Zep Inc.Company OverviewFebruary 2013
Safe HarborThis presentation and our commentary contain forward-looking statements within the meaning of the Private Secur...
Zep Inc. Zep is a leading                        Serve key end-markets  consumable packaged                      where o...
Trusted Family of Brands for Over 75 Years We market over 4,000 formulas under a trusted  family of brands to over 200,00...
Consumable Packaged Chemicals Market      $75 Billion Global Opportunity                                       Consistent ...
Transformation Largely Complete  Estimated U.S. Cleaning                           Zep Sales by Channel                   ...
Strategy: Compete Where We Can Win Clear understanding of competitive positioning and capabilities is value creating…   Fo...
New Platform Created: Zep Vehicle Care                Zep Vehicle Care          Highly complementary organizations       ...
Long-Term Financial Objectives $1 billion in revenue within 5 years Target of 50 bp annualized EBITDA margin  improvemen...
Growing Sales, Profitably($ Millions)                                                                       EBITDA Growth ...
Growing EPS and ROIC          EPS Growth 33% CAGR                                                            ROIC Improved...
Strong/Consistent Cash Flow Generation            Strong FCF Important          Characteristic of Zep Model               ...
Debt Position                                                                           $248.7                            ...
Priorities for 2013 Integrate Ecolab Vehicle Wash Business and  Create Zep Vehicle Care Maximize the benefit from ERP sy...
Zep is a Solid Investment Differentiated strategy caters to “Right to Win” in our  markets   – Focus on key end markets  ...
Appendices
Zep’s Product Offering   Transportation                Maintenance                               Jan San   Exterior/interi...
Acquisition of Ecolab Vehicle CareDivision – Financial Impact                    Zep Inc.        Adjusted                 ...
Acquisition of Ecolab Vehicle CareDivision – Financial ImpactPurchase Multiple Improvement   after Realized Synergies     ...
Acquisition Overview          StrategyStrengthen our Leadership Position Expanding Access to Market through New Platforms...
Acquisition OverviewAcquisition Overview                                 Brands                               Strategic Ra...
First Quarter 2013 Highlights Solid financial results Completed strategic acquisition and formed Zep Vehicle  Care – cre...
1Q ‘13 Sales Drivers              $160.0                                                            $3.5 $158.0           ...
1Q’13 North American Sales Trends –Channel and End-market Performance  End Market                                         ...
1Q ‘13 Gross Profit Margin           Year-over-Year                                                    Quarter-to-Quarter ...
Items Affecting Gross Margin in 2013 Q2 Historically lowest gross margin   – Sequentially, Q2 is 200 basis points lower t...
Gross Margin:Selected Feed Stocks Impacting Raw Material Purchases   Magnitude of Commodity Costs (Select Feed Stocks acco...
Financial Impacts of SAP & Zep Vehicle Care We expect two investments to reduce operating earnings by  approximately $3.0...
Fiscal 2013 Outlook Given uncertain economic conditions, believe organic  sales growth will be modest   – Expect greater ...
Board of Directors and ManagementZep Inc. Board of DirectorsName                         TitleRonald D. Brown             ...
EBITDA Reconciliation Annual (Years Ended August 31)        2008             2009            2010          2011     2012 N...
Zep Inc. Non-GAAP Disclosure•    This presentation includes the following supplemental non-GAAP financial measures: EBITDA...
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Investor Presentation-February 2013

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Investor Presentation-February 2013

  1. 1. Zep Inc.Company OverviewFebruary 2013
  2. 2. Safe HarborThis presentation and our commentary contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.Specifically, forward-looking statements include, but are not limited to, statements relating to our future economic performance, business prospects,revenue, income, and financial condition; and statements preceded by, followed by, or that include the words "expects," "believes," "intends," "will,""anticipates," and similar terms that relate to future events, performance, or our results. Examples of forward-looking statements in this presentationand our commentary include but are not limited to: statements regarding the economic environment and the impact this environment has had or couldhave on our current and/or future financial results; statements regarding our expectations for pricing actions and gross margin performance; statementsregarding benefits that we may realize from our acquisitions and our restructuring activities; statements regarding investments that may be made in thefuture to grow our business, either organically or otherwise, in accordance with our strategic plan, or that may be made for other purposes; andstatements and related estimates concerning the benefits that the execution of our strategic initiatives are expected to have on future financial results.In connection with the acquisition of Ecolab’s Vehicle Care Division (“Vehicle Care”), Zep Inc. has performed due diligence procedures on and reviewedthe financial results of Vehicle Care contained within this presentation and other related oral and written releases of information. The financial results ofVehicle Care discussed herein represent results of Vehicle Care for the twelve month period beginning July 1, 2011 and ended June 30, 2012. VehicleCare has operated as a division of a much larger, publically-held company, and has had no stand-alone interim audit or review requirements, and pre-acquisition due diligence procedures must not be considered a substitute for such. Because the twelve month period reflected in the results presentedherein has been neither audited by nor subject to the review of an independent audit firm, the financial results presented herein are preliminary andsubject to adjustment. Therefore, this financial information should be considered preliminary as actual historical financial results of Vehicle Care coulddiffer materially from these disclosures. Zep Inc. intends to file the financial statements of Vehicle Care required by Regulation S-X and Form 8-K asthey become available for filing with the Securities and Exchange Commission. These financial statements will not include a trailing twelve month periodended June 30, 2012.Our forward-looking statements are subject to certain risks and uncertainties that could cause actual results, expectations, or outcomes to differmaterially from our historical experience as well as our present expectations or projections. These risks and uncertainties include, but are not limited to:economic conditions in general;customer and supplier relationships and prices;competition;ability to realize anticipated benefits from strategic initiatives and timing of benefits, including those related to acquisition synergies and benefits;market demand; andlitigation and other contingent liabilities, such as environmental matters.A variety of other risks and uncertainties could cause our actual results to differ materially from the anticipated results or other expectations expressedin our forward-looking statements. A number of those risks are discussed in Part I, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for thefiscal year ended August 31, 2012. We believe the forward-looking statements are reasonable; however, undue reliance should not be placed on anyforward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, andwe undertake no obligation to update publicly any of them in light of new information or future events. © 2013 Zep Inc. - All rights reserved. 2
  3. 3. Zep Inc. Zep is a leading  Serve key end-markets consumable packaged where our focus and scale chemicals company provide a competitive producing and marketing of a wide advantage % FY2012 Sales variety of transportation – Transportation 37% & maintenance 61% – Industrial / MRO 24% chemicals that help our customers: – Other 39% – Protect their assets – Work more efficiently – Provide a superior product or experience to their customers © 2013 Zep Inc. - All rights reserved. 3
  4. 4. Trusted Family of Brands for Over 75 Years We market over 4,000 formulas under a trusted family of brands to over 200,000 customers • Largest selection of • Broad product line of • Narrow line of high-efficacy formulas specific use chemicals formulations • Application expertise • Distributor focused • Specific use • Small to bulk • Distributor packaging • Jan/San & Plumbing packaging • Retail packaging Broad Range of High Efficacy Formulas with Multiple Value Propositions © 2013 Zep Inc. - All rights reserved. 4
  5. 5. Consumable Packaged Chemicals Market $75 Billion Global Opportunity Consistent Cash Flow $19 Billion U.S. Opportunity Stability 1,000s of Small Suppliers Growth Top 4 I&I Players < 25% Market Fragmentation Share Creating Opportunities Through Consolidation* Estimated 5 © 2013 Zep Inc. - All rights reserved.
  6. 6. Transformation Largely Complete Estimated U.S. Cleaning Zep Sales by Channel Zep Sales by Channel Maintenance Chemicals August 2007 November 2012 Market ($19 Billion) Distributors 1% Retailers Direct 13% Distributors 21% 21% Distributors 44% Retailers Direct 18% 61% Retailers Direct 35% 86% Acquisitions and Organic Growth Have Driven Channel Shift Market Data Source: Information compiled by Zep Inc. based on research provided by Kline & Company and the Automotive Aftermarket Industry Association. Direct sales through Sales & Service organization. © 2013 Zep Inc. - All rights reserved. 6
  7. 7. Strategy: Compete Where We Can Win Clear understanding of competitive positioning and capabilities is value creating… Focus on Key End Markets • Transportation, Food & Government • Multi-channel distribution capability • Focus on expanding distribution and Expand Market Access retail • Acquisitions accelerate market access • Raw materials and supply chain Drive Economies of Scale opportunities • Create platforms that will drive Generate Organic Growth organic growth and market share © 2013 Zep Inc. - All rights reserved. 7
  8. 8. New Platform Created: Zep Vehicle Care Zep Vehicle Care  Highly complementary organizations  Expanded access to market across North America  A leader in $1 Billion market  Premier customer list  Strong leadership team joining Zep  Nationwide sales and service Strong Leadership  Strong leadership team with considerable experience to join from both organizations  Leaders from both organizations will drive integration  Moving existing Zep vehicle care portfolio into new platform Leading Brands Extensive R&D and Technology  Largest dedicated R&D staff in the industry  Strong capabilities in formula development, dispensing, soil and water testing  Differentiated innovation © 2013 Zep Inc. - All rights reserved. 8
  9. 9. Long-Term Financial Objectives $1 billion in revenue within 5 years Target of 50 bp annualized EBITDA margin improvement 11%-13% annualized EPS improvement Return on Invested Capital (ROIC) target of 15%+ © 2013 Zep Inc. - All rights reserved. 9
  10. 10. Growing Sales, Profitably($ Millions) EBITDA Growth 31% CAGR Strong Growth 9.3% CAGR EBITDA Margin 117 bps per year $60 10%$700 $646.0 $653.5 8.2%$600 $568.5 $50 7.3% $501.0 8%$500 $40 6.0% 6%$400 4.7% $30$300 $53.7 $47.5 4% $20$200 $33.9 $23.8 2%$100 $10 $0 $0 0% FY09 FY10 FY11 FY12 FY09 FY10 FY11 FY12 © 2013 Zep Inc. - All rights reserved. 10
  11. 11. Growing EPS and ROIC EPS Growth 33% CAGR ROIC Improved 80 bps $0.98 9.8% $0.78 9.2% 8.8% 8.0% $0.61 $0.42 FY09 FY10 FY11 FY12 FY09 FY10 FY11 FY12Fully diluted Earnings per Share, as reported Return on Invested Capital (ROIC) is calculated as after tax operating profit divided by Invested Capital. © 2013 Zep Inc. - All rights reserved. 11
  12. 12. Strong/Consistent Cash Flow Generation Strong FCF Important Characteristic of Zep Model Use-of-Cash Strategies $ Millions $35  Fund normal operations $30 $29.0  Fund $10-$12 Capital Spending $24.2 $25 $22.9 SAP  Fund dividend $20 Capital spend and  Pay down long-term debt increased $15 working capital $10 $4.3 Noteworthy FCF $5 Generation While $0 FY09 FY10 FY11 FY12 Investing in Strategic Growth InitiativesCapex $7.5 $9.8 $8.9 $18.4  $80 million in cumulative free cash flow during the past four years 1) 2011 Free Cash Flow includes $0.9 million proceeds from the sale of property, plant, and equipment 2) Free Cash Flow is defined as Net Cash Provided by Operating Activities less Capital Expenditures plus Proceeds from Sale of Property Plant and Equipment. 12 © 2013 Zep Inc. - All rights reserved.
  13. 13. Debt Position $248.7 Net Debt $135.7 $115.6 Position ($mm)  Net debt increased Q4 FY12 Actual Q1 FY13 Actual Q1 FY12 Actual $113 million as a Covenants result of acquisition 3.77x 4.25x of vehicle care Debt to 2.58x business EBITDA  Expect fiscal 2013 Q4 FY12 Actual Q1 FY13 Pro Covenant Forma interest expense = 1.87x 1.77x $9 - $10 million Fixed 1.15x Charge Coverage Ratio Q4 FY12 Q1 FY13 Pro Covenant Actual Forma © 2013 Zep Inc. - All rights reserved. 13
  14. 14. Priorities for 2013 Integrate Ecolab Vehicle Wash Business and Create Zep Vehicle Care Maximize the benefit from ERP system launched in December 2012 Drive cash flow from recent investments to pay down debt Cash Flow & Debt Reduction = Improved ROIC © 2013 Zep Inc. - All rights reserved. 14
  15. 15. Zep is a Solid Investment Differentiated strategy caters to “Right to Win” in our markets – Focus on key end markets – Developed capabilities to serve customers in all channels – Driving economies of scale in purchasing and supply chain – Creating platforms for organic growth Produces consistent cash flows that outgrow the market Considerable Upside Growth Opportunities © 2013 Zep Inc. - All rights reserved. 15
  16. 16. Appendices
  17. 17. Zep’s Product Offering Transportation Maintenance Jan San Exterior/interior Lubricants, Penetrants, Air care, Cleaners, Hand Cleaning, Vehicle Greases, Parts Washers, Cleaners, Degreasers, Maintenance, Food Processing Floor Care, Carpet Care, Protectants & Polishes, Cleaners/Sanitizers, Disinfectants, Parts Cleaners, Metal Working, Sanitizers, Laundry, Degreasers, Lubricants, Adhesives, Drain Care, Dispensing Systems, Automatic Fleet Wash Pesticides/Herbicides, and more… Equipment and Pressure Dispensing Systems, Washers, and more… and more… Competitive Advantage to Serve the Market © 2013 Zep Inc. - All rights reserved. 17
  18. 18. Acquisition of Ecolab Vehicle CareDivision – Financial Impact Zep Inc. Adjusted % Chg Fiscal 2012 Ecolab Zep Inc. Proforma $ Millions Reported Vehicle Care Fiscal 2012 vs. 8/31/12 TTM 6/30/12 Proforma Reported Net Sales $653.5 $66.2 $719.8 10.1% EBITDA $53.7 $13.0 $66.6 24% % Margin 8.2% 19.6% 9.3% 110 bps Modest EPS Accretion in FY13… and $0.08 to $0.10 per share in FY14 After Integration is Completed © 2013 Zep Inc. - All rights reserved. 18
  19. 19. Acquisition of Ecolab Vehicle CareDivision – Financial ImpactPurchase Multiple Improvement after Realized Synergies 9.2x  12-month integration plan  Expected synergies $1.5 to $2 million 8.0x  Attractive cash flows At Closing After Integration is Complete Fits with Long-Term Financial Objectives and Strategy to Compete Where We Can Win © 2013 Zep Inc. - All rights reserved. 19
  20. 20. Acquisition Overview StrategyStrengthen our Leadership Position Expanding Access to Market through New Platforms and Tuck-ins Targeting Businesses with Revenues in the $50M - $150M RangeAcquisition Overview Brands Strategic RationaleAmrep (2010) • Increases penetration of distribution channelSpecialty chemical formulator, packager of • Expands product portfolioprofessional grade chemical products for • Strengthens presence in the automotiveAutomotive, Fleet Maintenance, Industrial/MRO marketSupply, Institutional Supply, Motorcycle markets. • Adds additional manufacturing capabilities Private Brands • Delivers significant private label capabilities &• Purchase price - $64 million relationships• ~$105M in TTM revenue w/ attractive margins• $6M in annualized synergies in FY’11Waterbury (2010) • Expands access to distributors and specialtyA leading provider of air care delivery systems retailersand products for facility maintenance. • Leverages the strength of the Amrep operating platform• Purchase price - $66M • Creates leadership position in the institutional• ~$40M in TTM revenue; attractive margins and industrial air care market• High-end of $2M to $3M est. in annualized synergies in FY’12 © 2013 Zep Inc. - All rights reserved. 20
  21. 21. Acquisition OverviewAcquisition Overview Brands Strategic RationaleNiagara National (2010) • Anticipate leveraging the Zep North AmericanA leader in automatic truck wash systems, Sales and Service sales force to drive organicpressure washers and water recovery systems. growth. • Increase product and service offerings in• Approximately $7 million in TTM revenue Vehicle Wash - a strategic Zep vertical.Washtronics (2011) • Part of Zep Inc.s Niagara National division.A pioneer of automatic truck and fleet wash • Extends geographic customer access west.systems and products. • Addition of brand expands Zep Inc.s overall transportation product portfolio.• Approximately $1 million in TTM revenueHale Group Limited (2012) • Part of Zep Europe, highly complementary toU.K.-based manufacturers and suppliers of existing European operations.liquid, powder and aerosol chemicals and • Expected to expand Zep’s reach to a broadsolutions direct to industry and commercial range of industrial, commercial and publiclaundries. sector customers both in the United Kingdom and into export markets.• ~USD$8 million in revenue for CY’11Mykal Industries Limited (2012) • Part of Zep Europe, highly complementary toU.K.-based manufacturer of cleaning and existing European operations.degreasing products for European retail, “DIY” • Expected to further expand market access inand professional distribution markets. Europe with an extended portfolio of well- recognized branded and private label products• ~USD$7 million in revenue for CY’11 as well as new retail and distribution channels. Strengthening our Leadership Position 21 © 2013 Zep Inc. - All rights reserved.
  22. 22. First Quarter 2013 Highlights Solid financial results Completed strategic acquisition and formed Zep Vehicle Care – creating a leading vehicle care business with the finest house of brands in the industry. Successful launch of our new ERP system. © 2013 Zep Inc. - All rights reserved. 22
  23. 23. 1Q ‘13 Sales Drivers $160.0 $3.5 $158.0 $158.0  Growth from $156.0 $2.1 ($0.8 ) previous (millions) ($0.3 ) acquisitions and $153.5 pricing was $154.0 partially offset by volume and $152.0 foreign exchange impacts. $150.0 2.9% Revenue Growth © 2013 Zep Inc. - All rights reserved. 23
  24. 24. 1Q’13 North American Sales Trends –Channel and End-market Performance End Market S&S Distribution Retail Total Jan San / Institutional Automotive Aftermarket Industrial / MRO Vehicle Wash Food Processing Government and Schools Total Note: End markets in order of sales volume. Focusing on Stability in S&S and Growth in Dist. & Retail © 2013 Zep Inc. - All rights reserved. 24
  25. 25. 1Q ‘13 Gross Profit Margin Year-over-Year Quarter-to-Quarter (10bp) +190bp 50.0% 48.0% 0.6% 47.4% 49.0% 47.0% 0.8% 1.0% ( 1.1%) 0.5% 48.0% 46.0% 47.5% 47.4% 45.5% 47.0% 45.0% 46.0% 44.0% 1Q 12 Material Mfg. 1Q 13 4Q 12 Business Material Mfg. 1Q 13 Margin Mix Margin © 2013 Zep Inc. - All rights reserved. 25
  26. 26. Items Affecting Gross Margin in 2013 Q2 Historically lowest gross margin – Sequentially, Q2 is 200 basis points lower than Q1 Gross margin continues to fluctuate based on: Items Affecting Gross Margin Expectation for Q2 2013 Raw material input costs No impact Labor & overhead absorption Reduced inventory post SAP may result in lower labor and overhead absorption Business mix Impacted by product launch in retail With Vehicle Care, Now Expect F ’13 Gross Margin to Improve to 46% - 48% © 2013 Zep Inc. - All rights reserved. 26
  27. 27. Gross Margin:Selected Feed Stocks Impacting Raw Material Purchases Magnitude of Commodity Costs (Select Feed Stocks according to Total Spend*)  Moderating volatility  Purchases below year-ago levels  Will continue to monitor petrochemicals  90-120 days for raw material purchases to flow to income statement  Will continue to balance price and cost to effectively manage business Ethylene HDPE Propylene Crude Oil Unleaded gasoline Moderating Volatility in Commodity Costs * Represents approximately 45% of total spend © 2013 Zep Inc. - All rights reserved. 27
  28. 28. Financial Impacts of SAP & Zep Vehicle Care We expect two investments to reduce operating earnings by approximately $3.0 - $3.5 million in the second quarter, neither of which are likely to affect subsequent quarters. – SAP implementation – Creation and integration of Zep Vehicle Care Pro-forma financial results & independent valuation expected in mid-February will result in additional amortization expense related to our acquisition of the Vehicle Care Division of Ecolab © 2013 Zep Inc. - All rights reserved. 28
  29. 29. Fiscal 2013 Outlook Given uncertain economic conditions, believe organic sales growth will be modest – Expect greater growth from Distribution and Retail channels, offset by North American Sales and Service Expect gross margins to remain similar to fiscal 2012 in the 47% range plus or minus 100 basis points Expect capital spending in the $10 to $12 million range, once this phase of SAP is completed Expect tax rate to range between 36.5% and 37.5% © 2013 Zep Inc. - All rights reserved. 29
  30. 30. Board of Directors and ManagementZep Inc. Board of DirectorsName TitleRonald D. Brown Managing Director, Taft Law Consulting, LLC; Former President and CEO of Milacron, Inc.; Director: A.O. Smith CompanyTimothy M. Manganello Executive Chairman & Former CEO of BorgWarner Inc.; Director: Bemis Company, Inc.; Board Chairman of the Federal Reserve Bank of Chicago – Detroit BranchO.B. Grayson Hall, Jr. President & CEO and Director, Regions Financial CorporationSidney J. Nurkin Of Counsel: Alston & Bird, LLP.Joseph Squicciarino Formerly CFO: King Pharmaceuticals, Inc. ; CFO-North America: Revlon, Inc.; CFO-International: Revlon International, Inc. Group & Controller, Pharmaceuticals-Europe, Middle East, Africa: Johnson & JohnsonTimothy T. Tevens President, CEO and Director: Columbus McKinnon Corp. Director: ISMACarol A. Williams Executive Vice President of Manufacturing and Engineering of The Dow Chemical Company.Zep Inc. Named Executive OfficersName Title Zep Inc. Hire Yr. Prior ExperienceJohn K. Morgan Chairman, President & CEO November 2007 30+ yrs; Acuity Lighting Bus; Team grew revenues from $600mm to $2bnMark R. Bachmann EVP & Chief Financial Officer November 2007 12 yrs; Acuity Brands; President: Enforcer Products; 12 yrs Quaker OatsRobert P. Collins VP & Chief Administrative Officer November 2007 VP & Chief HR Officer: Serologicals Corp.Jeffrey L. Fleck VP & Chief Supply Chain Officer September 2010 Senior Director; International Supply Chain; The Clorox Company; 11 yrs with the companyPhilip A. Theodore VP, General Counsel & Secretary July 2010 30+yrs in corporate law practice ; 20 yrs at King & Spalding; 10 yrs as general counsel at various public companies © 2013 Zep Inc. - All rights reserved. 30
  31. 31. EBITDA Reconciliation Annual (Years Ended August 31) 2008 2009 2010 2011 2012 Net income $16.3 $9.3 $13.5 $17.4 $21.5 Interest expense 2.8 1.7 2.0 6.6 5.5 Provisions for income taxes 9.7 5.9 8.2 9.3 11.9 Depreciation & amortization 6.9 7.0 10.3 14.2 14.3 EBITDA (unaudited) $35.7 $23.8 $33.9 $47.5 $53.7 Quarterly (unaudited) 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Net income $4.9 $2.2 $6.2 $4.1 $3.6 $2.4 $8.6 $7.3 $3.5 Interest expense 1.9 1.6 1.6 1.5 1.4 1.4 1.4 1.3 1.2 Provisions for income taxes 3.6 3.5 3.7 3.5 3.5 3.5 3.6 3.7 2.0 Depreciation & amortization 2.9 1.0 3.7 1.7 2.0 1.5 5.1 3.3 3.6 EBITDA $13.3 $8.3 $15.2 $10.8 $10.5 $8.8 $18.7 $15.6 $10.4 31 © 2013 Zep Inc. - All rights reserved.
  32. 32. Zep Inc. Non-GAAP Disclosure• This presentation includes the following supplemental non-GAAP financial measures: EBITDA. GAAP means generally accepted accounting principles in the United States. This presentation contains reconciliations of this non-GAAP financial measures to the most directly comparable GAAP financial measure. EBITDA is equal to net income plus (a) interest expense, net; (b) provision for income taxes; and (c) depreciation and amortization.• We believe non-GAAP financial measures to be an important indicator of our operating strength and the performance of our business because they provide a link between profitability and operating cash flow, and enhance period-to-period comparability of our operations and financial performance. We believe these measures exclude or adjust certain items affecting reported operating results that were unusual and/or not comparable to the Company’s historic core operating results, and additionally adjust reported operating results for certain non-cash items. We also believe that analysts and investors use EBITDA as supplemental measure to evaluate the overall operating performance of companies in our industry.• Our management uses EBITDA and other non-GAAP financial information: – as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis as they remove the impact of certain non-cash items as well as items not directly resulting from our core operations; – to evaluate the effectiveness of our operational strategies; and – to evaluate our capacity to fund capital expenditures and expand our business. EBITDA and the ratios derived from these measures as calculated by us are not necessarily comparable to similarly titled measures used by other companies. In addition, these measures: (a) do not represent net income or cash flows from operating activities as defined by GAAP; (b) are not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered in isolation of, as alternatives to, or more meaningful measures than operating profit, net income, cash provided by operating activities, or our other financial information as determined under GAAP. © 2013 Zep Inc. - All rights reserved. 32

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