Q Earnings Conference Call

Transcription

1 Q Earnings Conference Call Tuesday February 8, 2011 Thomas J. Howatt President and Chief Executive Officer Scott P. Doescher Executive Vice President, Finance Henry C. Newell Senior Vice President, Paper Perry D. Grueber Director, Investor Relations

2 Forward Looking Statements The matters discussed in this presentation concerning the company s future performance or anticipated financial results are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Reform Act of Such statements involve risks and uncertainties which may cause results to differ materially from those set forth during this presentation. Among other things, these risks and uncertainties include the strength of the economy and demand for paper products, increases in raw material and energy prices, manufacturing problems at company facilities, and other risks and assumptions described under Information Concerning Forward-Looking Statements in Item 7 and in Item 1A of the company s Form 10-K for the year ended December 31, The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Non-GAAP Financial Measures This presentation refers to certain non-u.s. GAAP financial measures. A reconciliation of those numbers to U.S. GAAP financial measures is provided in the appendix of this presentation and on the Company's website at: 2

3 Highlights Q4 and full-year results reflect relative earnings stability achieved through Tissue growth and Paper restructuring Tissue achieved above-market sales growth and reported second most profitable year ever Paper earnings improved over H2 as pulp prices stabilized Modest leverage and consistent cash flows position the company for strategic investment 3

4 Current Market Conditions Economic conditions slow to improve Expect 2011 transition to more stable and predictable growth Q1 demand reflects seasonal weakness Fiber costs below peak but remain at elevated levels 4

5 Earnings Summary Adjusted Q4 earnings equaled prior-year Adjusted full year earnings $0.48 vs. $0.59 in 2009 $0.80 per share year-over-year fiber cost increase Strong growth in value-added Tissue and targeted Paper market sectors $0.30 $0.20 $0.10 $0.00 $0.80 $0.40 $0.00 Adjusted Net Earnings Per Share $0.14 $0.20 $0.14 Q4 09 Q3 10 Q4 10 $0.01 Quarterly Annual $0.59 $ See Appendix for presentation of Adjusted Earning Per Share reconciled to Earning Per Share 5

6 Tissue - Operating Summary Q4 operating profit $11.1MM vs. $12.5MM last year Yankee roll resurfacing Full-year profits second best ever $12MM year-over-year fiber cost increase 1% decline in AFH market Impacted by economic conditions Value-added shipments +7% Represents 49% of product mix $MM $20 $10 $0 $60 $30 $0 Operating Profit Quarterly $13.5 $12.5 $11.1 Q4 09 Q3 10 Q4 10 Annual $49.5 $46.1 $

7 Q Earnings Conference Call February 8, 2011 Henry C. Newell Senior Vice President, Paper

8 Paper - Operating Summary Q4 adjusted profit $4.5MM exceeded prior-year Full-year adjusted profit $16.2MM vs. $21.9MM prior year Fiber cost +$51MM reflecting record pulp prices Demonstrated sustainability in segment earnings and growth in core market sectors $10 $5 $0 $MM $30 $15 Adjusted Operating Profit Quarterly $8.3 $4.3 $4.5 Q4 09 Q3 10 Q4 10 Annual $21.9 $16.2 $0 ($4.8) ($15) See Appendix for presentation of Adjusted Operating Profit reconciled to Operating Profit 8

9 Paper Adjusted Operating Profit Growth in core sectors Expanding margins with record pulp Well positioned for 2011 $80 $60 $29.9 $13.1 $40 $20 $0 $21.9 $2.7 $16.2 $ Price Mix Pulp Other

10 Paper Core Sector Growth SECTOR 2010 vs OUTLOOK TREND Food +8% Packaging & Processing Growth Solid Demand and Margins Industrial & Tape + 4% Crepe Tape Growth Solid Demand and Expanding Margins Coated & Liner +16% Coated -19% Liner Niche Growth Improving Margins and Solid Demand in Niche Print & Color +6% Premium & Board Stable Share Growth in Core Premium 10

11 Paper Core Market Strategy 2010 Mid-term Target (Capacity Realignment) Sector Growth Targets Print & Color 43% Noncore (Redirect) 8% Food 13% Coated & Liner 16% Tape & Industrial 20% Print & Color 42% Food 15% Tape & Industrial 28% Coated & Liner 15% Print & Color 34% Food 20% Tape & Industrial 30% Coated & Liner 16% 490,000 tons 465,000 tons Revenue $715MM 2-3% Growth 11

12 Paper Revenue Growth Redirecting capacity to higher margin growth sectors Creating manufacturing flexibility Driving pricing in all sectors 2010 vs % Revenues +6% Revenue/Ton $800 $700 $600 $1,600 $1, Tons (000) Realignment $696 $712 +2% Target $1,370 Revenue ($MM) Revenue/Ton $1,454 +7% $1, Target 12

13 Paper Margin Expansion H operating margin improvement Accelerating pulp costs compressed H margins Price and mix offset record pulp costs in H Brought business closer to target 5% operating margin 6.0% 3.0% 0.0% -3.0% Adjusted Operating Margin 3.6% 1.0% 1H '10 2H '10 5.0% 3.1% 2.3% -0.8% -0.6% Target 13

14 Paper B7 Rebuild Three weeks down in Q1 Supports accelerated growth in Tape & Industrial sectors Improved quality to support premium Print & Color Start-up in March $27 MM Brainerd PM Rebuild 14

15 Paper - Tape & Industrial Sector B7 Provides Capacity to Support Growth Tons (000 s) % +15% Goals 15

16 Paper - Print & Color Redesign Leadership Position Premium Colored Paper Board Grades (000 s) % 50% Custom Colors Supported by our Service Model End State 0% Premium & Board Non Core % Premium & Board 16

17 Paper 2011 Priorities Share Growth at Target Margins Brainerd Rebuild and Tape Commercialization Print & Color Redesign It s All About Execution 17

18 Q Earnings Conference Call February 8, 2011 Scott P. Doescher Executive Vice President, Finance

19 Financial Highlights Stable Earnings/EBITDA relative to high fiber cost Elected conversion to cellulosic biofuel producer credit Q4 credit $12.7MM or $0.26 per share Repaid $15MM alternative fuel tax credit Expect $27MM cash benefit from CBPC Expect 35% effective tax rate in 2011 Timberland sales program 6,700 acres sold in 2010 at $1,270/acre 7,900 acres remaining in sales program Balance sheet remains solid 33% debt / capital 19

20 Adjusted Net EPS $0.40 Q vs. Q $0.30 $0.15 $0.20 $0.14 $0.02 $0.14 $0.10 $- $(0.15) $(0.02) 4Q09 Adj. EPS Sales Price / Mix Fiber Price Income Tax Rate Operations and 4Q10 Adj. EPS / Volume Other $0.30 Q vs. Q $0.20 $0.10 $0.20 $(0.02) $0.01 $(0.04) $0.02 $(0.03) $0.14 $- 3Q10 Adj. EPS Sales Price / Mix / Volume Fiber Price Maintenance Income Tax Rate Operations and Other 4Q10 Adj. EPS 20

21 Adjusted Net EPS 2009 vs $1.60 $1.20 $0.61 $0.80 $0.59 $0.06 $0.02 $0.48 $0.40 $(0.80) $ Sales Price / Mix / Volume Fiber Price Energy Price Operations and Other

22 Balance Sheet Highlights ($ in millions) Cash & Equivalents $2.0 $1.3 Net Working Capital $109.1 $ 92.1 Long-Term Debt $127.4 $ Debt/Total Capital 33% 34% 22

23 Capital Spending Summary Capital Spending 2010 spending $43MM $MM $60 Est spending $40MM $48.3 $45.9 $43.0 $40 $30 $27MM Brainerd machine rebuild $15MM in 2011 $ Est. 23

24 Q Earnings Conference Call February 8, 2011 Thomas J. Howatt President and Chief Executive Officer 24

25 Strategic Priorities Align our businesses with attractive growth markets 15% Target Adjusted ROCE Strategically invest to drive profitable growth 10% Cost 11.2% 8.9% Achieve a targeted 15% return on capital employed 5% 0% 3.9% 2.1% See Appendix for presentation of Adjusted ROCE to ROCE 25

26 Outlook Recovery continues at modest pace Seasonally weak market conditions and elevated fiber costs will impact Q1 profitability Expect Q1 adjusted EPS in the range of $ $0.05 vs. prior year of $0.08 Expect to achieve earnings improvement over the balance of the year 26

27 Q & A 27

28 Q Earnings Conference Call Tuesday February 8, 2011 Q Earnings Release Monday April 25, 2011 Next Investor and Analyst Conference Call Tuesday April 26, 2011

29 Additional Information Requests Contact: Perry Grueber Director Investor Relations Telephone: And see our website at 29

30 Appendix 30

31 2010 Reconciliations Net Earnings (Loss) to Adjusted Net Earnings FY 08 FY 09 FY 10 ROCE to Adjusted ROCE GAAP Net Earnings (Loss) per Share $ (0.32) $ 0.42 $ 0.75 Facility Closure and Machine Shutdown Charges Alternative Fuel Mixture Excise Tax Credit - (0.17) (0.00) Capital Related Expenses Gain on Sale of Yeast Business - (0.03) - Gain on Sale of Timberlands (0.08) (0.04) (0.10) Tax Audit Settlement (0.02) - - Change in Income Tax Law Natural Gas Transportion Contract Adjustment Alternative Fuel Mixture Tax Credit Conversion - - (0.28) Curtailment - Cash Balance Pension Plan ROCE -2.4% -3.2% 8.9% 9.1% Facility Closure Charges 8.0% 6.4% 5.6% 0.8% Gain of Sale of Timberlands -1.7% -1.2% -0.6% -1.6% Alternative Fuels Mix Excise Tax Credit 0.0% 0.0% -2.7% 0.0% Gain of Sale of Yeast Business 0.0% 0.0% -0.5% 0.0% Curtailment of Cash Balance Plan 0.0% 0.0% 0.0% 0.6% Major Capital Expense 0.0% 0.0% 0.6% 0.0% Adjusted ROCE 3.9% 2.1% 11.2% 8.9% Adjusted Net Earnings per Share 1 $ 0.01 $ 0.59 $ Differences in total due to rounding Operating Profit (Loss) to Adjusted Operating Profit ($MM) Paper Segment Operating Profit (Loss) $ (38.6) $ 9.6 $ 12.3 Groveton Mill Closure Charges Jay Restructure / Closing Charges Appleton Plant Closure Charges Gain on Sale of Lake States Yeast - (2.7) - Roll Wrap Operations Closure Charges Capital-Related Expense Alternative Fuel Mixture Excise Tax Credit - (13.5) 0.1 Natural Gas Transportion Contract Adjustment Adjusted Operating Profit 1 $ (4.8) $ 21.9 $ Differences in total due to rounding 31

32 Q Reconciliations Net Ea rnings to Adjusted Net E arnings WPP Q4 09 Q3 10 Q4 10 GAAP Net Earnings per Share $ 0.19 $ 0.27 $ 0.31 Facility Closure and Machine Shutdown Charges Alternative Fuel M ixture Excise Tax Credit (0.05) (0.02 ) Gain on Sale of Tim berlands (0.03) (0.05 ) (0.0 0) Change in Income Tax Law Natural Gas Transportion Contract Adjustment Alternative Fuel M ixture Tax Credit Conversion - - (0.2 8) Curtailment - Cash Balance Pension Plan Adjusted Net Earnings per Share 1 $ 0.14 $ 0.20 $ 0.14 Operating Profit (Loss) to Adjusted Operating Profit ($ M M ) Paper Segment Q4 09 Q3 10 Q4 10 Operating Profit (Loss) $ 7.1 $ 9.6 $ (0.7) Groveton Mill Closure Charges (0.0) - - Jay Restructure / Closing Charges Appleton Plant Closure Charges Gain on Sale of Lake States Yeast Roll W rap Operations Closure Charges Alternative Fuel M ixture Excise Tax Credit (3.7) (1.3 ) 1.4 Natural G as Transportio n Con tract Adjustm ent Adjusted Operating Profit 1 $ 4.3 $ 8.3 $ D ifferences in total due to rounding 32

33 2010 Key Metrics Financial Measures ($MM): Net Sales $ 1,055.7 $ 1,032.1 $ 1,191.8 EBITDDA $ $ $ 52.7 Dividends paid $ 1.5 $ 4.2 $ 16.7 Average Shares Outstanding in period - millions Statistical Measures: Paper shipments - tons (short) 666, , ,959 Fiber consumption: Market Pulp (metric tons) 387, , ,137 Waste Paper (tons) 137, , ,301 Energy consumption: Natural Gas DTH 3,616,586 3,497,682 3,117,804 Coal - tons 233, , ,473 33