Q4 2016 Earnings Conference Call Quarter ended December 31, 2016 - PowerPoint PPT Presentation

Q4 2016 Earnings Conference Call Quarter ended December 31, 2016

Forward-looking Statements This presentation contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained in this presentation that are not statements of historical fact may be deemed to be forward-looking statements. All such forward-looking statements are intended to provide management’s current expectations for the future operating and financial performance of the Company based on current expectations and assumptions relating to the Company’s business, the economy and other future conditions. Forward-looking statements generally can be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “forecasts,” “predicts,” “targets,” “prospects,” “strategy,” “signs,” and other words of similar meaning in connection with the discussion of future operating or financial performance. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Such risks and uncertainties which include, among others, worldwide economic or political changes that affect the markets that the Company’s businesses serve which could have an effect on demand for the Company’s products and impact the Company’s profitability, challenges encountered by the Company in the integration of the Texel and Gutsche acquisitions, disruptions in the global credit and financial markets, including diminished liquidity and credit availability, changes in international trade agreements, including tariffs and trade restrictions, foreign currency volatility, swings in consumer confidence and spending, unstable economic growth, raw material pricing and supply issues, fluctuations in unemployment rates, retention of key employees, increases in fuel prices, and outcomes of legal proceedings, claims and investigations. Accordingly, the Company’s actual results may differ materially from those contemplated by these forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in Lydall’s filings with the Securities and Exchange Commission, including the risks and uncertainties identified in Part I, Item 1A - Risk Factors of Lydall’s Annual Report on Form 10-K for the year ended December 31, 2016. These forward-looking statements speak only as of the date of this presentation, and Lydall does not assume any obligation to update or revise any forward-looking statement made in this presentation or that may, from time to time, be made by or on behalf of the Company. This presentation contains non-GAAP financial measures, including organic sales growth, adjusted earnings per share, adjusted gross margin, and adjusted operating margin. The Appendix at the end of this presentation includes a reconciliation to the most comparable GAAP measures. We believe that the presentation of these non-GAAP financial measures, among other things, provides enhanced visibility into our performance. It is important to view each of these non-GAAP financial measures in addition to, rather than as a substitute for, the comparable GAAP measures. 2 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.

Key Takeaways 1 1 Growth Profitability Other • Sales up 8.1% to $566.9m Gross margin up 100 bps to • 24.4% 2016 vs. 2015 Concluded German Federal • Organic growth of 1.5% • Adj. operating margin up 100 bps • Cartel matter for €3.3m; to 11.3% expense recorded in Q4 2016 and one-time payment Adj. EBITDA up 130 bps to 15.0% • anticipated in Q1 2017 Adj. EPS up 24% to $2.61 • Completed acquisition of • Gutsche on December 31, 2016; integration on track • Sales up 9.7% to $144.2m Adj. gross margin up 20 bps to • Q4 2016 vs. Q4 2015 22.4% • Organic growth of 0.8% Adj. operating margin down 60 • Completed acquisition of Texel • bps to 8.4% on July 7, 2016; integration on track Adj. EBITDA up 20 bps to 12.5% • Adj. EPS up 13% to $0.52 • 1 Reference Appendix for reconciliation between adjusted and GAAP financials. 3 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.

Clear, Consistent Strategy for Profitable Growth New Product Develop and quickly deploy next Development generation product offerings Drive revenue and margin expansion Lean Six Sigma through operational excellence Profitable Growth Geographic Evaluate opportunities to further Expansion strengthen global footprint Select Disciplined M&A for Filtration & Acquisitions Engineered Materials opportunities 4 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.

Business Conditions Filtration & Engineered Materials Automotive Thermal / Acoustical Thermal / Acoustical Performance Technical Metals Fibers Materials Nonwovens • Growth in excess • Continued • Growth in filtration • Normal seasonality moderate growth in within Industrial of market in North across all regions; America North America improving demand for Filtration and Advanced Materials insulation products • Growth in line with from historical lows • Encouraging order market in Europe activity for power generation filtration • China facility continuing to • Integrations on track ramp up 5 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.

Financial Highlights of Q4 2016 vs. Q4 2015 1 Balance Sheet Income Statement Sales up 9.7% to $144.2m • • Cash balance of $71.9m as of Dec. 31, 2016 ◦ Organic growth of 0.8% ◦ ~$129m of total borrowings from credit facility • Adj. gross margin up 20 bps to 22.4% Cash Flows • Adj. operating margin down 60 bps to 8.4% ◦ Driven by operational inefficiencies in Metals • Capital expenditures of $25.5 in 2016 segment ◦ 2017 estimated at ~$35m • Adj. EBITDA up 20 bps to 12.5% • Cash generated from operating activities of $69.7m in 2016 vs $36.1m in 2015 • Adj. EPS up 13% to $0.52 1 Reference Appendix for reconciliation between adjusted and GAAP financials 6 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.

Thermal / Acoustical Metals 1 1 Adj. Adj. ($ in 000) Q4 2016 Q4 2015 Var $ Var % FY 2016 FY 2015 Var $ Var % Net sales Parts 38,609 34,382 4,227 12.3 % 156,187 141,117 15,070 10.7 % Tooling 4,486 7,062 (2,576) (36.5)% 18,787 19,815 (1,028) (5.2)% Metals Segment 43,095 41,444 1,651 4.0 % 174,974 160,932 14,042 8.7 % Operating income 1,951 3,194 (1,243) 15,041 15,517 (476) % of net sales 4.5% 7.7% 8.6% 9.6% Highlights ▪ Strong organic growth of 11.1% in Q4 and 9.7% for 2016 ▪ Adj. operating margin down 320 bps in Q4 due to operating inefficiencies; full year impact was 100 bps ▪ China facility profitable for the year Dual Wall Heat Shield 1 Reference Appendix for reconciliation between adjusted and GAAP financials 7 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.

Thermal / Acoustical Fibers ($ in 000) Q4 2016 Q4 2015 Var $ Var % FY 2016 FY 2015 Var $ Var % Net sales Parts 36,716 34,855 1,861 5.3 % 144,345 135,595 8,750 6.5% Tooling 238 1,624 (1,386) (85.3)% 5,067 3,152 1,915 60.8% Fibers Segment 36,954 36,479 475 1.3 % 149,412 138,747 10,665 7.7% Operating income 10,472 9,367 1,105 41,452 37,086 4,366 % of net sales 28.3% 25.7% 27.7% 26.7% Highlights Strong organic growth of 5.1% in Q4, 6.3% for full year ▪ Increase in operating income primarily due to lower raw ▪ material costs and positive mix Molded Flooring Solution 8 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.

Performance Materials 1 1 Adj. Adj. ($ in 000) Q4 2016 Q4 2015 Var $ Var % FY 2016 FY 2015 Var $ Var % Net sales Filtration 16,569 14,576 1,993 13.7 % 70,430 62,716 7,714 12.3 % Thermal Insulation 7,213 6,866 347 5.1 % 27,783 28,311 (528) (1.9)% Life Sciences Filtration 2,166 2,504 (338) (13.5)% 12,915 10,451 2,464 23.6 % Performance Materials 25,948 23,946 2,002 8.4 % 111,128 101,478 9,650 9.5 % Segment Operating income 2,237 2,073 164 12,339 8,144 4,195 % of net sales 8.6% 8.7% 11.1% 8.0% Highlights ▪ Strong organic growth of 8.9% in Q4, 9.5% for full year ▪ Improved demand in Air and Fluid Power & Transport Filtration across all geographies ▪ Operating margin flat during Q4 at 8.6% and up 310 bps for 2016 to 11.1% due to leverage and favorable mix Advanced HD ASHRAE Air Filtration Media 1 Reference Appendix for reconciliation between adjusted and GAAP financials 9 USE OR DISCLOSURE OF INFORMATION CONTAINED ON THIS SHEET IS SUBJECT TO THE RESTRICTIONS ON THE TITLE SLIDE.