Value Times Three. Grant s Spring Conference April 7, 2015

Transcription

1 Value Times Three Grant s Spring Conference April 7, 2015

2 Disclaimer The following information has been prepared solely for use by intended recipients and shall be maintained in strict confidence. The information contained herein reflect the opinions and projections of Mountain Lake Investment Management LLC and its affiliates (collectively Mountain Lake ) as of the date of this presentation. All graphics, code, text and design are owned by Mountain Lake. This presentation, in its entirety or in parts, may not be reproduced without prior written permission from Mountain Lake. The information set forth herein does not purport to be complete and no obligation to update or otherwise revise such information is being assumed. Certain statements, projections, or other estimates herein are based upon certain assumptions. Other events that were not taken into account may occur and may significantly affect the analysis. Any assumptions should not be construed to be indicative of the actual events that will occur. No representation or warranty is made concerning the accuracy of any data presented. All information provided in this presentation is for informational purposes only and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. These materials do not constitute an offer to sell, or a solicitation of an offer to buy, interest in any Mountain Lake product.

3 Mountain Lake Partners Cash Position 70% 60% 50% 9/30/2008: 54.5% 3/31/2015: 62.8% 40% 30% 20% 10% 0%

4 Mountain Lake Partners billions $35 $30 $25 $20 $15 $10 $5 $0 Weighted Median Market Cap of Equity Investments

5 Owens-Illinois 3/31/2015 Market Capitalization = $3.8 billion

6 Owens-Illinois Corporate History 1903 Michael Owens completes the automated bottle blowing machine and forms Owens Bottle Machine Company Owens-Illinois was formed after the acquisition of Illinois Glass Owens-Illinois sells Kaylo, its asbestos containing insulation unit, to Owens Corning. During the 10 years of ownership, aggregate sales are less than $40 million.

7 Owens-Illinois Corporate History 1987 KKR leveraged buyout for $3.7 billion 1988 With the acquisition of Brockway Glass, Owens-Illinois domestic market share is greater than 40% 1991 Initial public offering 2014 Asbestos related payments total $4.4 billion 2015 Current market capitalization is $3.8 billion

8 Owens-Illinois Recent Decade of Nothing $80 Stock Price $60 $40 $20 $ Source: Bloomberg

9 Owens-Illinois Glass Bottle Industry Dynamics - High fixed costs - Consolidated market - Barriers to entry - Steady demand - Limited growth - Generates lots of cash

10 20% 15% 10% 5% 0% Owens-Illinois European Operating Margin E 2016E - In Europe, Owens-Illinois has 25% market share. - The top three firms have 67% market share. - Normal margins are 12.5%. Source: Company reports and Mountain Lake estimates

11 20% 15% 10% 5% 0% Owens-Illinois North American Operating Margin In North America, Owens-Illinois has 40% market share. - The top three firms have 85% market share. - Normal margins are 15% E 2016E Source: Company reports and Mountain Lake estimates

12 Owens-Illinois South American Operating Margin 25% 20% 15% 10% 5% 0% In Brazil, Owens-Illinois has 65% market share. - In Peru, Ecuador and Columbia, Owens-Illinois has 100% market share. - Normal margins are 20% E 2016E Source: Company reports and Mountain Lake estimates

13 20% 15% 10% 5% 0% Owens-Illinois Asia Pacific Operating Margin E 2016E - In China, Owens-Illinois has about a 2% market share with a 0% margin. - In Australia and New Zealand, Owens-Illinois has 70% market share. Normal margins are 15%. Source: Company reports and Mountain Lake estimates

14 Owens-Illinois All Regions Operating Margin 20% 15% 10% 5% 0% E 2016E Source: Company reports and Mountain Lake estimates

15 millions $600 $500 $400 $300 $200 $100 $0 Owens-Illinois Pretend Free Cash Flow* E 2016E *excluding payments for asbestos and restructuring Source: Company reports and Mountain Lake estimates

16 billions $6 $5 $4 $3 $2 $1 $0 Owens-Illinois Net Debt Cash used since 2000: $191 million per year Current leverage ratio: 2.4 Source: Company reports

17 $250 Owens-Illinois Restructuring Charges $200 millions $150 $100 $50 $ E Asian and European restructurings completed in 2009 and 2015 Cash use since 2009: $114 million per year Source: Company reports and Mountain Lake estimates

18 $200 Owens-Illinois Asbestos Charges millions $150 $100 $50 $ Cash used since 2009: $158 million per year Source: Company reports

19 Owens-Illinois Mesothelioma Incidence Source: National Cancer Institute

20 Owens-Illinois Core Competency in Asbestos Litigation 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Asbestos Claims Pending ,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Asbestos Claims Filed Source: Company reports

21 Owens-Illinois Recent Claims Activity 12,000 10,000 8,000 6,000 4,000 2, Disposed Filed Source: Company reports

22 Owens-Illinois $400 Reported Free Cash Flow millions $300 $200 $100 $ The impact in 2014 from the strong USD was $40 million. Source: Company reports

23 Owens-Illinois Reported Free Cash Flow with Estimates millions $400 $300 $200 $100 $ E 2016E Source: Company reports and Mountain Lake estimates

24 Owens-Illinois Reported Free Cash Flow with Estimates and Adjusted Estimates* millions $600 $500 $400 $300 $200 $100 $ E 2016E *excluding payments for asbestos and restructuring Source: Company reports and Mountain Lake estimates

25 Koppers Holdings 3/31/2015 Market Capitalization = $403 million

26 Koppers Holdings Corporate History 1914 Heinrich Koppers sells patents for by-product coke ovens to Andrew Mellon for $300,000. Koppers Inc. reorganizes in Pittsburg Fletcher Byrom focuses the company on end products Beazer plc led an LBO 1997 Hansen plc, who acquired Beazer in 1991, wanted control. Management exercised right of first refusal Streamlined company producing carbon materials and wood products has IPO.

27 Koppers Holdings 2013 Revenues $1.5 billion Carbon Materials and Chemicals 61% Railroad and Utility 39% Source: Company reports

28 Koppers Holdings COAL TAR Carbon Pitch 50% Chemical Oils 20% Distillate 30% Naphthalene Creosote Phthalic Anhydride Primary End Products Aluminum Vinyl, Paint and Concrete Additives Railroad Crossties Source: Company reports

29 15% Koppers Holdings Carbon Materials and Chemicals Operating Margins 10% 5% 0% -5% E Source: Company reports and Mountain Lake estimates

30 30% 25% 20% 15% 10% 5% 0% -5% Koppers Holdings Carbon Materials and Chemicals Return on Invested Capital E Source: Company reports and Mountain Lake estimates

31 Koppers Holdings Net Debt millions $1,000 $800 $600 $400 $200 $ Date Acquisition Product or Service Price 8/15/2014 Osmose Wood preservation $491 M 1/20/2014 Ashcroft Crosstie treating $29.8 M Source: Company reports

32 Koppers Holdings 11/7/2014 Walt Turner resigns, Leroy Ball appointed CEO 1/14/2015 Company announces delay of low cost naphthalene plant to preserve cash 1/22/2015 Attempt to refinance high cost debt fails 2/26/2015 Company misses earnings guidance for 8 th quarter in a row 2/26/2015 Company announces $200mn-$250mn debt reduction target 2/26/2015 Board of Directors suspends dividend

33 Koppers Holdings $60 Stock Price $50 $40 $30 $20 $10 $ Year End Shares = 20.5 million Source: Bloomberg

34 Koppers Holdings $800 Debt Maturities $600 millions $400 $200 $ Source: Company reports

35 Koppers Holdings 2015 Revenues $1.8 billion Carbon Materials and Chemicals 41% Railroad and Utility 38% Performance Chemicals 21% Source: Company reports

36 Koppers Holdings 14% 12% 10% 8% 6% 4% 2% 0% Railroad and Utility Operating Margins E Source: Company reports and Mountain Lake estimates

37 Koppers Holdings Railroad and Utility is a Good Business - Largest supplier of railroad ties to North American railroads - Two firm concentration is about 80% - Steady replacement market demand 600 million railroad ties wear out; over 20 million replaced every year - Long-term contracts with cost-plus pricing - Minimal capital investment - Margin opportunity from process improvements

38 Koppers Holdings 50% Railroad and Utility Return on Invested Capital 40% 30% 20% 10% 0% E Source: Company reports and Mountain Lake estimates

39 Koppers Holdings Performance Chemicals $400 Revenues 15% Operating Margins $300 $200 $100 10% 5% $ E 2016E 0% E 2016E Source: Company reports and Mountain Lake estimates

40 Koppers Holdings Performance Chemicals is a Good Business - Wood treatments for outdoors decks - They are a dominant provider, still gaining market share - High IP content; patent protection - Not capital intensive - Sell to wood treaters who in turn sell to big box stores, contractors and small stores - Housing starts is a small percent of demand; driven by remodels

41 Koppers Holdings 30% Performance Chemicals Return on Invested Capital 25% 20% 15% 10% 5% 0% E Source: Company reports and Mountain Lake estimates

42 Koppers Holdings Operating Income by Segment In millions E 2016E Carbon Materials and Chemicals $89.1 $83.1 $43.9 -$5.3 -$9.1 $6.5 Railroad and Utility $34.8 $45.1 $58.3 $53.6 $73.8 $72.6 Performance Chemicals $0.0 $0.0 $0.0 $1.6 $40.6 $37.2 Total Segment Operating Income $123.9 $128.2 $102.2 $49.9 $105.3 $116.3 Source: Company reports and Mountain Lake estimates

43 Koppers Holdings Free Cash Flow In millions E 2016E Net Income $37.6 $67.2 $40.1 -$39.4 $37.2 $46.4 Depreciation and Amortization $48.8 $27.6 $29.7 $44.0 $65.0 $61.0 Capital Expenditures -$33.2 -$28.9 -$72.9 -$83.8 -$45.0 -$44.0 Free Cash Flow $53.2 $65.9 -$3.1 -$79.2 $57.2 $63.4 Source: Company reports and Mountain Lake estimates

44 Koppers Holdings In millions Stella Jones Koppers Holdings Koppers without CMC Date 3/31/2015 3/31/2015 3/31/2015 Market Capitalization $2,161 $403 $403 Enterprise Value $2,548 $1,217 $1, E Revenues $1,138 $1,705 $1, E Operating Income $142 $105 $ E Operating Margin 12.5% 6.2% 11.4% Source: Bloomberg and Mountain Lake estimates

45 Tidewater Big Floating Trucks Boat and/or truck pictures 3/313/2015 Market Capitalization = $898 million

46 Tidewater Big Floating Trucks with a Bow for Extra Beauty - Safe, efficient and compliant operations - New vessels that service all water depths - Geographic diversity - Strong customer base, relationships and contracting

47 Tidewater Vessel Population by Owner Deepwater Vessels only Source: Company reports

48 Tidewater Vessel Commitments Jan Dec Vessel Count Total Cost Deepwater PSVs 102 $2,900m Deepwater AHTSs 12 $387m Towing Supply/Supply 111 $1,667m Other 53 $227m Totals 278 $5,181m Source: Company reports

49 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Tidewater Stock Price Source: Bloomberg

50 Tidewater 12/31/2014 Balance Sheet Items (in Billions) Vessel and Related Equipment $4.63 Net PP&E $3.67 Goodwill $0.00 Net Debt $1.41 Equity $2.51 Shares 46.9 M Book Value per Share $53.50 Stock price as of 3/31/2015 $19.14 Market cap as of 3/31/2015 $897 M Source: Company reports and Bloomberg

51 Tidewater Debt Maturities millions Fiscal Year ending March 31 Source: Company reports

52 Tidewater 60% 50% 40% 30% 20% 10% 0% Vessel Cash Operating Margin E 2016E 2017E 2018E Fiscal Year ending March 31 Source: Company reports and Mountain Lake estimates

53 50% 40% 30% 20% 10% 0% -10% Tidewater Operating Margin E 2016E 2017E 2018E Fiscal Year ending March 31 Source: Company reports and Mountain Lake estimates

54 millions $300 $200 $100 $0 -$100 -$200 -$300 -$400 Tidewater Free Cash Flow Fiscal Year ending March E 2016E Source: Company reports and Mountain Lake estimates

55 millions $200 $150 $100 $50 $0 Tidewater Capital Expenditures We are here, 85 days until positive free cash flow 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018 4Q2018 Fiscal Year ending March 31 Source: Company reports and Mountain Lake estimates

56 millions $300 $200 $100 $0 -$100 -$200 -$300 -$400 Tidewater Free Cash Flow E 2016E 2017E 2018E Fiscal Year ending March 31 Source: Company reports and Mountain Lake estimates

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