paper-based solutions for niche markets worldwide

PAPER-BASED SOLUTIONS
FOR NICHE MARKETS WORLDWIDE
Henry C. Newell
President and Chief Executive Officer
Sherri L. Lemmer
Senior Vice President and
Chief Financial Officer
UBS Securities
Paper and Forest Products Conference
September 13, 2012
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 1995. Such statements involve
risks and uncertainties which may cause results to differ materially from those set forth in
these statements. 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, 2011. 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 on the Company's website
at: www.wausaupaper.com/investors.
IR Sept 2012
2
Company Profile
• Founded in 1899
• Provider of paper-based
brands and solutions for
Tissue and Technical
Specialty markets
Mosinee, Wisconsin
Middletown, Ohio
Corporate Headquarters
Tissue
Mosinee, Wisconsin
Harrodsburg, Kentucky
Technical
Tissue
Brainerd, Minnesota
Rhinelander, Wisconsin
Technical
Technical
• Five manufacturing
facilities in four states
• ≈ $850 million in revenues*
• 2,000 employees
* Continuing Operations
IR Sept 2012
3
Vision, Purpose and Goals
Vision
• We will be the leading provider of paper based, environmentally
sensitive brands and solutions to the markets we serve, driven by our
business model of collaborative innovation
Purpose
• A sustainable enterprise that delivers long-term attractive returns
Strategic Goals (Five Year):
• 4-5% Revenue Growth (CAGR)
• +15% Return on Capital Employed
• Earn the Right to Accelerate Growth and Investment
IR Sept 2012
4
Operating Strategies
• Focus on Strategic Markets
• Drive growth through Strategic Innovation
• Deploy Integrated Value Delivery System(s)
aligned to strategic customers
• Build a Strategic Operations Platform to
support market growth
• Instill Sustainable Business Practices
IR Sept 2012
5
Management Team
• Henry C. Newell (54)
– President & CEO – January 2012
• Sherri L. Lemmer (45)
– Senior Vice President and Chief Financial Officer – May 2012
• Matthew L. Urmanski (39)
– Senior Vice President, Tissue – March 2012
• Michael W. Nelson (45)
– Senior Vice President, Paper – March 2011
• Patrick J. Medvecz (49)
– Senior Vice President, Operations – March 2011
IR Sept 2012
6
We Operate in Two Business Segments
Tissue
41%
Washroom solutions for
away-from-home Towel
and Tissue markets
% of consolidated LTM sales*
Paper
Paper-based solutions designed
for technical requirements of
global Food, Coated & Liner and
Industrial & Tape markets
59%
% of consolidated LTM sales*
IR Sept 2012
* Continuing operations for LTM ended June 30, 2012
7
Tissue
Operations Aligned to Support Growth
Harrodsburg, Kentucky
Converting
Tissue Capacity Expansion
Middletown, Ohio
Paper
Harrodsburg, Kentucky
Brainerd, Minnesota
IR Sept 2012
Mosinee, Wisconsin
Rhinelander, Wisconsin
8
Our Markets (Tons)
World Paper & Board Demand
Specialty ~25MM
Tape & Industrial
24%
~400MM
Packaging
50%
Coated & Liner 5%
Specialty
Our Market
7%
Segments
Tissue
8%
Food 5%
Tissue ~28MM
Printing &
Writing 27%
Away-from-Home
23%
Newsprint
8%
At Home
77%
North America
9%
Sources: AWA, RISI, and Company
IR Sept 2012
9
Markets We Serve
SECTOR
TISSUE
FOOD
TAPE &
INDUSTRIAL
COATED &
LINER
Solutions
Washroom
Solutions
Food Packaging
& Processing
Solutions
Engineered
Solutions
Pressure Sensitive
Solutions
End Use
Markets
• Educational
Institutions
• Office Buildings
• Lodging
• Healthcare
• Food Service
•
•
•
•
• Towel Products
• Tissue Products
• Dispensing Systems
• Greaseproof
Applications
• Microwavable
Applications
• Baking Papers
Product
Categories
IR Sept 2012
Consumer Packaging
Bakeries
Food Processors
Food Service
•
•
•
•
•
Consumer Packaging
Construction
Automotive
Manufacturing
Healthcare
• Crepe Tape Base
• Coating &
Laminating Base
• Abrasive & Specialty
Saturating Base
• Interleavers
• Technical Specialties
•
•
•
•
•
Consumer Packaging
Alternative Energy
Aerospace
Medical
Hygiene
• Silicone Coated
Papers
• High Performance
Release Liners
• Supercalendared Kraft
• Specialty Glassines
10
Wausau Paper Revenue
2012 Expected $0.9B
2011 $1.0B
Tissue
31%
Print
33%
5-Year $1.1B
Food
16%
Tape &
Industrial
19%
Coated
& Liner
16%
Food
15%
Tissue
41%
Tape &
Industrial
18%
Tissue
52%
Coated
& Liner
15%
Transition
8%
Executing Growth Strategy (Post Print)
IR Sept 2012
11
Significant Actions in 2011-2012
• Capital Investments
– $27MM Brainerd Investment (Tape)
– $220MM Tissue Expansion
• Discontinued Operations
– Print & Color Sale
– Brokaw Site Shutdown and Sale
• Financing
– Sale of Timberlands
– Favorable Financing Construct
IR Sept 2012
12
Tissue
IR Sept 2012
13
North American Away-From-Home Tissue
(Tons)
Demand
Wausau Paper
2.5MM
.2MM
Education 10%
Education
27%
Lodging /
Other 23%
Food Service
40%
Sources: AF&PA, RISI , and Company
IR Sept 2012
Office Buildings
12%
Lodging /
Other 26%
Office
Buildings
36%
Healthcare
15%
Food Service
3%
Healthcare
8%
14
Tissue - Overview
• Annual sales ≈ $343MM (LTM*)
– ≈ 8% share of North American AFH market
– Consistently achieving above-market growth and margins
• Broad line of towel, tissue, soap and dispensing systems
• Sold exclusively through distribution
• Major $220MM investment underway:
– Expand premium offering
– Raise product quality
– Reduce cost to manufacture
* LTM ended June 30, 2012
IR Sept 2012
15
Tissue Expansion $220MM
• Highly flexible manufacturing asset
(conventional tissue, premium towel & tissue)
• Premium attributes equivalent to TAD (virgin)
• Fiber flexibility – 100% recycled fiber or virgin
• Strong competitive cost position
• 75,000 TPY
IR Sept 2012
16
Enhanced Products
• Full spectrum of quality possible
(recycled & virgin)
• Improved mid-grade Dubl-Nature®
• New to world - premium 100% recycled fiber
products
• First Green Seal™ eligible premium products
IR Sept 2012
17
Paper
IR Sept 2012
18
Paper Segment
FOOD
INDUSTRIAL & TAPE
COATED & LINER
Markets
Markets
Markets
Bakery & Restaurant
Building & Construction
Aerospace Composite
Food Processing
Automotive & Electronics
Alternative Energy
Consumer Packaging
Diversified Manufacturing
Electronics & Consumer
90% of Sales
Customer Specific
IR Sept 2012
800 Unique Grades
19
Worldwide – Technical Specialty
(Tons)
Food
Tape & Industrial
Coated & Liner
1.2MM
6.1MM
1.3MM
Specialized
Commodity
65%
Technical
Specialty
35%
Specialized
Commodity
66%
Technical
Specialty
52%
Technical
Specialty
34%
Coated
16%
Specialized
Commodity 32%
Our Markets:
8.7MM
Specialty Focus:
3.7MM
Wausau Capacity: ≈ 0.3MM
Today’s Specialty is Often Tomorrow’s Specialized Commodity
Sources: AWA and Company
IR Sept 2012
20
Paper Overview
• Annual Sales ≈ $500MM (LTM*)
• Growing Technical Specialty
• Expanding Margins Despite
Elevated Input Costs
• 2011 Strongest Technical
Specialty Profit in 13 Years
• Exited Print & Color
* LTM ended June 30, 2012
IR Sept 2012
21
Brainerd Machine Rebuild
• $27MM rebuild completed Q1 2011
• Supports global customer growth
• Lowest cost crepe tape asset in the
world across full spectrum of quality
IR Sept 2012
22
WHY WAUSAU?
“Investment Thesis”
IR Sept 2012
23
Investment Thesis
Wausau: Grow at Target Margins
• 4-5% Revenue Growth (CAGR)
• 15% Return on Capital Employed (ROCE)
Paper:
Earn the Right to Grow (ROCE Improvement)
• Stable Revenue
• 7-8% Operating Margins within 36 months
• 16% ROCE
Tissue:
Investing $220MM (High ROCE Business)
• +6% Case Growth (CAGR)
• 13-15% Operating Margins
• 20-25% ROCE
IR Sept 2012
ROCE: Return on Capital Employed (pretax)
24
UBS Securities
Paper and Forest Products Conference
September 13, 2012
FINANCE
Sherri L. Lemmer
Senior Vice President and Chief Financial Officer
IR Sept 2012
25
Financial Overview
($MM)
Consolidated Net Sales
$1,032
$1,056
$1,100
$1,035
Revenue Growth
Tissue:
$823
4-5% CAGR
+3-4% (2012)
+6% CAGR (5-year)
Technical: +8% (2012)
+$500MM Revenue (5 year)
Print Exit Transition
($MM)
Net sales from continuing operations, unaudited
Adjusted EBITDA
• Tissue Expansion
• Technical Growth
EBITDA Improvement
Tissue Expansion
Growth, Cost Structure & Mix
Technical Growth
Volume & Margin Improvement
Adjusted EBITDA as
originally reported
IR Sept 2012
Adjusted EBITDA from
continuing operations
See Appendix for reconciliations of Consolidated Net Sales from continuing operations and Adjusted EBITDA.
26
Capital Investment Funding
Capital Spending
($MM)
• Expect $162MM
2012 Capital Spend
• $325MM Capacity under
Existing Credit Agreements
Net Long-term Debt
($MM)
• Capacity Secured to Fulfill
Funding Obligations
* Net of $33.1MM in cash & cash equivalents
IR Sept 2012
27
Change in Net Debt
($MM)
Year Ended
12/31/11
EBITDA (1)
$37.9
$29.8
Capital Expenditures, Net of Grants
(73.6)
(77.5)
Change in Receivables
0.8
6.4
Change in Inventories
32.4
19.0
(18.7)
(19.2)
20.5
43.8
(15.2)
22.1
Net Change in Debt
$(15.9)
$24.4
Beginning Net Debt
$101.0
$125.4
Ending Net Debt
$116.9
$101.0
Change in Other Assets/Liabilities
Proceeds on Disposals
Other (2)
(1) See Appendix for reconciliation of EBITDA
(2) See Appendix for details of the “Other” category
IR Sept 2012
Six Months Ended
6/30/12
28
Value Drivers
Tissue
Growth (Cases)
Operating Margin
Paper
Growth (Technical)
Operating Margin
IR Sept 2012
2012
Five Year Target
+3-4%
13%
+6% (CAGR)
13-15%
+8%
(Volume)
+$500MM
(Revenue)
Cash Focus
7-8%
29
Our Near-Term Outlook
• Tissue
– Expanding Margins
– Stable Revenue
– Demand Recovery
– Transition of Print & Color
– Gains through Operations
– Outlook - Selective Demand
Improvement - Global
Recovery Inconsistent
– Major Investment on Plan
– Customer Engagement
in 2012 New Product
Strategy: High
IR Sept 2012
• Paper
– Commercialization of
Brainerd Tape Investment
30
PAPER-BASED SOLUTIONS
FOR NICHE MARKETS WORLDWIDE
Henry C. Newell
President and Chief Executive Officer
Sherri L. Lemmer
Senior Vice President and
Chief Financial Officer
UBS Securities
Paper and Forest Products Conference
September 13, 2012
QUESTIONS
IR Sept 2012
32
APPENDIX
IR Sept 2012
33
Wausau Paper
Adjusted Return on Capital Employed
• Five-year Target + 15%
Adjusted ROCE
• Pressure as we Start-up
Tissue Machine
See reconciliation of Adjusted ROCE.
IR Sept 2012
34
Balance Sheet Highlights
($MM)
6/30/12
12/31/11
Cash & Equivalents
$33.1
$26.7
Net Working Capital
$58.2
$71.0
Long-Term Debt
$150.0
$127.7
Shareholders’ Equity
$204.7
$196.2
Debt/Total Capital*
42.3%
39.4%
Total Borrowing Base
$325
Remaining Available Borrowing Capacity
$175
* The calculation of Debt/Total Capital is not intended to be used for purposes of calculating debt covenant compliance
IR Sept 2012
35
Second Half Outlook
• Cautious Economic Outlook
• New Tissue Machine
Startup
• Brainerd Machine
Commercialization
• Full Year Adjusted EPS
$.39-$.41 per Share
2012
IR Sept 2012
36
2012 Guidance
($MM)
Continuing Operations
Depreciation, Depletion and Amortization
Interest Expense, net of Capitalized Interest
2012 Targets
$45-$48
$2-$3
Tax Rate
37%
Capital Expenditures
$162
Pension:
Cash Contributions
Non-Cash Pension Expense
IR Sept 2012
$25
$19-$21
37