Image-oriented
high-end textured and
colored graphic papers
End Markets: premium
print communications,
luxury packaging and
premium labels, crafting
Manufacturing in
the U.S.
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.
~$900+ million
net sales
$384
$421 $407
$416
$438
7.6% 8.0%
9.2% 9.3% 10.1%
5.0%
8.0%
11.0%
320
330
340
350
360
370
380
390
400
410
420
430
440
2010 2011 2012 2013LTM June' 14
Net Sales
OP %
3
Technical Products
Top-line reflects growing markets and share gains; largest category is filtration media
Margins expanding with higher value mix, volume-driven growth and cost efficiencies
Further opportunities to grow in new markets and geographies, organically & through M&A
$273 $275
$373 $402 $410
13.6% 14.4% 15.0% 15.0% 14.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
-20
80
180
280
380
480
2010 2011 2012 2013LTM June'14
Net SalesOP %
2010 2011 2012
Fine Paper
Growing organically despite challenging market via share gains and premium packaging
Maintaining attractive margins, cash flow and returns on capital
Highly accretive brand acquisitions in 2012 and 2013 further boosting growth and returns
2013 2010 2011 2012 2013 LTM Jun’14
LTM Jun’14
Lead in profitable, defensible niche markets
Increase or retain our positions in core markets that can provide us with
leading positions and value performance or image
Strong margins and pricing power expected as a sign of defensibility
Increase presence in growing categories through capital efficient
organic initiatives and value adding M&A
Invest behind high value performance and image-driven products (e.g.
filtration, premium packaging, performance media)
Allocate resources to expand in new geographies and market adjacencies
Supplement organic growth with value-adding acquisitions in strategic
markets that leverage our unique capabilities
Deliver consistent, attractive returns
Continual improvement in efficiencies to drive financials “up and to the right”
Return on Capital a key performance and decision-making metric
Increased cash returns to shareholders primarily through an attractive dividend
4
5
Filtration Specialties Backings
High-performance
filtration media for
transportation,
water and 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
Filtration 45%
Specialty 26% Backings
29%
6
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
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
(transportation, water,
other)
Invest and grow through
High performing products
Geographic expansion
New market adjacencies
2x
GDP
Specialties
(labels, durable print
media, NW wall cover,
others)
Grow and optimize mix
Performance labels
Durable print applications
Non-woven wall cover
Others (medical packaging, image transfer, industrials)
GDP+
Backings- Tape
Differentiate with specialized products via saturating/coating
Work with customers to develop solutions/unique products GDP
Backings- Abrasives Enter new adjacencies
Follow global customers
Europe
North
America
Asia/
RoW
Europe
North
America Asia/
RoW
Europe
Americas
Asia/
RoW
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 LTM
Jun'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+%)
Growing share with focus on higher value products and new adjacencies
Geographic Expansion
Global engine filter requirements continue to become more demanding
Existing global customers desire for us to have an expanded geographic presence
The large and developed NAFTA market
represents a logical priority for expansion
8
Net Sales
CAGR 8%
Source: company estimates
Transaction Summary
• Acquired 100% on July 1 for $72 million
(including $8 mm tax benefit)
• Almost $50 mm of sales; non-dilutive to existing mid-teen EBITDA margins
• One-time deal/integrations costs of
$2-$3 million in second half of 2014
Strategic Fit and Benefits
Expands into adjacent, high-growth filtration media markets that value performance, with leading share positions
and strong customer relationships
Adds new wetlaid nonwoven technologies/processes with potential to leverage filtration knowledge to pursue added opportunities
Establishes US filtration expertise and manufacturing base with available capacity for growth
9
Craneglas: • Wetlaid glass
media • ~33% of revenue
Beverage Filtration Micro/Ultrafiltration (6-12% growth)
Water Filtration Reverse Osmosis (8-10% growth)
Environmental (4-5% growth)
Energy Management (3-4% growth)
Thermal & Acoustical Insulation (2-3% growth)
Cranemat: • Wetlaid polyester
media • ~67% of revenue
Products End Markets
10
EU NA Asia SA ROW
Trans
Water
Enviro
Food/Bev
Air
Indust.
Other
EU NA Asia SA ROW
Trans
Water
Enviro
Food/Bev
Air
Indust.
Other
Strong filtration business concentrated in transportation and Europe
Geographic and market diversification; new technologies
Global filtration media provider for multiple end-markets
Base
Today with NTM
Future
Dust
Control
Transport/H.
Duty
HVAC/Air
Process &
Food
Water
Life
Sciences
Gas Turbine
Specialty filtration media markets
> $4 billion
Source: company estimates
+ EU NA Asia SA ROW
Trans
Water
Enviro
Food/Bev
Air
Indust.
Other
Key
Market Presence
M
M
M
M Manufacturing site
11
Specialty
Retail
Graphic
Imaging
Premium
Packaging
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, hang tags and
wine, spirit and food
labels
Graphic 65%
Pkg 10%
Retail 22%
12
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
Widely distributed at
major retailers
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
Global Packaging
Market
$42 Billion
Premium Packaging
Market
$2 bn (5%)
Near Term Targeted
$300 Million (<1%)
Global market, growing 3-5%
$2 billion premium market; >50% in folding cartons and labels
$300 million addressable market identified; currently fragmented
13
$300 Million
Trade-up non-premium
James Cropper
Design Pkg
Monadnock
Fibermark
Converters
Arjo
Fedrigoni
Cordenons
Neenah
Cosmetics & Fragrance
Alcohol
Electronics
Retail
Cosmetics / Fragrance • 3% forecast CAGR driven by demographics and emerging
economies
• High value packaging; helps drive purchase decision
Alcohol • 6% forecast CAGR driven by increased specialty sprits
• Spirits customers focused on packaging as point of differentiation and “premium” positioning
• Build off historical strength in wine business
Electronics • 12% forecast CAGR driven by mass adoption; new
emerging product categories such as wearables
• Packaging valued after purchase; brand building (unboxing) helps buyer feel good about purchase
High End Retail • 3%+ forecast CAGR
• Packaging creates premium impression; builds brands
3%
24% 20%
11%
Cosm /Frag
Alcohol Con Elect Retail
2014 Est Neenah Market Share
14
$300 million market
15
Consistent and profitable growth
Return on Capital focused
Efficient capital structure
Attractive shareholder returns, with a
meaningful cash component
16
$ millions 2010 2011 2012
2013
LTM Jun-14
% YTD
14 vs. 13
Sales $ 658 $ 696 $ 809 $ 845 $ 875 7%
Adj. EBIT1 52 59 80 85 89 9%
% ROS 7.9% 8.5% 9.9% 10.1% 10.2%
Adj. E.P.S.1 $ 1.47 $ 1.91 $ 2.78 $ 2.93 $3.08 10%
(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
$1.47
$1.91
$2.78 $2.93
$3.08
2010 2011 2012 2013 LTM
Q2 14
Adjusted
E.P.S.
Full Year
7%
15%
20%
0
0.05
0.1
0.15
0.2
0.25
Sales Adj. EBIT Adj. E.P.S
% Growth
2010-2014
8% 9%
11% 12% 13%
2010 2011 2012 2013 LTM Q2
14
17
Delivering improvements 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 investments, judge business performance
and also a key metric in management compensation plans
$245
$186 $182
$212 $193
2.8x
2.0x
1.6x
1.8x
1.6x
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 Jun 14
18
$ millions
Dec
2010
Dec
2011
Dec
2012
Dec
2013
Jun
2014
Bonds 5.25%
(due Nov. 2021) $ 223 $ 158 $ 90 $ 175 $ 175
ABL (due Nov. 2017)
- - 56 - -
Term Loan - - 30 - -
Germany 22 28 6 37 18
Debt $ 245 $ 186 $ 182 $ 212 $ 193
Cash $ 48 $ 13 $ 8 $ 73 $ 92
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
NTM acquisition on July 1, 2014 for $72 million (financed with available cash)
Debt/Net Debt ($ millions)
Targeted Debt/EBITDA
Range 2.0x – 3.0x
Cash
$0.40 $0.44 $0.48
$0.60
$0.80
$0.96
$1.08
0
0.2
0.4
0.6
0.8
1
1.2
19
Pro Forma Cash Flow ($ millions)
EBITDA $ 130
Interest Expense (10)
Other (tax, wkg cap, pension, etc.)
(20 - 25)
Cash From Operations $ 95-100
Capital Expenditures (30 - 35)
Free Cash Flow $ 60–70
Cash Deployment
Priority on highest returning investments Organic initiatives
Value-adding M&A
Dividends have doubled since 2012; moving towards targeted 3% yield
Stock repurchase plan of $25 million
Annual Dividend
(per share)
2010 2011 2012 2013
2H
2013
1H
2014
1H
2014
2H
Cash Generation
Strong operating cash flows from businesses
Efficient cap-ex with only $10 mm/yr for maintenance; remainder value-adding projects
Free cash flow representing ~$4.00/share
20
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)
Active process with dedicated resources
Focused on performance-oriented
markets that are growing and offer
profitable, defendable niches (filtration,
performance media, premium packaging, etc…)
May include bolt-ons as well as targets
that broaden growth platform Strategic Growth
Touch points
Geographies
Technologies Products/
End Markets
Customers
Value-adding, with returns above risk-adjusted cost of capital
Demonstrated track record and competency in deal execution
and integration to capture value
Debt-financed within targeted capital structure range
21
22
7 7
2
NP Specialty
Chemicals
Paper
Group
Revenue CAGR %
(2010 – LTM Mar’ 2014)
10
8 8
NP Specialty
Chemicals
Paper
Group
EBIT Margins %
(LTM Mar’ 2014)
3 4
5
NP Specialty
Chemicals
Paper
Group
Capex % Sales
(2012 – LTM Mar’ 2014)
20
12 6
NP Specialty
Chemicals
Paper
Group
Return on Equity %
(LTM Mar’ 2014)
7.8x
8.6x 8.8x
NP Specialty
Chemicals
Paper
Group
EV (July 31, 2014) /
(2014) EBITDA
16.3x
18.9x
16.0x
NP Specialty
Chemicals
Paper
Group
P/E (July 31, 2014)
(ttm e.p.s.)
23
Sustainable, strong cash flows and sound capital structure providing flexibility
to pursue value adding opportunities
Attractive shareholder returns resulting from
organic growth, strategic activities and increasing cash return to shareholders
Despite our name, strategy focused on
expansion in growing specialty markets,
further from historical “paper” positioning
$86
$93
$113 $119
$123
2010 2011 2012 2013 LTM Q2
14
Consolidated
Adjusted EBITDA (U$ millions)
Leading positions in defensible and profitable niche markets with
attractive margins and opportunities for growth
Consistent record of growth in sales, profits and ROIC with
successful execution of plans
24
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]
25
Continuing Operations
$ millions 2010 2011 2012
2013 LTM
Jun’ 14
EBIT (Operating Income) $ 55 $ 57 $ 70 $ 84 $ 88
Ripon Mill Close/(Gain on Sale) (3)
Acquisition integration costs 6 1 1
Other1 2 4
Adjusted EBIT $ 52 $ 59 $ 80 $ 85 $ 89
Depreciation & Amortization 29 30 28 29 29
Amort. Equity-Based Compensation 5 4 5 5 5
Adjusted EBITDA $ 86 $ 93 $ 113 $ 119 $ 123
Earnings (Loss) per Share $ 1.61 $ 1.82 $ 2.41 $ 2.96 $ 3.12
Ripon Mill Close/(Gain on Sale) (0.14)
Acquisition integration costs 0.22 0.02 0.04
R&D Tax Credit (0.08) (0.08)
Other1 0.09 0.15 0.03
Adjusted Earnings per Share $ 1.47 $ 1.91 $ 2.78 $ 2.93 $ 3.08
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.
26
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
27