Glatfelter (NYSE: GLT) Investor Presentation February 2011

Transcription

1 Glatfelter (NYSE: GLT) Investor Presentation February 2011 DANTE C. PARRINI PRESIDENT & CHIEF EXECUTIVE OFFICER JOHN P. JACUNSKI SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER

2 Forward Looking Statements Any statements included in this document, which pertain to future financial and business matters, are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of These statements are based on management s current expectations and are subject to numerous risks, uncertainties and other unpredictable or uncontrollable factors, which may cause actual results or performance to differ materially from the Company s expectations. Various risks and factors that could cause future results to differ materially from those expressed in the forward-looking statements include, but are not limited to: changes in industry, business, market, political and economic conditions in the U.S. and other countries in which Glatfelter does business, demand for or pricing of its products, changes in tax legislation, governmental laws, regulations and policies, initiatives of regulatory authorities, acquisition integration risks, technological changes and innovations, market growth rates, cost reduction initiatives, and other factors. In light of these risks, uncertainties and other factors, the forward-looking events discussed in this document may not occur and readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date of this document and Glatfelter undertakes no obligation, and does not intend, to update these forward-looking statements to reflect events or circumstances occurring after the date of this document. More information about these factors is contained in Glatfelter s filings with the U.S. Securities and Exchange Commission, which are available at 1

3 Agenda GLT Value Drivers Business Overview Strategic Direction Financial Summary Wrap up / Q&A Appendix 22

4 Glatfelter Value Drivers Sustained Revenue Growth Exposure to global growth markets Tea and coffee markets growing at 5% Feminine Hygiene market growing at 6% Broad and diverse product lines Innovation leaders in key markets drives revenue growth opportunities Expanding Margins Driving cost reduction and productivity improvement through structured Continuous Improvement Initiatives Leveraging leading positions in niche segments Strong cash flow and financial strength to fund future growth Expect strong 2011 cash flow including $24 million from biofuel credits (rec d $18 million in Jan.) Cap Ex forecast at $60 - $65 million vs. depreciation of $68 million Timberland holdings of 32,000 acres Strong balance sheet to fund growth opportunities 3

5 Agenda GLT Value Drivers Business Overview Strategic Direction Financial Summary Wrap up / Q&A Appendix 44

6 Broad and Diverse Product Line Specialty Papers Carbonless & Forms Engineered Products Book Publishing Envelope & Converting Composite Fibers Food & Beverage Technical Specialties Composite Laminates Metalized Advanced Airlaid Materials Feminine Hygiene Adult Incontinence Food Pads Specialty Wipes 2010 Net Sales Breakdown 2010 Adjusted EBITDA Breakdown Specialty Papers, $843 58% 58% 13% 13% 29% % Composite Fibers, $419 Specialty Papers, $93 57% 8% 35% Composite Fibers, $57 Advanced Airlaid Materials, $193 Advanced Airlaid Materials, $12 Total Revenue of $1,455 mm Total 2010 EBITDA of $151 mm (1) (1) Net of $11 mm of expenses for Other Unallocated (excl. pension). 5

7 Leading Positions in Growing Niche Markets Specialty Papers Composite Fibers Advanced Airlaid Materials Postal Applications #1 Playing Cards #1 Trade Book Publishing #1 Greeting Cards #2 Carbonless Products #2 Tea Bags & Coffee Filters #1 Composite Laminates #1 Metalized Products #2 Feminine Hygiene #1 Adult Incontinence #1 Food Pads #2 Specialty Wipes #2 Glatfelter has leading market share positions in its key product lines. 6

8 Flexible Operating Platforms, Strong Global Reach Lydney, UK Gatineau, Quebec Caerphilly, UK Scaër, France Fremont, OH York, PA Chillicothe, OH Spring Grove, PA Atlanta, GA Moscow, Russia Falkenhagen, Germany Gernsbach, Germany Suzhou, China Hong Kong, China Corporate Headquarters Specialty Papers Composite Fibers Advanced Airlaid Materials Sales / Distribution Offices Glatfelter end-markets Lanao del Norte, Philippines 2010 revenue breakdown North America $955 66% Europe $500 34% Total $1, % Glatfelter s strong global production platform in core geographies is enhanced by key sales and distribution operations. 7

9 Agenda GLT Value Drivers Business Overview Strategic Direction Financial Summary Wrap up / Q&A Appendix 8

10 Strategic Growth Drivers Globalization Leading market positions in global growth markets Tea and coffee market growing globally at 5% Feminine Hygiene market growing globally at 6% Highest growth rates in central/eastern Europe and Asia Pacific Opportunity to expand service with global customers Opportunity to expand into adjacent markets and new geographies Specialization & Innovation Glatfelter is the innovation leader in key markets served Well-established new product development process Over 50% of revenue from products less than 5 years old for 7 consecutive years Key differentiator for both our growth businesses as well as our Specialty Papers business Continuous Improvement Aggressively manage costs, reduce waste and strengthen business processes Create incremental capacity to serve growing markets Has been key driver of operating income growth over the past five years Target 1% of revenue as annual financial benefit from program Financial Discipline Cash flow profile significantly improved Expect strong cash generation in 2011 Significant liquidity available to fund growth initiatives Leverage on net debt basis of 1.3x at 12/31/10 Capital expenditures generally below depreciation 2011 includes $25 million of high return cost reduction and capacity expansion projects 9

11 Specialty Papers Business Unit Key Product Sales Mix Operating Income & EBITDA Margin Engineered Products, 18% Envelope & Converting, 19% Carbonless & Forms, 43% Book Publishing, 20% 10.6% 12.1% 7.5% 11.8% 11.1% 8.6% 10.1% $55.9 $58.4 $49.2 $34.0 $10.5 $19.0 Year-Over-Year Change in Shipments 7.0% 2.0% 4.0% 1.6% 2.5% 3.5% 0.0% (0.7%) (5.0%) -(2.3%) (5.5%) (5.0%) (8.0%) (16.0%) UFS Market Demand for N.A. Glatfelter Shipments (adjusted for acquisitions) ($1.4) Operating Income EBITDA % Operating income grew for the sixth consecutive year Shipments increased by 3.5% despite a 2.3% decline in the broader UFS market New product development, customer service initiatives and flexible assets driving outperformance vs. market Continuous improvement initiatives resulting in improved productivity and cost reduction to drive profitability improvement Asset flexibility allows business to aggressively manage mix to improve profitability and maximize asset utilization 10

12 Composite Fibers Business Unit Technical Specialties 9% Operating Income & EBITDA Margin $ % Key Product Sales Mix Composite Laminates 12% $ % Metalized 21% $ % 13.6% Food & Beverage 58% $25.9 $ % $ % $ % Shipments increased 13% in 2010 GLT remains the leader in the tea and coffee market with shipments increasing 8% in 2010 EBITDA margins increased by 190 bps in 2010 to 13.5% Tea & Coffee market expected to grow at 5% per year Business well-positioned to capture growth to maintain or grow market share Russian sales office and distribution center providing growth opportunities for Metalized and Food & Beverage products Implementing continuous improvement methodology to increase productivity, reduce costs and expand margins Expect investments to expand capacity to fulfill market growth Operating Income EBITDA % 11

13 Advanced Airlaid Materials Business Acquired Feb 12, 2010 Dollars in Thousands Q Q Tons shipped 22,053 19,827 Net sales $58,036 $55,360 Operating income $1,164 $1,081 Operating margin 2.0% 2.0% The rapid rise in input costs and currency fluctuations significantly impacted results during 2010 Gatineau results have been impacted by inconsistent operating performance and below expected capacity utilization New line in Falkenhagen that was started up in Q is meeting output and efficiency expectations Profit improvement initiatives are focused on: Execution of Continuous Improvement projects to reduce waste and improve efficiency Innovation and new business development to improve capacity utilization Aggressive cost control 12

14 Agenda GLT Value Drivers Concert Acquisition Strategic Direction Financial Summary Wrap up / Q&A Appendix 13

15 Financial Highlights Net Sales Adj. EBITDA / Margin % ($ in millions) ($ in millions) 12.1% 11.4% 10.0% 10.7% 10.3% 8.9% 9.7% $151 $986 $1,148 $1,264 $1,184 $1,455 $88 $112 $126 $126 $544 $579 $66 $ Adj. EBITDA Margin % Strategic acquisitions, organic growth and execution of continuous improvement initiatives driving EBITDA growth and margin expansion 14

16 Solid EPS Performance $1.20 $1.00 Net Pension went from income of $16m ($0.22/share) in 08 to an expense of $7.0m (-$0.09/ share) in 09. $0.80 $0.60 $0.40 $0.20 $0.30 $0.35 $0.55 $0.31 $0.81 $0.63 $1.04 $0.82 $0.64 $0.74 $0.88 $1.00 $0.00 $0.06 $ Adj. EPS incl. Pension Adj. EPS excl. Pension Effective execution of our strategies has driven long-term earnings growth. 15

17 Substantial Improvement in Free Cash Flow avg. FCF of $85.4 million, including avg. cash flow from AFM/CBC credits of $21.5 million $137.6 $ avg. FCF of $4.3 million $71.4 $21.0 $11.8 $ ($20.0) Reflects costs related to the Chillicothe and Lydney acquisitions, and the Neenah facility shutdown ($72.9) 16

18 Strong Balance Sheet (in millions) 31-Dec Dec Dec Dec-10 Cash $29.8 $32.2 $135.4 $95.8 Total Debt $313.2 $313.3 $254.6 $333.0 Collateralized Debt ($34.0) ($70.7) ($36.7) ($36.7) Net Debt $249.4 $210.4 $82.5 $200.5 Shareholders' Equity $476.1 $342.7 $510.7 $552.4 TTM Adjusted EBITDA (exc. Pension Inc.) $112.0 $125.7 $125.8 $150.9 Leverage 2.2x 1.7x 0.7x 1.3x Strong balance sheet provides financial flexibility to support growth investments. 17

19 Pension Expense and Funded Status (in millions) Service and interest costs $31.4 $32.0 $33.4 $34.5 Expected return on plan assets (50.1) (39.8) (40.3) (41.6) Amortization of prior service and actuarial costs Pension (Income) / Expense $(16.1) $7.0 $9.2 $11.8 Funded status $14.3 $79.6 $92.1 N/A Cash contributions* $0 $0 $0 $0 * Qualified plans only Qualified plans are fully funded with no cash contribution expected for the foreseeable future. 18

20 Glatfelter Value Drivers Sustained Revenue Growth Exposure to global growth markets Tea and coffee markets growing at 5% Feminine Hygiene market growing at 6% Broad and diverse product lines Innovation leaders in key markets drives revenue growth opportunities Expanding Margins Driving cost reduction and productivity improvement through structured Continuous Improvement Initiatives Leveraging leading positions in niche segments Strong cash flow and financial strength to fund future growth Expect strong 2011 cash flow including $24 million from biofuel credits (rec d $18 million in Jan.) Cap Ex forecast at $60 - $65 million vs. depreciation of $68 million Timberland holdings of 32,000 acres Strong balance sheet to fund growth opportunities 19

21 Agenda GLT Value Drivers Concert Acquisition Strategic Direction Financial Summary Wrap up / Q&A Appendix 20

22 Agenda GLT Value Drivers Concert Acquisition Strategic Direction Financial Summary Wrap up / Q&A Appendix 21

23 Reconciliation of Non-GAAP Adjusted Earnings and Net Debt Net Income (loss) $0.30 $1.27 $0.87 ($0.27) $1.40 $1.27 $2.70 $1.17 Alternative fuel mixture credits / cellulosic biofuel (2.09) (0.50) Gains from timberlands sales and other asset sales (0.46) (0.78) (0.25) (0.20) (0.97) (0.24) - (0.02) Insurance recoveries (0.48) (0.29) Shutdown, restructuring charges and asset writedowns (0.01) Acquisition and integration costs Foreign currency hedge on acquisition price 0.04 Debt redemption costs 0.04 Ecusta related reserves 0.16 Fox River reserve 0.35 Adjusted Earnings $0.25 $0.30 $0.35 $0.55 $0.81 $1.04 $0.64 $0.88 Calculation of net debt excluding collateralized debt: Dec '10 Dec '09 Short term debt $798 $3,888 Long term debt $332,224 $250,694 Total $333,022 $254,582 (-) Cash ($95,788) ($135,420) Total debt less cash $237,234 $119,162 (-) Collateralized debt ($36,695) ($36,695) Net debt excluding collateralized debt $200,539 $82,467 Note: The sum of individual per share amounts set forth above may not agree to adjusted income per share due to rounding. 22

24 Reconciliation of Non-GAAP Adjusted EBITDA, Excluding Pension Year Ended December 31 In millions Net income $ 56.1 $ 38.6 $ (12.2) $ 63.5 $ 57.9 $123.4 $54.4 Interest expense, net Income tax provision (benefit) (10.0) (20.9) Depreciation, depletion and amortization EBITDA Net pension (income) expense (17.3) (16.5) (17.0) (12.9) (16.1) Unusual items and asset write-downs (Reversals of) shutdown and restructuring charges (0.9) - Gain on Timberland Sales and Transaction Related Costs (58.5) (22.1) (15.7) (79.0) (18.6) (0.5) (0.4) Insurance recoveries (32.8) (20.2) (0.2) Alternative fuel mixture credits (105.5) 0.1 Charge for environmental remediation Acquisition and integration costs Write-off of Concert Indemnification Receivable 2.5 Foreign currency hedge on acquisition price 3.4 Debt redemption premium Adjusted EBITDA, excluding pension $ 65.5 $ 64.7 $ 88.4 $ $ $ $

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