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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.
~$850+ 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
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
$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 SalesOP %
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
2013 2010 2011 2012 2013 LTM
Mar’14 LTM
Mar’14
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
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
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
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
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
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
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
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%
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.
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
$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
$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
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
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)
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)
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)
21
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]
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 .
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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