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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 higher value performance and image-driven products (e.g.
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 $407
7.6% 8.0%
9.2% 8.5%
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
$429
2010 2011 2012
Technical Products
Margins expand with higher value mix,
sales gains, cost efficiencies and price
Top-line growth led by filtration,
performance labels and abrasives
$273 $275
$373 $389
13.6% 14.4% 15.0% 15.2%
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
Top-line growth boosted by brand
acquisitions and double-digit gains in
luxury packaging & premium label
TTM Jun-13
TTM Jun-13
$429 Currency
Adjusted
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 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
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 pkg, image transfer, industrials)
GDP+
Industrial Backing- Tape
Differentiate 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
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
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
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 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
Performance-based and aligned with shareholders
All incentive plans are tied to performance achievement
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)
Short-term bonus metric: growth in business profit/EBITDA
Performance share metrics based equally on:
Return on Capital
Revenue growth
Free cash flow as a % of sales
Total shareholder return (top half of Russell 2000 value index)
13
Consistent profitable growth
Return on Capital focused
Efficient capital structure
Attractive shareholder returns, including cash component
14
$ millions 2010 2011 2012
2012
2013
Sales $ 658 $ 696 $ 809 $410 $425
Adj. EBIT1 52 59 80 46 46
Adj. E.P.S.1 $1.47 $1.91 $2.78 $1.63 $1.55
(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 (YTD $0.12/share)
Full Year First Half
$1.47 $1.91
$2.78
2010 2011 2012
Adjusted E.P.S.
8%
9%
12% 12%
2010 2011 2012TTM
Jun-13
15
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%-10%
Primary measure to evaluate investment opportunities and judge business
performance and a key metric in compensation plans
$245
$186 $182 $193
2.8x
2.0x
1.6x 1.7x
1
1.5
2
2.5
3
3.5
0
50
100
150
200
250
300
Dec 10 Dec 11 Dec 12 Jun 13
16
Target Debt/EBITDA 2.0x – 3.0x
$ millions
Dec
2010
Dec
2011
Dec
2012
Jun
2013
Bonds (due Nov. 2021)
$ 223 $ 158 $ 90 $ 175
ABL (due Nov. 2017)
- - 56 -
Term Loan (amortized 5 yrs)
- - 30 -
Germany 22 28 6 18
Debt $ 245 $ 186 $ 182 $ 193*
Interest Exp. (rolling 12 months)
$ 20 $ 16 $ 13 $ 11
Ample flexibility and borrowing capacity; debt currently below targeted range
May 2013 bond refinancing reducing interest rate from 7.375% to 5.25%
Debt rating on bonds upgraded to Ba3/BB-
* Excludes cash build following bond refinancing of $27 million
Debt ($ millions)
$0.40 $0.44
$0.48
$0.60
$0.80
0
0.2
0.4
0.6
0.8
1
2010 2011 2012 2013
2H
2013
1H
17
Pro Forma Cash Flow ($ 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
Cash Generation Pro forma free cash flow of ~ $ 60 million Moderate cap-ex needs (maint ~ $10 mm/year) Favorable cash tax position (NOLs = $39 mm - Q213)
Cash Deployment Priority on growth (organic and M&A) Attractive dividend; moving to targeted 3-4% yield Opportunistic $10 million stock repurchase plan
Annual Dividend
(per share)
Substantial cash flows representing
attractive yields
> $3.50
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-on acquisitions as well
as targets that provide a broader
platform for future growth
Strategic Growth
Touch points
Geographies
Technologies Products/
End Markets
Customers
Value adding, with risk-adjusted DCF returns above cost of capital
Likely debt-financed within our targeted capital structure range
(approximate deal size up to $300 million)
18
10
8
NP Paper Group
EBIT Margins %
(2012)
7.0x
8.3x
NP Paper Group
EV(August 30)/
(2012) EBITDA
7 4
22
8
NP Paper Group
% Returns (2012)
Assets
Equity
13.1x
17.6x
NP Paper Group
P/E (August 30) (ttm e.p.s.)
3
5
NP Paper Group
Capex % Sales
(2010-2012)
19
10
3
NP Paper Group
Revenue CAGR %
(2009 – 2013 TTM)
20
Leading positions in profitable specialty
markets with attractive margins
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,
strategic events and cash return to shareholders
$86
$93
$113
2010 2011 2012
Consolidated Adjusted
EBITDA (U$ 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]
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Continuing Operations
$ millions 2010 2011 2012
1H
2012
1H
2013
EBIT (Operating Income) $ 55.1 $ 56.6 $ 70.4 $38.2 $44.8
Ripon Mill Close/(Gain on Sale) (3.4)
Acquisition integration costs 5.8 4.4 0.2
Other1 2.4 4.1 3.7 0.7
Adjusted EBIT $ 51.7 $ 59.0 $ 80.3 $46.3 $45.7
Depreciation & Amortization 29.7 30.0 28.0 14.6 14.4
Amort. Equity-Based Compensation 4.9 4.3 4.9 3.0 2.7
Adjusted EBITDA $ 86.3 $ 93.3 $113.2 $63.9 $62.8
Earnings (Loss) per Share $ 1.61 $ 1.82 $ 2.41 $1.32 $1.51
Ripon Mill Close/(Gain on Sale) (0.14)
Acquisition integration costs 0.22 0.17 0.01
Other1 0.09 0.15 0.14 0.03
Adjusted Earnings per Share $ 1.47 $ 1.91 $2.78 $1.63 $1.55
1 Results for Year End includes in 2011 $2.4 million cost of early redemption of bonds, in 2012 includes $0.6 million cost of early redemption of bonds, and
$3.5 million SERP settlement charge.
Results for the six months ended June 30, 212, include a supplemental executive pension plan settlement charge of $3.5 million and costs related to the
early extinguishment of debt of $0.2 million, and for the six months ended June 30, 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.
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
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