Appvion, Inc. Earnings Review Second Quarter August 10, 2016

Transcription

1 Appvion, Inc. Earnings Review Second Quarter 2016 August 10, 2016

2 Forward-Looking Statements This presentation contains forward-looking statements. The words will, may, should, believes, anticipates, intends, estimates, expects, projects, plans, seek or similar expressions are intended to identify forward-looking statements. All statements in this news release, other than statements of historical fact, including statements which address Appvion s strategy, future operations, future financial position, estimated revenues, projected costs, prospects, plans and objectives of management and events or developments that Appvion expects or anticipates will occur, are forward-looking statements. All forward-looking statements speak only as of the date on which they are made. They rely on a number of assumptions concerning future events and are subject to a number of risks and uncertainties, many of which are outside the Company s control that could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the factors listed under Item 1A - Risk Factors in the Annual Report on Form 10-K for the year ended January 2, Many of these factors are beyond Appvion s ability to control or predict. Given these uncertainties, you should not place undue reliance on the forwardlooking statements. Appvion disclaims any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Financial Measures This presentation refers to certain non-u.s. GAAP financial measures. A reconciliation of the non-u.s. GAAP financial measures is attached in the appendix of this presentation. 2

3 Second Quarter 2016 Overview Adjusted EBIT & adjusted EBITDA increased 550% and 43%, respectively, compared to Q2 2015; compared to H1 2015, adjusted EBIT & adjusted EBITDA increased 116% and 33%, respectively Q volume and sales increased by approximately 1% and 5%, respectively, compared to Q2 2015; thermal volume increased almost 16% and sales increased 21%; carbonless volume decreased 14% and sales decreased 12% Compared to Q2 2015, thermal point-of-sale (POS) receipt paper volume increased 23%. Tag, label, and entertainment (TLE) paper volume increased 11%. This volume more than offset the unfavorable market volume decline in carbonless Performance for the quarter was impacted by our annual maintenance outage at Spring Mill which was successfully completed at a cost of roughly $4.0 million Strong performance in Q in price, mix, manufacturing spend, and SG&A totaling $6.7 million more than offset unfavorable performance on carbonless volume compared to Q

4 Total Company YTD 2016 Overview EBITDA up 33% compared to H due to strong manufacturing improvement, SG&A spend and thermal volume/price Favorable price/mix in both businesses, plus improved volume in thermal, somewhat offset carbonless volume decline impact Favorable manufacturing performance from cost savings initiatives and mill spend SG&A s trend is favorable $35 $30 $25 $20 $22.6 $3.6 ($ in millions) H H Change Net Sales $ $ % Adj. EBIT $ 15.1 $ % Adj. EBITDA $ 30.0 $ % Adj. EBITDA Margin % 8.5% 6.5% 200 bps $8.3 $2.0 $30.0 $15 $10 $(6.5) $5 $0 H Volume Price/Mix Mfg. Ops, net (2) SG&A / Other H Total company results exclude Encapsys (2) FX impact on H was ($2.7M) 4

5 Total Company Q Overview EBITDA up 43% compared to Q due to improved price, strong cost savings initiatives and mill spend Sales increased 5% on a 1% volume increase Annual Spring Mill down expense of $4.0 million occurred within Q SG&A lower by $0.8 million due to lower distribution costs and professional fees ($ in millions) Q Q Change Net Sales $ $ % Adj. EBIT $ 5.2 $ % Adj. EBITDA $ 12.9 $ % Adj. EBITDA Margin % 7.4% 5.4% 200 bps $15 $1.3 $0.8 $12.9 $4.6 $10 $9.0 $5 $(2.8) $0 Q Volume Price/Mix Mfg. Ops, net (2) SG&A / Other Q Total company results exclude Encapsys (2) FX impact on Q was ($0.8M) 5

6 Thermal Business Segment Q Overview EBITDA is up $9.9 million vs. Q and up 23% sequentially Q thermal POS shipment volume was up 23% compared to the same period in 2015; price up approximately 10% Thermal TLE shipment volume increased over 11% from Q2 2015; thermal TLE price is favorable compared to Q and is favorable sequentially $10.0 $8.0 ($ in millions) Q Q Q Volume Change (as compared to) % 15.9% Net Sales $ $ $ 83.0 Adj. EBIT $ 5.6 $ 4.0 $ (4.3) Adj. EBITDA $ 8.7 $ 7.1 $ (1.2) Adj. EBITDA Margin % 8.6% 7.0% (1.4%) $2.0 $1.4 $8.7 $6.0 $3.4 $4.0 $2.0 $3.1 $0.0 -$2.0 $(1.2) Q Volume Price/Mix Mfg. Ops, net SG&A / Other Q FX impact on Q was ($0.6M) 6

7 $14.0 $12.0 Carbonless Business Segment Q Overview Favorable carbonless price/mix and SG&A spending helped somewhat offset market volume declines and manufacturing performance Manufacturing operations negatively impacted by timing of annual maintenance down Compared to Q2 2015, specialty paper volume is up nearly 14%; up 20% sequentially $12.4 ($ in millions) Q Q Q Volume Change (as compared to) - (7.5%) (13.9%) Net Sales $ 72.8 $ 78.6 $ 83.2 Adj. EBIT $ 2.3 $ 7.7 $ 8.9 Adj. EBITDA $ 5.7 $ 11.1 $ 12.4 Adj. EBITDA Margin % 7.8% 14.1% 14.9% $10.0 $8.0 $1.2 $6.0 $(5.9) $0.8 $5.7 $4.0 $(2.8) $2.0 $0.0 Q Volume Price/Mix Mfg. Ops, net SG&A / Other Q FX impact on Q was ($0.2M) 7

8 Balance Sheet Q Net Debt & Unused revolver plus cash include the impact of the Encapsys transaction and reset of debt covenants Operating working capital increased $9.2 million from 2015 year end primarily due to an increase in inventory of $3.1 million and accounts receivable of $3.9 million ($ in millions) Q YE 2015 Net Debt $ $ Unused revolver plus cash $ 13.0 $ 21.3 Capital Expenditures $ 4.0 $ 16.7 Operating Working Capital $ 86.9 $ 77.7 Cash Conversion Days Operating working capital defined as receivables plus inventory less payables 8

9 Outlook for Q Thermal shipment volumes for TLE are expected to remain strong compared to last year Continued raw material cost savings and manufacturing spend improvements A strong pipeline of cost reduction projects are expected to continue the positive impact in Q3 of 2016 Ongoing capital spending related to January 2017 Boiler MACT compliance Q3 POS volume is expected to remain in line with Q volume Final Fox River payment of $7.5 million is in Q3 of

10 Appendix 10

11 Total Company Net Sales $ millions $300 $250 $200 $183.9 $166.2 $180.6 $169.4 $180.5 $173.6 $150 $100 $50 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Total company results exclude Encapsys 11

12 Total Company Adjusted EBITDA (1&2) $ millions $20 $18 $16 $17.5 $17.1 $14 $13.6 $12.9 $12 $11.3 $10 $9.0 $8 $6 $4 $2 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q A reconciliation of non-gaap financial measures is in the attached appendix. Numbers presented have been adjusted for rounding. (2) Total company results exclude Encapsys 12

13 Net Debt $ millions $650 $600 $584 $576 $561 $578 $576 $583 $550 $500 $450 $400 $402 $414 $414 $429 $350 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

14 2 nd Quarter 2016 & 2015 Earnings Summary For the For the Three Months Ended Six Months Ended % % ($ in millions) July 3, 2016 July 5, 2015 Change July 3, 2016 July 5, 2015 Change Net sales $ $ % $ $ % Gross profit % $ 66.5 $ % Operating income 3.9 (1.4) 378.6% $ 13.5 $ % Loss from continuing operations (6.9) (14.1) 51.1% $ (7.3) $ (24.3) 70.1% Other financial data Normal depreciation and amortization % $ 13.2 $ % EBITDA % % Adjusted EBITDA % $ 30.0 $ % Comparison as a % of net sales: Gross margin 17.5% 16.3% 1.2% 18.8% 17.0% 1.8% Operating income 2.2% -0.9% 3.1% 3.8% 0.8% 3.0% Loss from continuing operations -4.0% -8.5% 4.5% -2.1% -6.9% 4.8% EBITDA 6.0% 3.2% 2.8% 7.5% 4.7% 2.8% Adjusted EBITDA 7.4% 5.4% 2.0% 8.5% 6.5% 2.0% A reconciliation of non-gaap financial measures is in the attached appendix. 14

15 Reconciliation of Adjusted Operating Income For the Three Months Ended For the Six Months Ended ($ in millions) July 3, 2016 July 5, 2015 July 3, 2016 July 5, 2015 Operating income $ 3.9 $ (1.4) $ 13.5 $ 2.9 Repair recovery boiler at Spring Mill $ - $ 2.1 $ - $ 2.1 Mark-to-Market for employee benefit plans $ - $ - $ 0.1 $ 1.5 Severance $ 0.1 $ 0.1 $ 0.2 $ 0.5 Consulting & other legal fees $ 1.2 $ - $ 1.3 $ - Adjusted operating income $ 5.2 $ 0.8 $ 15.1 $

16 Reconciliation of Non-GAAP EBITDA & Adjusted EBITDA For the Three Months Ended For the Six Months Ended ($ in millions) July 3, 2016 July 5, 2015 July 3, 2016 July 5, 2015 Net Loss $ (6.9) $ (9.8) $ (7.3) $ (15.6) Income from disc ops $ - $ (4.3) $ - $ (8.7) Loss from continuing operations $ (6.9) $ (14.1) $ (7.3) $ (24.3) Interest expense, net $ 10.2 $ 12.6 $ 20.4 $ 25.4 Provision for income taxes $ 0.1 $ - $ 0.2 $ 0.1 Depreciation $ 5.9 $ 6.3 $ 11.9 $ 12.4 Amortization $ 0.6 $ 0.5 $ 1.3 $ 1.1 Foreign exchange loss (Gain) $ 0.2 $ (0.2) $ (0.3) $ 1.2 Other expense $ 0.3 $ 0.3 $ 0.5 $ 0.5 EBITDA $ 10.4 $ 5.4 $ 26.7 $ 16.4 Repair recovery boiler at Spring Mill $ - $ 2.1 $ - $ 2.1 Mark-to-Market for employee benefit plans $ - $ - $ 0.1 $ 1.5 Consulting & other legal fees $ 1.2 $ - $ 1.3 $ - Severance $ 0.1 $ 0.1 $ 0.2 $ 0.5 ESOP contributions and issuances $ 1.2 $ 1.4 $ 1.7 $ 2.1 Adjusted EBITDA $ 12.9 $ 9.0 $ 30.0 $ 22.6 Pro Forma Non-GAAP EBITDA & Adj. EBITDA excludes Encapsys 16

17 Segment EBITDA ($ in millions) 2015 Year Ended 2016 Year Ended QTR 1 QTR 2 QTR 3 QTR 4 FY QTR 1 QTR 2 QTR 3 QTR 4 FY Thermal papers Adjusted operating income $ (1.0) $ (4.3) $ (0.5) $ 2.2 $ (3.6) $ 4.0 $ 5.6 $ - $ - $ 9.5 Depreciation, amortization & other $ 3.2 $ 3.2 $ 3.3 $ $ 3.2 $ 3.1 $ - $ - $ 6.3 Adjusted EBITDA $ 2.2 $ (1.2) $ 2.8 $ 5.2 $ 9.0 $ 7.1 $ 8.7 $ - $ - $ 15.8 Carbonless papers Adjusted operating income $ 10.1 $ 8.9 $ 6.6 $ 9.6 $ 35.2 $ 7.7 $ 2.3 $ - $ - $ 10.0 Depreciation, amortization & other $ 3.4 $ 3.3 $ - $ - $ 6.8 Adjusted EBITDA $ 13.6 $ 12.4 $ 10.5 $ 12.8 $ 49.4 $ 11.1 $ 5.7 $ - $ - $ 16.8 Unallocated corporate charges Adjusted operating income $ (2.9) $ (3.8) $ (2.5) $ (1.9) $ (11.1) $ (1.7) $ (2.7) $ - $ - $ (4.4) Depreciation, amortization & other $ 0.5 $ 1.2 $ - $ - $ 1.8 EBITDA $ (2.2) $ (2.3) $ (2.0) $ (0.5) $ (7.0) $ (1.2) $ (1.4) $ - $ - $ (2.6) Adjusted EBITDA $ 13.6 $ 9.0 $ 11.3 $ 17.5 $ 51.4 $ 17.1 $ 12.9 $ - $ - $

18 Condensed Balance Sheets ($ in millions) July 3, 2016 January 2, 2016 Cash and cash equivalents $ 4.1 $ 1.8 Accounts receivable Inventories Other current assets Total current assets Property, plant and equipment, net Other long-term assets Total assets $ $ Accounts payable Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total equity (297.9) (283.5) Total liabilities & equity $ $