june 2013 investor presentation
DESCRIPTION
June 2013 Investor PresentationTRANSCRIPT
June 2013
Fine Paper Technical Products
2
Specialty,
performance-based
products
End Markets: filtration,
industrial backings,
labels and other
specialties
Manufacturing in
Germany and the U.S.
Image-oriented
high-end textured and
colored graphic papers
End Markets: premium
print communications,
luxury packaging, crafting
and premium labels
Manufacturing in
the U.S.
$800+ million
net sales
Lead in profitable, specialty niche markets
Increase participation in markets that can provide us with leading positions and
value our competencies in high performance media, coating and saturating
Expand in new geographies and market adjacencies
Increase our size, growth rate and portfolio diversification through
organic initiatives and M&A
Sizeable cash flow generation and conservative balance sheet providing
flexibility to pursue attractive opportunities
Invest to grow in our higher value performance and image-driven products
(e.g. melt blown filtration premium label , luxury packaging)
Supplement organic growth with acquisitions that deliver value and expand
our presence in growing specialty markets
Deliver consistent, attractive returns
Pricing power and ability to offset input cost variability
Cash deployment to shareholders via increasing dividends and share buybacks
Return on Capital a key performance metric
3
$384
$421
$407 $408
7.6% 8.0%
9.2% 8.6%
5.0%
8.0%
11.0%
320
330
340
350
360
370
380
390
400
410
420
430
2010 2011 2012 TTM
Net Sales
OP %
4
Currency
Impact
$429
2010 2011 2012
Technical Products
Growth led by filtration, labels
and abrasives
Margins expanding with higher
value mix, sales growth, cost
efficiencies and pricing
$273 $275
$373 $386
13.6% 14.4% 15.0% 15.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
-20
80
180
280
380
480
2010 2011 2012 TTM
Net Sales
OP %
2010 2011 2012
Fine Paper
Consistent and attractive profits, cash
flow and returns on capital
Three years of top-line growth,
boosted in 2012 by brand acquisition
TTM
Mar-13
TTM
Mar-13
$429
Currency
Impact
5
Filtration Specialties Industrial Backings
High-performance
filtration media for
fuel, air, oil, cabin
air in transportation,
as well as products
for other markets
Includes labels,
non-woven wall
cover, medical
packaging,
durable print
media and other
markets
Saturated and
coated papers
used for backing of
specialty abrasives
and tapes
6
Key technologies
Multi-fiber forming capabilities
Saturation, coating and surface treatments
Polymer chemistries
Ability to Meet
Specialized
Performance
Requirements
Strong
Barriers
to Entry
Long-standing relationships
Global market-leading customers
Intricate qualification requirements
Ongoing joint product development
Innovative new products
Customer Intimacy
and Qualification
7
Strategic
Priorities
Est. Market Growth
Geography
Filtration
Higher value melt blown products
Internationalization
Market Adjacencies
2x
GDP
Specialties
Performance labels
Non-woven wall cover
Medical packaging
GDP+
Industrial Backing- Tape
Differentiation via saturating/coating
Optimize costs
GDP Industrial Backing- Abrasives
Enter new adjacencies
Follow customers in emerging markets
Europe
North America
Asia/ RoW
Europe
North America
Asia/ RoW
Europe
North America
Asia/ RoW
Dust Control
Transport/H. Duty
HVAC/Air
Process & Food
Water
Life Sciences
Gas Turbine
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Asia NAFTA Europe RoW
Other
NP
H&V
Ahlstrom
Global Transportation Filtration Market Size and Share Global Market ~ US $1 billion
Transportation Filtration Core Growth
Leader in European auto filtration (fuel, oil, engine & cabin air) to OEMs and aftermarket
Growth in higher value products and new adjacencies requiring third melt blown line
Entry into New Adjacencies
Recent entry in beverage filtration (coffee capsule) and industrial filter applications
Ability to leverage our technologies to enter into other attractive filtration markets
Specialty filtration media markets
> $4 billion
Geographic Expansion Opportunities
Global engine filter requirements continue to become more demanding
Existing global customers desire for us to have an expanded geographic presence
8
Source: company estimates
CAGR: 8% Net Sales
Source: company estimates
9
Retail Graphic
Imaging
Luxury Packaging &
Premium Label
Branded specialty
papers sold to
consumers for school
supplies, posters,
crafting, business and
resume papers,
advertising and
promotions
Unique colors,
textures and finishes
for identity, print
collateral, invitations,
advertising, and
other high-end
commercial printing
Image-enhancing
colors and textures of
premium folded
cartons, box wrap,
bags, premium wine,
beverage and spirit
labels, food labels,
hang tags
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Neenah
60%
Mohawk
30%
Others
10%
Value Share- Premium Papers
$650 million market
Leading Brands and Supply Chain
Capabilities
Brands known > 2:1 over competition,
specified by printers and designers
Technology tools to drive demand
and improve supply chain efficiencies
Superior Asset Base with a
Leading Cost Position
Purpose-built assets considered
youngest in the industry
Redundant capabilities, unique
in our category with a variety
of texture and color
11
The global market for luxury packaging,
premium labels and retail solutions is over
$500 million and growing. Our current share in this market is less than 7%,
anchored by labels in North America.
Luxury Packaging Premium Label Specialty Retail
Neenah is now widely distributed with
major retailers
Opportunities for additional
distribution and products within
existing channels, as well as new ones kindle
12
Consistent profitable growth
17 consecutive quarters ahead of expectations
Return on Capital Focused
Averaging over 150 bps improvement per year since 2009
Efficient capital structure
Low cost debt with ample financing availability
Attractive shareholder returns
Top quartile returns for Russell 2000 Value stocks 2010-2012
Cash returns with attractive and growing dividend targeted at 3-4% yield
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$ millions 2010 2011 2012
Q1
2012
Q1
2013
Sales $ 658 $ 696 $ 809 $198 $213
Adj. EBIT1 52 59 80 22 22
Adj. E.P.S.1 $ 1.47 $ 1.91 $ 2.78 $0.77 $0.74
(1) Excludes one-time items for divestitures, integration and other costs as noted in GAAP table
Top line growth via share gains, new products, price/mix and 2012/2013 acquisitions
Faster bottom line growth with margin improvement and debt reduction
Cash deployed to support growth, reduce debt, increase dividend and buy shares
Full Year
14
8% 9%
12%
2010 2011 2012
% Return on
Invested Capital
Primary measure to evaluate investment opportunities and judge business performance
Key metric in compensation plans
Delivering improvement through:
Profitable growth/margin expansion
Carefully managed assets/investments
Strategic moves (divest pulp, brand acquisitions)
$245
$186 $182 $186
2.8x
2.0x
1.6x 1.6x
1
1.35
1.7
2.05
2.4
2.75
3.1
3.45
3.8
30
80
130
180
230
Dec 10 Dec 11 Dec 12 Mar 13
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Target Range
2.0 – 3.0x
$ millions
Dec
2010
Dec
2011
Dec
2012
Mar
2013
Mar
2013
Bonds 5.25%
(due Nov. 2021) $ 223 $ 158 $ 90 $ 90 $ 175
ABL (due Nov. 2017)
- - 56 49 -
Term Loan (amortized 5 yrs)
- - 30 29 29
Germany 22 28 6 18 18
Debt $ 245 $ 186 $ 182 $ 186 $ 222*
Interest Exp. (rolling 12 months)
$ 20 $ 16 $ 13 $ 12 $ 11
Debt below targeted capital structure range with ample flexibility and borrowing capacity
Recent debt restructuring lowering interest expense
Bond debt rating Ba3/BB-, recently upgraded in May 2013
Pro Forma
* Excludes temporary cash build following May 2013 bond refinancing of $36 million
Debt Levels ($ millions)
$0.40 $0.44
$0.48
$0.60
$0.80
0
0.2
0.4
0.6
0.8
1
2010 2011 2012 2013
2H
2013
1H
16
Pro Forma Cash Flow ($ millions)
EBITDA $ 115
Interest Expense (10)
Other (tax, wkg cap, pension, etc.)
(15-20)
Cash From Operations $ 85- 90
Capital Expenditures (25-30)
Free Cash Flow $ 55 – 65
FCF per share > $3.50
Cash Generation Pro forma free cash flow of ~ $ 60 million Moderate cap-ex needs (maint. of $10 mm/year)
with disciplined allocation process Favorable cash tax position (NOLs = $66 mm)
Cash Deployment Priority on organic growth and M&A; active
process to identify and evaluate opportunities Debt reduction $10 million stock repurchase plan Attractive dividend
Annual Dividend
(per share)
Substantial cash flows resulting in
double-digit yields
9.9
7.1
NP Paper Group
EBIT Margins %
(2012)
6.4x
7.6x
NP Paper Group
EV(5/31/13)/EBITDA
(2012)
6.7
3.0
NP Paper Group
Return on Assets %
(2012)
21.7
8.4
NP Paper Group
Return on Equity %
(2012)
11.3x
16.8x
NP Paper Group
Price (5/31/13)/
EPS (TTM)
3.0
5.8
NP Paper Group
Capex % Sales
(2010-2012)
17
18
Leading positions in profitable specialty
markets
Track record of consistent momentum in
sales and profits reflecting successful
execution of plans
Sustainable, strong cash flows and sound
capital structure with financial flexibility to
support growth opportunities
Strategic focus on expanding in defensible
and growing specialty markets, further from
historical “pulp & paper” positioning
Attractive returns driven by organic growth, events and cash return to shareholders
$86
$93
$113
2010 2011 2012
Consolidated Adjusted EBITDA (U$ millions)
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For more information
visit our website: www.neenah.com
email: [email protected]
Investor Relations
Bill McCarthy
VP, Financial Planning and Analysis & Investor Relations
3460 Preston Ridge Rd., Suite 600
Alpharetta, GA 30005
Phone: (678) 518-3278
Email: [email protected]
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Continuing Operations
$ millions 2010 2011 2012
Mar
2013
EBIT (Operating Income) $ 55.1 $ 56.6 $ 70.4 $22.2
Ripon Mill Close/(Gain on Sale) (3.4)
Acquisition integration costs 5.8 0.1
Other1 2.4 4.1
Adjusted EBIT $ 51.7 $ 59.0 $ 80.3 $22.3
Depreciation & Amortization 29.7 30.0 28.0 7.2
Amort. Equity-Based Compensation 4.9 4.3 4.9 1.4
Adjusted EBITDA $ 86.3 $ 93.3 $113.2 $30.9
Earnings (Loss) per Share $ 1.61 $ 1.82 $ 2.41 $0.73
Ripon Mill Close/(Gain on Sale) (0.14)
Acquisition integration costs 0.22 0.01
Other1 0.09 0.15
Adjusted Earnings per Share $ 1.47 $ 1.91 $2.78 $0.74
1 Includes in 2011 ($0.09) and 2012 ($0.02) cost of early redemption of bonds, and in 2012 ($0.13) SERP settlement charge
EBITDA, Adjusted EBITDA and Free Cash Flow as presented in these slides, are supplemental measures of our performance, and Net Debt, as presented in these slides, is a supplemental measure of our financial position. In each case, these measures are not required by, or presented in accordance with, generally accepted accounting principles in the United States (‘‘GAAP’’). EBITDA, Adjusted EBITDA and Free Cash Flow are not measurements of our financial performance or financial position under GAAP and should not be considered as alternatives to net sales, net income (loss), operating income or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as a measure of our liquidity.
Adjusted EBITDA consists of operating income plus depreciation, amortization and stock-based compensation expense. We also exclude acquisition-related costs, gain (loss) on sale of fixed assets, SERP settlement charge and costs related to early retirement of debt, as these amounts are not considered as part of usual business operations. Our management considers EBITDA, Adjusted EBITDA and Free Cash Flow to be measurements of performance which provide useful information to both management and investors. Because EBITDA, Adjusted EBITDA and Free Cash Flow are not calculated identically by all companies, our measurements of EBITDA, Adjusted EBITDA and Free Cash Flow may not be comparable to similarly titled measures reported by other companies. All amounts in USD unless otherwise noted.
EBITDA, Adjusted EBITDA and Free Cash Flow, as presented herein, are non-GAAP financial measures as defined by SEC regulations. As required by those regulations, a reconciliation of these measures to what management believes are the most directly comparable GAAP measures is included as an appendix to this presentation.
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Statements in this presentation which are not statements of historical fact are “forward-looking statements” within the “safe harbor”' provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by, Neenah Paper, Inc. at the time this presentation was made. Although Neenah Paper believes that the assumptions underlying such statements are reasonable, it can give no assurance that they will be attained. Factors that could cause actual results to differ materially from expectations include the risks detailed in the section “Risk Factors” in the Company’s most recent Form 10-K and SEC filings.
In addition, the company may use certain figures in this presentation that include non-GAAP financial measures as defined by SEC regulations. As required by those regulations, a reconciliation of these measures to what management believes are the most directly comparable GAAP measures would be included as an appendix to this presentation and posted on the company’s web site at www.neenah.com
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