v
60% 40%
Other Performance Materials
2
3
Profitable growth in core businesses where we have defensible, leading market positions
Disciplined M&A to add value and increase Neenah’s underlying organic growth rate
Capital deployment to maintain a high ROIC, strong balance sheet and attractive dividend
Five Year Shareholder Return (2012-17)
Neenah
R2000 Value
318
167
4
Investment in US filtration capacity supporting geographic share gains and $80 million end of curve sales (by 2021)
Double-digit growth in premium packaging helping to offset pressures in fine paper market
Digital transfer media acquisition providing synergies and a leading position in growing global market
Footprint optimization in fine paper & packaging to increase efficiencies
Steep and prolonged input cost increases temporarily outpacing selling price recovery
Added impact of higher freight rates following U.S. regulatory change
New filtration asset generating losses in early ramp up years; expected to turn profitable in 2019
Recent Q3 results include added planned downtime as well as operational inefficiencies
5
Growing and profitable performance-based markets
Strong customer relationships with long qualification
periods
Leading Positions in Defensible Niche
Markets
Broad Range of Technical Abilities
Innovative offerings from a global footprint
Long-term joint development relationships
Strong technical support and service
High value, growing specialty markets
Long customer qualifications - strong barrier
Our media is a key performance driver, but a small part of product cost
Multiple technologies and chemistries
Proprietary formulations & strong “dark” IP
Leading performance and innovation
6
35
55
75
95
115
135
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 16 17
Europe NAFTA Asia RoW
Other
Neenah
H&V
Ahlstrom
Consolidated global market growing ~4%, with tight capacity
More demanding engines requiring higher performing filters
Products include air, fuel, oil and cabin air filters for both cars and trucks/heavy duty
> 80% of sales to after-market (replacement)
Present in fast-growing markets including water, industrial, and beverage filters
7
Net Sales
Organic CAGR 7%
First asset in U.S. started up in 2017 after capacity in European base was consumed
Global customers support expansion and looking for added choice in No. America
New asset capabilities/costs best in class
Five year ramp up to $80 mm EOC sales with significant profit turnaround
Asia share growth a future opportunity
Global Transportation
Filtration Market/Shares
~ US $1.3 billion
Sizeable global category with media primarily used in tapes and abrasives
Markets generally grow with GDP
Focused on performance niches requiring downstream applications, opportunity to gain share overseas
Smaller, specialty markets include labels, digital transfer, security, décor, and others
Markets generally growing at GDP+
Saturating and coating know-how used to impart unique characteristics
8
9
Coldenhove a leader in digital image transfer media for clothing, sportswear, and other material
European operations and dye sublimation technology complemented and expanded our digital transfer platform and customer base
Provides leadership in a ~$200 million digital transfer market growing high single digits
Neenah
28%
Others
72%
$45 million purchase price represented pre-synergy EBITDA multiple of 7.5x
Added sales of $45 million with EBITDA of $6 million and immediately accretive to earnings
Delivering $1-2 mm of projected annual synergies ahead of plan
$404
$429
$466
$502
$564
12%13% 14%
11% 10%
14%13%
4%
9%
14%
19%
24%
29%
34%
$250
$300
$350
$400
$450
$500
$550
$600
2014 2015 2016 2017 LTM
Q318*
Net SalesAdjusted EBIT %Excluding U.S. Filtration start-up
Markets growing GDP+ Share gains through performance,
innovation and geographic expansion Investing organically and through M&A
10
*Recent results challenged by filtration start up and $8 mm of temporarily unrecovered input costs
Exclusive of recent results, margin gains supported by: Mix enhancement, led by profitable and
faster growing filtration products Cost efficiencies and scale R&D investments driving new or improved
products valued by customers
5 Yr CAGR> 9%/yr
11
Generating high returns and cash flows while repositioning portfolio for growth
LeadingBrands
12
Go To MarketInnovation
Best in Class Manufacturing
Capabilities
Creating image and leading brand equity pulls demand
Proven pricing ability to recoup input costs over time
Unique purpose-built assets provide fast, flexible and low cost offerings at highest quality
Specialty coating, saturation, colors and textures allow creation of a unique and customized breadth of portfolio
Design and rapid prototyping, provides customers a more holistic solution and create barriers for competitors
Able to replicate short lead times with outstanding service
13
Consolidated $600 million niche market of premium textured and colored papers
Uses include high-end commercial printing and consumer applications
Market continues to face pressures by electronic substitution
Neenah is the clear market leader in both the commercial and consumer channels with our well-known brands
Neenah
60%
Mohawk
Fine Papers
19%
Others
21%
14
Premium market growing 3-5% annually; Neenah growing at a double-digit pace
Products include spirit & wine labels, premium folding board, luxury box wrap, and paper gift cards (a “green” alternative to plastic), and others
Efficiently uses Fine Paper assets and their texture & color capabilities to provide customers with preferred products unique to their brands
Neenah Design Center helping customers visualize final products more quickly and accelerate time to commercialization
Beauty
49%
Alcohol
29%
Retail/
Other
22%
$436$443
$452 $455 $452
14% 16%16%
15%13%
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
21.0%
23.0%
25.0%
27.0%
29.0%
31.0%
33.0%
35.0%
37.0%
39.0%
41.0%
43.0%
45.0%
47.0%
49.0%
340
348
356
364
372
380
388
396
404
412
420
428
436
444
452
460
468
476
484
492
500
2014 2015 2016 2017 LTM
Q318Net Sales
Adjusted EBIT %
15
Outperforming market with double-digit packaging growth, gains in digital and wide format categories and other initiatives, including M&A
Potential for other small, consolidating acquisitions
Historical mid-teen EBIT margins as brand equity supports pricing through input cost cycles
Recent headwinds from combined double impact of input cost/freight increases
Planned footprint and portfolio optimization efforts to increase efficiencies and profitability
High return on capital and substantial cash generation available for redeployment
5 Yr CAGR> 1%/yr
Consistent strategy execution to drive profitable growth
Focus on Return on Capital
Flexible and prudent capital structure
Attractive shareholder returns
16
All employees have a component of pay that is performance-based
Majority of executive pay is performance-based (CEO = 70%)
Management also required to hold a multiple of base salary in stock (4-6 times)
Return on
Capital
Shareholder
Return (vs. Russell
2000)
Revenue
Growth
Performance Share Metrics
Earnings
per Share
Performance-based and aligned with shareholders
17
Double digit earnings growth
High Return on Capital
Increasing cash returns to shareholders
Strong balance sheet
Market-beating shareholder returns
Return to
Shareholders
$140mm
Value-Adding
Organic Capital
$150mm
Acquisitions
$250mm
Substantial cash flows and balanced capital deployment has resulted in:
18
$3.21$3.70
$4.54 $4.32 $4.03
2014 2015 2016 2017 LTM
Q318
Adjusted
E.P.S. Five-year growth driven by share gains, new products, price/mix improvement and acquisitions
2017-18 results reflect temporary impacts of filtration capacity ramp-up and unrecovered input costs following a period of rapid increases
6% 6%
10%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Sales Adj. EBIT Adj. E.P.S
% Annual
Growth
2012- 2017
$840$888
$942$980
$1,038
11% 12% 13% 11% 9%
-3.0%
2.0%
7.0%
12.0%
17.0%
22.0%
27.0%
32.0%
510
610
710
810
910
1010
1110
2014 2015 2016 2017 LTM
Q318
Net Sales
Adjusted EBIT %
19
13%12%
13%
10%10%
2014 2015 2016 2017 LTM
Q318
% ROIC
WACC
~ 7-9%
Profitable growth leveraging asset base
Disciplined organic capital spending
Continual focus on asset efficiency and footprint optimization
Value-adding acquisitions -and divestitures of non-returning assets
20
175 175 175 175 175
53 54 4680 75
1.8x1.6x
1.4x
1.8x 1.9x
0
0.5
1
1.5
2
2.5
3
3.5
0
50
100
150
200
250
300
Dec 14 Dec 15 Dec 16 Dec 17 LTM Q318
Bonds S-T Debt
$229$228$221
$255
Capital structure with significant flexibility to act on future opportunities
• $175 million bond due 2021; 5.25% Ba3/BB
• Short-term debt primarily from ABL (sized at $200 million, current draw only $66 million)
Strong cash generation keeping Debt to EBITDA ratio below target 2-3x range
Willing to go up to 4x Debt/EBITDA for right opportunity
Debt($ millions)
21
Debt/EBITDA
$250
Prioritize highest return investments
Organic initiatives
Value-adding M&A
Committed to an attractive dividend, with a five-year CAGR of ~20%/yr
Authorized $25 mm/yr buyback plan
Strong business cash flows, compounded with acquisitions
Efficient assets; capital spend 3-5% of sales (maintenance spend < $20 mm)
Cash tax rate < 10% as we consume prior period R&D tax credits
Recent results w/filtration start up
$1.02$1.20
$1.32$1.48
$1.64
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2014 2015 2016 2017 2018
Dividends
per share
22
$95$111 $116
$100$82
0
20
40
60
80
100
120
140
2014 2015 2016 2017 LTM Q318
Cash From
Operations
Active and disciplined process with dedicated resources. Ideas come from robust network of sources
Focused on growing, profitable and defensible niche markets, with bias to performance-based technical products
Most targets $50 - $250 million of sales
Seek strategic fit to unlock synergiesStrategic Touch Points
Geographies
TechnologiesProducts/
End Markets
Customers
23
2014Crane
(Filtration)
2015FiberMark
(Packaging, Other)
2017Hazen
(Packaging)
2017Coldenhove
(Perf. Materials)
2013Southworth
(Fine Paper)
Strong track record of value-adding acquisitions
Leading positions in defensible and profitable core categories, with ROIC focus
Catalysts to increase organic growth
Complete US filtration ramp up
Additional filtration geographic share gains
Premium packaging growth
Fast-growing adjacent technical product markets
Strong cash flows and balance sheet provide flexibility to act on attractive opportunities
Proven record of value-adding capital deployment
24
Fine Paper &
PackagingTechnical
Products
Premium
Packaging &
Fine PaperTechnical
Products
v
100
150
212 219
299318
283
132 135122
157 167 160
Neenah vs Russell 2000
NP
R2000
$28
$43
$60 $62
$85$91
$80
15
25
35
45
55
65
75
85
95
Neenah Stock Price
(Year End 2012-2017)
26
Top 10 Shareholders (13-F)Shares
6/30/18
BlackRock Institutional Trust Company 2,2201,633
Wells Capital Mgmt 1,071,752
The Vanguard Group 992,959
Wellington Mgmt Company 924,302
Macquarie Investment Mgmt 827,972
Dimensional Fund Advisors 737,050
Aberdeen Asset Mgmt 731,379
Daruma Capital Mgmt 492,972
State Street Global Advisors 484,932
Fidelity Mgmt & Research Company 401,525
$1.7$2.3
$3.0$3.5
$5.0$4.5
$4.9
$2.6 $2.6
$4.1
$4.8
$6.5 $6.4
$6.6
$5.0
$3.3
$5.3
$6.6
$8.4 $8.5 $8.5
2012 2013 2014 2015 2016 2017 2018
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
NP Trading Liquidity
$/day millions
27
Continuing Operations
$ millions 2014 2015 2016 2017LTM
Q318
GAAP Operating Income $ 86.6 $ 101.4 $ 114.1 $ 104.3 $ 55.4
Impairment loss 34.0
Acquisition/Integration/Restructuring Costs 2.3 6.5 7.0 1.3
Pension/Insurance Settlement/Other 3.7 0.8 (2.6) 1.8
Adjusted Operating Income $ 92.6 $ 107.9 $ 121.9 $ 103.0 $91.2
Depreciation & Amortization 25.0 27.5 30.1 32.1 35.0
Amort. Equity-Based Compensation 6.0 6.5 5.8 6.4 5.8
Adjusted EBITDA $ 123.6 $ 141.9 $ 157.8 $ 141.5 $ 132.0
Earnings (Loss) per Share $ 3.99 $ 3.53 $ 4.26 $ 4.68 $2.51
Impairment loss 1.49
Acquisition/Integration/Restructuring Costs 0.08 0.24 0.25 0.06 (0.02)
Prior Period R&D Tax Credits (1.00) (0.07)
Tax Adjustment for Indefinite Reinvestment (0.24)
TCJA and Other Tax Adjustments (0.08) (0.03)
Pension/Insurance Settlement/Other 0.14 0.03 (0.10) 0.08
Adjusted Earnings per Share $ 3.21 $ 3.70 $ 4.54 $ 4.32 $4.03
Results for year ended December 31, 2014, include integration and restructuring costs of $2.3 million, a pension plan settlement charge of $3.5 million and
costs related to the early extinguishment of debt of $0.2 million. Results for the year ended December 31, 2015, include integration and restructuring costs
of $6.5 million. Results for the year ended December 31, 2016, include integration and restructuring costs of $7.0 million and a pension plan settlement
charge of $0.8 million. Results for the year ended December 31, 2017, include integration and restructuring costs of $1.3 million, a pension plan settlement
charge of $0.6 million and Insurance Settlement of ($3.2)
28
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
29
Visit Our Website: www.neenah.com
Email: [email protected]
Bill McCarthyVP Investor Relations and Corporate Analysis
3460 Preston Ridge Road
Suite 600
Alpharetta, GA 30005
Phone: (678) 518-3278
Email: [email protected]
30
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