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NP Paper
Group
Revenue CAGR %
(2011 – LTM Q115)
11
8
NP Paper
Group
EBIT Margins %
(LTM Q115)
10
6
NP Paper
Group
Return on Capital %
(2014)
When it delivers
strong, consistent
top & bottom line
growth
With attractive
profit margins
..and a sustainable
double digit Return
on Capital
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Two primary business segments:
• Performance-based TECHNICAL PRODUCTS
• Image-oriented FINE PAPER & PACKAGING
> 2,500 employees worldwide
Publicly traded on NYSE/Euronext (NP)
Market cap ~US$1 billion
Headquartered in Alpharetta (Atlanta), GA
Sales in more than 80 countries
Global manufacturing base:
U.S. (14 sites)
Germany (3 sites), U.K. and India (small JV)
> $1 bn sales
55% Technical Products
45% Fine Paper & Pkg
Enhance leading positions in high value, core categories
Expand our geographic presence in transportation filtration
Build off our global base in performance backings
Leverage our strong market position in fine paper & packaging
Invest to grow in targeted niche markets that are profitable and
defensible and where our capabilities are valued
Focused on filtration, premium packaging and performance materials
Prioritize organic growth and supplement with value-adding acquisitions
Deliver consistent, attractive returns
Disciplined capital deployment and double-digit Return on Capital
An attractive dividend part of a meaningful return to shareholders
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On August 1, 2015, Neenah acquired FiberMark, a specialty coating and
finishing company, for $120 million
Over $160 million in revenue, with EBITDA of ~$18 million • Added revenue approximately evenly split between both segments
7 operating facilities (with more than 100 assets focused on converting)
Almost 600 employees
Strategic fit with targeted growth areas
Expands presence in premium packaging
Overlapping presence in tapes, décor and other technical products
Extends and deepens our ability to drive future growth through new
coating/converting/laminating, heavyweight papers and prototyping
Delivers attractive financial returns
Annual synergies of >$6 million by year three; mid-teen IRR
Not-dilutive to Neenah’s (mid-teen) EBITDA margins
Ongoing accretion of >$0.40/share (and accretive in year one)
Filtration 40%
Backings 25%
Specialties 35%
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Filtration
Specialties:
Backings:
High-performance
filtration media for
transportation,
water and other
markets Includes security
papers, decorative
coverings, label,
and others
Saturated and
coated backings for
specialty abrasives
and tapes
* adjusted to reflect FiberMark acquisition
~ $550 million
net sales*
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Technical
Products Top-line reflects growing markets
and share gains, including 2014
acquisition
Margin expansion through higher
value mix, volume-driven growth
and cost efficiencies
Filtration a key driver, with faster
growth and attractive margins
Further opportunities to expand in
new markets and geographies,
both organically & through M&A
$421 $407
$416
$467 $471
8.0%
9.2% 9.3%
10.1%
10.9%
5.0 %
6.0 %
7.0 %
8.0 %
9.0 %
10. 0%
11. 0%
12. 0%
13. 0%
14. 0%
15. 0%
$320
$340
$360
$380
$400
$420
$440
$460
$480
$500
$520
2011 2012 2013 2014 LTM
Q215
Net Sales
EBIT %
Adj. for currency $505
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Key technologies
Multi-fiber forming
capabilities
Polymer chemistries
Saturation, coating
and surface treatments
R&D 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
11%
14% 16%
16% 16%
2011 2012 2013 2014 LTM
Q215
Innovative New Next
Generation Products
New Product Sales (% of total sales of new products launched within past 36 months)
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Asia NAFTA Europe RoW
Other
NP
H&V
Ahlstrom
Global Transportation Filtration Market Size and Share Global Market ~ US $1 billion
Growing global market
Global market growing ~4%/year with sales split: 30% OEMs/ 70% aftermarket
Filter needs continuing to become more demanding (fuel, oil, engine & cabin air)
Neenah growing twice the market with share gains due to advanced technology, innovation and focus on higher value mix
Expansion Opportunity- U.S.
Current operations based in Germany; existing capacity likely consumed in 2016
Historical constraint on US entry expired; project underway for capital-efficient repurposing of fine paper asset
Customers supporting expansion
Proven success vs. NAFTA competitors
Start-up early 2017; attractive mid-teen IRR
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Net Sales
CAGR 8%
Source: company estimates
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Beverage Filtration Micro/Ultrafiltration
(6-12% growth)
Water Filtration Reverse Osmosis (RO)
(8-10% growth)
Environmental (4-5% growth)
Energy Management (3-4% growth)
Thermal & Acoustical Insulation
(2-3% growth)
Important fast-growing markets
Currently represent ~ 25% of filtration sales
Products employ a variety of technologies,
including cellulose and synthetic wet laid nonwovens, glass and melt blown substrates
Bolstered by July 2014 acquisition of specialty No. American filtration business from Crane
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Backings
Sizeable global category with primary end uses including tapes and abrasives
Markets generally growing with global GDP
Focused on performance niches requiring downstream applications
Specialties
Smaller specialized markets including security, medical packaging, labels, décor, and others
Markets generally growing at above GDP rates with attractive margins
Similarly employ saturating and coating to impart unique characteristics
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Graphic Imaging
Premium Packaging
Unique colors,
textures and finishes
for high-end
commercial printing
and consumer needs
Image-enhancing
colors and textures
of premium folded
cartons, curved box
wrap, bags, & labels
Graphic Imaging
78%
Packaging 15%
Folder/ Office
7%
~ $480 million
net sales*
* adjusted to reflect FiberMark acquisition
Filing/Office Premium boards with a
variety of colors and
properties. Used for
records mgmt,
classification, binder
covers, and other
professional applications
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$275
$373 $402 $409 $401
14.4% 15.0% 15.0% 15.0%
16.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
-20
30
80
130
180
230
280
330
380
430480
2011 2012 2013 2014 LTM
Q215
Net Sales
EBIT % Growing organically via share gains,
new revenue streams and premium
packaging. Supplemented by highly
accretive consolidating acquisitions.
Consistently attractive margins, with
strong brand equity supporting
pricing power
Capital efficient, with strong cash
flows and high returns on capital
Fine Paper
& Packaging
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Demand is pulled as
brands are known > 2:1
over competition
Products specified by
printers, graphic
designers and other
end-use customers
Purpose-built assets
that are youngest in
the industry
Unique capabilities to
produce a variety of
textures and colors
Recognized
Brand Equity
Superior Asset
Base and Cost Position
Clear Market
Leadership
Widely distributed at
major wholesalers and
retailers
Technology tools helping
to drive demand and
supply chain efficiencies
Neenah 65% Mohawk
25%
Others 10%
Market Share Commercial Channel
~$500 million
Neenah 55% Others
45%
Market Share Retail Channel ~$150 million
NA Printing & Writing
$20+ bn
Uncoated Free sheet
$10 bn
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Premium Fine Paper ~ $650 mm
Graphic Imaging
Niche market focused on high
quality, textured and colored
papers
End uses include premium
printing, marketing collateral
and advertising, and specialty
retail products
Market is growth-challenged;
we have increased organically
and through highly accretive
consolidating acquisitions
Clear leader in commercial
and retail channels
US-based operations and sales
Cosmetics &
Fragrance
Spirits
Food
Electronics
Retail
Global Pkg Mkt
$42 bn
Premium Market
$2 bn (5%)
Near Term Targeted $450 mm
(<1%)
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Premium Packaging
Global market, growing 3-5% annually
Fragmented category with no clear market leader
Leverages strength of our high end color and texture capabilities
$450 million targeted market focused in high value niche areas
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Consistent and profitable growth
High Return on Capital and Return on Equity
Flexible and prudent capital structure
Attractive shareholder returns, including a
meaningful cash component
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$ millions 2011 2012
2013 2014
LTM Q2’15
% 15 vs. 14
Sales $ 696 $ 809 $ 845 $ 903 $ 899 (0.4%)
Adj. EBIT1 59 80 85 94 101 8%
% ROS 8.5% 9.9% 10.1% 10.4% 11.3%
Adj. E.P.S.1 $ 1.91 $ 2.78 $ 2.93 $ 3.28 $ 3.50 7%
(1) Excludes integration costs, tax credits and other items noted in GAAP table
Five-year annual mid single digit top line and
double-digit bottom line growth with share gains,
new products, price/mix improvement and
acquisitions
Continued margin improvement
* 2015 YTD reflects currency impacts from a weaker euro
of $30 million. YTD constant currency growth 6%
$1.91
$2.78 $2.93 $3.28
$3.50
2011 2012 2013 2014 LTM
Q2'15
Adjusted
E.P.S.
7%
15%
16%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Sales Adj. EBIT Adj. E.P.S
% Annual Growth
2011-2015
* *
9%
11% 12% 13% 13%
2011 2012 2013 2014 LTM
Q2'15
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Delivering improvements through:
Profitable growth/margin expansion
Management focus on asset efficiency
Disciplined organic capital spending/good returning projects
Value-adding acquisitions
WACC
~ 8%
Primary measure to evaluate investments, judge business performance
- also a key metric in management compensation plans
$186 $182
$212
$234 $216
2.0x
1.6x
1.8x 1.8x
1.6x
1
1.5
2
2.5
3
3.5
0
50
100
150
200
250
300
350
Dec 11 Dec 12 Dec 13 Dec 14 Jun 15
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$ millions
Dec
2011
Dec
2012
Dec
2013
Dec
2014
Jun
2015
Bonds 5.25% (due Nov. 2021)
$ 158 $ 90 $ 175 $ 175 $ 175
Global ABL Rate Libor +125
- 56 - 50 32
Other 28 36 37 9 9
Total Debt $ 186 $ 182 $ 212 $ 234 $ 216
Cash $ 13 $ 8 $ 73 $ 73 $ 78
Balance sheet providing financial strength and capacity for growth
Currently below targeted range of 2 – 3 x Debt/EBITDA
Attractive bonds with debt rating of Ba3/BB and low coupon rate
Global ABL sized at $200 million providing added flexibility/borrowing capacity
Debt ($ millions)
Targeted Debt/EBITDA
Range 2.0x – 3.0x
Actual Debt/EBITDA
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Pro Forma Cash Flow ($ millions)
EBITDA $ 155
Interest Expense (11)
Other (tax, wkg cap, pension, etc.) (35 - 40)
Cash From Operations $ 105 – 115
Capital Spending (3-5% sales) (35 - 55)
Free Cash Flow $ 60 – 85
FCF/Share $3.50 - $5.00
Cash Deployment
Priority on highest returning investments o Organic initiatives
o Value-adding M&A
Authorized $25 mm
stock repurchase plan
Committed to cash returns via attractive and growing dividend
Cash Generation
Strong operating cash flows
Efficient asset base; maintenance cap-
ex of < $15 mm/year
Pension plan well funded, significant US R&D tax credits
$0.44 $0.48
$0.70
$1.02 $1.20
0
0.5
1
1.5
2011 2012 2013 2014 2015
Cash Dividends Paid
(per share)
* excludes one-time costs for acquisition accounting and other items
$57 $66
$84 $95
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013 2014
Cash From Operations
*
Adjusted for FiberMark acquisition
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Performance-based and aligned with shareholders
All incentive plans are tied to performance achievement
50% cash, based on growth in business profit/EBITDA
50% equity, based (options and performance shares)
Performance shares based on:
Return on Capital improvement
Revenue growth
Free cash flow (as a % of sales)
Total Shareholder Return (vs. Russell 2000 index)
Management required to hold a multiple of salary in Neenah
stock (for example CEO = 6x)
Active and disciplined process with dedicated
resources
Targeting growing, profitable niche markets
(filtration, performance materials, premium pkg,
etc…) with a strategic linkage
Most targets sized between $50 and $250 million
of sales
Demonstrated track record and competency in deal execution and integration to capture value
Strategic Growth
Touch points
Geographies
Technologies Products/
End Markets
Customers
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FiberMark (Germany)
2006
Fox River 2007
Wausau brands 2012
Southworth brand 2013
Crane 2014
FiberMark (US) 2015
With leading positions in defensible and profitable niche markets
With catalysts to enhance our growth profile in filtration, premium packaging and other targeted markets
With financial strength and a double-digit Return on Invested Capital
With a clear track record of value-adding capital deployment and generating attractive financial returns
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Transportation filtration Performance Materials Fine paper
U.S. transp. filtration expansion Premium packaging Adjacent filtration markets
Strong cash flow generation Low debt/financial flexibility
Double-digit Return on Capital Top quartile shareholder returns Dividend tripled over last 5 years
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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 2011 2012
2013
2014 LTM
Q2 2015
EBIT (Operating Income) $ 57 $ 70 $ 84 $ 87 $ 95
Acquisition integration costs 6 1 3 4
Other1 2 4 4 2
Adjusted EBIT $ 59 $ 80 $ 85 $ 94 $ 101
Depreciation & Amortization 30 28 29 30 31
Amort. Equity-Based Compensation 4 5 5 5 5
Adjusted EBITDA $ 93 $ 113 $ 119 $ 129 $ 137
Earnings (Loss) per Share $ 1.82 $ 2.41 $ 2.96 $ 4.03 $ 4.29
Acquisition integration costs 0.22 0.02 0.11 0.07
R&D Tax Credit (0.08) (1.00) (1.00)
Other1 0.09 0.15 0.03 0.14 0.14
Adjusted Earnings per Share $ 1.91 $ 2.78 $ 2.93 $ 3.28 $ 3.50
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 integration and restructuring costs of $0.6 million, a post-retirement
benefit plan settlement charge of $0.2 million and costs related to the early extinguishment of debt of $0.5 million, results for the year ended
December 31, 2014, include integration and restructuring costs of $2.9 million, a post-retirement benefit plan settlement charge of $3.5 million and
costs related to the early extinguishment of debt of $0.2 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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