Appvion, Inc. Earnings Review Second Quarter August 8, 2017

Transcription

1 Appvion, Inc. Earnings Review Second Quarter 2017 August 8, 2017

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, future refinancing activities, 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 December 31, Many of these factors are beyond Appvion s ability to control or predict. Given these uncertainties, you should not place undue reliance on the forward-looking 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 2017 Overview Q2 EBITDA increased $0.8 million year-over-year despite lower net sales of $9.6 million as a result of significant pricing headwinds and point-of-sale thermal paper at historical lows The improved EBITDA in Q was driven by continued growth in our North American thermal tag, label and entertainment market with a 4% improvement and strong volume in the carbonless segment, holding steady for five straight quarters; up 2.6% from Q Strong health of the thermal business was able to withstand poor receipt paper price; as a point of reference, in Q the thermal segment reported EBITDA of $4.7 million versus negative EBITDA of $(1.4) million reported in Q under similar price conditions Specialty papers, sub-segment of carbonless, showed continued strength with shipment volume up 21% from Q2 2016; first half 2017 up 29% compared to first half 2016, and up 5% sequentially Cost reduction and continuous improvement programs totaled $8.0 million; comprised of $4.2 million of manufacturing improvements and $3.8 million in lower SG&A 3

4 Total Company YTD 2017 Overview Adjusted EBITDA margins keeping pace with 2016, despite depressed market prices Volume, price and mix had a major degradation on H1 results primarily driven by lower thermal POS paper price and international carbonless price/mix Continued profit improvement initiatives, manufacturing performance, lower mill and SG&A spend nearly offset poor price/mix ($ in millions) H H Change Net Sales $ $ (6.6%) Adj. EBIT $ 13.6 $ 15.1 (9.9%) Adj. EBITDA $ 27.7 $ 30.0 (7.7%) Adj. EBITDA Margin % 8.4% 8.5% (10) bps $35 $30 $25 $30.0 $(1.6) $13.1 $5.9 $27.7 $20 $15 $10 $5 $(19.7) $0 H Volume Price/Mix Mfg. Ops, net SG&A / Other H

5 Total Company Q Overview EBITDA increased $0.8 million year-over-year despite lower net sales as a result of significant pricing headwinds and point-of-sale thermal paper at historical lows Competitive pricing, due in part to the strong U.S. dollar, foreign competition and delayed price increase impacted price and earnings Profit improvement initiatives have accelerated since Q1 2017, driving the Q2 EBITDA improvement as compared to Q ($ in millions) Q Q Q Net Sales $ $ $ Adj. EBIT $ 6.5 $ 7.1 $ 5.2 Adj. EBITDA $ 13.7 $ 14.0 $ 12.9 Adj. EBITDA Margin % 8.4% 8.4% 7.4% $16 $14 $12.9 $0.5 $3.8 $13.7 $12 $10 $7.3 $8 $6 $4 $2 $(10.8) $0 Q Volume Price/Mix Mfg. Ops, net SG&A / Other Q

6 Thermal Business Segment Q Overview Adjusted EBITDA was down $4.0 million versus Q primarily due to POS price conditions Thermal volume decreased 3.0% overall compared to Q2 2016» TLE up 4.0%» POS down 13.1% Despite POS prices at historical lows, the thermal segment generated over $6.1 million of improvements versus Q under similar price conditions $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 $8.7 $(0.6) $(5.2) ($ in millions) Q Q Q Volume Change (as compared to) - (0.5%) (3.0%) Net Sales $ 94.5 $ 95.0 $ Adj. EBIT $ 1.7 $ 2.4 $ 5.6 Adj. EBITDA $ 4.7 $ 5.4 $ 8.7 Adj. EBITDA Margin % 5.0% 5.7% 8.6% $0.9 Q Volume Price/Mix Mfg. Ops, net $0.9 SG&A / Other $4.7 Q

7 Carbonless Business Segment Q Overview Q volume up 2.6% as compared to Q Specialty paper volume is up 21% compared to Q2 2016; H up 29% compared to H Negative price/mix were offset by execution of profit improvement initiatives, favorable manufacturing operations (including $4.0 million due to Roaring Spring Mill moving to 18-month maintenance down) and lower SG&A ($ in millions) Q Q Q Volume Change (as compared to) - (2.8%) 2.6% Net Sales $ 69.5 $ 71.7 $ 72.8 Adj. EBIT $ 5.4 $ 6.6 $ 2.3 Adj. EBITDA $ 8.7 $ 9.9 $ 5.7 Adj. EBITDA Margin % 12.5% 13.8% 7.8% $10.0 $9.0 $1.1 $8.7 $8.0 $6.4 $7.0 $1.1 $6.0 $5.7 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 $(5.6) Q Volume Price/Mix Mfg. Ops, net SG&A / Other Q

8 Balance Sheet Operating working capital decreased $2.7 million from year end 2016, improved accounts payable of $5.3 million and inventory of $0.8 million were partially offset by higher accounts receivable of $3.4 million ($ in millions) Q YE 2016 Net Debt $ $ Revolver Balance $ 19.5 $ 31.9 Capital Expenditures (YTD) $ 4.1 $ 14.8 Operating Working Capital (1) $ 75.5 $ 78.2 (1) Operating working capital defined as receivables plus inventory less payables 8

9 Outlook for Q Price increases implemented for thermal POS, the weakening of the U.S. dollar to the Euro and secured volume with key customers will positively improve the outlook for POS in the 2H of TLE volume growth is expected to exceed the improvement achieved during Q and increase at a rate slightly higher than overall market demand. Modest year-on-year volume growth is expected for carbonless roll and sheet products will be supported by the sustained growth of its specialty paper products. As planned for in 2016, the Roaring Spring Mill will change the timing of the annual maintenance shutdown from Q2 to Q The shutdown is anticipated to start the last week of Q The plant will then migrate to an to an 18 month rolling shutdown. As a result, there will not be a planned maintenance shutdown in fiscal The profit improvement initiatives will continue to outperform the targeted $25 million in improvements for full-year

10 Appendix 10

11 Total Company Net Sales $ millions $300 $250 $200 $180.5 $173.6 $169.2 $167.1 $166.7 $164.0 $150 $100 $50 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

12 Total Company Adjusted EBITDA (1) $ millions $20 $18 $17.1 $17.3 $16 $14 $12.9 $14.4 $14.0 $13.7 $12 $10 $8 $6 $4 $2 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q (1) A reconciliation of non-gaap financial measures is in the attached appendix. Numbers presented have been adjusted for rounding. 12

13 Net Debt $ millions $650 $600 $576.4 $582.5 $550 $500 $450 $400 $402.4 $413.5 $414.3 $429.2 $430.4 $432.1 $439.4 $445.0 $350 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

14 Second Quarter 2017 and 2016 Earnings Summary For the For the Three Months Ended Six Months Ended % % ($ in millions) July 2, 2017 July 3, 2016 Change July 2, 2017 July 3, 2016 Change Net sales $ $ % $ $ % Gross profit % % Operating income % % Net income (loss) (7.3) (6.9) -5.8% (12.7) (7.3) -74.0% Other financial data (1) Normal depreciation and amortization % % EBITDA % % Adjusted EBITDA % % Comparison as a % of net sales: Gross margin 17.4% 17.5% -10 bps 18.0% 18.8% -80 bps Operating income 3.1% 2.2% 90 bps 3.5% 3.8% -30 bps Net income (loss) -4.5% -4.0% -50 bps -3.8% -2.1% -170 bps EBITDA 7.0% 6.0% 100 bps 7.4% 7.5% -10 bps Adjusted EBITDA 8.4% 7.4% 100 bps 8.4% 8.5% -10 bps (1) 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 2, 2017 July 3, 2016 July 2, 2017 July 3, 2016 Operating income $ 5.1 $ 3.9 $ 11.7 $ 13.5 Debt modification expenses $ - $ - $ 0.2 $ - Mark-to-Market for retiree benefit plans $ - $ - $ - $ 0.1 Severance/Other $ 0.4 $ 0.1 $ 0.7 $ 0.2 Tornado insurance deductible $ 1.0 $ - $ 1.0 $ - Consulting & other legal fees $ - $ 1.2 $ - $ 1.3 Adjusted operating income $ 6.5 $ 5.2 $ 13.6 $

16 Reconciliation of Non-GAAP EBITDA & Adjusted EBITDA For the Three Months Ended For the Six Months Ended ($ in millions) July 2, 2017 July 3, 2016 July 2, 2017 July 3, 2016 Net income (loss) $ (7.3) $ (6.9) $ (12.7) $ (7.3) Interest expense, net $ 12.5 $ 10.2 $ 24.2 $ 20.4 Provision for income taxes $ 0.1 $ 0.1 $ 0.2 $ 0.2 Depreciation $ 5.7 $ 5.9 $ 11.4 $ 11.9 Amortization $ 0.6 $ 0.6 $ 1.3 $ 1.3 Foreign exchange loss (gain) $ (0.5) $ 0.2 $ (0.6) $ (0.3) Other expense $ 0.3 $ 0.3 $ 0.6 $ 0.5 EBITDA $ 11.4 $ 10.4 $ 24.4 $ 26.7 Mark-to-Market for retiree benefit plans $ - $ - $ - $ 0.1 Severance/Other $ 0.4 $ 0.1 $ 0.7 $ 0.2 Debt modification expenses $ - $ - $ 0.2 $ - Consulting & other legal fees $ - $ 1.2 $ - $ 1.3 Tornado insurance deductible $ 1.0 $ - $ 1.0 $ - ESOP contributions and issuances $ 0.9 $ 1.2 $ 1.4 $ 1.7 Adjusted EBITDA $ 13.7 $ 12.9 $ 27.7 $

17 Segment Adjusted EBITDA ($ in millions) 2016 (1) Year Ended 2017 (1) 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 $ 4.0 $ 5.6 $ 3.4 $ 4.3 $ 17.2 $ 2.4 $ 1.7 $ - $ - $ 4.1 Depreciation, amortization & other $ 3.2 $ 3.1 $ 3.2 $ $ 3.0 $ 3.0 $ - $ - $ 6.0 Adjusted EBITDA $ 7.1 $ 8.7 $ 6.6 $ 7.4 $ 29.9 $ 5.4 $ 4.7 $ - $ - $ 10.1 Carbonless papers Adjusted operating income $ 7.7 $ 2.3 $ 5.4 $ 5.3 $ 20.7 $ 6.6 $ 5.4 $ - $ - $ 12.0 Depreciation, amortization & other $ 3.3 $ 3.3 $ - $ - $ 6.6 Adjusted EBITDA $ 11.1 $ 5.7 $ 8.8 $ 9.0 $ 34.6 $ 9.9 $ 8.7 $ - $ - $ 18.6 Unallocated corporate charges Adjusted operating income $ (1.7) $ (2.7) $ (1.4) $ (0.4) $ (6.2) $ (1.4) $ 0.2 $ - $ - $ (1.2) Depreciation, amortization & other $ 0.1 $ 0.1 $ - $ - $ 0.2 EBITDA $ (1.2) $ (1.4) $ (1.0) $ 0.8 $ (2.8) $ (1.3) $ 0.3 $ - $ - $ (1.0) Adjusted EBITDA $ 17.1 $ 12.9 $ 14.4 $ 17.2 $ 61.6 $ 14.0 $ 13.7 $ - $ - $ 27.7 (1) Unaudited quarterly financial data. Numbers presented have been adjusted for rounding. 17

18 Condensed Balance Sheets ($ in millions) July 2, 2017 December 31, 2016 Cash and cash equivalents $ 1.8 $ 6.4 Accounts receivable Inventories Other current assets Total current assets Property, plant and equipment, net Other long-term assets Total assets $ $ Current portion of long-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total equity (331.0) (312.3) Total liabilities & equity $ $