Presentation Transcript

1. Taminco CorporationFirst Quarter 2014 Earnings

   Conference Call, May 8, 2014
2. Disclaimer FORWARD-LOOKING STATEMENTS Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of the federal securities laws, and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this presentation, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If we do update one or more forward-looking statements, there should be no inference that we will make additional updates with respect to those or other forward-looking statements. FURTHER INFORMATION This presentation should be read together with our SEC filings, including with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included in such filings. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Taminco will arrange to send you our SEC filings if you request it by calling toll-free 1-800-831-9146. For more information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements please refer to the “Risk Factors” section of our Annual Report on Form 10-K and subsequent reports filed by the Company with the Securities and Exchange Commission. NON-GAAP FINANCIAL MEASURES In this presentation, Taminco presents Adjusted EBITDA, Adjusted EBITDA margin, and Recurring Free Cash Flow because it believes these measures are useful as supplemental measures in evaluating the performance of its operating businesses and provide greater transparency into our results of operations. Adjusted EBITDA, Adjusted EBITDA margin, and Recurring Free Cash Flow should not be considered in isolation or as a substitute for net income, cash flow from operations or other statement of operations data prepared in accordance with U.S. GAAP. See Appendix for the definitions and reconciliations of these non-GAAP measures. MARKET, RANKING AND OTHER INDUSTRY DATA In this presentation we rely on and refer to information and statistics regarding our industry, the size of certain markets and our position within the sectors in which we compete. Our estimates have also been based on information obtained from our customers, suppliers and other contacts in the markets in which we operate. While we are not aware of any misstatements regarding any industry data presented herein, our estimates, in particular as they relate to market share and our general expectations, involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our SEC filings. 2
3. First Quarter FY ‘14 Overview Volume increased 5% and Adjusted EBITDA increased 6% year over year for a 22% EBITDA margin Strong performance in Crop Protection and continued growth in Specialty Amines serving personal & home care, water treatment and energy end-markets The first quarter was negatively affected by cold weather in the US, which impacted sales in some of our end-markets, particularly agriculture Our Methylamine expansion project at our Pace, FL facility is progressing well and we anticipate it will come online ahead of schedule at the end of the second quarter Successfully completed the acquisition of Kemira’s Formic Acid business; the integration timeline is on schedule and there was a one month contribution to our first quarter results Announced a joint venture with Balchem Corporation to build and operate a world-class choline chloride facility in the US Repriced our credit agreement, lowering the interest rate on the senior secured facilities by 100 bps, or increasing pre-tax cash flow by approximately $5 million per year Q1 FY ‘14 Performance Historical Adjusted EBITDA Trend ($ in millions) 3
4. Q1 FY ’14 Net Sales Mix Q1 FY ’14 Net Sales by End Markets Q1 FY ’14 Net Sales by Region Q1 FY '14 Net Sales by Division Emerging Markets: 12% Top 5 Account for 89% of Q1 FY’14 Net Sales Latin America 5% Americas: 51% Crop Protection Asia 7% Functional Amines North America 46% Europe 42% Specialty Amines Our top 5 end markets account for 89% of our Q1 FY ’14 net sales and continue to be driven by favorable mega-trends North America was down 2% year over year primarily due to lower volume in Functional Amines and Crop Protection, which was partially offset by growth in Specialty Amines Our European business was up 16% year over year primarily due to strong sales in Specialty Amines, Crop Protection and the contribution of the recently acquired Formic Acid business Emerging markets declined from the prior period due to a softer macro environment and certain regional non-recurring events 4
5. Divisional Highlights – Functional Amines ($ in millions) Q1 FY ‘14 Performance Year-over-Year Comparison Highlights Historical Adjusted EBITDA Trend Volume - Decreased 8% year over year for Q1 FY’14 primarily due to lower alkylamines sales to agriculture customers in the US driven by higher inventory levels combined with the unusually cold winter. We were also impacted by operational issues at a couple of customers Adjusted EBITDA - Declined $3 million year over year to $29 million, which was primarily driven by volumes dropping due to a severe winter in the US. We estimate that one off events negatively affected Adjusted EBITDA by $4 million in the first quarter 5
6. Divisional Highlights – Specialty Amines ($ in millions) Q1 FY ’14 Performance Year-over-Year Comparison Highlights Historical Adjusted EBITDA Trend Volume - Increased 21% year over year for Q1 FY’14 primarily due to strong demand in personal & home care and water treatment, both in US and Europe, and the one month contribution of the recently acquired formic acid solutions business. After a slow start in January and February, we are also seeing solid improvements in our energy end-market Adjusted EBITDA - Increased 9% year over year to $24 million due to volume and mix effects. Results include a one month contribution from the formic acid solutions business. The severe winter in the US negatively affected Adjusted EBITDA by about $1 million in the first quarter 6
7. Divisional Highlights – Crop Protection ($ in millions) Q1 FY ‘14 Performance Year-over-Year Comparison Highlights Historical Adjusted EBITDA Trend Volume - Increased 9% year over year for Q1 FY’14 primarily due to strong European performance, particularly in our plant growth regulator products, which benefitted from mild weather conditions. US sales were negatively affected by weather, causing some delay in soil fumigants Adjusted EBITDA - Increased 42% year over year to a record $17 million, primarily due to higher pricing coupled with improved volume, mix effects and a favorable exchange rate 7
8. Cash Flow and Balance Sheet Update Financial Highlights Recurring Free Cash Flow Balance Sheet & Cash Flow Recurring Free Cash Flow of $6 million for the 3 months ended March 31, 2014 – limited by: $27 million of capital expenditures during the quarter, including a significant part of the methylamine expansion project $7 million of working capital increases primarily due to the Formic Acid business and the Pace shutdown $20 million of semi-annual interest payments on the senior secured notes Robust free cash flow generation expected in remaining quarters of the year as working capital and capital expenditures will come down versus Q1 FY ’14 Q1 FY ‘14 Adjusted EBITDA less Capex: $43 million2 Cash & Cash Equivalents: $34 million Net Debt: $1.0 billion Net Debt / LTM 3/31/14 Adjusted EBITDA: 3.6x4 Trade working capital: $133 million which includes the impact of the Formic Acid Acquisition ($ in millions) 1 Note: Primarily due to deferred taxes, amortization of debt costs and interest payment 2 Note: Excludes intangibles. 3 Note: Includes non-recurring items such as the transaction costs for the Formic Acid acquisition 4 Note: Pro-forma for Formic Acid acquisition 8
9. Appendix – Additional Information
10. Reconciliation of Net Income to Adjusted EBITDA Reconciliation of Net Income to Adjusted EBITDA: Three Months Ended March 31, 2014 and 2013 ($ in millions) 10
11. Reconciliation of Cash from Operations to Recurring Cash Flow Reconciliation of Net Cash from Ops to Recurring Free Cash Flow: Three Months Ended March 31, 2014 ($ in millions) 11
12. Use of Non-GAAP Financial Measures We present Adjusted EBITDA, Adjusted EBITDA margin, and Recurring Free Cash Flow to enhance an investor’s understanding of our results of operations, financial condition, and cash generating ability of the operating business. EBITDA consists of profit for the period before interest, taxation, depreciation and amortization. Adjusted EBITDA consists of EBITDA and eliminates transaction costs, (ii) restructuring charges, (iii) foreign currency exchange gains/losses, (iv) non-cash equity in earnings/losses of unconsolidated affiliates net of cash dividends received (as we receive cash only when these unconsolidated affiliates pay us a dividend, regardless of equity-based earnings), (v) stock option compensation and (vi) sponsor management and director fees and expenses (successor period only). Adjusted EBITDA margin reflects Adjusted EBITDA as a percentage of Net Sales. Recurring Free Cash Flow consists of net cash flow provided by operating activities and eliminates tangible capital expenditures and adds back cash paid for transaction costs related to the Formic Acid acquisition. We believe that making such adjustments provides investors meaningful information to understand our operating results and ability to analyze financial and business trends on a period-to-period basis. You should not consider Adjusted EBITDA, Adjusted EBITDA margin, or Recurring Free Cash Flow as an alternative to (a) operating profit or profit for the period, as reported in accordance with U.S. GAAP, as a measure of our operating performance, (b) cash flows from operating, investing and financing activities as a measure to meet our cash needs or (c) any other measures of performance under generally accepted accounting principles. You should exercise caution in comparing Adjusted EBITDA, Adjusted EBITDA margin, and Recurring Free Cash Flow as reported by us to similar measures of other companies. In evaluating Adjusted EBITDA and Recurring Free Cash Flow, you should be aware that we are likely to incur expenses similar to the adjustments in this presentation in the future and that certain of these items could be considered recurring in nature. Our presentation of Adjusted EBITDA and Recurring Free Cash Flow should not be construed as an inference that our future results will be unaffected by non-recurring items. We present Adjusted EBITDA, Adjusted EBITDA margin, and Recurring Free Cash Flow because we believe these are useful as supplemental measures in evaluating the performance of our operating businesses and provide greater transparency into our results of operations and cash flows. Adjusted EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations data prepared in accordance with U.S. GAAP. Recurring Free Cash Flow should not be considered in isolation or as a substitute for net cash flows provided by operating activities or other statement of cash flows data prepared in accordance with U.S. GAAP. Our management, including our chief operating decision makers, uses Adjusted EBITDA and Recurring Free Cash Flow as factors in evaluating the performance of our business. These measures are not recognized in accordance with U.S. GAAP and should not be viewed as an alternative to U.S. GAAP measures of performance. The most directly comparable financial measure presented in accordance with U.S. GAAP in our consolidated financial statements for Adjusted EBITDA is net income and for Recurring Free Cash Flow is net cash flow provided by operating activities. Adjusted EBITDA and Recurring Free Cash Flow have limitations as analytical tools, and you should not consider these measures either in isolation or as a substitute for analyzing our results as reported under U.S. GAAP. Some of these limitations include: (i) Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future and Adjusted EBITDA and Recurring Free Cash Flow do not reflect any cash requirements that would be required for such replacements; (iii) Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary, to service interest or principal payments on our debt; (iv) Adjusted EBITDA does not reflect stock option expense or its potentially dilutive impact; (v) some of the exceptional items that we eliminate in calculating Adjusted EBITDA and Recurring Free Cash Flow reflect cash payments that were made, or will be made in the future; and (vi) other companies in our industry may calculate Adjusted EBITDA and Recurring Free Cash Flow differently than we do, which limits its usefulness as a comparative measure. 12