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Neenah ir presentation first quarter 2014 db conference june 4 2014

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Neenah ir presentation first quarter 2014 db conference june 4 2014

  1. 1. Fine PaperTechnical 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. ~$850+ million net sales
  2. 2. 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 Increase our size, growth rate and portfolio diversification through organic initiatives and M&A  Expand in new geographies and market adjacencies  Invest to grow in high value performance and image-driven products (e.g. filtration, premium packaging, performance media)  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 attractive dividend and share buybacks  Return on Capital a key performance metric 3
  3. 3. $384 $421 $407 $416 $427 7.6% 8.0% 9.2% 9.3% 10.0% 5.0% 8.0% 11.0% 320 330 340 350 360 370 380 390 400 410 420 430 2010 2011 2012 2013LTM Mar' 14 Net Sales OP % 4 Technical Products  Growth led by filtration, labels and backings  Margins expand with higher value mix, sales gains, cost efficiencies and price  Further growth is expected to come from attractive opportunities in new markets and expanding end markets $273 $275 $373 $402 $404 13.6% 14.4% 15.0% 15.0% 14.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% -20 80 180 280 380 480 2010 2011 2012 2013LTM Mar'14 Net Sales OP % 2010 2011 2012 Fine Paper  Top-line growth boosted by brand acquisitions and double-digit gains in premium packaging  Consistent and attractive profits, cash flow and returns on capital  Successfully outperforming a challenging market 20132010 2011 2012 2013 LTM Mar’14 LTM Mar’14
  4. 4. 5 Filtration Specialties 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 backings for specialized abrasives and tapes
  5. 5. 6 Key technologies  Multi-fiber forming capabilities  Saturation, coating and surface treatments  Polymer chemistries  Research and development facilities in U.S. and Germany Ability to Meet Specialized Performance Requirements Customer Intimacy and Qualification Long-standing relationships  Global market-leading customers  Intricate qualification requirements  Ongoing joint product development  Innovative new products Filtration Specialties Backings New Product Sales (% launched within 36 months) 17% 19% 18% 2011 2012 2013 Innovative New Next Generation Products
  6. 6. 7 Strategic Priorities Est. Market Growth Geography Filtration Attractive growth through  Higher value melt blown products  Internationalization  New market adjacencies 2x GDP Specialties Growth and mix optimization  Performance labels  Non-woven wall cover  Durable print applications  Others (medical packaging, image transfer, industrials) GDP+ Backing- Tape  Differentiate via saturating/coating  Optimize costs GDP 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
  7. 7. Dust Control Transport/ H. Duty HVAC/Air Process & Food Water Life Sciences Gas Turbine '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 LTM Mar'14 Asia NAFTA Europe RoW Other NP H&V Ahlstrom Global Transportation Filtration Market Size and Share Global Market ~ US $1 billion Grow Core Transportation Filtration  Leader in European market (fuel, oil, engine & cabin air). Sales to OEMs and aftermarket (70+%)  Growth in higher value products and new adjacencies requiring third melt blown line Entry into New Adjacencies  Recent entry in beverage (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
  8. 8. 9 Specialty Retail Graphic Imaging Premium Packaging & 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
  9. 9. 10 Neenah 60% Mohawk 30% Others 10% Value Share- Premium Papers $650 million market  Brands known > 2:1 over competition, specified by printers and designers  Technology tools to drive demand and improve supply chain efficiencies  Purpose-built assets considered youngest in the industry  Redundant capabilities, unique in our category with a variety of texture and color Leading Brands and Supply Chain Capabilities Superior Asset Base with a Leading Cost Position
  10. 10. 11  The global market for premium packaging and labels is over $2 billion and growing 3-5%/year, with a short term addressable market of $300 million. Our current share in this market is less than 15%, 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
  11. 11. 12  Consistent profitable growth  Return on Capital focused  Efficient capital structure  Attractive shareholder returns, including a cash component with a dividend yield of at least 3%
  12. 12. 13 $ millions 2010 2011 2012 2013 % Chg ’13 vs ‘12 LTM Mar’14 Sales $ 658 $ 696 $ 809 $ 845 4% $ 856 Adj. EBIT1 52 59 80 85 6% 86 % ROS 7.9% 8.5% 9.9% 10.1% 10.0% Adj. E.P.S.1 $ 1.47 $ 1.91 $ 2.78 $ 2.93 5% $2.98 (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 acquisitions  Faster bottom line growth via margin improvement and debt reduction  2013 E.P.S. reflects higher tax rate due to increased cash repatriation ($0.18/share) Full Year $1.47 $1.91 $2.78 $2.93 $2.98 2010 2011 2012 2013 LTM Mar' 14 Adjusted E.P.S.
  13. 13. 8% 9% 11% 12% 12% 2010 2011 2012 2013 LTM Mar' 14 14 Delivering improvement through:  Profitable growth/margin expansion  Focus on asset efficiency  Disciplined capital spending/good returning projects  Strategic moves (divest pulp, brand acquisitions) WACC ~ 8% Primary measure to evaluate investment opportunities and judge business performance and a key metric in compensation plans
  14. 14. $245 $186 $182 $212 $205 2.8x 2.0x 1.6x 1.8x 1.7x 1 1.5 2 2.5 3 3.5 0 50 100 150 200 250 300 350 Dec 10 Dec 11 Dec 12 Dec 13 Mar 14 15 $ millions Dec 2010 Dec 2011 Dec 2012 Dec 2013 Mar 2014 Bonds (due Nov. 2021) $ 223 $ 158 $ 90 $ 175 $175 ABL (due Nov. 2017) - - 56 - - Term Loan - - 30 - - Germany 22 28 6 37 30 Debt $ 245 $ 186 $ 182 $ 212 $ 205 Cash $ 48 $ 13 $ 8 $ 73 $ 77  Ample flexibility and borrowing capacity; debt currently below targeted range  May 2013 bond refinancing reduced interest rate from 7.375% to 5.25%  Debt rating on bonds upgraded to Ba3/BB- in May 2013 Debt/Net Debt ($ millions) Target Debt/EBITDA 2.0x – 3.0x Cash
  15. 15. $0.40 $0.44 $0.48 $0.60 $0.80 $0.96 $1.08 0 0.2 0.4 0.6 0.8 1 1.2 2010 2011 2012 2013 2H 2013 1H 16 Pro Forma Cash Flow ($ millions) EBITDA $ 120 Interest Expense (10) Other (tax, wkg cap, pension, etc.) (20-25) Cash From Operations $ 85-90 Capital Expenditures (25-30) Free Cash Flow $ 55–65 Cash Generation  Pro forma free cash flow of ~ $ 60 million  Moderate cap-ex needs (maint ~ $10 mm/year)  Favorable cash tax position (NOLs = $31 mm Q114) Cash Deployment  Priority on growth (organic and M&A)  Attractive dividend; moving to targeted yield > 3%  Stock repurchase plan of $25 million Annual Dividend (per share) 2014 1H 2014 2H
  16. 16.  Active process with dedicated resources  Focused on performance-oriented markets that are growing and offer profitable, defendable niches (filtration, labels, luxury packaging, etc…)  May include bolt-ons as well as targets providing a broader growth platform Strategic Growth Touch points Geographies Technologies Products/ End Markets Customers  Value-adding, with returns above risk-adjusted cost of capital  Likely debt-financed within our targeted capital structure range 17
  17. 17. 10 7 NP Paper Group EBIT Margins % (2013) 3 5 NP Paper Group Capex % Sales (2010-2013) 18 10 3 NP Paper Group Revenue CAGR % (2009 – 2013) 21 5 NP Paper Group Return on Equity % (2013)
  18. 18. 19 Performance-based and aligned with shareholders  All incentive plans are tied to performance achievement  Short-term bonus metric: growth in business profit/EBITDA  Approximately 50% of pay is equity-based (options and performance shares) and management is required to hold a multiple of base salary in Neenah stock (for example CEO = 6x)  Performance share metrics based equally on:  Return on Capital increase  Revenue growth  Free cash flow (as a % of sales)  Total shareholder return (versus Russell 2000 value index)
  19. 19. 20  Leading positions in profitable specialty markets with attractive margins  Consistent sales and profit growth 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 “paper” positioning  Attractive shareholder returns supported by organic growth, strategic activities and cash return to shareholders $86 $93 $113 $119 $120 2010 2011 2012 2013 LTM Mar' 14 Consolidated Adjusted EBITDA (U$ millions)
  20. 20. 21 For more information visit our website: www.neenah.com email: investors@neenah.com 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: bill.mccarthy@neenah.com
  21. 21. 22 Continuing Operations $ millions 2010 2011 2012 2013 LTM Mar’ 14 EBIT (Operating Income) $ 55 $ 57 $ 70 $84 $85 Ripon Mill Close/(Gain on Sale) (3) Acquisition integration costs 6 1 1 Other1 2 4 Adjusted EBIT $ 52 $ 59 $ 80 $ 85 $ 86 Depreciation & Amortization 29 30 28 29 29 Amort. Equity-Based Compensation 5 4 5 5 5 Adjusted EBITDA $ 86 $ 93 $ 113 $ 119 $ 120 Earnings (Loss) per Share $ 1.61 $ 1.82 $ 2.41 $ 2.96 $ 3.01 Ripon Mill Close/(Gain on Sale) (0.14) Acquisition integration costs 0.22 0.02 0.02 R&D Tax Credit (0.08) (0.08) Other1 0.09 0.15 0.03 0.03 Adjusted Earnings per Share $ 1.47 $ 1.91 $ 2.78 $ 2.93 $2.98 1 Results for year ended December 31, 2011 includes $2.4 million of costs related to the early extinguishment of debt, results for the year ended December 31, 2012, include a supplemental executive pension plan settlement charge of $3.5 million and costs related to the early extinguishment of debt of $0.6 million, results for the year ended December 31, 2013, include a supplemental executive pension plan settlement charge of $0.2 million and costs related to the early extinguishment of debt of $0.5 million .
  22. 22. 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. 23
  23. 23. 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 24

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