.

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits and Financial Statement Schedules

SIGNATURES
GLOSSARY OF TERMS
CORPORATE INFORMATION

Exhibit 10.7

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

LONG-TERM INCENTIVE PLAN

First Amendment and Restatement

Effective as of January 1, 2009

RECITALS:

WHEREAS , the Corporation adopted a Long-Term Incentive Plan (LTIP) in 2001 to provide a long-term incentive opportunity to its participants;

WHEREAS, the LTIP is intended to provide incentive compensation that is qualified as exempt from the limitation on tax deductibility when paid to a participant that is covered by Section 162(m) of the Internal Revenue Code;

WHEREAS, Revenue Ruling 2008-13 issued new guidance from the Internal Revenue Service on its revised interpretation of the performance based compensation exemption from Code Section 162(m) limits on deductible compensation;

WHEREAS, the Company desires to maintain the exempt performance based compensation status of any awards issued to a participant in the LTIP that is also a Covered Person, as hereinafter defined, and therefore amends and restates the plan as follows.

1. PURPOSE

The purpose of this Long-Term Incentive Plan (the “Plan”) of Schweitzer-Mauduit International, Inc. (the “Company”) is to promote the long-term financial success of the Company by:

(a) attracting and retaining executive personnel of outstanding ability;

(b) strengthening the Company’s capability to develop, maintain and direct a competent management team; and

2. EFFECTIVE DATE

The Plan is adopted effective as of January 1, 2001.

3. DEFINITIONS

“Affiliate” means any company in which the Company owns 20% or more of the equity interest (collectively, the “Affiliates”).

“Board” means the Board of Directors of the Company.

“Change of Control” shall mean the date as of which: (a) a third person, including a “group” as defined in Section 13(d)(3) of the Exchange Act of 1934, acquires actual or beneficial ownership of shares of the Company having 15% or more of the total number of votes that may be cast for the election of Directors of the Company; or (b) as the result of any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a “Transaction”), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder, as amended from time to time.

“Committee” means the Compensation Committee of the Board. The Committee shall administer the Plan.

“Covered Employee” shall have the meaning given to such term by Internal Revenue Code Section 162(m)(3), and any sucessor provision.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as amended from time to time.

“Participant” means an officer or employee who the Committee selects to participate in this Plan (collectively, the “Participants”) in accordance with Section 5 of this Plan. Participant’s shall be listed on Addendum A hereto, as it may be amended from time to time.

“Potential Change of Control” shall mean the date as of which: (a) the Company enters into an agreement the consummation of which, or the approval by shareholders of which, would constitute a Change of Control; (b) proxies for the election of Directors of the Company are solicited by anyone other than the Company; (c) any person (including, but not limited to, any individual, partnership, joint venture, corporation, association or trust) publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change of Control; or (d) any other event occurs which is deemed to be a Potential Change of Control by the Board and the Board adopts a resolution to the effect that a Potential Change of Control has occurred.

“Performance Cycle” or “ Cycle” means each three-year period, as determined by the Committee, during which the performance of the Company is measured for the purposes of

determining the extent to which the Performance Awards which have been contingently allotted for such Cycle may be earned. The term shall include any year within a Cycle when the Committee has established Performance Goals and the related Performance Award opportunities for the individual years that comprise a Cycle.

“Performance Goals” means the objectives for the Company established by the Committee for a Performance Cycle, for the purpose of determining the extent to which Performance Awards which have been contingently allotted for such Cycle are earned.

“Performance Award” means the units contingently earned during a Performance Cycle by Participants under this Plan.

“Retirement” and “Retire” means the termination of employment on or after the date the Participant is entitled to receive immediate payments under a qualified retirement plan of the Company or an Affiliate; provided, however, if the Participant is not eligible to participate under a qualified retirement plan of the Company or its Affiliates then such Participant shall be deemed to have retired if his termination of employment is on or after the date such Participant has attained age 55.

“Threshold” means the minimum level of performance in relation to the Performance Goals for which any Performance Award may be earned.

“Total and Permanent Disability” means a condition arising out of injury or disease which the Schweitzer-Mauduit International, Inc. Human Resources Committee determines is permanent and prevents a Participant from engaging in any occupation with his Employer commensurate with his education, training and experience, excluding (i) any condition incurred in military service (other than temporary absence on military leave) if the Participant’s service is not resumed at the end of his military service, (ii) any condition incurred as a result of or incidental to a felonious act perpetrated by the Participant, and (iii) any condition resulting from excessive use of drugs or narcotics or use of illegal drugs or (iv) from willful self-inflicted injury.

4. ADMINISTRATION

The Plan shall be administered by the Committee, which in its absolute discretion, shall have the power to interpret and construe the Plan and to resolve all questions arising thereunder. Any action by the Committee shall be final and conclusive as to all individuals affected thereby.

The Committee shall have sole and complete authority to determine the employees to whom Performance Award opportunities shall be allotted for each Performance Cycle, to determine the basis for measuring the value of such Performance Awards, and to determine the value of such Performance Award opportunities, if any, to be allotted to each Participant. Performance Awards may be based on such unit of value as the Committee may in its sole discretion designate.

The Committee may delegate to any director, officer, or employee such ministerial or administrative duties relating to the Plan as deemed appropriate by the Committee. No member of the Board or of the Committee shall be liable for any act done or omitted to be done by such member or by any other member in connection with the Plan, except for such member’s own willful misconduct or as expressly provided by statute.

5. ELIGIBILITY

The Committee shall, in its sole discretion, specify in writing for each Performance Cycle those officers and employees of the Company or any Affiliate who shall be eligible to participate in the Plan for such Performance Cycle based upon such Participants’ ability to have a substantial impact on the Company’s longer-term results. Only employees of the Company and its Affiliates are eligible to participate in the Plan. Nothing contained in the Plan shall be construed as or be evidence of any contract of employment with any Participant for a term of any length, or as a limitation on the right of the Company to discharge any Participant with or without cause.

6. PERFORMANCE AWARDS AND PERFORMANCE GOALS

Any Performance Award earned by a Participant shall be credited to a bookkeeping account to be maintained by the Company for such Participant. At the start of each Cycle, the Committee shall establish the value of each Performance Award opportunity to be allotted for the Cycle.

The Committee shall establish Performance Goals for each Cycle to accomplish such objectives as the Committee may from time to time determine. Performance Goals may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant, or of an Affiliate, division, operating unit, department, region, function, or other organizational unit within the Company or an Affiliate in which the Participant is employed. The Performance Goals may be made relative to the performance of other corporations or business units of other corporations provided they are Affiliates of the Company. The Performance Goals applicable at the discretion of the Committee to any award to a Participant shall be based on specified and pre-established levels of or growth in one or more of the following criteria:

1.	the price of common stock;
2.	market share;
3.	sales;
4.	unit sales volume;
5.	return on equity, assets, capital or sales;
6.	economic profit;
7.	total shareholder return;
8.	costs;
9.	margins;
10.	earnings or earnings per share;
11.	cash flow;

12.	customer satisfaction;
13.	pre-tax profit;
14.	operating profit;
15.	earnings before interest and taxes;
16.	earnings before interest, taxes, depreciation and amortization;
17.	debt/capital ratio;
18.	revenues from new product development;
19.	percentage of revenues derived from designated lines of business; and
20.	any combination of the foregoing.

If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or an Affiliate, or the manner in which it conducts its business, or other events or circumstances render the Performance Goals unsuitable, the Committee may in its discretion modify such Performance Goals or the related pre-established level of achievement, in whole or in part, as the Committee deems appropriate and equitable, except in the case of a Covered Employee where such action would result in the loss of an exemption of the award or a portion thereof under Section 162(m) of the Code that would otherwise have been available and would have been applicable to exempt all or a portion of the Covered Employee’s compensation from the Section 162(m) limits for the relevant tax year. In such case, the Committee shall not make any modification of the Performance Goals or the pre-established level of achievement applicable to the Covered Employee for the impacted portion of the Performance Cycle.

To recognize a range of Company performance, Participants may earn from 25% to 200% of the Performance Awards allocated to them as specified by the Committee, based upon actual Company performance compared to the specified Performance Goals. At Threshold, 25% of the Performance Award will be earned. No Performance Awards will be earned for performance below Threshold. Target performance will result in a Participant earning 100% of the Performance Award. Outstanding performance will result in a Participant earning 150% of the allocated Performance Award and Maximum performance will result in a Participant earning 200% of the allocated Performance Award.

7. DETERMINATION AND PAYMENT OF PERFORMANCE AWARDS

(a) The Committee shall determine the number of Performance Awards that have been earned by each Participant for the Cycle on the basis of the Company’s performance in relation to the established Performance Goals during the period of performance that has been completed and is being measured.

(b) Performance Awards, if any, earned by a Participant shall be determined independently for each year of a Performance Cycle where the Committee has established Performance Objectives and related Performance Unit opportunities for each year within a Performance Cycle. Performance Awards shall be awarded to the Participant at the end of the year in which they are earned, if an opportunity is established to earn Performance Awards on other than a full Performance Cycle basis, or at the end of the Performance Cycle if the

Committee has established Performance Objectives that are to be determined only at the completion of the Performance Cycle. A Performance Award earned in any one year of the Performance Cycle, where such an opportunity has been established by the Committee, shall not be lost or revoked because Performance Objectives are not achieved in any other year during such Performance Cycle or because an additional Performance Objective established for the entire Performance Cycle is not met.

As to Participants that are not also Covered Employees:

(c) Payment in respect of the Performance Awards which are earned by a Participant shall be made in one lump sum in cash in the first calendar quarter following the end of the Performance Cycle for which the Performance Awards were earned or, subject to Section 10, within 60 days following termination of employment in the event of a termination within two years following a Change of Control or due to death or Retirement or following a determination of Total and Permanent Disability by the Company’s Human Resources Committee. The Company shall have the right to deduct from the payment any taxes required by law to be withheld thereon.

(d) Termination of employment for any reason other than Change of Control, death, Retirement or Total and Permanent Disability during a Performance Cycle will result in a forfeiture of any award attributable to performance during the Performance Cycle in which termination occurred. Termination of employment due to death, Retirement or Total and Permanent Disability shall result in the payment of a pro rata portion of the Performance Awards allotted to the Participant that the Participant would have earned if the Participant had remained employed until the end of each Performance Cycle during which such termination occurred. Termination of employment within two years following a Change of Control will result in the payment of a pro rata portion of the Performance Awards allotted to the Participant based upon Target performance. Notwithstanding anything herein to the contrary, in the event a Participant’s employment is involuntarily terminated by the Company or an Affiliate or the Participant is constructively discharged from his employment with the Company or an Affiliate within two years following a Potential Change of Control, such Participant shall be entitled to payment of a pro rata portion of the Performance Awards allotted to the Participant based upon Target performance. For purposes of this Plan, a constructive discharge shall include, but not be limited to, any of the following actions taken by the Company or an Affiliate without the Participant’s written consent following a Potential Change of Control: (a) the assignment of duties inconsistent with, or the reduction of the powers, duties, responsibilities, and prerogatives associated with, the Participant’s position, office, and status with the Company or an Affiliate; (b) a demotion of the Participant or any removal of the Participant from or failure to re-elect or reappoint the Participant to any title or office; (c) a reduction in the Participant’s base salary or bonus potential or the Company’s or an Affiliate’s failure to increase the Participant’s base salary (within 12 months of the Participant’s last increase in base salary); and (d) any other similar actions or inactions by the Company or an Affiliate.

As to Participants that are also Covered Employees:

(e) Payment in respect of the Performance Awards which are earned by a Participant shall be made in one lump sum in cash in the first calendar quarter following the end of the Performance Cycle for which the Performance Awards were earned, subject to Section 8, or, subject to Section 10, within 60 days following termination of employment in the event of a termination within two years following a Change of Control or due to death or following a determination of Total and Permanent Disability by the Company’s Human Resources Committee. The Company shall have the right to deduct from the payment any taxes required by law to be withheld thereon.

(f) Termination of employment for any reason other than Change of Control, death or Total and Permanent Disability during a Performance Cycle will result in a forfeiture of any award attributable to performance during the Performance Cycle in which termination occurred. Termination of employment due to death or Total and Permanent Disability shall result in the payment of a pro rata portion of the Performance Awards allotted to the Participant that the Participant would have earned if the Participant had remained employed until the end of each Performance Cycle during which such termination occurred. Termination of employment within two years following a Change of Control will result in the payment of a pro rata portion of the Performance Awards allotted to the Participant based upon Target performance.

8. TAX TREATMENT OF AWARDS

The Company may, but shall not be required to, seek to qualify this Plan under Code Section 162(m) and for such purpose, the Company’s Human Resources Committee is delegated the authority to amend this Plan to add a Maximum Award provision limiting the cash award payable to any Participant in the plan who is a Covered Employee to the maximum amount permitted by Section 162(m) or any successor section. Notwithstanding anything herein to the contrary, in the event that the Company reasonably anticipates that the payment of a Performance Award as provided in Section 7 would cause the Company’s tax deduction with respect to such payment to be disallowed due to the application of Section 162(m), the payment of all Performance Awards due to be paid to the Participant during such year shall be delayed and paid to the Participant during the Participant’s first taxable year in which the Company reasonably anticipates that the payment during such year will not cause the Company’s deduction to be disallowed by application of Section 162(m). The Participant shall have no election with respect to the timing of the payment under this Section 8.

Participants may elect to defer any Performance Unit payout in accordance with the terms of the Deferred Compensation Plan.

9. MISCELLANEOUS PROVISIONS

(a) Except as provided in this Plan, no right of any Participant shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, attachment, garnishment, execution, levy, bankruptcy, or any other disposition of any kind, whether voluntary or involuntary, prior to actual payment of a Performance Unit award. No Participant or any other person shall have any interest in any fund, or in any specific asset or

assets of the Company, by reason of a Performance Unit award that has been made but has not been paid or distributed.

(b) The Board may, at any time, amend this Plan, order the temporary suspension of its application, or terminate it in its entirety, provided, however, that no such action shall adversely affect the rights or interests of Participants theretofore earned hereunder.

(c) The terms of the Plan shall be governed, construed, administered, and regulated by the laws of the state of Georgia and applicable federal law. In the event that any provision of the Plan shall be determined to be illegal or invalid for any reason, the other provisions shall continue in full force and effect as if such illegal or invalid provision had never been included herein.

10. CODE SECTION 409A

(a) In the event that a Participant is or may be liable for Federal income taxes in the United States, for purposes of this Plan a termination of his or her employment shall be deemed to occur only upon the Participant’s “separation from service,” as such term is defined in Code Section 409A (without giving effect to any elective provisions that may be available under such definition).

(b) Notwithstanding anything in this Plan to the contrary, in the event that a Participant is or may be liable for Federal income taxes in the United States and if any amount or benefit specified herein as “subject to Section 10” would be payable or distributable under this Agreement by reason of the Participant’s separation from service at a time at which he is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by Employer under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes), the Participant’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service.

(c) For purposes of this Plan, the term “Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder (“Final 409A Regulations”), in accordance with rules adopted by the Board of Directors or a committee thereof, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of Employer, including this Agreement, as to the determination of Specified Employees.

Exhibit 10.10

SUPPLEMENTAL BENEFIT PLAN TO THE
SCHWEITZER-MAUDUIT INTERNATIONAL, INC. RETIREMENT PLAN

Effective as of December 1, 1995

Amended and Restated as of November 21, 2003

Further Amended and Restated as of December 4, 2008

1. Use of Defined Terms. Capitalized terms used herein have the respective meanings ascribed to such terms as set forth in Section 5 below.

2. Purpose. The Supplemental Benefit Plan is for the purpose of providing Participants and their Survivors with such benefits, in addition to the Retirement Plan, as are necessary to fulfill the intent of the Retirement Plan without regard to Section 415 and Section 401(a)(17) of the Code. It is intended that the Supplemental Benefit Plan constitute an unfunded plan of deferred compensation for a select group of management or highly compensated employees, within the meaning of Title I of ERISA.

3. Benefit. The Benefit of a Participant or a Survivor under the Supplemental Benefit Plan shall be the difference between:

(a) the monthly amount payable under the Retirement Plan, which monthly amount shall be calculated (i) without regard to Article XI of the Retirement Plan,(ii) without regard to amounts stated in Appendix D to Schedule 1 of the Retirement Plan and (iii) using the term Earnings defined as set forth in Section 5(e) of the Supplemental Benefit Plan below; less

(b) the monthly amount payable under the Retirement Plan (“accrued benefit”).

(c) the accrued benefit (sum of (a) minus (b)) shall be converted to a lump sum effective December 31, 2008 based on the following factors:

(i) RP 2000 white collar mortality table projected 10 years

(ii) discount rate of 5.6% which generates a lump sum payout equal to the current accrued liability as of December 31, 2008

4. Amendment and Termination. The Company, by action of its Board of Directors, may amend the Supplemental Benefit Plan in any respect, or terminate the Supplemental Benefit Plan at any time; provided, however, that no such amendment or termination shall be effective to the extent it adversely impacts the Benefit of any Participant or Survivor accrued as of the effective date of such amendment or termination.

5. Definitions. The following capitalized terms shall have the respective meanings set forth below:

(a) “Benefit” shall mean a benefit payable pursuant to, and determined in accordance with the provisions of the Supplemental Benefit Plan.

(b) “ Code” shall mean the Internal Revenue Code of 1986, as amended.

(d) “ Committee” shall mean the Committee named under the Retirement Plan.

(e) “ Earnings” shall be determined in accordance with the provisions of Article X of the Retirement Plan without regard to any limitation under Section 401(a)(17) of the Code.

(f) “ Employer” shall mean the Company or any participating employer shown in Appendix A to the Retirement Plan.

(g) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(h) “Participant” shall mean a participant in the Retirement Plan who (i) is a member of a “select group of management or highly compensated employees” of the Company, within the meaning of Title I of ERISA, and (ii) has earnings in excess of the limit provided under Section 401(a)(17) of the Code for any calendar year in which the Participant participates in Schedule 1 of the Retirement Plan, except that no individual shall be a participant herein to the extent that such participation in this Supplemental Benefit Plan would prevent this Supplemental Benefit Plan from being maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees, or is precluded by an agreement between the Company and such individual.

(i) “ Retirement Plan” shall mean the Schweitzer-Mauduit International, Inc. Retirement Plan, or any successor defined benefit pension plan.

(j) “ Supplemental Benefit Plan” shall mean this Supplemental Benefit Plan to the Schweitzer-Mauduit International, Inc. Retirement Plan.

(k) “ Survivor” or “Beneficiary” shall refer to the beneficiary designated by the Participant.

6. Miscellaneous

(a) The Company is the Plan Sponsor of this Supplemental Benefit Plan, within the meaning of ERISA.

(b) The Committee shall administer the Supplemental Benefit Plan and shall have all such powers and duties in its discretion as may be necessary to discharge its duties, including, but not limited to, the power to construe and interpret the Supplemental Benefit Plan, determine all questions of

eligibility, and compute the amount and determine the method of payment of any Benefits hereunder.

(c) Notwithstanding anything herein to the contrary, in connection with the amendment and restatement of this Plan, and as permitted under Section 409A of the Internal Revenue Code of 1986, as amended, each Participant shall be given the opportunity to submit an election (the “Special Distribution Election”) prior to December 31, 2008, to receive a special distribution of the amounts payable to the Participant under the Supplemental Benefit Plan, as determined under Section 3 (the “Distribution Amount”). In the event the Participant timely submits a Special Distribution Election, the Participant’s Distribution Amount shall be paid to him or her in a lump sum on July 1, 2009 or in three equal annual installments commencing July 1, 2009 and on each anniversary thereof, as the Participant shall have elected. If the Participant fails timely to submit a Special Distribution Election, the Participant’s Distribution Amount shall be paid to him or her in lump sum on July 1, 2009. Accordingly, following this amendment and restatement, the amounts paid under the Supplemental Benefit Plan shall no longer be paid at the same times or pursuant to the same elections made by the Participant, as they would have been paid under the Retirement Plan, were it not for the limitation on benefits under Code Sections 415 and 401(a)(17).

(d) An application or claim for a benefit under the Retirement Plan shall constitute a claim for a Benefit under the Supplemental Benefit Plan. In the event a claim for a Benefit under the Supplemental Benefit Plan is denied, a Participant or Survivor shall be entitled to request a review of such denied claim in accordance with the provisions of Section 6.8 of the Retirement Plan.

(e) The Supplemental Benefit Plan shall not be a funded plan, and the Company shall be under no obligation to set aside any funds for the purpose of making payments under this Plan. Any payments hereunder shall be made out of the general assets of the Company.

(f) Subject to the provisions of Section 4, the Supplemental Benefit Plan shall automatically terminate when the Retirement Plan terminates.

(g) There shall be deducted from the payment of any Benefits due a Participant or a Survivor under the Supplemental Benefit Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Company or other person or entity paying Benefits under this Supplemental Benefit Plan to such governmental authority for the account of the Participant or Survivor entitled to such payment.

(h) Neither the Participant, his Survivor, nor his legal representative shall have any rights to sell, assign, transfer, or otherwise convey the right to receive the payment of any portion or all of the Benefits payable hereunder. Any attempt to assign or transfer the right to Benefit payments under this Supplemental Benefit Plan shall be null and void and of no effect.

(i) Participation hereunder shall not be construed as creating any contract of employment between the Company and a Participant, nor shall it limit the right of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship between the Company and a Participant.

(j) This Supplemental Benefit Plan shall be construed in accordance with the laws of the State of Georgia, to the extent such laws are not otherwise superseded by the laws and the United States.

IN WITNESS WHEREOF, the Corporation has adopted this SUPPLEMENTAL BENEFIT PLAN TO THE SCHWEITZER-MAUDUIT INTERNATIONAL, INC. RETIREMENT PLAN as amended and restated herein.

By:

	Wayne H. Deitrich
	Chairman of the Board and Chief Executive officer

Exhibit 10.11

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

EXECUTIVE SEVERANCE PLAN

Amended and Restated -

As of December 4, 2008

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

EXECUTIVE SEVERANCE PLAN FOR KEY EMPLOYEES

AMENDED AND RESTATED AS OF DECEMBER 4, 2008

ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN

1.1 Adoption of Plan . Schweitzer-Mauduit International, Inc. (“Company”) hereby amends and restates the Schweitzer-Mauduit International, Inc. Executive Severance Plan as of February 24, 2000. The Company intends that this Plan qualify as and come within the various exceptions and exemptions under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, for an unfunded plan maintained primarily for a select group of management or highly compensated employees, and any ambiguities in this Plan shall be construed to effect that intent. The benefits of this Plan for U.S. Employees (as hereinafter defined) shall be paid solely from the general assets of the Company. The benefits of this Plan for French Employees (as hereinafter defined) shall be paid by the French Employer (as hereinafter defined) but, if as a result of applicable French laws, a French Employer would be prohibited from paying the benefits of this Plan to a French Employee, any such benefits shall be paid by the Company to such French Employee.

1.2 Purpose. The Plan is primarily designed to provide benefits to certain Key Employees (as hereinafter defined) upon termination of employment as a result of a Change of Control or otherwise.

1.3 Effect on Other Plans Sponsored by the Company or by a French Employer . The benefits payable under the Plan are in addition to the coverage and benefits generally afforded by Other Plans (as hereinafter defined) to Key Employees terminating from the

service of the Company or, as the case may be, from the service of a French Employer and any other programs sponsored by the Company or provided to Participants who are French Employees including, but not limited to, vested benefits under any qualified employee benefit plans. However, nothing herein is intended to or shall be construed to require the Company or a French Employer to institute or continue in effect any particular plan or benefit sponsored by the Company or such French Employer, and the Company and each French Employer hereby reserve the right to amend or terminate any of their Other Plans or benefit programs at any time in accordance with the procedures set forth in each such plan or program and any applicable law.

The masculine pronoun shall be construed to include the feminine pronoun and singular shall include the plural where the context so requires.

ARTICLE 2 - DEFINITIONS

2.1 “ Administrator ” shall mean the Compensation Committee of the Board. Following a Change of Control, the Administrator shall be the Trustee of a grantor trust established by the Company that includes this Plan.

2.2 “ Agreement ” shall mean the participation agreement provided to a Key Employee by the Administrator as provided in Section 3.2.

2.3 “ Annual Compensation ” shall mean:

a) For U.S. Employees, a Participant’s rate of base salary paid or payable for a calendar year by the Company and any incentive award paid or payable to such Participant pursuant to the Schweitzer-Mauduit International, Inc. Annual Incentive Plan (the “SMI Annual Incentive Plan”) or any replacement or successor to such plan for such calendar year.

b) For French Employees, a Participant’s rate of base salary paid or payable for a calendar year by his French Employer, plus any incentive award paid or payable to such Participant pursuant to the SMI Annual Incentive Plan or any replacement or successor to such plan for such calendar year, plus any profit-sharing paid or payable by his French Employer attributable to such calendar year minus the aggregate amount of (i) any Convention Collective payments, (ii) Assedic Payments, or (iii) private insurance payments paid or payable to such Participant as a result of a Change of Control Termination.

2.4 “ Basic Plan ” shall mean the Securite Sociale retirement benefit plan sponsored by the French Government.

2.5 “ Board ” shall mean the Board of Directors of Schweitzer-Mauduit International, Inc.

2.6 “ Cause ” shall mean the termination of the Participant’s employment by the Company or by his French Employer, as the case may be, on the basis of criminal or civil fraud on the part of the Participant.

2.7 “ Change of Control ” shall mean the date as of which: (a) a third person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, acquires actual or beneficial ownership of shares of the Company having 15% or more of the total number of votes that may be cast for the election of Directors of the Company; or (b) as the result of any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a “Transaction”), the persons who

were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company.

2.8 “ Change of Control Termination ” shall mean the termination of a Participant’s employment by the Company or his French Employer, as the case may be, within two years of a Change of Control for any reason other than for Cause, Retirement, Disability or the Participant’s death.

2.9 “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

2.10 “ Company ” shall mean Schweitzer-Mauduit International, Inc. and each of its successors and assigns.

2.11 “ Complementary Plan ” shall mean the national pension plans for French Employees and workers sponsored by the Association des Régimes de Retraite Complémentaires (“ARRCO”) and the Association Généralé des Institutions de Retraite des Cadres (“AGIRC”), respectively.

2.12 “ Disability ” shall mean Totally and Permanently Disabled, within the meaning of the Retirement Plan, provided that the Administrator shall make any such determination with respect to a Participant hereunder.

2.13 “ French Employee ” shall mean an individual employed by one of the French Employers.

2.14 “ French Employer(s) ” mean Schweitzer-Mauduit France, S.A.R.L. or LTR Industries, S.A., and their respective successors and subsidiaries.

2.15 “ French Supplementary Plans ” shall mean the supplementary pension benefit plans provided, respectively, by Papeteries de Mauduit, S.A. and LTR Industries, S.A. to their employees.

2.16 “ Key Employee ” shall mean an individual who is a member of a select group of management or highly compensated French Employees and/or U.S. Employees, as determined from time to time by the Administrator.

2.17 “ Other Plans ” shall mean other plans of the Company or of the French Employer, including but not limited to the Schweitzer-Mauduit International, Inc. Annual Incentive Plan, the Schweitzer-Mauduit International, Inc. Equity Participation Plan, the Schweitzer-Mauduit International, Inc. Long-Term Incentive Plan, Schweitzer-Mauduit International, Inc. Restricted Stock Plan, Schweitzer-Mauduit International, Inc. Deferred Compensation Plan.

2.18 “ Participant ” shall mean a Key Employee who has entered into an Agreement with the Administrator in accordance with Section 3.2.

2.19 “ Plan ” shall mean this Schweitzer-Mauduit International, Inc. Executive Severance Plan.

2.20 “ Retirement ” shall mean

a) For U.S. Employees, the voluntary termination of the Participant’s employment by the Company pursuant to the terms of the qualified defined benefit pension plan of the Company, which termination was initiated by such Participant in writing pursuant to the procedures of such qualified defined benefit pension plan prior to a Change of Control notwithstanding the Participant’s actual retirement date occurs after a Change of Control.

b) For French Employees, the voluntary termination of the Participant’s employment by his French Employer as a result of such Participant’s retirement pursuant to the terms of the Basic Plan, the Complementary Plan and, if applicable, the French Supplementary Plan, which termination was initiated by

such Participant in writing pursuant to the procedures of such Basic Plan, Complementary Plan and, if applicable, French Supplementary Plan prior Change of Control, notwithstanding that the Participant’s actual retirement date occurs after a Change of Control.

2.21 “ Retirement Plan ” shall mean the Schweitzer-Mauduit International, Inc. Retirement Plan, as amended and restated as of July 1, 2000 and including amendments 2001-1, 2001-2, 2002-2 and 2003-1. For clarity and to avoid confusion, the term Retirement Plan for the purposes of this Plan shall not refer to or include the terms of any amendment of the Retirement Plan impacting the benefits of a participant therein made subsequent to July 1, 2000 other than those specifically identified hereinabove.

2.22 [Reserved]

2.23 “ U.S. Employee ” shall mean individuals employed by the Company.

2.24 “ Voluntary Resignation ” shall mean termination of a Participant’s employment with the Company or the French Employer(s) as a result of a resignation initiated by the Participant which is unrelated to any act or omission of the Company or the French Employer, as the case may be, which could not reasonably be construed to be a constructive discharge of such Participant.

2.25 “ Deferred Compensation Plan ” shall mean the Schweitzer-Mauduit International, Inc. Deferred Compensation Plan, amended and restated as of February 26, 2004, and the Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2, effective as of January 1, 2005.

ARTICLE 3 - ELIGIBILITY

3.1 Eligibility to Participate. The Administrator shall from time to time determine in writing the Key Employees who are eligible to participate in this Plan. A list of current Participants shall be set forth on Appendix A hereto, as updated by the Committee from time to time.

3.2 Agreement . The Administrator shall enter into a participation agreement with each Key Employee the Administrator determines to be eligible for participation in this Plan. Such Agreement shall identify the Key Employee as a Participant in this Plan and shall contain such terms as deemed appropriate by the Administrator, but shall be consistent with and governed by the terms of this Plan.

ARTICLE 4 - SEVERANCE BENEFITS

4.1 Termination Following Change of Control. A Participant shall be entitled to receive benefits under this Plan following a Change of Control as follows:

a) Subject to Section 4.1 (b), a Participant’s employment with the Company or his French Employer, as the case may be, shall terminate within two years of a Change of Control for any reason other than for Cause, Retirement, Disability or the Participant’s death.

b) A Participant that has been requested in writing by the Company or the French Employer, as the case may be, to continue in the employment of the Company or the French Employer through a specified date, which shall not be more than six (6) months from the date of a Change of Control, under terms and conditions of employment, at the place of employment and with the same salary and benefits that the Participant was provided prior to the Change of Control, shall have

satisfied such request by remaining in the employment of the Company or the French Employer for the specified period.

c) A Participant entitled to benefits under this Plan shall receive and the Company or, subject to the provisions of Section 1.1, the French Employer, as the case may be, shall pay or, with respect to certain benefits hereinafter described, shall cause to be paid to the Participant the following benefits:

(1) an amount equal to three times the Participant’s highest Annual Compensation for any calendar year beginning with or within the three-year period terminating on the date of termination of the Participant’s employment, which amount shall be paid to the Participant in cash on or before the fifth day following the date of termination, subject to Section 8.2;

(2) for a period of three years following the date of termination of employment, the Participant and anyone entitled to claim under or through the Participant shall be entitled to benefits as follows:

(i) For U.S. Employees, all benefits under the group health care plan, dental care plan, life or other insurance or death benefit plan, or other present or future similar group employee benefit plan or program of the Company for which key executives are eligible at the date of a Change of Control, to the same extent as if the Participant had continued to be an employee of the Company during such period and such benefits shall, to the extent not fully paid under any such plan or program, be paid by the Company; and

(ii) for French Employees, all medical and dental benefits provided by

“Social Securite”, medical, dental and life insurance or death benefit plans, or other present or future similar medical, dental, life or other insurance or death benefit plans or programs generally available to French Employees for which such Participant is eligible at the date of the Change of Control, to the same extent as if the Participant had continued to be a French Employee during such period and such benefits shall, to the extent not fully paid under any such plan or program, be paid by the French Employer;

(iii) notwithstanding the foregoing, in the event that a Participant is or may be liable for Federal income taxes in the United States, (A) during such three-year period, the benefits provided (or the amounts paid by the Company with respect to such benefits) in any one calendar year shall not affect the amount of benefits (or amounts paid with respect to such benefits) provided in any other calendar year; (B) the reimbursement of an eligible taxable expense shall be made as soon as practicable but not later than December 31 of the year following the year in which the expense was incurred; and (C) the Participant’s rights pursuant to this Section 4.1(c)(2) shall not be subject to liquidation or exchange for another benefit.

(3) for a U.S. Employee, a lump sum payable in cash on or before the fifth day following the date of termination, subject to Section 8.2, equal to:

(i) for a U.S. Employee Participant in the final average pay benefit formula under the Retirement Plan an amount equal to the

Actuarial Equivalent (as defined in the Retirement Plan) of the accrued benefit the Participant would have earned under the Retirement Plan for the three-year period following the date of termination of his employment with the Company based on the Participant’s earnings in effect for purposes of the Retirement Plan on the date of such termination.

(ii) for a U.S. Employee Participant in the cash balance benefit formula under the Retirement Plan an amount equal to the actual dollar amount of the accrued benefit the Participant would have earned under the Retirement Plan for the three-year period following the date of termination of his employment with the Company based on the Participant’s earnings in effect for purposes of the Retirement Plan on the date of such termination. Such amounts shall include any amounts payable in the form of Excess Retirement Benefit contributions into the Deferred Compensation Plan, as such term is defined in the Deferred Compensation Plan.

(4) for French Employees, a lump sum equal to the sum of the following amounts which sum shall be payable in cash on or before the tenth day following the date of termination, subject to Section 8.2:

(i) the cost of purchasing any pension credits lost by a Participant under the Basic Plan as a result of a Change of Control Termination, but in no event shall the pension credits so purchased exceed 12 quarters of pension credits;

(ii) a lump sum equal to (x) the purchase price of any pension credits lost by a Participant under the Complementary Plan plus (y) the present value of any portion of lost pension credits which may not be purchased back from the Complementary Plan, each as a result of a Change of Control Termination provided , however, that in no event shall such lost Complementary Plan benefits exceed the present worth of three years of such lost pension benefits; and

(iii) for pension benefits lost under the French Supplementary Plan as a result of a Change of Control Termination, payment of a lump sum calculated as follows:

a) if the Participant is terminated between ages 62 and 65, a lump sum equal to the present worth of the difference between the pension benefits the Participant would have received at age 65 absent the Change of Control Termination and the reduced pension benefit such Participant will receive at age 65 as a result of such termination;

b) if the Participant is terminated between ages 60 and 62, payment of a lump sum as calculated in (a) above multiplied by the ratio of A to B where A = three years and B = the number of years between the Change of Control Termination and attainment of age 65.

c) if the Participant is terminated before age 60 or with less than 20 years service with a French Employer, a lump sum equal to the present worth of the pension benefit the Participant would have received at age 65, absent the Change of Control Termination multiplied by the ratio of A to B where A = three years and B = the number of years between the Change of Control Termination and the date on which the Participant would attain age 65 provided, however, that no such lump sum shall be payable unless such Participant could have earned 20 years service with a French Employer on or before attainment of age 65, absent a Change of Control Termination.

d) If a Participant is or may be liable for Federal income taxes in the United States, such Participant’s Agreement shall provide that the parties agree that the payments provided in Section 4.1(a) hereof are reasonable compensation in light of the Participant’s services rendered to the Company or the French Employer, as the case may be, and that neither party shall contest the payment of such benefits as constituting an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code.

e) In the event that (i) the Participant becomes entitled to the compensation and benefits described in Section 4.1(a) hereof (“Compensation Payments”), (ii) the Company determines, based upon the advice of tax counsel selected by the Company’s independent auditors and acceptable to the Participant, that, as a result of such Compensation Payments and any other benefits or payments required to be taken into account under Code Section 280G(b)(2) (“Parachute Payments”), any of such Parachute Payments must be reported by the Company as “excess parachute payments”, and (iii) such Parachute Payments are 3.5 or more times the “base amount” as defined in Code Section 280G(b)(3) with respect to such Participant (“Base Amount”), the Company shall pay to the Participant at the time specified in Section 4.1(a) above (and in no event later than December 31 of the year after the year in which the related taxes are remitted to the applicable taxing authorities) an additional amount (“Gross-Up Payment”) such that the net amount retained by the Participant, after deduction of any of the tax imposed on the Participant by Section 4999 of the Code (“Excise Tax”) and any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to the Parachute

Payments determined prior to the application of this paragraph. The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors, or another independent accounting firm selected by the Company. For purposes of determining the amount of the Gross-Up Payment, the Participant shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Participant’s residence on the date of termination of his employment, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax payable by the Participant is subsequently determined to be less than the amount, if any, taken into account hereunder at the time of termination of the Participant’s employment, the Participant shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction plus interest on the amount of such repayment at the rate provided for in Section 1274(b)(2)(B) of the Code

(“Repayment Amount”). In the event that the Excise Tax payable by the Participant is determined to exceed the amount, if any, taken into account hereunder at the time of the termination of the Participant’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalty payable with respect to such excess) immediately prior to the time that the amount of such excess is required to be paid by Participant (regardless of any contest of such payment pursuant to Section 4.1(e)) (“Additional Gross-up Payment”), such that the net amount retained by the Participant, after deduction of any Excise Tax on the Parachute Payments and any Federal, state and local income tax and Excise Tax upon the Additional Gross-Up Payment, shall be equal to the Parachute Payments determined prior to the application of this paragraph. In the event that the Excise Tax payable by the Participant is subsequently determined to be less than the amount of the Additional Gross-up Payment paid to the participant, the Participant shall repay to the Company at the time that the amount of such reduction in the Additional Gross-up

Payment is determined the portion of the Additional Gross-up Payment attributable to such reduction plus interest on the amount of such repayment at the rate provided for in Section 1274(h)(2)(B) of the Code (“Additional Repayment Amount”). The obligation to pay any Repayment Amount, Additional Gross-up or Additional Repayment Amount shall remain in effect under this Agreement for the entire period during which the Participant remains liable for the Excise Tax, including the period during which any applicable statute of limitation remains open.

f) In the event the Participant’s Parachute Payments are less than 3.5 times the Base Amount, the Company shall limit the Compensation Payments provided hereunder to the extent necessary so that the Participant’s Parachute Payments do not exceed 2.99 times the Base Amount. Such limitation of payments shall be determined in such a manner as to maximize the economic present value of the payments actually made to the Participant, determined by the the accounting firm as of the date of the Change in Control using the discount rate required by Section 280G(d)(4) of the Code.

g) Unless the Company determines that any Parachute Payments made hereunder must be reported as “excess parachute payments” in accordance with Section 4.1(c) above, neither party shall file any return taking the position that the payment of such benefits constitutes an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code. If the Internal Revenue Service proposes an assessment of Excise Tax against the Participant in excess of the amount, if any, taken into account at the time specified in Section 4.1(c) and the Company notifies the Participant in writing that the Company elects to contest such assessment at its own expense, the Participant shall cooperate in good faith with the Company in contesting such proposed assessment and agrees not to settle such contest without the written consent of the Company. Any such contest shall be controlled by the Company, provided, however, that the Participant shall have the right to participate in such contest. Notwithstanding the Company’s election to contest the assessment of an Excise Tax, the Participant shall be entitled to an Additional Gross-Up Payment under Section 4.l(c) at the time set forth therein.

4.2 Termination of Employment . If a Participant’s employment with the Company or his French Employer shall terminate during the term of his Agreement for any reason other than death, Retirement, Voluntary Resignation or Cause, the Company or (if such payment is not inconsistent with any relevant French law) his French Employer, shall pay the Participant or the Participant’s beneficiary, as the case may be, in cash a lump sum payment in the amount set forth in the Agreement with such Participant under this Plan within 30 days of his termination of employment. Such amount shall be set forth on Appendix A hereto and shall not be more than the Participant’s monthly base salary multiplied by 24. No benefits shall be payable pursuant to this Section 4.2 in the event a Participant is entitled to severance payments under Section 4.1 hereof.

ARTICLE 5 - ADMINISTRATION

5.1 Administrator. The Administrator is responsible for the general administration of the Plan.

5.2 Duties of the Administrator. The Administrator shall be responsible for the daily administration of the Plan and may appoint other persons or entities to perform or assist in the performance of any of its duties, subject to its review and approval. The Administrator shall have the right to remove any such appointee from his position without cause upon notice.

5.3 Powers. The Administrator shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan as more particularly set forth herein. The Administrator shall have discretionary authority to interpret the Plan, and to determine all questions arising in the administration, interpretation, and application of the Plan; provided, however, that such discretionary authority shall be exercised in good faith in order to

achieve the principal purposes of the Plan to provide severance benefits, including enhanced severance benefits upon a Change of Control, as described in Article 4. All such determinations shall be conclusive and binding on all interested persons. The Administrator shall adopt such procedures and regulations necessary and/or desirable for the discharge of its duties hereunder and may appoint such accountants, counsel, actuaries, specialists, and other agents as it deems necessary and/or desirable in connection with the administration of this Plan.

5.4 Compensation of the Administrator. The Administrator shall not receive any compensation from the Plan for its services.

5.5 Indemnification . The Company shall indemnify the Administrator against any and all claims, losses, damages, expenses, and liability arising from its actions or omissions, except when the same is finally adjudicated to be due to the Administrator’s gross negligence or willful misconduct. The Company may purchase at its own expense sufficient liability insurance for the Administrator to cover any and all claims, losses, damages, and expenses arising from any action or omission in connection with the execution of the duties as the Administrator.

ARTICLE 6 - SUCCESSOR TO THE COMPANY

6.1 The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely and unconditionally to assume this Plan and agree to perform the obligations of the Company under this Plan and each Participant’s Agreement in the same manner and to the same extent that the Company would be required to perform such obligations if no such succession or assignment had taken place.

ARTICLE 7 - MISCELLANEOUS

7.1 Funding of Benefits. The benefits payable to a Participant under the Plan shall not be funded in any manner and shall be paid by the Company or the French employer, as the case may be, out of its general assets, which assets are subject to the claims of the Company’s or the French Employer’s creditors.

7.2 Establishment of Trust.

a) The Company may establish a Grantor Trust (“Trust”) for the Plan. If established, all benefits payable under this Plan to a Participant shall be paid directly by the Company from the Trust. To the extent that such benefits are not paid from the Trust, the benefits shall be paid from the general assets of the Company and shall be reimbursed to the Company by the Trust at the Company’s request upon presentation of reasonable proof that the Company made such payment. Any Trust shall be an irrevocable grantor trust which conforms the requirements of the model trust as described in IRS Revenue Procedure 92-64, I.R.B. 1992-33. The assets of the Trust are subject to the claims of the Company’s creditors in the event of its insolvency. Except as to any amounts paid or payable to a Trust, the Company shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan, and the Participant shall not have any property interest in any specific assets of the Company other than the unsecured right to receive payments from the Company, as provided in this Plan.

b) Payment From the Trust. In the event a Trust is established and payments are not made by the Company in accordance with the terms of the Plan, a Participant may petition the trustee of the Trust directly for payment and the trustee may make

such payment directly to the Participant upon the trustee’s good faith determination that the payment was in fact owed, was not timely paid by the Company and that there are sufficient assets in the Trust to make the payment.

7.3 Settlement of Accounts. Except as prohibited by applicable law, there shall be deducted from the payment of any benefit due under the Plan the amount of any uncontested indebtedness, obligation, or liability which the Participant has acknowledged in writing as owing to the Company or the French Employer as the case may be, or any of their respective subsidiaries and the amount of which has been agreed to by the Participant.

7.4 Withholding. There shall be deducted from the payment of any benefit due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Company or the French Employer, as the case may be, to such governmental authority for the account of the Participant entitled to such payment.

7.5 Assignment by the Participant . Unless required by court order, no Participant or beneficiary shall have any rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect.

7.6 Amendment and Termination. The Plan may be amended or terminated at any time by the Company, by resolution of the Board; provided that no termination or amendment reducing the severance benefits provided hereunder shall be effective until the expiration of the two-year period following the date of the Board resolution providing for such termination. Further, no amendment or termination shall be effective during the two-year period following the date of a Change of Control of the Company without the consent of all the Participants. Any

termination of this Plan shall cause the immediate termination of all outstanding Agreements hereunder. No amendment or termination shall affect the rights of any Participant who is entitled to severance benefits pursuant to Article 4 at the time of such amendment or termination.

7.7 No Guarantee of Employment. Participation hereunder shall not be construed as creating any contract of employment between the Company or a French Employer and any Key Employee, nor shall it limit the right of the Company or such French Employer to terminate a Key Employee’s employment at any time for any reason whatsoever.

7.8 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent such laws are not otherwise superseded by the laws of the United States.

ARTICLE 8 — CODE SECTION 409A

8.1 Separation from Service. In the event that a Participant is or may be liable for Federal income taxes in the United States, for purposes of this Plan a termination of his or her employment shall be deemed to occur only upon the Participant’s “separation from service,” as such term is defined in Code Section 409A (without giving effect to any elective provisions that may be available under such definition).

8.2 Additional Requirements Regarding Payments and Benefits. Notwithstanding anything in this Plan to the contrary, in the event that a Participant is or may be liable for Federal income taxes in the United States and if any amount or benefit specified herein as “subject to Section 8.2” would be payable or distributable under this Plan by reason of the Participant’s separation from service at a time at which he is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by Employer under Treas. Reg. Section 1.409A-3(j)(4)(ii)

(domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):

(a) if the payment or distribution is payable in a lump sum, the Participant’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service; and

(b) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participant’s separation from service will be accumulated and the Participant’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service, whereupon the accumulated amount will be paid or distributed to the Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume.

8.2 Specified Employee . For purposes of this Plan, the term “Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder (“Final 409A Regulations”), in accordance with rules adopted by the Board of Directors or a committee thereof, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of Employer, including this Plan, as to the determination of Specified Employees.

APPENDIX A

Participants in the

Schweitzer-Mauduit International, Inc.

Executive Severance Plan and Number of

Months of Base Salary Pursuant to

Section 4.2 of the Plan

		Number of Months of
		Participant’s Base Salary in the
		Event of Termination, Pursuant to
Name		Section 4.2 of the Plan

Chief Executive Officer		24
Secretary and General Counsel		12
Chief Operating Officer		12
Chief Financial Officer and Treasurer		12
President — European Operations		12
President — the Americas		12
Vice President - Administration		12
Vice President Strategic Planning		12
Controller		6

Exhibit 10.15

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN NO. 2
FOR NON-EMPLOYEE DIRECTORS
Effective as of January 1, 2005
Amended and Restated as of January 1, 2005

Further Amended and Restated as of December 4, 2008

Article I – Purpose and Participation

The purpose of the Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2 for Non-Employee Directors (“Plan”) is to enhance the ability of Schweitzer-Mauduit International, Inc. (“SWM”) to attract and retain as members of its Board of Directors (“Board”) individuals of outstanding competence.

Article II – Definitions

As used within this document, the following words and phrases have the meanings described in this Article II unless a different meaning is required by the context. Some of the words and phrases used in the Plan are not defined in this Article II, but for convenience, are defined as they are introduced into the text. Words in the masculine gender shall be deemed to include the feminine gender. Any headings used are included for ease of reference only, and are not to be construed so as to alter any of the terms of the Plan.

Section 2.1 Annual Deferral . The amount of the annual retainer or meeting fees which the Director elects to defer in each Deferral Period pursuant to Article 3.2 of the Plan.

Section 2.2 Beneficiary . An individual or entity designated by a Participant in accordance with Section 8.11.

Section 2.3 Board or Board of Directors . The Board of Directors of the Corporation.

Section 2.4 Change of Control . For the purposes of this Plan, a Change of Control shall mean the condition that exists if at any time any of the following events shall have occurred with respect to the Corporation: (a) “change in the ownership” of the Corporation; (b) a “change in the effective control” of the Corporation; or (c) a “change of the ownership of a substantial portion of

the assets” of the Corporation, all as defined in Treasury Regulations § 1.409A-3(i)(5). Notwithstanding any other provision herein, a change in the ownership, a change in the effective control, or a change in the ownership of a substantial portion of the assets, of the Corporation or another Employer shall not constitute a “Change in Control,” for purposes of this Plan, unless such transaction also represents a change in the ownership, a change in the effective control, or a change in the ownership of a substantial portion of the assets, of Schweitzer-Mauduit International, Inc.

Notwithstanding the foregoing, in the event that the regulations of the Secretary of the Treasury defining a “change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation” for purposes of Section 409A of the Code are more restrictive than the foregoing definition, then the definition in the Treasury Regulations shall be substituted for the foregoing definition of Change of Control.

Section 2.5 Code . The Internal Revenue Code of 1986. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes such section.

Section 2.6 Committee . The Compensation Committee of the Corporation’s Board of Directors.

Section 2.7 Corporation . Schweitzer-Mauduit International, Inc.

Section 2.8 Deferral Accounts . The Stock Unit Account and the Investment Account established for each Director participating in this Plan pursuant to Sections 4.2 and 4.3, respectively, of the Plan.

Section 2.9 Deferral Election . The election made by the Director pursuant to Section 3.2 of the Plan.

Section 2.10 Deferral Period . The Plan Year, or in the case of a new Director elected during a Plan Year, the remaining portion of the Plan Year. In the case of the first Plan Year, the Deferral Period commences January 1, 2005 and ends December 31, 2005.

Section 2.11 Disability . A Director shall be considered to have experienced a “Disability” or to be disabled, for purposes of this Plan, if the Director (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Corporation.

Section 2.12 Effective Date . January 1, 2005.

Section 2.13 Fair Market Value . Shall have the meaning given to such term in Section 4.2.

Section 2.14 IRS . The Internal Revenue Service.

Section 2.15 Plan . The Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2 for Non-Employee Directors.

Section 2.16 Plan Administrator . The Corporation’s Board of Directors or a committee thereof as appointed by the Board from time to time.

Section 2.17 Plan Year . “Plan Year” means the 12-month period beginning each January 1 and ending on the following December 31.

Section 2.18 Rabbi Trust . The trust which the Corporation, as grantor, may establish, in its discretion, as a trust intended to qualify under subpart E, part I, Subchapter J, chapter 1, Subtitle A of the Code as a grantor trust for the Plan.

Section 2.19 Separation from Service . Shall have the meaning assigned to such term in Code Section 409A, Treasury Regulations Section 1.409 A-1(h), as amended, and other applicable regulatory guidance of the IRS.

Section 2.20 Valuation Date . Shall have the meanings, as applicable, given to such term in Sections 5.1, 5.2, 5.3 and 5.4.

Article III – Eligibility and Participation

Section 3.1 Non-employee members of the Board (“Directors”) may elect to defer receipt of all or any portion of earned Director’s annual retainer fees paid in SWM common stock pursuant to the Schweitzer-Mauduit International, Inc. Outside Director Stock Plan into a stock unit account (the “Stock Unit Account”) and Board and committee meeting fees, established by resolution of the Board from time to time and other amounts paid to Directors in cash by the Corporation, into an Investment Account (the “Investment Account”)(collectively, the retainer fees, Board and committee meeting fees and other sums are called “Director’s Compensation” herein). One-quarter of a Director’s annual retainer fee shall be deemed earned on the first business day of each calendar quarter and all Board and committee meeting fees shall be deemed earned on the last business day of the calendar month in which the meeting is attended by the Director.

Section 3.2 A Director must submit a Deferral Election Form to SWM’s Vice President-Administration by December 15 of each year indicating deferrals elected for the following Plan Year in the form attached hereto.

Section 3.3 If any individual initially becomes a Director during a Plan Year, he or she may elect to defer Director’s Compensation to be earned during that Plan Year before attendance at the first Board or committee meeting following election to the Board (and in all events no later than 30 days after election to the Board).

Article IV – Deferred Compensation Accounts

Section 4.1 For record-keeping purposes only, SWM shall maintain a Stock Unit Account and an Investment Account.

Section 4.2 Stock Unit Account . The Stock Unit Account shall consist of fictional shares (“Stock Units”) of SWM par value $0.10 common stock (“Common Stock”) accumulated and accounted for the sole purpose of determining the pay out in shares of Common Stock or the

cash equivalent upon any distribution of benefits under this portion of a Director’s deferred compensation.

Section 4.2.1 One quarter of the Director’s deferred annual retainer fee will be credited to the Stock Unit Account on the first trading day on the New York Stock Exchange (“Trading Day”) of each calendar quarter during the Plan Year to the hypothetical purchase of whole or fractional shares of Common Stock on that day.

Section 4.2.2 For purposes of determining the number of whole or fractional shares of Common Stock which shall be credited to the Stock Unit Account, the hypothetical purchase shall be deemed to be made at Fair Market Value on the date of the hypothetical purchase. For purposes of Section 4.2, effective as of February 22, 2007, Fair Market Value means the closing price of the Common Stock, as reported on the New York Stock Exchange composite tape, on the day immediately preceding the distribution date, or if no such trading in the Common Stock shall have taken place on that day, on the last preceding day on which there was such trading in the Common Stock.

Section 4.2.3 The equivalent of any cash dividends paid with respect to the shares of Common Stock shall be applied on the last business day of the month in which such dividends are paid, based on the hypothetical number of shares of Common Stock in the Stock Unit Account as of the record date for such dividend, to the hypothetical purchase of additional whole or fractional shares of Common Stock at Fair Market Value. The appropriate number of whole or fractional shares shall be credited to the Stock Unit Account.

Section 4.2.4 In the event SWM pays a stock dividend or reclassifies or divides or combines its outstanding Common Stock , then an appropriate adjustment shall be made in the hypothetical number of shares of Common Stock held in the Stock Unit Account.

Section 4.3 Investment Account – As of the end of each calendar month in which a Director would be entitled to payment of Board or committee meeting fees, SWM shall credit to the Investment Account the amount of such meeting fees that were deferred by the Director in the Deferral Election Form submitted for the applicable Plan Year.

Section 4.3.1 Any distribution of benefits from an Investment Account shall be charged to that account as of the date such payment is made by SWM or by the trustee of any Rabbi Trust established by the Corporation for the Plan.

Section 4.4 Earnings and Losses on the Investment Account – The Investment Account balance shall be credited or debited, as the case may be, with deemed net income, gain and loss, including the deemed net unrealized gain and loss based on hypothetical investment directions made by the Participant with respect to the Investment Account on the Deferral Election Form, in accordance with investment options and procedures adopted by the Plan Administrator in its sole discretion, from time to time.

Section 4.5 Hypothetical Nature of Accounts – With respect to each participating Director, the Plan constitutes an unsecured promise by SWM to make the benefit distributions in the future in the amount of the cash account balance in the Investment Account, after adjustment for gains or losses, and for the number of whole or fractional shares of Common Stock in the Stock Unit Account. Any Deferral Account established for a Director under this Plan shall be hypothetical in nature and shall be maintained solely for the Corporation’s record-keeping purposes so that any contributions can be credited and deemed investment earnings and losses on such amounts can be credited (or debited, as the case may be). Neither the Plan, the Investment Accounts (or subaccounts) nor the Stock Unit Account shall hold any actual funds or assets.

Section 4.5.1 The right of any individual or entity to receive one or more payments or distributions of shares of Common Stock under the Plan shall be an unsecured claim against the general assets of the Corporation. Any liability of the Corporation to any Director, former Director, or Beneficiary with respect to a right to payment or distribution shall be based solely upon contractual obligations created by the Plan. The Corporation, the Board of Directors, the Committee, the Plan Administrator and any individual or entity shall not be deemed to be a trustee of any amounts to be paid or shares of Common Stock to be distributed under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Corporation and a Director, former Director, Beneficiary, or any other individual or entity.

Section 4.5.2 The Corporation may, in its sole discretion, establish a Rabbi Trust as a vehicle in which to place funds or shares of Common Stock with respect to this Plan. If established, all benefits payable under this Plan to a Director shall be paid directly by the Corporation from the Rabbi Trust. To the extent that such benefits are not paid from the Rabbi Trust, the benefits shall be paid from the general assets of the Corporation and shall be reimbursed to the Corporation by the Rabbi Trust at the Corporation’s request upon presentation of reasonable proof that the Corporation made such payment. The assets of the Rabbi Trust shall be subject to the claims of the Company’s creditors in the event of its insolvency. Except as to any amounts paid or payable to a Rabbi Trust, the Company shall not be obligated to set aside, earmark or place in escrow any funds or other assets to satisfy its obligations under this Plan, and the Directors shall not have any property interest in any specific assets of the Corporation other than the unsecured right to receive payments from the Corporation, as provided in this Plan.

Section 4.5.3 The Corporation does not in any way guarantee any Director’s Investment Account against loss or depreciation, whether caused by poor investment performance, insolvency of a deemed investment or by any other event or occurrence. In no event shall any employee, officer, director, or stockholder of the Corporation be liable to any individual or entity on account of any claim arising by reason of the Plan provisions or any instrument or instruments implementing its provisions, or for the failure of any Director, Beneficiary or other individual or entity to be entitled to any particular tax consequences with respect to the Plan or any credit or payment of benefits thereunder.

Article V – Benefits

Section 5.1 Disability . If a Director suffers a Disability while serving as a Director of the Corporation and before he is entitled to benefits under this Plan, he shall receive the number of shares of Common Stock and the cash amount credited to his Deferral Accounts as of the Valuation Date, which for purposes of this Article 5.1 shall be the date on which the Director is determined by the Committee to have suffered a Disability. No further investment gains or losses shall be credited or debited against the Investment Account as of and after the Valuation Date. Dividend equivalent amounts shall continue to be earned on shares of Common Stock in the Stock Unit Account and credited to that account in whole or fractional shares of Common Stock in

accordance with the Plan terms. Distribution of benefits from the Deferral Accounts under this Article shall commence within thirty (30) days after the date on which the Committee determines the existence of the Director’s Disability and in accordance with the payment method elected by the Director on his Deferral Election Form; provided, however, that in all cases the Director shall not have the right to designate the year of payment.

Section 5.2 Pre-Termination Survivor Benefit . If a Director dies before becoming entitled to benefits under this Article, the Beneficiary or Beneficiaries designated pursuant to Section 8.11 shall receive the cash amount and a distribution of the number of shares of Common Stock credited to the Director’s Deferral Accounts as of the Valuation Date, which for purposes of this Section 5.2 shall be the date the Director died or the first business day thereafter if such date falls on a holiday or a weekend. No further investment gains or losses shall be credited or debited against the Investment Account as of and after the Valuation Date. Dividend equivalent amounts shall continue to be earned on shares of Common Stock in the Stock Unit Account and credited to that account in whole or fractional shares of Common Stock in accordance with the Plan terms. Distribution of any benefits under this Article shall be made within thirty (30) days after the date of the Director’s death, or if later, within thirty (30) days after the date on which the Plan Administrator receives notification of or otherwise confirms the Director’s death; provided, however, that in all cases the Beneficiary or Beneficiaries shall not have the right to designate the year of payment.

Section 5.3 Post-Termination Survivor Benefit . If a Director dies after benefits have commenced, but prior to receiving complete payment of benefits under this Plan, the Beneficiary or Beneficiaries designated under Section 8.11, shall receive in a single lump sum the cash amount and a distribution of the number of shares of Common Stock credited to the Director’s Deferral Accounts as of the Valuation Date determined in accordance with Section 5.2. No further investment gains or losses shall be credited or debited against the Investment Account as of and after the Valuation Date. Dividend equivalent amounts shall continue to be earned on shares of Common Stock in the Stock Unit Account and credited to that account in whole or fractional shares of Common Stock in accordance with the Plan terms. Distribution of any benefits under this Article shall be made within thirty (30) days after the date of the Director’s death, or if later, within thirty (30) days after the date on which the Plan Administrator receives notification of or

otherwise confirms the Director’s death; provided, however, that in all cases the Beneficiary or Beneficiaries shall not have the right to designate the year of payment.

Section 5.4 Change of Control . If a Change of Control occurs before a Director becomes entitled to receive benefits by reason of any of the above Articles or before the Director has received complete payment of his benefits under this Plan, he shall receive a lump sum payment of the cash amount and a distribution of the shares of Common Stock credited to his Deferral Accounts as of the Valuation Date which for purposes of this Section 5.4 shall mean the business day immediately preceding the date on which the Company receives notice of facts indicating that a Change of Control occurred. No further investment gains or losses shall be credited or debited against the Investment Account as of and after the Valuation Date. Dividend equivalent amounts shall continue to be earned on shares of Common Stock in the Stock Unit Account and credited to that account in whole or fractional shares of Common Stock in accordance with the Plan terms. Distribution of any benefits under this Article shall commence within thirty (30) days after the Valuation Date; provided, however, that in all cases the Director shall not have the right to designate the year of payment .

Article VI – Benefit Distributions

Section 6.1 Distributions from either the Stock Unit Account or the Investment Account or transfers between the two accounts shall not be allowed while the individual remains a Director of SWM.

Section 6.2 At the time of filing a Deferral Election Form, a Director must indicate an election to receive distribution of: (1) the entire amount in the Investment Account and a distribution of all shares of Common Stock in the Stock Unit Account immediately following the end of the month in which the participant experiences a Separation from Service with the Corporation, (2) the entire balance in the Investment Account and the Stock Unit Account in three (3), five (5) or ten (10) annual installments with the initial distribution made in the following January. If no distribution election is made by the Director or no election form is in effect at the time a participant experiences a Separation from Service, the balance of cash and shares of Common Stock in such Director’s Deferral Accounts will be distributed in installments over five years. Annual installments shall be calculated each year by dividing the remaining Investment

Account balance and the number of shares of Common Stock remaining in the Stock Unit Account as of January 1 of that year by the remaining number of installments. Any Deferral Election may be amended provided that all of the following requirements are met:

(i) the amendment of the Deferral Election shall not take effect until at least 12 months after the date on which such amendment is made;

(ii) in the case of an amendment of a Deferral Election related to a payment not made on account of the Participant’s death or Disability, the first payment with respect to which the amendment is made shall in all cases be deferred for a period of not less then 5 years from the date on which such payment otherwise would have been made;

(iii) in the case of an amendment of an election related to a payment that is to be made at a specified time or pursuant to a fixed schedule, such an amendment of the election must be made at least 12 months prior to the date of the first scheduled payment.

Section 6.3 If the Director or former Director dies before all payments have been made, distribution(s) shall be made to the beneficiary designated by the Director in the Deferral Election Form. The designated beneficiary may be changed from time to time by delivering a new Beneficiary designation in writing to SWM’s Vice President - Administration. If no designation is made, or if the named beneficiary predeceases the Director, distributions of benefits shall be made to the Director’s estate.

Section 6.4 Notwithstanding any other provision herein, if a distribution becomes payable to a Director or former Director due to his Separation from Service and the individual is a “specified employee” (as detailed in Code Section 409A and Treasury Regulations Section 1.409A-1(i)), then the distribution of the amount due to the Director or the former Director, or the first annual installment (if the distribution is to be made in installments) shall be postponed until the first day of the seventh month after the month in which the Separation from Service occurs.

Section 6.5 Special Distribution Election With respect to the Plan Years 2005 through 2008 only, the Plan Administrator is authorized to prescribe rules and procedures under which

eligible Participants may amend elections as to the time and form of distribution in accordance with Internal Revenue Service Notice 2001-1; Section XI of the Preamble to the Proposed Regulations under Section 409A, 70 Fed. Reg. 57930; Internal Revenue Service Notice 2006-79; and Internal Revenue Service Notice 2007-86.

Article VII – Establishment of Trust

Section 7.1 Establishment of Trust . The Corporation may establish a Rabbi Trust (“Trust”) for the Plan. If established, all benefits payable under this Plan to a Director shall be paid directly by the Corporation from the Trust. To the extent that such benefits are not paid from the Trust, the benefits shall be paid from the general assets of the Corporation and shall be reimbursed to the Corporation by the Trust at the Corporation’s request upon presentation of reasonable proof that the Corporation made such payment. Any Trust shall be an irrevocable grantor trust which is intended to qualify as such under subpart E, part I, Subchapter J, chapter 1, Subtitle A of the Code. The assets of the Rabbi Trust are subject to the claims of the Corporation’s creditors in the event of its insolvency. Except as to any amounts paid or payable to a Trust, the Corporation shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan, and the Director and/or his designated Beneficiaries shall not have any property interest in any specific assets of the Corporation other than the unsecured right to receive payments from the Corporation, as provided in this Plan.

Section 7.2 Distribution of Benefits from the Trust . In the event a Trust is established and benefit distributions are not made by the Corporation in accordance with the terms of the Plan, a Director may petition the trustee of the Trust directly for distribution of benefits and the trustee may make such distributions directly to the Director upon the trustee’s good faith determination that the benefit distribution was in fact owed to the Director under the terms of the Plan, was not timely made by the Corporation and that there are sufficient assets in the Trust to make the distribution.

Article VIII – Miscellaneous

Section 8.1 Benefits provided under this Plan are unfunded obligations of the Corporation. Nothing contained in this Plan shall require the Corporation to segregate any monies

or other assets from its general funds or assets with respect to such obligations. This Plan is not an “ employee benefit plan ” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and is not intended for the benefit of any common law employee of the Corporation.

Section 8.2 The Board shall be the plan administrator of this Plan and shall be solely responsible for its general administration and interpretation and for carrying out the provisions hereof, and shall have all such powers as may be necessary to do so. The Board shall have the right to delegate from time to time the administration of the Plan, in whole or in part, to any committee of the Board. The decisions made, and the actions taken, by the Board or any committee thereof in the administration of the Plan shall be final and conclusive on all persons, and no member of the Board or any committee thereof shall be subject to individual liability with respect to the Plan.

Section 8.3 Neither the Director nor any beneficiary nor any next-of-kin shall have the right to assign or otherwise alienate the right to receive payments hereunder, in whole or in part, which payments are expressly non-assignable and non-transferable, whether voluntarily or involuntarily. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such amount, whether presently or thereafter payable, shall be void. Except as required by law, no benefit payable under this Plan shall in any manner be subject to garnishment, attachment, execution or other legal process, or be liable for or subject to the debts or liability of any Director.

Section 8.4 The Corporation shall withhold from amounts paid under this Plan any taxes or other amounts required to be withheld by any applicable federal, state, local or foreign income tax law. The Corporation shall comply with all governmental reporting requirements applicable to the Plan or any payment pursuant to the Plan.

Section 8.5 The Board may, at any time, amend the Plan for whatever reasons it may deem appropriate. No amendment shall (a) impair the rights of a participant with respect to amounts then in the participant’s account of (b) be effective without the written consent of the Directors. All references to action by the Directors shall mean a vote of a majority of the total number of Directors authorized by the Board unless such action may potentially result in the loss of deferred tax treatment of the plan benefits, in which case the unanimous vote of the Board shall be required.

Section 8.6 Each Director in the Plan will receive a quarterly statement indicating the dollar amount credited to the participant’s Investment Account and the number of shares of Common Stock in the Unit Stock Account as of the end of the preceding calendar quarter.

Section 8.7 This Plan shall become effective with respect to annual retainer and meeting fees earned on and after January 1, 2005 with all elections and designations filed by the Directors prior to January 1, 2005 pursuant to this Plan becoming effective as of such date.

Section 8.8 Good Faith Distribution of Benefits . Any distribution of benefits made in good faith in accordance with provisions of the Plan shall be a complete discharge of any liability for the making of such payment under the provisions of this Plan.

Section 8.9 Binding Effect . The provisions of this Plan shall be binding upon the Corporation and its successors and assigns and upon every Director and his heirs, Beneficiaries, estates and legal representatives. Director Change of Address . Each Director entitled to benefits shall file with the Corporation’s Vice President - Administration, in writing, notification of any change of address. Any check representing payment and any communication addressed to a Director or a former Director at this last address filed with the Corporation’s Vice President - Administration, or if no such address has been filed, then at his last address as indicated on the Corporation’s records, shall be binding on such Director for all purposes of the Plan, and neither the Plan Administrator, the Corporation, any trustee, nor any other payor shall be obliged to search for or ascertain the location of any such Director. If the Corporation and the Plan Administrator are unable to locate a Participant or another person or entity to whom payment is due under this Plan, in order to make a distribution to such person or entity, the amount of the Participant’s benefits under the Plan that would otherwise be considered as nonforfeitable shall be forfeited effective four years after (i) the last date a payment of said benefit was made, if at least on such payment was made, or (ii) the first date a payment of said benefit was directed to be made by the Plan Administrator pursuant to the terms of the Plan, if no payments have been made. If such person is located after the date of such forfeiture, the benefits for such Participant or Beneficiary shall not be reinstated hereunder.

Section 8.10 Designation of Beneficiary . Each Director shall designate, by name, on the Deferral Election Form, the Beneficiary(ies) who shall receive any benefits which might be payable after such Director’s death. A Beneficiary designation may be changed or revoked in writing by the Director making the designation without such Beneficiary’s consent at any time or from time to time in the manner as provided by the Plan Administrator, and the Plan Administrator shall have no duty to notify any individual or entity designated as a Beneficiary of any change in such designation which might affect such individual or entity’s present or future rights. If the designated Beneficiary does not survive the Director, all amounts that would have been paid to such deceased Beneficiary shall be paid to the Director or to his estate.

Section 8.7.1 No Director shall designate more than three (3) simultaneous Beneficiaries, and if more than one (1) Beneficiary is named, Director shall designate the share to be received by each Beneficiary. Despite the limitation of three (3) Beneficiaries, a Director may designate more than three (3) Beneficiaries provided such beneficiaries are the surviving spouse and children of the Director. If a Director designates alternative, successor, or contingent Beneficiaries, such Director shall specify the shares, terms and conditions upon which amounts shall be paid or shares of Common Stock distributed to such multiple, alternative, successor or contingent beneficiaries. Any payment made under this Plan or distribution of shares of Common Stock after the death of a Participant shall be made only to the Beneficiary or Beneficiaries designated pursuant to this Section.

Section 8.8 Claims . Any claim for benefits must initially be submitted in writing to the Corporation’s Vice President - Administration. If such claim is denied (in whole or in part), the claimant shall receive notice from the Plan Administrator, in writing, setting forth the specific reasons for denial, with specific reference to applicable provisions of this Plan. Such notice shall be provided within ninety (90) days after the date on which the claim for benefits is received by the Corporation’s Vice President - Administration, unless special circumstances require an extension of time for processing the claim, in which event notification of the extension shall be provided to the claimant prior to the expiration of the initial 90-day period. The extension notification shall indicate the special circumstances requiring the extension of time and the date by which the Plan Administrator expects to render its decision. Any such extension shall not exceed 90 days. Any disagreements about such interpretations and construction may be appealed in writing by the

claimant to the Plan Administrator within sixty (60) days after the date on which the claimant receives the notice with respect to the claim denial. The Plan Administrator shall respond to such appeal within sixty (60) days, with a notice in writing fully disclosing its decision and its reasons, unless special circumstances require an extension of time for reviewing the claim, in which event notification of the extension shall be provided to the claimant prior to the expiration of the initial sixty (60) day period. Any such extension shall be provided to the claimant prior to the commencement of the extension. Any such extension shall not exceed 60 days. No member of the Board, or any committee thereof, and no officer, employee or agent of the Corporation shall be liable to any individual or entity for any action taken hereunder, except those actions undertaken with lack of good faith.

Section 8.8.1 Provided that the Corporation has established a Rabbi Trust for the Plan pursuant to which the trustee has agreed to act in a capacity other than as a directed trustee in the event of a Change in Control, the trustee of the Trust shall perform the duties of the Plan Administrator under this Section 8.12 following a Change of Control.

Section 8.9 Nothing contained in the Plan shall be construed as a commitment by the Board to nominate any person for election or re-election to the Board. Nothing contained in this Plan shall be construed to create a right in any person to be elected or to continue to serve as a Director.

Section 8.10 The adoption of this Plan shall have no effect on the existing Schweitzer-Mauduit International, Inc. Outside Directors Stock Plan. Nothing contained in this Plan shall prevent SWM from adopting other or additional compensation plans or arrangements for its non-employee Directors.

Section 8.11 Governing Law . To the extent not superseded by the laws of the United States, the laws of the State of Georgia (except for the provisions of Georgia law relating to conflicts of laws) shall be controlling in all matters relating to this Plan.

Section 8.12 Severability . In the event any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the

Plan, and the Plan shall be interpreted and enforced as if such illegal and invalid provisions had never been set forth.

Section 8.13 Code Section 409A. It is the intention of the Company that this Plan shall meet the requirements of section 409A of the Code and applicable Treasury Regulations that must be met in order for amounts of Compensation deferred under this Plan to be taxable, for purposes of federal income taxation, in the year of actual receipt by the Participant or Beneficiary. If any provision of this Plan is susceptible of two interpretations, one of which results in the compliance of the Plan with section 409A of the Code and the applicable Treasury Regulations, and one of which does not, then the provision shall be given the interpretation that results in compliance with section 409A and the applicable Treasury Regulation.

IN WITNESS WHEREOF, Schweitzer-Mauduit International, Inc. has adopted the foregoing instrument effective as of December 4, 2008.

	SCHWEITZER-MAUDUIT INTERNATIONAL, INC.


	By:


	Title:

Exhibit 10.16

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN NO. 2

EFFECTIVE AS OF JANUARY 1, 2005
AMENDED AND RESTATED AS OF DECEMBER 4, 2008

PLAN HISTORY

The Plan was established to provide a mechanism under which qualified participants could elect to defer a limited portion of their annual base salary and incentive compensation in a manner intended to comply with the requirements of Internal Revenue Code Section 409 A.

The Plan was first amended and restated effective as of December 31, 2008 in order to comply with the final regulations issued by the United States Treasury Department in 2008 implementing the requirements of Internal Revenue Code Section 409A and requiring full compliance by year-end 2008.

ARTICLE I
ESTABLISHMENT OF PLAN

1.1 Purpose. The Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2 is intended to enhance the Corporation’s ability to attract to and retain for the Corporation outstanding executive talent by providing a deferred compensation benefit to selected executives of the Corporation as more fully provided herein. The benefits provided under the Plan are in addition to other employee benefit plans and programs offered by the Corporation, including but not limited to tax-qualified employee benefit plans.

1.2 Effective Date and Term. Schweitzer-Mauduit International, Inc. adopts this unfunded deferred compensation plan effective as of January 1, 2005 to be known as the Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2, hereinafter referred to as the “Plan.” The Plan is herein amended and restated, effective as of January 1, 2005; provided, however, that certain provisions herein have a later effective date, as specifically provided in those provisions.

1.3 Applicability of ERISA. This Plan is an unfunded plan maintained primarily for the purpose of providing deferred compensation to a select group of management and other highly compensated employees within the meaning of ERISA. It is the intent of the Corporation that the Plan be exempt from Parts 2, 3 and 4 of Subtitle B of Title I of ERISA as an unfunded Plan that is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees (the “ERISA exemption”). Notwithstanding anything to the contrary in any other provision of the Plan, the Plan Administrator may, in its sole discretion, exclude any one or more employees from eligibility to participate or from participation in the Plan, and may take any further action the Plan

Administrator considers necessary or appropriate if the Plan Administrator reasonably determines in good faith that such exclusion or further action is necessary in order for the Plan to qualify for, or to continue to qualify for, the ERISA exemption.

ARTICLE II
DEFINITIONS

2.1 AIP Awards . The cash awards, if any, that may be earned by participants in the Corporation’s Annual Incentive Plan.

2.2 Annual Deferral. The amount of Base Salary, AIP Awards and/or LTIP Awards which the Participant elects to defer in each Deferral Period pursuant to Section 4.1 of the Plan Document.

2.3 Base Salary. A Participant’s base annual salary for the applicable Plan Year.

2.4 Beneficiary. An individual or entity designated by a Participant in accordance with Section 13.6.

2.5 Board or Board of Directors. The Board of Directors of the Corporation.

2.6 Change of Control. For the purposes of this Plan, a Change of Control shall mean the condition that exists if at any time any of the following events shall have occurred with respect to the Corporation: (a) “change in the ownership” of the Corporation; (b) a “change in the effective control” of the Corporation; or (c) a “change of the ownership of a substantial portion of the assets” of the Corporation, all as defined in Treasury Regulations § 1.409A-3(i)(5). Notwithstanding any other provision herein, a change in the ownership, a change in the effective control, or a change in the ownership of a substantial portion of the assets, of the Corporation or another Employer shall not constitute a “Change in Control,” for purposes of this Plan, unless such transaction also represents a change in the ownership, a change in the effective control, or a change in the ownership of a substantial portion of the assets, of Schweitzer-Mauduit International, Inc.

2.7 Code. The Internal Revenue Code of 1986. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes such section.

2.8 Committee. The Compensation Committee of the Corporation’s Board of Directors.

2.9 Corporation. Schweitzer-Mauduit International, Inc.

2.10 Deferral Account. The account established for a Participant pursuant to Section 5.1 of the Plan Document.

2.11 Deferral Election. The election made by the Participant pursuant to Section 4.1 of the Plan Document.

2.12 Deferral Period. The Plan Year, or in the case of a newly hired or promoted employee who becomes an Eligible Employee during a Plan Year, the remaining portion of the Plan Year. In the case of the first Plan Year, the Deferral Period commences January 1, 2005 and ends December 31, 2005.

2.13 Disability. A Participant shall be considered to have experienced a “Disability” or to be disabled, for purposes of this Plan, if the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reasons of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Corporation.

2.14 Effective Date. January 1, 2005.

2.15 Eligible Employee. An employee of the Corporation who is designated by the Plan Administrator as being eligible to participate in the Plan or who is a member of a class of employees that the Plan Administrator has designated as being eligible to participate in the Plan. The employee shall remain eligible to participate in the Plan for such period as is designated by the Plan Administrator.

2.16 Employer . The Corporation and any related entity that becomes a participating employer in the Plan, in accordance with Section 12.2.

2.17 ERISA . The Employee Retirement Income Security Act of 1974, as amended.

2.18 IRS . The Internal Revenue Service.

2.19 Internal Revenue Service . Limits means any of the limitations on the amounts of contributions to or benefits under a qualified retirement plan required by Code sections 401(a)(4), 401(a)(17), 410(b), or 415.

2.20 LTIP Awards. The cash awards, if any, that may be earned by participants in the Corporation’s Long-Term Incentive Plan.

2.21 Participant. Any Eligible Employee who is designated by the Plan Administrator to participate in the Plan pursuant to Article III of the Plan Document commencing as of such time and for such period as is designated by the Plan Administrator. The list of Participants is set forth in Appendix A hereto, as amended from time to time.

2.22 Participant Agreement. The written agreement, including a Deferral and Investment Election Form, to defer Base Salary, AIP Awards and/or LTIP Awards made by the Participant and investment directions as to any discretionary corporate contributions made on the Participant’s

behalf. Such written agreement and Deferral and Investment Election Form shall be in the format designated by the Corporation, attached hereto.

2.23 Plan. The Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2.

2.24 Plan Administrator. The Corporation’s Human Resources Committee.

2.25 Plan Year. “Plan Year” means the 12-month period beginning each January 1 and ending on the following December 31.

2.26 Rabbi Trust. The Rabbi Trust, which the Corporation may, in its discretion, establish for the Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2, as amended from time to time.

2.27 Specified Age. Age 55 or a later age chosen by the Participant on his Participation Agreement and Deferral Election Form at which time the vested credits in the Participant’s Deferral Account shall be paid out as benefits in accordance with the payment method selected by the Participant in accordance with the Plan terms, unless the Plan Administrator has begun to pay-out benefits at an earlier date, as provided in Article VII of this Plan.

2.28 A Specified Employee . Shall have the meaning given to such term in Code Section 409A.

2.29 Unforeseeable Emergency . A severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152(a) without regard to section 152(b)(1), (b)(2), and (d)(1)(B)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant ( e.g. , the imminent foreclosure of the mortgage on the Participant’s primary residence or eviction from the Participant’s primary residence, the need to pay for medical expenses, including non-refundable deductibles and the costs of prescription drug medication, and funeral expenses of a spouse, a Beneficiary, or a dependent (as defined above). A withdrawal on account of an Unforeseeable Emergency may be paid to the Participant only if the amounts distributed with respect to an emergency do not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or (effective as of January 1, 2008) by cessation of deferrals under this Plan. This section shall be interpreted in a manner consistent with Code section 409A and applicable provisions of the Treasury Regulations.

2.30 Separation from Service. Shall have the meaning assigned to such term in Code Section 409 A, Treasury Regulations Section 1.409A-1(h), as amended, and other applicable regulatory guidance of the IRS.

2.31 Valuation Date. Each business day of the Plan Year.

2.32 Year of Service. Each consecutive twelve (12) month period during which a Participant is continuously and actively employed by the Corporation.

ARTICLE III
ELIGIBILITY AND PARTICIPATION

3.1 Participation –Eligibility and Initial Period . Participation in the Plan is open only to Eligible Employees of the Corporation. Each Eligible Employee of the Corporation, as of the Effective Date, may become a Participant for the Deferral Period from January 1, 2005 through December 31, 2005 (“Initial Period”) if he submits a properly completed Participation Agreement and Deferral Election Form to the Plan Administrator prior to December 31, 2004. Following the Initial Period, a Participant must submit a Deferral Election Form by December 15 of the year preceding the Plan Year for which the Deferral Election was made. Any employee becoming an Eligible Employee after the Effective Date, e.g., new hires or promoted employees, may become a Participant with respect to services performed subsequent to the filing of the Deferral Election Form for the current Deferral Period if he submits a properly completed Participation Agreement and Deferral Election Form within thirty (30) days after becoming eligible for participation; provided, however, that in this case the election shall apply only to compensation (Base Salary, AIP Awards and/or LTIP Awards) paid for services to be performed after the election; provided, further, that, with respect to compensation for services performed on and after January 1, 2008, in the case of compensation that is based upon a specified performance period ( e.g. , an AIP Award) where a deferral election is made in the first year of eligibility but after the beginning of the performance period, the election shall apply to no more than an amount equal to (i) total amount of the compensation for the performance period multiplied by (ii) a fraction the numerator of which is the number of days remaining in the performance period after the election and the denominator of which is the total number of days in the performance period.

3.2 Participation –Subsequent Entry into Plan. An Eligible Employee who does not elect to participate at the time of initial eligibility as set forth in Section 3.1 shall remain eligible to become a Participant in subsequent Plan Years as long as he continues his status as an Eligible Employee. In such event, the Eligible Employee may become a Participant by submitting a properly executed Participation Agreement and Deferral Election Form on or prior to December 15 of the year preceding the Plan Year for which it is to be effective.

3.3 Determination of Non-Eligibility to Participate. If, at any time, an Eligible Employee or Participant is determined or reasonably believed, based on a judicial or administrative determination or opinion of counsel, or based (effective as of January 1, 2008) on a determination by the Plan Administrator, not to qualify as “management” or a “highly compensated employee” under ERISA Sections 201(2), 301 (a) (3), and 401 (a) (1), the employee shall cease active participation in the Plan as of the last day of the Plan Year in which such determination is made.

ARTICLE IV
CONTRIBUTIONS

4.1 Deferral Election. On or before the 15th day of December preceding the first day of each Plan Year, a Participant may file with the Plan Administrator, a Participation Agreement and Deferral Election Form indicating the amount of Base Salary, AIP Award and/or LTIP Award to be deferred for that Plan Year. A Participant shall not be obligated to make a Deferral Election in

each Plan Year to remain a participant in the Plan. After a Plan Year commences, such Deferral Election shall continue for the entire Plan Year.

4.2 Maximum Deferral Election. A Participant may elect to defer up to 25% of Base Salary and/or up to 50% of AIP Awards and/or LTIP Awards earned during the corresponding Deferral Period. The amount of deferral may be stated as a flat dollar amount or as a percent. A Deferral Election may be automatically reduced if the Plan Administrator determines that such action is necessary to meet Federal or State tax withholding obligations.

4.3 Minimum Deferral Election. A Participant who wishes to defer a portion of his qualifying compensation must elect to defer at least $1,200 during the Deferral Period from Base Salary, AIP Awards, LTIP Awards or a combination of Base Salary, AIP Awards and LTIP Awards. The Participant may also elect not to make any deferral for a Plan Year.

4.4 Employer Contributions. The Corporation, with the Committee’s prior approval, may, in its sole discretion, make a contribution to any one or more of the Participants’ Deferral Accounts. Employer Contributions may also be mandated by the terms of the AIP and/or LTIP if a participant in one or more of those plans is also a “Covered Employee,” as such term is defined in Code Section 162(m) and the total amount of non-exempt compensation payable to such participant in any tax year exceeds the Code Section 162(m) limits . Also, the amount by which any cash balance benefit formula amount under the Schweitzer-Mauduit International, Inc. Retirement Plan exceeds applicable Internal Revenue Service Limits (hereinafter an “Excess Retirement Benefit”) shall be made as an Employer Contribution to the Deferred Compensation Plan for the account of such participant.

4.5 Insurance. The Corporation may insure the lives of Participants. A Participant whose deferral is approved shall, as a condition of his deferral, cooperate in providing any information or submitting to any necessary examinations that may be requested by the Corporation in connection with its application for such insurance policies. The Corporation shall be the applicant, owner and beneficiary of such policies. The Participant shall have no interest in any policies nor will the Participant be able to look to an insurance carrier for benefits under any such policies.

ARTICLE V
ACCOUNTS

5.1 Deferral Accounts. Solely for recordkeeping purposes, The Plan Administrator shall establish a Deferral Account for each Participant. A Participant’s Deferral Account shall be credited with the contributions made by him or on his behalf by the Corporation under Section 4.4 and shall be credited (or charged, as the case may be) with the hypothetical or deemed investment earnings and losses determined pursuant to Section 5.3, and charged with distributions made to or with respect to him on deferrals of Base Salary, AIP Award and/or LTIP Award, dividends on stock units , and Corporate Contributions.

5.2 Crediting of Deferral Accounts. Salary contributions under Section 4.1 shall be credited to a Participant’s Deferral Account as of the date on which such contributions were withheld from his Base Annual Salary. AIP Award and LTIP Award contributions under Section 4.1 shall be credited to a Participant’s Deferral Account as of the date on which the contribution would have

otherwise been paid in cash. Contributions under Section 4.4 shall be credited to the Participant’s Deferral Account as of the date declared by the Corporation or in accordance with the AIP Award and/or LTIP Award provisions hereinabove, if applicable. Dividends deemed to be earned on the stock units shall be credited as of the dividend payment date on the Corporation’s common stock. Excess Retirement Benefit contributions shall be credited in accordance with the crediting provisions of the Retirement Plan. Any distribution with respect to a Deferral Account shall be charged to that Account as of the date the Corporation or the trustee of any Rabbi Trust established for the Plan makes such payment.

5.3 Earning Credits or Losses. Amounts credited to a Deferral Account shall be credited with deemed net income, gain and loss on Deferred Base Salary, AIP Awards, LTIP Awards and deemed dividends on stock units, including the deemed net unrealized gain and loss based on hypothetical investment directions made by the Participant with respect to this Deferral Account on a form designated by the Plan Administrator, in accordance with investment options and procedures adopted by the Plan Administrator in its sole discretion, from time to time. Excess Retirement Benefit contributions shall be credited with deemed net income, gain and loss on such amounts as though invested in thirty-year Treasury Securities (tracking instrument substituted for the thirty-year T-Bill). Such earnings will continue to accrue during any period in which installments of vested benefits are paid to a Participant or his beneficiary pursuant to Article VII. Earnings or losses in the market value of stock units shall have no effect on the number of stock units that are reflected in the Participant’s account. The number of stock units held in the Deferred Compensation Plan for a Participant shall be tracked and the Participant shall recognize the bargain element associated with the number of stock units held in his account as ordinary income or loss when the stock units are converted into shares of the Corporation’s common stock and issued in the form of clean stock certificates out of the Deferred Compensation Plan as permitted for a mandatory deferral.

5.4 Hypothetical Nature of Accounts. The Plan constitutes a mere promise by the Corporation to make the benefit payments in the future. Any Deferral Account established for a Participant under this Article V shall be hypothetical in nature and shall be maintained for the Corporation’s recordkeeping purposes only, so that any contributions can be credited and so that deemed investment earnings and losses on such amounts can be credited (or charged, as the case may be). Neither the Plan nor any of the Accounts (or subaccounts) shall hold any actual funds or assets. The right of any individual or entity to receive one or more payments under the Plan shall be an unsecured claim against the general assets of the Corporation. Any liability of the Corporation to any Participant, former Participant, or Beneficiary with respect to a right to payment shall be based solely upon contractual obligations created by the Plan. The Corporation, the Board of Directors, the Committee, the Plan Administrator and any individual or entity shall not be deemed to be a trustee of any amounts to be paid under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Corporation and a Participant, former Participant, Beneficiary, or any other individual or entity. The Corporation may, in its sole discretion, establish a Rabbi Trust as a vehicle in which to place funds with respect to this Plan. The Corporation does not in any way guarantee any Participant’s Deferral Account against loss or depreciation, whether caused by poor investment performance, insolvency of a deemed investment or by any other event or occurrence. In no event shall the employee, officer, director, or stockholder of the Corporation be liable to any individual or entity on account of any claim arising by reason of the Plan provisions or

any instrument or instruments implementing its provisions, or for the failure of any Participant, Beneficiary or other individual or entity to be entitled to any particular tax consequences with respect to the Plan or any credit or payment thereunder.

5.5 Statement of Deferral Accounts. The Plan Administrator shall provide to each Participant quarterly statements setting forth the value of the Deferral Account maintained for such Participant.

ARTICLE VI
VESTING

6.1 Vesting of Corporate Elective and Mandated Contributions. The Corporation’s contributions (excluding AIP Awards, LTIP Awards and Excess Retirement Benefit contributions), if any, credited to a Participant’s Deferral Account under Plan Section 4.4 and any deemed investment earnings attributable to these contributions shall be one hundred percent (100%) vested and nonforfeitable when the Participant has satisfied any vesting restrictions contained in the Board or Compensation Committee approval of the award, irrespective of when the Corporation’s contribution is credited to the Participant’s Deferral Account. A Participant shall be one hundred percent (100%) vested in the Corporation’s contributions, including any deemed investment earnings attributable to these contributions, upon his death or Disability while he is actively employed by the Corporation or in the event of a Change of Control. The vesting of mandated LTIP Awards and AIP Awards and Excess Retirement Benefit contributions shall occur as set forth in the respective plans governing those awards and payments. All other amounts credited to a Participant’s Deferral Account shall be one hundred percent (100%) vested at all times.

ARTICLE VII
BENEFITS

7.1 Attainment of Specified Age. Unless benefits have already commenced pursuant to another section in this Article VII, a Participant shall be entitled to begin receipt of the vested amount credited to his Deferral Account as of the Valuation Date coinciding with the Specified Age or date chosen by the Participant in his or her Participation Agreement and Deferral Election Form. A Participant may make a separate choice with respect to the timing of the commencement of distribution of the amounts credited to the Deferral Account with respect to each Deferral Period. In addition, a Participant may elect, with respect to a particular Deferral Election, to (i) receive payment on a specified date of a flat dollar amount or a percentage of the amount deferred for the Deferral Period and (ii) to have the remainder of the amount deferred for that Deferral Period paid at a Specified Age; provided, however, that the specified date shall not be earlier than January 1 of the fifth Plan Year following the Plan Year with respect to which the amount was deferred. Payment of any amount under this Section shall commence within thirty (30) days after the Participant’s Specified Age or date and in accordance with the payment method elected by the Participant on his Participation Agreement and Deferral Election Form. Payments shall commence on or after that age even if the Participant is still then employed.

7.2 Disability. If a Participant suffers a Disability while employed with the Corporation and before he is entitled to benefits under this Article, he shall receive the amount credited to his Deferral Account as of the Valuation Date coinciding with the Date on which the Participant is

determined to have suffered a Disability. Payment of any amount under this Section shall commence within thirty (30) days after the date on which the Committee determines the existence of the Participant’s Disability and in accordance with the payment method elected by the Participant on his Participation Agreement and Deferral Election Form; provided, however, that in all cases the Participant shall not have the right to designate the year of payment.

7.3 Death Pre- Benefit Commencement. If a Participant dies before becoming entitled to benefits under this Article, the Beneficiary or Beneficiaries designated pursuant to Section 13.6, shall receive the vested amount credited to the Participant’s Deferral Account as of the Valuation Date coinciding with the date of the Participant’s death. Payment of any amount under this Section shall be made within thirty (30) days after the Participant’s death, or if later, within thirty (30) days after the date on which the Plan Administrator receives notification of or otherwise confirms the Participant’s death; provided, however , that in all cases the Beneficiary or Beneficiaries shall not have the right to designate the year of payment.

7.4 Death Post- Benefit Commencement. If a Participant dies after benefits have commenced, but prior to receiving complete payment of benefits under this Article, the Beneficiary or Beneficiaries designated under Section 13.6, shall receive in a single lump sum the vested amount credited to the Participant’s Deferral Account as of the Valuation Date coinciding with the date of the Participant’s death. Payment of any amount under this Section shall be made within thirty (30) days after the Participant’s death, or if later, within thirty (30) days after the date on which the Plan Administrator receives notification of or otherwise confirms the Participant’s death; provided, however, that in all cases the Beneficiary or Beneficiaries shall not have the right to designate the year of payment.

7.5 Termination. If a Participant experiences a “separation from service” with the Corporation (determined in accordance with the standards of Code Section 409A) the Participant’s benefits shall be paid out in accordance with his deferral election. If the Participant failed to make a deferral election with respect to any deferred amount, the Participant shall receive in a single lump sum the vested amount credited to his Deferral Account for which no deferral election was made as of the Valuation Date coinciding with the date on which the Participant experiences the Separation from Service. Payment of the first annual installment or any lump sum amount under this Section shall be made within thirty (30) days after the date on which the Participant separates from service with the Corporation; provided, however , that in the case of a Participant who is a “specified employee” (within the meaning of Code section 409A and the Treasury Regulations issued pursuant to that section), such payment shall be made on the first day of the seventh month after the month in which occurs the Participant’s separation from service with the Corporation; provided further that in all cases the Participant shall not have the right to designate the year of payment. The Corporation shall be entitled to distribute in a single lump sum amount any account balance that is $15,000 or less notwithstanding any payment election to the contrary specified by the Participant.

7.6 Change of Control. If a Change of Control occurs before a Participant becomes entitled to receive benefits by reason of any of the above Sections or before the Participant has received complete payment of his benefits under this Article, he shall receive a lump sum payment of the amount credited to his Account as of the Valuation Date immediately preceding the date on which the Change of Control occurs. Payment of any amount under this section shall commence within

thirty (30) days after the date on which the Change of Control occurs; provided, however, that in all cases the Participant shall not have the right to designate the year of payment.

7.7 Payment Methods. Unless otherwise provided in this Article VII, a Participant may elect to receive payment of the vested amount credited to his Deferral Account based on a Participant deferral in a single lump sum or in three (3), five (5), or ten (10) annual installments. This election must be made in the Participation Agreement and Deferral Election Form for the corresponding Plan Year (at the time when the Participant makes his or her initial election to defer compensation). Any installment payments shall be paid annually no later than thirty (30) days after the distributions are scheduled to commence and on each following anniversary of that date until the total number of installments has been paid; provided, however , that that in the case of a Participant who is a “specified employee” (within the meaning of Code section 409A and the Treasury Regulations issued pursuant to that section), the first such payment shall be made on the first day of the seventh month after the month in which occurs the Participant’s separation from service with the Corporation. Each installment payment shall be determined by multiplying the Deferral Account Balance by a fraction, the numerator of which is one and the denominator of which is the number of remaining installment payments. The Corporation shall be entitled to distribute in a single lump sum amount any account balance that is $15,000 (or such higher amount as may be in effect for such Plan Year under Code Section 402(g)(1)(B) and Treasury Regulations Section 1.409A-3(j)(4)(v)) or less notwithstanding any payment election to the contrary specified by the Participant.

7.8 The schedule of payments pursuant to a Deferral Election may be amended provided that all of the following requirements are met:

(i) the amendment of the Deferral Election shall not take effect until at least 12 months after the date on which such amendment is made;

(ii) in the case of an amendment of a Deferral Election related to a payment not made on account of the Participant’s death or Disability or an Unforeseeable Emergency, the first payment with respect to which the amendment is made shall in all cases be deferred for a period of not less then 5 years from the date on which such payment otherwise would have been made;

(iii) in the case of an amendment of an election related to a payment that is to be made at a specified time or pursuant to a fixed schedule, such an amendment of the election must be made at least 12 months prior to the date of the first scheduled payment.

7.9 Special Distribution Election Change Opportunity . With respect to Plan Years 2005 through 2008 only, the Plan Administrator is authorized to prescribe rules and procedures under which eligible Participants may amend elections as to the time and form of distribution in accordance with Internal Revenue Service Notice 2005-1; Section XI of the Preamble to the Proposed Regulations under IRC Section 409A, , 70 Fed. Reg. 57930; Internal Revenue Service Notice 2006-79; and Internal Revenue Service Notice 2007-86.

ARTICLE VIII
UNFORESEEABLE EMERGENCY WITHDRAWALS

8.1 Unforeseeable Emergency Withdrawals. If a Participant incurs an Unforeseeable Emergency, the Participant may make a written request to the Plan Administrator for a withdrawal from his account. In the event of a withdrawal on account of an Unforeseeable Emergency, the Participant’s deferrals for the remainder of the Plan Year shall be suspended. Deferrals may commence with the next following Plan Year provided the Participant completes the appropriate Participation Agreement and Deferral Election Form prior to January 1 of the corresponding Plan Year.

ARTICLE IX
ESTABLISHMENT OF TRUST

9.1 Establishment of Trust. The Corporation may establish a Rabbi Trust (“Trust”) for the Plan. If established, all benefits payable under this Plan to a Participant shall be paid directly by the Corporation from the Trust. To the extent that such benefits are not paid from the Trust, the benefits shall be paid from the general assets of the Corporation and shall be reimbursed to the Corporation by the Trust at the Corporation’s request upon presentation of reasonable proof that the Corporation made such payment. Any Trust shall be an irrevocable grantor trust which conforms to the terms of the model trust as described in IRS Revenue Procedure 92-64, I.R.B. 1992-33. The assets of the Trust are subject to the claims of the Corporation’s creditors in the event of its insolvency. Except as to any amounts paid or payable to a Trust, the Corporation shall not be obligated to set aside, earmark or place in escrow any funds or other assets to satisfy its obligations under this Plan, and the Participant and/or his designated Beneficiaries shall not have any property interest in any specific assets of the Corporation other than the unsecured right to receive payments from the Corporation, as provided in this Plan.

9.2 Payment From the Trust . In the event a Trust is established and payments are not made by the Corporation in accordance with the terms of the Plan, a Participant may petition the trustee of the Trust directly for payment and the trustee may make such payment directly to the Participant upon the trustee’s good faith determination that the payment was in fact owed, was not timely paid by the Corporation and that there are sufficient assets in the Trust to make the payment.

ARTICLE X
PLAN ADMINISTRATION

10.1 Plan Administration. The Plan shall be administered by the Committee, and such Committee may designate an agent to perform the recordkeeping duties and delegate to the Plan Administrator any of the Committee’s functions specified in this Article X. The Committee shall construe and interpret the Plan, including disputed and doubtful terms and provisions and, in its sole discretion, decide all questions of eligibility and determine the amount, manner and time of payment of benefits under the Plan. The determinations and interpretations of the Committee shall be consistently and uniformly applied to all similarly situated Participants and Beneficiaries, including but not limited to interpretations and determinations of amounts due under this Plan, and shall be final and binding on all parties. The Plan at all times shall be interpreted and administered as an unfunded deferred compensation plan, and no provision of the Plan shall be interpreted so as

to give any Participant or Beneficiary any right in any asset of the Corporation which is a right greater than the right of a general unsecured creditor of the Corporation.

ARTICLE XI
NONALIENATION OF BENEFITS

11.1 Nonalienation of Benefits. The interests of Participants and their Beneficiaries under this Plan are not subject to the claims of their creditors and may not be voluntarily or involuntarily sold, transferred, alienated, assigned, pledged, anticipated, encumbered, attached or garnished. Any attempt by a Participant, his Beneficiary, or any other individual or entity to sell, transfer, alienate, assign, pledge, anticipate, encumber, attach, garnish, charge or otherwise dispose of any right to benefits payable shall be void. The Corporation may cancel and refuse to pay any portion of a benefit which is sold, transferred, alienated, assigned, pledged, anticipated, encumbered, attached or garnished. The benefits which a Participant may accrue under this Plan are not subject to the terms of any Qualified Domestic Relations Order (as that term is defined in Section 414(p) of the Code) with respect to any Participant, and the Plan Administrator, Board of Directors, Committee and Corporation shall not be required to comply with the terms of such order in connection with this Plan. The withholding of taxes from Plan payments, the recovery of Plan overpayments of benefits made to a Participant or Beneficiary, the transfer of Plan benefit rights from the Plan to another plan, or the direct deposit of Plan Payments to an account in a financial institution (if not actually a part of an arrangement constituting an assignment or alienation) shall not be construed as assignment or alienation under this Article XI.

ARTICLE XII
AMENDMENT AND TERMINATION; ADOPTION BY RELATED EMPLOYERS

12.1 Amendment and Termination. The Corporation reserves the right to amend this Plan at any time. Such action may be taken in writing by the Plan Administrator. However, no such amendment shall deprive any Participant or Beneficiary of any portion of any benefit which would have been payable had the Participant’s employment with the Corporation terminated on the effective date of such amendment or termination. Notwithstanding the provisions of this Article XII to the contrary, the Corporation may amend the Plan at any time, in any manner, if the Corporation determines any such amendment is required to ensure that the Plan is characterized as providing deferred compensation for a select group of management or highly compensated employees and as described in ERISA Sections 201(2), 301(a)(3) and 401(a)(1) or to otherwise conform the Plan to the provisions of any applicable law including, but not limited to, ERISA and the Code (including without limitation section 409A of the Code).

12.2 Adoption by Other Employers . Effective as of January 1, 2008, any business entity that is a member of the same group of related business entities as the Corporation (determined in accordance with the standards of Code Sections 414(b), (c) and (m)) may adopt this Plan and become an Employer, with the written consent of the Plan Administrator or the Chief Executive Officer of the Corporation, by executing a written instrument evidencing its adoption of the Plan and filing the instrument with the Plan Administrator. Such adoption shall be subject to such terms and conditions as the Plan Administrator requires.

ARTICLE XIII
GENERAL PROVISIONS

13.1 Good Faith Payment. Any payment made in good faith in accordance with provisions of the Plan shall be a complete discharge of any liability for the making of such payment under the provisions of this Plan.

13.2 No Right to Employment. This Plan does not constitute a contract of employment, and participation in the Plan shall not give any Participant the right to be retained in the employment of the Corporation.

13.3 Binding Effect. The provisions of this Plan shall be binding upon the Corporation and its successors and assigns and upon every Participant and his heirs, Beneficiaries, estates and legal representatives.

13.4 Participant Change of Address. Each Participant entitled to benefits shall file with the Plan Administrator, in writing, any change of post office address. Any check representing payment and any communication addressed to a Participant or a former Participant at this last address filed with the Plan Administrator, or if no such address has been filed, then at his last address as indicated on the Corporation’s records, shall be binding on such Participant for all purposes of the Plan, and neither the Plan Administrator, the Corporation nor any other payer shall be obliged to search for or ascertain the location of any such Participant. If the Corporation and the Plan Administrator are unable to locate a Participant or another person or entity to whom payment is due under this Plan, in order to make a distribution to such person or entity, the amount of the Participant’s benefits under the Plan that would otherwise be considered as nonforfeitable shall be forfeited effective four (4) years after (i) the last date a payment of said benefit was made, if at least one such payment was made, or (ii) the first date a payment of said benefit was directed to be made by the Plan Administrator pursuant to the terms of the Plan, if no payments have been made. If such person is located after the date of such forfeiture, the benefits for such Participant or Beneficiary shall not be reinstated hereunder.

13.5 Notices. Each Participant shall furnish to the Plan Administrator any information the Plan Administrator deems necessary for purposes of administering the Plan, and the payment provisions of the Plan are conditional upon the Participant furnishing promptly such true and complete information as the Plan Administrator may request. Each Participant shall submit proof of his age when required by the Plan Administrator. The Plan Administrator shall, if such proof of age is not submitted as required, use such information as is deemed by it to be reliable, regardless of the lack of proof, or the misstatement of the age of individuals entitled to benefits. Any notice or information which, according to the terms of the Plan or requirements of the Plan Administrator, must be filed with the Plan Administrator, shall be deemed so filed if addressed and either delivered in person or mailed to and received by the Plan Administrator, in care of the Corporation at:

Schweitzer-Mauduit International, Inc.

100 North Point Center East

Suite 600

Alpharetta, Georgia 30022

Attention: Human Resources Committee

13.6 Designation of Beneficiary. Each Participant shall designate, by name, on Beneficiary designation forms provided by the Plan Administrator, the Beneficiary(ies) who shall receive any benefits which might be payable after such Participant’s death. A Beneficiary designation may be changed or revoked without such Beneficiary’s consent at any time or from time to time in the manner as provided by the Plan Administrator, and the Plan Administrator shall have no duty to notify any individual or entity designated as a Beneficiary of any change in such designation which might affect such individual or entity’s present or future rights. If the designated Beneficiary does not survive the Participant, all amounts that would have been paid to such deceased Beneficiary shall be paid to the Participant or to his estate.

13.6.1 No Participant shall designate more than five (5) simultaneous Beneficiaries, and if more than one (1) Beneficiary is named, Participant shall designate the share to be received by each Beneficiary. Despite the limitation on five (5) Beneficiaries, a Participant may designate more than five (5) Beneficiaries provided such beneficiaries are the surviving spouse and children of the Participant. If a Participant designates alternative, successor, or contingent Beneficiaries, such Participant shall specify the shares, terms and conditions upon which amounts shall be paid to such multiple, alternative, successor or contingent beneficiaries. Any payment made under this Plan after the death of a Participant shall be made only to the Beneficiary or Beneficiaries designated pursuant to this Section.

13.7 Claims. Any claim for benefits must initially be submitted in writing to the Plan Administrator. If such claim is denied (in whole or in part), the claimant shall receive notice from the Plan Administrator, in writing, setting forth the specific reasons for denial, with specific reference to applicable provisions of this Plan. Such notice shall be provided within ninety (90) days after the date the claim for benefits is received by the Plan Administrator, unless special circumstances require an extension of time for processing the claim, in which event notification of the extension shall be provided to the claimant prior to the expiration of the initial 90-day period. The extension notification shall indicate the special circumstances requiring the extension of time and the date by which the Plan Administrator expects to render its decision. Any such extension shall not exceed 90 days. Any disagreements about such interpretations and construction may be appealed in writing by the claimant to the Plan Administrator, within 60 days after the claimant receives the notice from the Plan Administrator of the initial denial of the claim. The Plan Administrator shall respond to such appeal of the initial denial of a claim within sixty (60) days, with a notice in writing fully disclosing its decision and its reasons, unless special circumstances require an extension of time for reviewing the claim, in which event notification of the extension shall be provided to the claimant prior to the expiration of the initial sixty (60) day period. Notice of any such extension shall be provided to the claimant prior to the commencement of the extension. Any such extension shall not exceed 60 days. No member of the Board of Directors, or any committee thereof, and no officer, employee or agents of the Corporation shall be liable to any individual or entity for any action taken hereunder, except those actions undertaken with lack of good faith. Provided that the Corporation has established a Trust for the Plan pursuant to which the trustee has agreed to act in a capacity other than as a directed trustee in the event of a Change of

Control, the trustee of the Trust shall perform the duties of the Plan Administrator under this Section 13.7 following a Change of Control.

13.8 Action by Board of Directors. Any action required to be taken by the Board of Directors of the Corporation pursuant to the Plan provisions may be performed by the Compensation Committee of the Board.

13.9 Governing Law. To the extent not superseded by the laws of the United States, the laws of the State of Georgia shall be controlling in all matters relating to this Plan.

13.10 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be interpreted and enforced as if such illegal and invalid provisions had never been set forth.

13.11 Code Section 409A . It is the intention of the Corporation that this Plan shall meet the requirements of Section 409A of the Code and applicable Treasury Regulations that must be met in order for amounts of compensation deferred under this Plan to be taxable, for purposes of federal income taxation, in the year of actual receipt by the Participant or Beneficiary. If any provision of this Plan is susceptible of two interpretations, one of which results in the compliance of the Plan with Section 409A of the Code and the applicable Treasury Regulations, and one of which does not, then the provision shall be given the interpretation that results in compliance with Section 409A and the applicable Treasury Regulations.

IN WITNESS WHEREOF, Schweitzer-Mauduit International, Inc. has adopted the foregoing instrument effective as of December 4, 2008.

	SCHWEITZER-MAUDUIT INTERNATIONAL, INC.


	By:

	Title:

APPENDIX A

LIST OF PARTICIPANTS

Exhibit 10.17

SUMMARY OF NON-MANAGEMENT DIRECTOR COMPENSATION
As of January 1, 2009

Function	Amount Paid	Form of Payment

Annual Retainer	$47,000 annually	Payable in quarterly increments in shares of company common stock at its fair market value

Board Meeting Fee	$5,000 per meeting	Cash per meeting attended

Standing Committee Meeting Fee	$1,750 per meeting	Cash per meeting attended

Committee Chair Meeting Fee	$2,500 total per meeting	Cash per meeting attended

Lead-Non Management Director Fee	$16,000 annually	Payable in cash in quarterly increments

Meeting Travel Expenses	Reasonable and actual	Cash reimbursement

Exhibit 10.18

SUMMARY OF NAMED EXECUTIVE OFFICER COMPENSATION

Effective as of January 1, 2009, the following are the annual base salaries of the Chief Executive Officer and the four other most highly compensated executive officers of Schweitzer-Mauduit International, Inc. No named executive officer has an employment contract with the company. The named executive officers participate in various compensation plans and other arrangements as described in the company’s 2009 Proxy Statement.

Chairman,
CEO

Treasurer, Chief
Financial and
Strategic
Planning Officer

President–
Americas

Chief Operating
Officer

President,
European
Operations

2009 Base Salary

US$

685,000

US$

335,000

US$

290,000

US$

420,000

289,120

Exhibit 10.22

SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

RESTRICTED STOCK AGREEMENT

You have been selected to be a recipient of a grant under the Schweitzer-Mauduit International, Inc. Restricted Stock Plan (the “Plan”), as specified below:

GRANTEE:

DATE OF GRANT:

NUMBER OF RESTRICTED SHARES GRANTED:

DATE(S) OF LAPSE OF RESTRICTIONS:

THIS AGREEMENT, effective as of the Date of Grant set forth above, is between Schweitzer-Mauduit International, Inc., a Delaware corporation (the “Company”) and the Grantee named above, and is entered into pursuant to the provisions of the Plan. The parties hereto agree as follows:

1. Employment by the Company . The Restricted Stock granted hereunder is awarded on the condition that Grantee remain in the employ of the Company from the Date of Grant through (and including) the Date of Lapse of Restrictions, as specified above (this time period is referred to herein as the “Restriction Period”).

However, neither such condition nor the award of the Restricted Stock shall impose upon the Company any obligation to retain Grantee in its employ for any given period or upon any specific terms of employment.

2. Certified Legend . Each certificate representing shares of Restricted Stock granted pursuant to the Plan shall bear the following legend:

“The sale or other transfer of the shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in Schweitzer-Mauduit International, Inc.’s Restricted Stock Plan (“Plan”), any rules of administration adopted pursuant to such Plan, and a Restricted Stock Agreement dated January 1, 2009. A copy of the Plan, such rules, and such Restricted Stock Agreement may be obtained from the Secretary of Schweitzer-Mauduit International, Inc.”

3. Removal of Restrictions . Except as otherwise provided herein and in the Plan, awards granted under this Agreement shall become freely transferable by Grantee after the last day of the Restriction Period. Once the awards are released from the restrictions, Grantee shall be entitled to have the legend required by Section 2 of this Agreement removed from his or her stock certificate.

4. Voting Rights and Dividends . During the Restriction Period, Grantee may exercise full voting rights and is entitled to receive all dividends and other distributions paid with respect to the shares of Restricted Stock while they are held. If any such dividends or

distributions are paid in shares of common stock of the Company, the shares shall be subject to the same restrictions on transferability as are the shares of Restricted Stock with respect to which they were paid.

5. Termination of Employment Due to Death . In the event the employment of Grantee is terminated by reason of death during the Restriction Period, the restrictions applicable to a specified number of the shares of Restricted Stock held by Grantee at the time of termination shall lapse as of the date Grantee’s employment terminated, as set forth in this Section 5. The number of shares of Restricted Stock with respect to which restrictions will lapse upon Grantee’s death shall be calculated as follows:

(a) The number of shares of Restricted Stock with respect to which restrictions shall lapse following the death of Grantee shall be determined based upon the assumption that Grantee’s employment continued throughout the entire Restriction Period, and that the Grantee would have been entitled to have the restrictions removed on 100% of his or her shares of Restricted Stock; and

(b) The actual number of shares of Restricted Stock with respect to which restrictions shall lapse following the death of Grantee shall be calculated by multiplying the number of shares determined in accordance with Subparagraph (a) above, by a fraction, the numerator of which is the number of full months of employment of Grantee during the applicable Restriction Period, and the denominator of which is the total number of full months comprising the Restriction Period.

6. Termination of Employment Due to Total and Permanent Disability . In the event Grantee’s active employment by the Company is terminated by reason of Total and Permanent Disability, as such term is defined in the Plan, during the Restriction Period, Grantee shall be entitled to a prorated award of shares on the Date of Lapse of Restrictions, based on the number of full months of employment of Grantee during the Restriction Period, in relation to the total number of full months in the Restriction Period. The restrictions on such shares of Restricted Stock shall lapse at the same time they otherwise would have, had the employment termination not occurred.

If, after the termination of Grantee’s employment due to Total and Permanent Disability, but prior to the Date of Lapse of Restrictions as set forth on the first page of this Agreement, Grantee dies, then the number of shares of Restricted Stock with respect to which restrictions shall lapse and the timing of such lapse shall be determined according to Section 5 herein, applied by treating Grantee as if he or she had remained employed by the Company until the date of his or her death.

7. Termination of Employment for Other Reasons . In the event that Grantee terminates employment with the Company for any reason other than those reasons set forth in Sections 5 and 6 herein, all shares of Restricted Stock held by the Grantee at the time of employment termination shall be forfeited by Grantee to the Company; provided, however, that in the event of an involuntary termination of the employment of Grantee by the Company, the Compensation Committee, in its sole discretion, may waive the automatic forfeiture provisions and pay out on a pro rata basis.

8. Change in Control. In the event of a Change in Control, (as defined in the Plan), all restrictions on the transferability of outstanding awards of Restricted Stock held by Grantee under the Plan shall immediately lapse, and thereafter such shares shall be freely transferable by Grantee, subject to applicable Federal and state securities laws.

9. Transferability . Shares of Restricted Stock granted under this Agreement are not transferable by Grantee, whether voluntarily or involuntarily, by operation of law or otherwise, during the Restriction Period, except as provided in the Plan. If any assignment, pledge, transfer, or other disposition, voluntary or involuntary, of Restricted Stock shall be made, or if any attachment, execution, garnishment, or lien shall be issued against or placed upon the Restricted Stock, then Grantee’s right to the Restricted Stock shall immediately cease and terminate, and Grantee shall promptly surrender to the Company all certificates evidencing Restricted Stock awarded under this Agreement.

10. Recapitalization . In the event that there is any change in the common stock of the Company through the declaration of stock dividends or through recapitalization resulting in stock split-ups or through merger, consolidation, or exchange of shares, or otherwise, the number of shares of Restricted Stock subject to this Agreement shall be equitably adjusted by the Compensation Committee to prevent dilution or enlargement of rights in accordance with the Plan.

11. Administration . This Agreement and the rights of Grantee hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Compensation Committee, as such term is defined in the Plan, may adopt for administration of the Plan. It is expressly understood that the Compensation Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon Grantee. Any inconsistency between this Agreement and the Plan shall be resolved in favor of the Plan.

12. Miscellaneous .

(a) This Agreement shall not confer upon Grantee any right to continuation of employment by the Company, nor shall this Agreement interfere in any way with the Company’s right to terminate his or her employment at any time.

(b) Subject to the terms of the Plan, the Compensation Committee may terminate, amend, or modify the Plan or this Agreement; provided, however, that no such termination, amendment, or modification of the Plan or this Agreement may in any way adversely affect Grantee’s rights under this Agreement without Grantee’s consent.

(c) The Company shall have the authority to deduct or withhold, or require Grantee to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including Grantee’s FICA obligation) required by law to be withheld with respect to any provision of this agreement.

(d) This Agreement shall be subject to all applicable laws, rules, and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required.

(e) To the extent not preempted by Federal law, this Agreement shall be governed by, and construed in accordance with the laws of the State of Georgia.

IN WITNESS THEREOF, the parties have caused the Agreement to be executed as of the Date of Grant.

	SCHWEITZER-MAUDUIT INTERNATIONAL, INC.


	By:
		Frederic Villoutreix, Chairman and CEO

ATTEST:


John W. Rumely, Jr., Secty. & General Counsel

Exhibit 21

SUBSIDIARIES OF SCHWEITZER-MAUDUIT INTERNATIONAL, INC.

The subsidiaries of the Company at December 31, 2008 were as follows:

Name	Jurisdiction of Incorporation or Organization	Percentage of Voting Power

Schweitzer-Mauduit Canada, Inc.	Manitoba Province (Canada)	100%
Schweitzer-Mauduit International China, Limited	Hong Kong, China	100%
China Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd. (1)	People’s Republic of China	50%
Schweitzer-Mauduit Spain, S.L.	Spain	100%
Schweitzer-Mauduit do Brasil, S.A.	Brazil	99.9%
Schweitzer-Mauduit Holding S.A.R.L.	France	100%
Schweitzer-Mauduit Industries S.A.R.L.	France	100%
Schweitzer-Mauduit France S.A.R.L.	France	100%
SM-Developpement	France	100%
LTR Industries S.A.	France	100%
Papeteries de Saint-Girons S.A.S.	France	100%
Saint-Girons Industries S.N.C.	France	100%
Papeteries de Mauduit S.A.S.	France	100%
PDM Industries S.N.C.	France	100%
Papeteries de Malaucène S.A.S	France	100%
Malaucène Industries S.N.C.	France	100%
P.T. PDM Indonesia	Indonesia	100%
PDM Philippines Industries, Inc.	Philippines	100%
Luna Rio Landholding Corporation	Philippines	40%

(1) Joint venture to produce tobacco-related papers in China.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 33-99812, No. 33-99814, No. 33-99816, No. 33-99848, No. 333-74634, No. 333-105986 and No. 333-105998 on Form S-8 of our reports, relating to the consolidated financial statements of Schweitzer-Mauduit International, Inc. and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s adoption of Statement of Financial Accounting Standards No. 158, “ Employer’s Accounting for Defined Benefit Pension and Other Post Retirement Plans” as of December 31, 2006) and the effectiveness of internal control over financial reporting, dated March 6, 2009 appearing in the Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. and subsidiaries for the year ended December 31, 2008.

/s/ DELOITTE & TOUCHE LLP

March 6, 2009

Atlanta, Georgia

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 33-99812, No. 33-99814, No. 33-99816, No. 33-99848, No. 333-74634, No. 333-105986 and No. 333-105998 on Form S-8 of Schweitzer-Mauduit International, Inc. of our report dated March 4, 2009 relating to the financial statements of China Tobacco Mauduit (Jiangmen) Paper Industry Company, Ltd., appearing in this Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. for the year ended December 31, 2008.

/s/DELOITTE TOUCHE TOHMATSU

Hong Kong
March 6, 2009

EXHIBIT 24

POWERS OF ATTORNEY

POWER OF ATTORNEY

The undersigned, Claire L. Arnold, hereby constitutes and appoints John W. Rumely, Jr. and Peter J. Thompson, or either of them, her true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. for the fiscal year ended December 31, 2008, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Dated this 26th day of February, 2009	/S/ CLAIRE L. ARNOLD
	Claire L. Arnold

POWER OF ATTORNEY

The undersigned, K.C. Caldabaugh, hereby constitutes and appoints John W. Rumely, Jr. and Peter J. Thompson, or either of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. for the fiscal year ended December 31, 2008, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Dated this 26th day of February, 2009	/S/ K.C. CALDABAUGH
	K.C. Caldabaugh

POWER OF ATTORNEY

The undersigned, William A. Finn, hereby constitutes and appoints John W. Rumely, Jr. and Peter J. Thompson, or either of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. for the fiscal year ended December 31, 2008, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Dated this 26th day of February, 2009	/S/ WILLIAM A. FINN
	William A. Finn

POWER OF ATTORNEY

The undersigned, Richard D. Jackson, hereby constitutes and appoints John W. Rumely, Jr. and Peter J. Thompson, or either of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. for the fiscal year ended December 31, 2008, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Dated this 26th day of February, 2009	/S/RICHARD D. JACKSON
	Richard D. Jackson

POWER OF ATTORNEY

The undersigned, Robert F. McCullough, hereby constitutes and appoints John W. Rumely, Jr. and Peter J. Thompson, or either of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. for the fiscal year ended December 31, 2008, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Dated this 26th day of February, 2009	/S/ ROBERT F. MCCULLOUGH
	Robert F. McCullough

POWER OF ATTORNEY

The undersigned, Frédéric P. Villoutreix, hereby constitutes and appoints John W. Rumely, Jr. and Peter J. Thompson, or either of them, his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Schweitzer-Mauduit International, Inc. for the fiscal year ended December 31, 2008, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Dated this 26th day of February, 2009	/S/ FREDERIC P. VILLOUTREIX
	Frédéric P. Villoutreix

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

-PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Frédéric P. Villoutreix, certify that:

1. I have reviewed this annual report on Form 10-K of Schweitzer-Mauduit International, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: March 6, 2009

	/s/ FREDERIC P. VILLOUTREIX
	Frédéric P. Villoutreix
	Chairman of the Board and
	Chief Executive Officer

A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter J. Thompson, certify that:

1. I have reviewed this annual report on Form 10-K of Schweitzer-Mauduit International, Inc. (the “Registrant”);

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: March 6, 2009

	/s/ PETER J. THOMPSON
	Peter J. Thompson
	Treasurer, Chief Financial and
	Strategic Planning Officer

EXHIBIT 32

CERTIFICATION OF PERIODIC FINANCIAL REPORTS

UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, in their respective capacities as chief executive officer and chief financial officer of Schweitzer-Mauduit International, Inc. (the “Company”), hereby certify to the best of their knowledge following reasonable inquiry that the Annual Report of the Company on Form 10-K for the period ended December 31, 2008, which accompanies this certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such periodic report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and no purchaser or seller of securities or any other person shall be entitled to rely upon the foregoing certification for any purpose. The undersigned expressly disclaim any obligation to update the foregoing certification except as required by law.

By:	/s/ FREDERIC P. VILLOUTREIX	By:	/s/ PETER J. THOMPSON
	Frédéric P. Villoutreix		Peter J. Thompson
	Chairman of the Board and		Treasurer, Chief Financial and
	Chief Executive Officer		Strategic Planning Officer

	March 6, 2009		March 6, 2009

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 1350 of Title 18 of the United States Code and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing).

Exhibit 99.1

CHINA TOBACCO MAUDUIT (JIANGMEN)

PAPER INDUSTRY COMPANY LTD .

Financial Statements

For the year ended December 31, 2008

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

INDEX TO FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm	F-2

Statements of Operations for the years ended December 31, 2006 (unaudited), 2007 (unaudited) and 2008	F-3

Balance Sheets as of December 31, 2007 (unaudited) and December 31, 2008	F-4

Statements of Stockholders’ Equity for the years ended December 31, 2006 (unaudited), 2007 (unaudited) and 2008	F-5

Cash Flow Statements for the years ended December 31, 2006 (unaudited), 2007 (unaudited) and 2008	F-6

Notes to Financial Statements	F- 7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of China Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd.

We have audited the accompanying balance sheet of China Tobacco Mauduit (Jiangmen) Paper Company Ltd.(the “Company”) as of December 31, 2008, and the related statement of operations, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of China Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd. as of December 31, 2008, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

March 4, 2009

F-2

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars)

	For the year ended December 31,
	20 08			2007			2006
				(unaudited)			(unaudited)
Related party sales	$	3,289		$	—		$	—
Cost of sales	9,037			—			—

Gross loss	(5,748		)	—			—
Operating expenses
Selling expense	337			—			—
General and administrative expense	3,447			1,182			638

Total operating expenses	3,784			1,182			638

Loss from operations	(9,532		)	(1,182		)	(638		)
Non-operating income (expenses)
Interest income	60			74			15
Interest expense	(1,411		)	—			—
Foreign exchange gain	2,762			855			173
Fair value of foreign currency contracts	—			—			166
Other income (expense), net	228			—			—

Total non-operating income (expenses)	1,639			929			354

Loss before income taxes	(7,893		)	(253		)	(284		)
Income tax expense	—			—			—

Net loss	$	(7,893	)	$	(253	)	$	(284	)

See notes to the financial statements.

F-3

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

BALANCE SHEET

(In thousands of U.S. dollars)

	December 31,
	20 08			2007
				(unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	1,371		$	4,218
Restricted cash	1,113			412
Related party receivables	391			33
Inventories	6,462			778
Other current assets	1,987			193

Total Current Assets	11,324			5,634
Property, plant and equipment, net	88,522			64,228
Land use right	1,629			1,400

Total Assets	$	101,475		$	71,262

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Current debt	$	13,817		$	14,204
Accounts payable	2,851			3,636
Related party payables	728			1,373
Accrued expenses	775			714

Total Current Liabilities	18,171			19,927
Long-term debt	51,950			19,015
Other long term liabilities	457			—

Total Liabilities	70,578			38,942

Stockholders’ Equity
Contributed capital	35,116			31,156
Accumulated deficit	(8,430		)	(537		)
Accumulated other comprehensive income	4,211			1,701

Total Stockholders’ Equity	30,897			32,320

Total Liabilities and Stockholders’ Equity	$	101,475		$	71,262

See notes to the financial statements.

F-4

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands of U.S. dollars, except share data)

						Accumulated					Total
						O ther					Comprehensive
	Contributed		Accumulated			Comprehensive		Total			Income
	Capital		Deficit			Income		Equity			(Loss)

UNAUDITED BALANCE AT JANUARY 1, 2006	$	5,729	$	—		$	—	$	5,729
Foreign currency translation adjustment	—		—			134		134			134
Net loss	—		(284		)	—		(284		)	(284		)

UNAUDITED BALANCE AT DECEMBER 31, 2006	$	5,729	$	(284	)	$	134	$	5,579		$	(150	)

Contribution from shareholders	25,427		—			—		25,427
Foreign currency translation adjustment	—		—			1,567		1,567			1,567
Net loss	—		(253		)	—		(253		)	(253		)

UNAUDITED BALANCE AT DECEMBER 31, 2007	$	31,156	$	(537	)	$	1,701	$	32,320		$	1,314

Contribution from shareholders	3,960		—			—		3,960
Foreign currency translation adjustment	—		—			2,510		2,510			2,510
Net loss	—		(7,893		)	—		(7,893		)	(7,893		)

BALANCE AT DECEMBER 31, 2008	$	35,116	$	(8,430	)	$	4,211	$	30,897		$	(5,383	)

See notes to the financial statements.

F-5

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

CASH FLOW STATEMENT

(In thousands of US dollars)

	For the year ended December 31,
	20 08			2007			2006
				(unaudited)			(unaudited)
Cash flows from operating activities
Net loss	$	(7,893	)	$	(253	)	$	(284	)
Adjustment for:
Depreciation	2,107			91			20
Land use right expense	66			75			—
Charges to inventories	624			—			—
Change in fair value of foreign currency contracts	—			166			(166		)
Other items
Changes in operating assets and liabilities:
Related party receivables	(358		)	(33		)	—
Inventories	(6,308		)	(778		)	—
Other current assets	(1,793		)	(70		)	(123		)
Accounts payable	315			5,490			1,315
Related party payables	(645		)	1,373			—
Accrued expenses	61			366			348
Other long term liabilities	457			—			—

Net cash provided by (used in) operations	(13,367		)	6,427			1,110

Cash flows from investing activities
Purchases of plant, property, and equipment,	(25,302		)	(59,635		)	(7,872		)
Acquisition of land use right	(295		)	(92		)	(1,382		)
Change in restricted cash	(701		)	(412		)	—

Cash used in investing activities	(26,298		)	(60,139		)	(9,254		)

Cash flows from financing
Proceeds from bank borrowings	46,877			27,721			5,498
Repayments of bank borrowings	(16,670		)	—			—
Contributions from shareholders	3,960			25,427			—

Cash provided by financing activities	34,167			53,148			5,498

Effect of exchange rate on cash	2,651			1,565			134

Increase (decrease) in cash and cash equivalents	(2,847		)	1,001			(2,512		)

Cash and cash equivalents at beginning of year	4,218			3,217			5,729

Cash and cash equivalents at end of year	$	1,371		$	4,218		$	3,217

Supplement disclosure of non cash transactions Interest paid (net of interest capitalized)	1,413			—			—

Non-cash investing activity Purchase of plant, property and equipment	2,539			3,639			470

See notes to the financial statements.

F-6

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

1. Description of business

China Tobacco Mauduit (Jiangmen) Paper Industry Company Ltd. (the Company) was incorporated in the People’s Republic of China (PRC or China) on December 31, 2005 as a joint venture between Schweitzer-Mauduit International, Inc. (SWM) and China National Tobacco Corporation (CNTC). The Company is engaged in manufacture and sale of cigarette paper and porous plug wrap paper.

These financial statements have been prepared for the purpose of filing with the United States Securities and Exchange Commission for complying with Article 3-09 of Regulation S-X of the 1933 Securities Act. The filing requirement is based on the Company being a significant equity method investee of SWM.

2. Development Stage

The Company was in the development stages at December 31, 2006 and 2007. The Company completed its development activities and commenced its planned principal operations in June 2008.

3. Summary of significant accounting policies

(a) Basis of preparation

The financial statements have been prepared and presented in accordance with accounting principles generally accepted in the United States of America.

(b) Use of estimates

The preparation of the financial statements, in accordance with generally accepted principles in the United States of America, requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could materially differ from these estimates. Significant estimates which are susceptible to change as more information becomes available are the useful lives of plant, property, and equipment, valuation of deferred tax assets and charges to inventories.

(c) Concentration of risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and related party receivables.

The Company places its cash and cash equivalents in various financial institutions in the PRC. The Company believes that no significant credit risk exists as these banks are principally government-owned financial institutions with high credit ratings and quality.

The Company conducts credit evaluations of its affiliated companies. The Company establishes an allowance for doubtful accounts mainly based on age of the receivables and other factors surrounding the credit risk of specific customers and affiliated companies.

F-7

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

3. Summary of significant accounting policies - continued

(d) Fair value of financial instruments

The Company’s financial instruments include cash and cash equivalents, related party receivables, other current assets, accounts and other payables, related party payables, accrued expenses, and short-term bank borrowings. As of December 31, 2008, the carrying amounts approximate the fair values due to the short-term nature of these instruments. The carrying amount of long-term debt approximate their fair values as they carry market interest rates.

(e) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and highly liquid short-term deposits which are unrestricted as to withdrawal and use, and which have maturities of three months or less when purchased.

(f) Restricted cash

Restricted cash represents amounts placed in bank accounts as deposits for short-term letters of credit issued by the bank for purchase of, machinery and equipment and financing of working capital.

(g) Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the First-In, First-Out, or FIFO. Costs include materials, direct labor, and overheads incurred in bringing the inventories to their present location and condition. The Company reviews and writes down the cost of excess and slow moving inventories to the estimated market value based on forecast demand. The charges to inventories were $624 and $0 (unaudited) for the year ended December 31, 2008 and 2007.

(h) Property, plant, and equipment, net

Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation on property, plant, and equipment is calculated on the straight-line method over the estimated useful lives of the assets. The depreciable lives are as follows:

		Years

Building		lesser of 30 years or lease term
Plant and machinery		16 to 20 years
Furniture, fixtures and equipment		5
Motor vehicles		5

F-8

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

3. Summary of significant accounting policies - continued

(i) Impairment of long-lived assets

The Company evaluates the recoverability of long-lived assets with finite lives whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses recoverability by a comparison of the carrying amount of the long-lived asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recognized as the difference between the carrying amount and fair value.

(j) Land use right

Land use right represents prepayments made to obtain land under operating lease arrangements. Land use right is recognized as an expense on a straight-line basis over the lease period of 30 years. Land use right expense for the year ended December 31, 2008, 2007 and 2006 was $66, $75 (unaudited) and $0 (unaudited).

(k) Revenue recognition

The Company recognizes revenue when the following 4 criteria are met: (1) persuasive evidence of an arrangement exists; (2) ownership has transferred to the customer; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured based on the Company’s judgment regarding the collectability of its accounts receivable. Generally, the Company recognizes revenue when it ships its manufactured product and title and risk of loss passes to its customer in accordance with the terms of sale of the product. Revenue is recorded when the Company receives acknowledgement of receipt from its customers which is typically received fifteen days from delivery date. Sales agreements typically do not contain customary product warranties except for return and replacement of defective products within a period of 30 days from delivery. Sales agreements do not contain any post-shipment obligations or any other return or credit provisions.

The cost of shipping and handling charged to the Company’s customers is recorded as a component of cost of products sold. Those costs include the amounts paid to a third party to deliver the finished goods of $73 and $0 (unaudited) for the years ended December 31, 2008 and 2007. Any freight costs billed to and paid by a customer are included in revenue.

F-9

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

3. Summary of significant accounting policies - continued

(l) Derivative instruments

The Company entered into derivative financial instruments such as foreign currency forward contracts to manage its risks on foreign currency borrowings. Derivative financial instruments are initially recognized at fair value and subsequently remeasured at their fair values with changes in fair value included in determination of net income. As of December 31, 2008, there were no derivative instruments outstanding.

(m) Employee welfare benefits

Full time employees of the Company in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, and other welfare benefits are provided to the employees. Chinese labor regulations require the Group to accrue for these defined contribution plans based on certain percentages of the employees’ salaries. For the year ended December 31, 2008, 2007 and 2006, the Company incurred expenses of $375, $230 (unaudited), and $35 (unaudited).

(n) Income taxes

Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, and unutilized tax loss carry forwards. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in which temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of change in tax rates has been recognized in the statement of operations in the period of the enactment of the change.

(o) Foreign currency

The functional currency of the Company is Renminbi (“RMB”). Foreign currency transactions have been converted into the functional currency at the exchange rates prevailing on transaction dates. Foreign currency denominated monetary assets and liabilities have been translated at the exchange rates prevailing on the balance sheet date. Exchange differences have been included in the statement of operations.

The financial statements are translated into U.S. dollar, the reporting currency. All assets and liabilities are translated at the rates of exchange ruling at the balance sheet date and all income and expense items are translated at the average rates of exchange over the year. All exchange differences arising from the translation of financial statements are recorded as a component of comprehensive income.

F-10

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

3. Summary of significant accounting policies - continued

(p) Comprehensive income (loss)

Comprehensive income (loss) includes all changes in equity from transactions and other events and circumstances from non-shareholder sources. The Company’s comprehensive income (loss) consists of net income (loss) and the foreign exchange differences arising from translation.

(q) Recent accounting pronouncements

In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of SFAS 115” (“SFAS 159”). SFAS 159 provides companies with the option to report selected financial assets and liabilities at fair value. SFAS 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Group’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 did not have a material effect on the Company’s financial statements as the Company did not elect the fair value option on eligible items.

In December 2007, the FASB issued SFAS No. 141R, “Business Combination” (“SFAS No. 141R”). The statement requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS 141R will have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS No. 160”) to improve the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report net income attributable to both the parent and noncontrolling (minority) interests in subsidiaries in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transaction. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS 160 will have a material impact on its financial statements.

F-11

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

3. Summary of significant accounting policies - continued

(q) Recent accounting pronouncements - continued

In February 2008, the FASB issued FSP 157-2, which delays the company’s January 1, 2008, effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities, except those recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until January 1, 2009. Implementation of this standard did not have a material effect on the financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivate Instruments and Hedging Activities”, an amendment of FASB Statement No. 133 (“SFAS No. 161). The new standard requires enhanced disclosures to help investors better understand the effect of an entity’s derivate instruments and related hedging activities on its financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company will adopt SFAS No. 161 on January 1, 2009.

4. Inventories

Inventories by major class:

	December 31,
	20 08		2007
			(unaudited)

Raw materials	$	4,516	$	778
Work in process	1,578		—
Finished goods	368		—
Total	6,462		778

F-12

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

5. Property, plant, and equipment, net

Property, plant and equipment, net consisted of the following:

	December 31,
	20 08			2007
				(unaudited)
Cost
Buildings	$	10,334		$	422
Plant and machinery	79,418			2,485
Furniture, fixtures and equipment	711			363
Motor vehicles	334			278
	90,797			3,548
Less accumulated depreciation	(2,275		)	(117		)

Sub-total	88,522			3,431
Construction in progress	—			60,797
Property, plant, and equipment, net	$	88,522		$	64,228

Construction in progress represents construction of production facilities. Costs incurred on construction is capitalized and transferred to property, plant and equipment upon completion, at which time depreciation commences.

Depreciation expense was $2,107, $91 (unaudited) and $20 (unaudited) for the years ended December 31, 2008, 2007 and 2006, respectively.

Interest expense incurred for construction of property, plant and equipment is capitalized as part of the cost of such assets. Interest expense capitalized for the years ended December 31, 2008, 2007 and 2006 were $2,251, $833 (unaudited), and $59 (unaudited), respectively.

F-13

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

6. Debt

Total debt consists of the following:

	December 31,
	20 08			2007
				(unaudited)
Short-term debt:

PRC revolving loans	$	1,010		$	—
Short-term loans	7,035			14,204
Current portion of long-term debt	5,772			—
	13,817			14,204
Long-term debt:

Term loans	57,722			19,015
Less current portion	(5,772		)	—
Non-current portion of long-term debt	$	51,950		$	19,015

Short term debt consisted of a revolving credit facility for $8,100 and short-term bank loans. Short term debts had a weighted average interest rate of approximately 6.38% and 5.12% as of December 31, 2008 and 2007 respectively. As of December 31, 2008, short-term debt of $7,035, $253, $631, and $126 were denoted in Renminbi, US dollars, Euro and Great British pounds, respectively. As of December 31, 2007, short-term debt of $413 (unaudited) and $13,791 (unaudited) were denoted in US dollars and Euro, respectively. As of December 31, 2008, $6,291 was secured by the land use right and fixed assets of the Company. Short-term debts as of December 31, 2007 were unsecured.

As of December 31, 2008, $20,665 and $37,057 of long-term debt were denominated in Renminbi and US dollars, respectively. As of December 31, 2007, $1,370 (unaudited) and $17,645 (unaudited) of long-term debt were denominated in Renminbi and US dollars, respectively. As of December 31, 2008 and 2007, all long-term debt was secured by the land use right and fixed assets of the Company. The weighted average interest rates were approximately 5.69% and 6.53% as of December 31, 2008 and 2007 respectively. The Renminbi denominated loans carry interest rate at 90% of the benchmark rate of 10 year term loan announced by the People’s Bank of China. According to the laws of the PRC, rates may be adjusted annually based on the interest rates determined by the People’s Bank of China. For the US dollar denominated debts, the interest rate is calculated at 1.1845% plus the six month LIBOR two business days before the actual draw down and is reset at the prevailing LIBOR rate plus 1.1845% every six months.

Following are the contractual maturities for the Company’s debt principal obligations as of December 31, 2008:

2009	$	13,817
2010	5,195
2011	4,675
2012	4,208
2013 and thereafter	$	37,872

F-14

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

7. Capital structure

The Company was incorporated as a joint venture in December 2005 with capital contribution of $5,729. In December 2007 and 2008 additional capital of $25,427 and $3,960, were made by the venturers, respectively.

8. Income taxes

The Company is subject to Enterprise Income Tax (“EIT”) on the taxable income in accordance with the Enterprise Income Tax Law and the Income Tax Law of the PRC concerning Foreign Investment Enterprise and Foreign Enterprises (collectively “PRC Enterprise Income Tax Laws”).

On March 16, 2007, the PRC National People’s Congress passed the China Corporate Income Tax Law which changed the income tax rates for most enterprises from 33% at the present to 25%. This new law became effective on January 1, 2008. There will be a transition period for certain qualifying enterprises, whether foreign-invested or domestic, which currently receive preferential tax treatments granted by relevant tax authorities. Certain enterprises that are subject to an enterprise income tax rate lower than 25% may continue to enjoy the lower rate and gradually transfer to the new tax rate within five years after the effective date of the new law. Certain enterprises that are currently entitled to exemptions or reductions from the standard income tax rate for a fixed term may continue to enjoy such treatment until the fixed term expires.

Prior to 2008, the Company was not considered an operating entity under PRC tax rules and therefore there is no effect of income tax for the years 2006-2007. In 2008, the statutory tax rate is 25%. However, the Company is qualified for a tax holiday and is entitled to full tax exemption for two years and 50% reduction in the following three years. Therefore, the Company is exempted from PRC Enterprise Income Tax (EIT) from 2008 to 2009 and will be subject to EIT at 12.5% from 2010 to 2012.

Income tax expenses as follows:

	December 31,
	20 08		2007
			(unaudited)

Current	$	—	$	—
Deferred	$	—	$	—
Total	$	—	$	—

F-15

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

8. Income taxes - continued

Principal components of deferred income taxes are as follows:

	December 31,
	20 08			2007
				(unaudited)
Non-current deferred tax asset:
Operating loss carry forwards	$	1,184		$	—
Valuation allowance	(327		)	—
Total deferred tax assets, net	$	857		$	—

Non-current deferred tax liability:
Plant, property and equipment	$	(857	)	$	—

For the purpose of balance sheet presentation, certain non-current deferred tax assets and liabilities within the same tax jurisdiction have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

	December 31,
	20 08			2007

Non-current deferred tax asset:
Net operating loss carry forwards	$	1,184		$	—
Valuation allowance	(327		)	—
Total deferred tax assets, net	$	857		$	—
Non-current deferred tax liability:
Plant, property and equipment	$	(857	)	$	—
Non-current deferred tax liabilities, net	$	—		$	—

The tax loss carry forwards of $9,468 will expire on various dates through 2013. Valuation allowance has been recorded to the extent deferred tax assets are expected to expire in the Company’s tax exemption period. Where a valuation allowance was not recorded, the Company believes that there was sufficient positive evidence to support its conclusion not to record a valuation allowance as it expects to generate sufficient taxable income in the future .

F-16

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

9. Commitments and contingencies

The Company leases certain premises under non-cancellable leases. Rental expenses under operating lease for the year ended December 31, 2008, 2007 and 2006 were $27, $0 (unaudited) and $0 (unaudited), respectively. As of December 31, 2008, future minimum lease payments under non-cancellable operating lease agreements of $14 are all due within one year.

The Company also enters into certain contracts for the purchase of equipment and related costs in connection with its ongoing capital projects, for which $72 was committed at December 31, 2008.

10. Related parties transactions

(a) Royalties to SWM and CNTC

The Company entered into a Know-how License Contract with SWM, and a Cigarette Information Services Contract with CNTC in which 2% of royalties charges are payable on gross sales of cigarette paper and porous plug wrap paper. Amounts paid to both SWM and CNTC for the years ended December 31, 2008, 2007 and 2006 were $57, $0 (unaudited) and $0 (unaudited). Amounts due to SWM and CNTC for the years ended December 31, 2008 and 2007 were $74 and $0 (unaudited).

(b) Technical Services from PdM

For the mill construction, Papeteries de Mauduit S.A.S. Inc. (PdM), a wholly owned subsidiary of SWM, provided professional consultancy service to the Company under a Technical Services Agreement signed between the Company and PdM. Amounts paid to PDM for the years ended December 31, 2008, 2007 and 2006 amounted to $2,467, $1,972 (unaudited) and $880 (unaudited). As of December 31, 2008 and 2007, amount due to PdM for consultancy services were $164 and $586 (unaudited), respectively.

(c) Purchase from PdM

Purchases of raw materials from PdM, a subsidiary of SWM, amounted to $2,585, $355 (unaudited) and $0 (unaudited) for the years ended December 31, 2008, 2007 and 2006, respectively. The Company purchased fixed assets from PdM amounting to $264, $0 (unaudited), and $0 (unaudited) for the years ended December 31, 2008, 2007 and 2006, respectively. As of December 31, 2008 and 2007, amount due to PdM related to rolls purchased were $465 and $750 (unaudited).

(d) Sales to cigarette manufacturer

All of the Company’s sales and related party receivables are transacted with subsidiaries of CNTC.

F-17

CHINA TOBACCO MAUDUIT (JIANGMEN) PAPER INDUSTRY COMPANY LTD.

NOTES TO FINANCIAL STATEMENTS

(In thousands of US dollars)

10. Related parties transactions - continued

(e) Employee benefits paid by PdMal

Papeteries de Malaucene S.A.S. Inc. (PdMal), a wholly owned subsidiary of SWM, paid employee benefits expenses on our behalf for the Company’s deputy general manager of productions who is a French native. The amount paid to PdMal for the years ended December 31, 2008, 2007, and 2006 were $25, $0 (unaudited), and $0 (unaudited), respectively. As of December 31, 2008 and 2007, amounts due to PdMal were $25 and $25 (unaudited), respectively.

(f) Training expenses to P.T. PDM Indonesia

P.T. PDM Indonesia Inc., a wholly owned subsidiary of SWM, paid training expenses on behalf of the Company. The amount paid to P.T. PDM Indonesia for the years ended December 31, 2008, 2007 and 2006 were $12, $0 (unaudited) and $0 (unaudited), respectively. As of December 31, 2008 and 2007, amounts due P.T. PDM Indonesia were $0 and $12 (unaudited), respectively.

*********

F-18

ARTICLE I ESTABLISHMENT OF PLAN

Administrator considers necessary or appropriate if the Plan Administrator reasonably determines in good faith that such exclusion or further action is necessary in order for the Plan to qualify for, or to continue to qualify for, the ERISA exemption.

ARTICLE II DEFINITIONS

2.1 AIP Awards . The cash awards, if any, that may be earned by participants in the Corporation’s Annual Incentive Plan.

2.2 Annual Deferral. The amount of Base Salary, AIP Awards and/or LTIP Awards which the Participant elects to defer in each Deferral Period pursuant to Section 4.1 of the Plan Document.

2.3 Base Salary. A Participant’s base annual salary for the applicable Plan Year.

2.4 Beneficiary. An individual or entity designated by a Participant in accordance with Section 13.6.

2.5 Board or Board of Directors. The Board of Directors of the Corporation.

2.7 Code. The Internal Revenue Code of 1986. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes such section.

2.8 Committee. The Compensation Committee of the Corporation’s Board of Directors.

2.9 Corporation. Schweitzer-Mauduit International, Inc.

2.10 Deferral Account. The account established for a Participant pursuant to Section 5.1 of the Plan Document.

2.11 Deferral Election. The election made by the Participant pursuant to Section 4.1 of the Plan Document.

2.12 Deferral Period. The Plan Year, or in the case of a newly hired or promoted employee who becomes an Eligible Employee during a Plan Year, the remaining portion of the Plan Year. In the case of the first Plan Year, the Deferral Period commences January 1, 2005 and ends December 31, 2005.

2.14 Effective Date. January 1, 2005.

2.16 Employer . The Corporation and any related entity that becomes a participating employer in the Plan, in accordance with Section 12.2.

2.17 ERISA . The Employee Retirement Income Security Act of 1974, as amended.

2.18 IRS . The Internal Revenue Service.

2.19 Internal Revenue Service . Limits means any of the limitations on the amounts of contributions to or benefits under a qualified retirement plan required by Code sections 401(a)(4), 401(a)(17), 410(b), or 415.

2.20 LTIP Awards. The cash awards, if any, that may be earned by participants in the Corporation’s Long-Term Incentive Plan.

2.22 Participant Agreement. The written agreement, including a Deferral and Investment Election Form, to defer Base Salary, AIP Awards and/or LTIP Awards made by the Participant and investment directions as to any discretionary corporate contributions made on the Participant’s

behalf. Such written agreement and Deferral and Investment Election Form shall be in the format designated by the Corporation, attached hereto.

2.23 Plan. The Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2.

2.24 Plan Administrator. The Corporation’s Human Resources Committee.

2.25 Plan Year. “Plan Year” means the 12-month period beginning each January 1 and ending on the following December 31.

2.26 Rabbi Trust. The Rabbi Trust, which the Corporation may, in its discretion, establish for the Schweitzer-Mauduit International, Inc. Deferred Compensation Plan No. 2, as amended from time to time.

2.31 Valuation Date. Each business day of the Plan Year.

2.32 Year of Service. Each consecutive twelve (12) month period during which a Participant is continuously and actively employed by the Corporation.

ARTICLE III ELIGIBILITY AND PARTICIPATION

ARTICLE IV CONTRIBUTIONS

each Plan Year to remain a participant in the Plan. After a Plan Year commences, such Deferral Election shall continue for the entire Plan Year.

ARTICLE V ACCOUNTS

any instrument or instruments implementing its provisions, or for the failure of any Participant, Beneficiary or other individual or entity to be entitled to any particular tax consequences with respect to the Plan or any credit or payment thereunder.

5.5 Statement of Deferral Accounts. The Plan Administrator shall provide to each Participant quarterly statements setting forth the value of the Deferral Account maintained for such Participant.

ARTICLE VI VESTING

ARTICLE VII BENEFITS

7.2 Disability. If a Participant suffers a Disability while employed with the Corporation and before he is entitled to benefits under this Article, he shall receive the amount credited to his Deferral Account as of the Valuation Date coinciding with the Date on which the Participant is

thirty (30) days after the date on which the Change of Control occurs; provided, however, that in all cases the Participant shall not have the right to designate the year of payment.

7.8 The schedule of payments pursuant to a Deferral Election may be amended provided that all of the following requirements are met:

(i) the amendment of the Deferral Election shall not take effect until at least 12 months after the date on which such amendment is made;

(iii) in the case of an amendment of an election related to a payment that is to be made at a specified time or pursuant to a fixed schedule, such an amendment of the election must be made at least 12 months prior to the date of the first scheduled payment.

ARTICLE VIII UNFORESEEABLE EMERGENCY WITHDRAWALS

ARTICLE I
ESTABLISHMENT OF PLAN

ARTICLE II
DEFINITIONS

ARTICLE III
ELIGIBILITY AND PARTICIPATION

ARTICLE IV
CONTRIBUTIONS

ARTICLE V
ACCOUNTS

ARTICLE VI
VESTING

ARTICLE VII
BENEFITS

ARTICLE VIII
UNFORESEEABLE EMERGENCY WITHDRAWALS