Company overview for website may 2014

Zep Inc.
Company Overview
May 2014

Safe Harbor
This 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 presentation
and our commentary include but are not limited to: statements regarding the economic environment and the impact this environment has had or could
have on our current and/or future financial results; statements regarding our expectations for pricing actions and gross margin performance; statements
regarding benefits that we may realize from our acquisitions and our restructuring activities; statements regarding investments that may be made in the
future to grow our business, either organically or otherwise, in accordance with our strategic plan, or that may be made for other purposes; and
statements and related estimates concerning the benefits that the execution of our strategic initiatives are expected to have on future financial results.
Specifically, the following statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995:
Statements regarding our optimism about future results and our ability to implement measures that will result in profitable growth; statements regarding
our ability to realize $9 million of cost savings in fiscal 2014 and reinvest a portion of those savings in strategic business initiatives; statements regarding
our top-line results during fiscal 2014; statements regarding the impact of our restructuring and simplification activities on our free cash flow and
outstanding indebtedness; statements regarding the expected magnitude of the reductions to our revenue from such activities and the timing of the
reductions; statements regarding our second quarter fiscal 2014 gross margin, cash usage and earnings per share and statements regarding utilizing
cash flow in our fiscal second half to make strategic investments, fund our dividend and reduce our debt balance.
Our forward-looking statements are subject to certain risks and uncertainties that could cause actual results, expectations, or outcomes to differ
materially from our historical experience as well as management's present expectations or projections. These risks and uncertainties include, but are not
limited to:
 economic conditions in general;
 the cost or availability of raw materials;
 competition;
 our ability to realize anticipated benefits from strategic planning and restructuring initiatives and the timing of the benefits of such actions;
 market demand
 our ability to maintain our customer relationships; and
 litigation 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 expressed
in 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 the
fiscal year ended August 31, 2013. We believe the forward-looking statements are reasonable; however, undue reliance should not be placed on any
forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and
we undertake no obligation to update publicly any of them in light of new information or future events.
2© 2014 Zep Inc. - All rights reserved.

• Zep Inc. sells a wide-variety of highly-effective,
consumable packaged chemicals that help
professionals maintain, clean & protect their assets,
facilities and environment.
• We market our products primarily to customers in the
Transportation, Industrial/MRO and
Jan/San & Institutional markets.
• Our multi-channel sales capability is valued by our
customers and enhanced by an integrated supply chain
and shared services structure, providing an additional
competitive advantage.
Zep Inc. Value Proposition

Zep Inc. Market Opportunity & Alignment
Total Market
$75B
$18B
Target Strategic Markets
Transportation $4.8B
Industrial / MRO $2.7B
& Other
Jan / San $10.6B
& Institutional
60%Revenue

Industrial/MRO
& Other
Jan/San &
Institutional
Zep Inc.’s Markets
© 2014 Zep Inc. - All rights reserved. 5
Exterior/interior Cleaning,
Vehicle Maintenance,
Protectants & Polishes,
Parts Cleaners, Degreasers,
Lubricants, Automatic
Fleet Wash Equipment and
Pressure Washers,
and more…
Lubricants, Penetrants,
Greases, Parts Washers,
Food Processing
Cleaners/Sanitizers,
Metal Working,
Adhesives, Drain Care,
Pesticides/Herbicides,
Dispensing Systems,
and more…
Air care, Cleaners, Hand
Cleaners, Degreasers,
Floor Care, Carpet Care,
Disinfectants, Sanitizers,
Laundry, Dispensing
Systems,
and more…
Transportation
• GDP
• Employment
• Trends in
Acceptable
Practices
• GDP
• New Vehicle Sales
• Miles Driven
• Average Vehicle Age
• Weather
• GDP
• Industrial
Production
• Manufacturing
Employment
Demand
Drivers
Market
Examples
% Sales 38% 22% 40%
Note: % of Fiscal 2013 Net Sales

U.S. New
Vehicle
Sales
Vehicle
Age
10
12
14
16
18
8
9
10
11
12
U.S.NewVehicleSales(MM)
VehicleAge(years)Favorable Industry Trends
Transportation
U.S. Vehicle Sales & Vehicle Age
Industrial/MRO
GDP & Industrial Production
U.S. GDP
Seasonally
Adj.
Industrial
Production
86
89
92
95
98
101
$13.5
$14.0
$14.5
$15.0
$15.5
$16.0
SeasonallyAdj.U.S.
IndustrialProduction(Index)
U.S.GDP(Trillions)

Zep Inc. Life Cycle
Complexity Reduction Will Drive Cash Flow
2007-2008 2009-2010 2010-2013 2014-2015 2015-2016
• Amrep
• Waterbury
• Niagara
• Washtronics
• Hale Group
• Mykal
• Ecolab Vehicle Care
• Focus on strategic end-markets
• Product line & customer
rationalization
• Supply chain
• Facilities
• Logistics
• Align sales & support functions
Spin
Improve
Business
Acquire
Platforms
Complexity
Reduction
Drive
Organic
Growth

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
high-efficacy formulas
• Application expertise
• Small to bulk
packaging
• Narrow line of
formulations
• Specific use
• Jan/San & Plumbing
• Retail packaging
• Broad product line of
specific use chemicals
• Distributor focused
• Distributor packaging
Broad Range of High Efficacy Formulas

Revenue Drivers for Fiscal 2014
• Plan to increase investment in revenue generation.
• Direct business has stabilized post-SAP but at new, lower level.
Comparisons improve beginning in fiscal second quarter of 2014.
• Product line and customer rationalization strategies could put pressure
on the retention of certain, larger customers.
• Robust sales pipeline was not included for purposes of sizing the cost-
reduction activities but is expected to contribute to fiscal 2014 results.

Long-Term Financial Objectives
1. $1 billion in revenue within 5 years
2. Target of 50 bps annualized EBITDA margin improvement
3. 11-13% annualized EPS improvement
4. Return on Invested Capital (ROIC) in excess of cost of
capital

11
Growing Sales, Profitably
© 2014 Zep Inc. - All rights reserved.
$501.0
$568.5
$646.0 $653.5
$689.6
$0
$100
$200
$300
$400
$500
$600
$700
$800
FY09 FY10 FY11 FY12 FY13
($ Millions)
Strong Revenue Growth
8.3% CAGR
EBITDA Growth 22% CAGR
EBITDA Margin 70 bps per year
$23.8
$33.9
$47.5
$53.7 $52.0
$0
$10
$20
$30
$40
$50
$60
EBITDA Margin:4.7% 6.0% 7.3% 8.2% 7.5%
Effect of
acquisitions*
Effect of
acquisitions*
($ Millions)
We estimate acquisitions since 2009 accounted for approximately
1/3 revenues and 1/2 of EBITDA during fiscal 2013
* Revenue and EBITDA excluding the effect of acquisitions based on company estimates.

Growing EPS and ROIC
$0.52
$0.95 $0.97 $0.98
$0.83
Fully diluted Earnings per Share, as reported
8.0%
9.2%
9.8%
8.8%
5.9%
Return on Invested Capital (ROIC) is calculated as after tax
operating profit divided by Invested Capital.
Adj. EPS Growth 12% CAGR
ROIC Impacted by
Acquisitions

Strong/Consistent Cash Flow Generation
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.
13
$ Millions
• $118 million in cumulative free cash
flow during the past five years
Strong FCF Important
Characteristic of Zep Model
Capex $7.5 $9.8 $8.9
• Fund normal operations
• Fund dividend
• Pay down long-term debt
Use-of-Cash Strategies
Noteworthy FCF
Generation While
Investing in Strategic
Growth Initiatives
$22.9 $24.2
$29.0
$4.3
$38.0
$0
$5
$10
$15
$20
$25
$30
$35
$40
$18.4
SAP
Capital
spend and
increased
working
capital
$12.1

Debt Position
14© 2014 Zep Inc. - All rights reserved.* As defined by Zep Inc.’s Credit Facility
 Q2 typically utilizes
cash
 Q2 net debt only
increased $8.7
million due to strong
cash management
3.89x
3.30x
3.60x
4.00x
2Q FY13 1Q FY14 2Q FY14 Covenant
$260.3
$204.7
$213.4
2Q FY13 1Q FY14 2Q FY14
1.67x
2.08x
1.72x
1.20x
2Q FY13 1Q FY14 2Q FY14 Covenant
Fixed
Charge
Coverage
Ratio*
Debt to
EBITDA*
Net Debt
Position
($mm)
Covenants
$47 Million Reduction in Net Debt in Last 12 Months

Fiscal 2014 Outlook
• Continued negative pressure on top-line results
• Gross margin between 46% - 48%
• Capital spending between $12 to $14 million
• Net interest expense between $8 - $9 million
• Tax rate between 35.5% and 36.5%
• Approximately half-turn improvement in Debt to EBITDA
ratio
Note: Represents year-over-year comparisons.
Confident in Ability to Drive Cost Reduction & Long-Term Strategy

Near-Term Expectations
• Optimize our earnings and cash flow
• Increasing estimated revenue range
Prior New
Q3 2014 -3% to Flat Return to Growth
Q4 2014 Return to Growth Continued Growth
• Gross profit margins of 46-48% for fiscal 2014
• S, D & A expense:
• Variable portion ranges 16-18% of sales
• Fiscal 2013 included $1.4 million favorable adjustment that will
not repeat
• Reinvesting a portion of the $9 million restructuring
savings to support growth plans

Zep is a Solid Investment
• Focused on growing strategic end-markets with
favorable demographics
• Developing a robust sales pipeline for 2014 and
beyond
• Revenue growth produces 25-30% operating
leverage
• Business produces consistent cash flow (4-6% Sales)
• Restructuring activities delivering results with $9
million of savings expected in fiscal 2014
Considerable Upside Margin Opportunities

$11.8 $12.4
$11.2
$8.0
$0.6 $1.3
$0.7
$2.3 $0.9
$0.6
$3.2
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
($millions)
19
2nd Quarter ‘14 EBITDA & Adjusted EBITDA
( )
( )
( )( )
( )
Adjusted EBITDA was $11.2 Million

20
2nd Quarter ‘14 EPS & Adjusted EPS
$0.12
$0.14
$0.09
$(0.03)
$0.02 $0.04
$0.02
$0.06 $0.03
$0.02
$0.12
-$0.05
$0.00
$0.05
$0.10
$0.15
$0.20
( )
( ) ( )
( ) ( )
Adjusted EPS was $0.09

$0.09
$0.18$0.09
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
Adjusted Cash EPS
Adjusted Cash EPS = Adjusted EPS + Amortization Expense Per Share

Average Daily Sales Illustration Pre/Post SAP
AverageDailySales($)
Time
Pre-SAP Post SAP
Sales were stabilizing
within a controlled
band prior to SAP.
Sales re-stabilized post
SAP, but within a new,
lower control band.
SAP Go-Live

Annual Adj. EBITDA & Adj. EPS Reconciliation
23
Annual (Years Ended August 31) 2009 2010 2011 2012 2013
Net income 9.3$ 13.5$ 17.4$ 21.9$ 15.2$
Interest expense 1.7 2.0 6.6 5.5 9.0
Provision for income taxes 5.9 8.2 9.3 11.9 7.9
Depreciation & amortization 7.0 10.3 14.2 14.3 19.9
EBITDA (unaudited) 23.8$ 33.9$ 47.5$ 53.7$ 52.0$

Quarterly Adj. EBITDA & Adj. EPS Reconciliation
24
Quarterly (unaudited)
(millions) Q1 Q2 Q1 Q2
Net income 3.5$ 2.8$ 3.1$ (0.7)$
Interest expense 1.2 2.3 2.3 3.4
Provision for income taxes 2.0 1.3 1.7 (0.3)
Depreciation & amortization 3.6 5.5 5.5 5.5
EBITDA (unaudited) 10.4$ 11.8$ 12.7$ 8.0$
Restructuring charges -$ -$ -$ -$
Acquisition and integrations costs 1.2$ 1.6$ 0.6$ 0.4$
Legal 0.4$ 0.2$ 0.8$ 2.8$
Other -$ (1.3)$ * -$ -$
Adjusted EBITDA (unaudited) 12.0$ 12.4$ 14.1$ 11.2$
Quarterly (unaudited)
Q1 Q2 Q1 Q2
Diluted earnings (loss) per share 0.16$ 0.12$ 0.14$ (0.03)$
Restructuring, net of tax -$ -$ -$ -$
Acquisition and integration costs, net of tax 0.03$ 0.05$ 0.01$ 0.01$
Legal, net of tax 0.01$ 0.01$ 0.02$ 0.11$
Other, net of tax -$ (0.04)$ -$ -$
Adjusted Diluted Earnings Per Share 0.20$ 0.14$ 0.17$ 0.09$
* Lancaster building writedown.
2013 2014
2013 2014

Zep Inc. Non-GAAP Disclosure
• This presentation contains a supplemental table of adjusted operating results, which includes non-GAAP financial information such as EBITDA, adjusted
EBITDA, adjusted earnings per share, free cash flow and free cash flow per share. This non-GAAP financial information is provided to enhance the user's
overall understanding of our financial performance. Specifically, management believes that EBITDA, adjusted EBITDA, adjusted earnings per share and free
cash flow may provide additional information with respect to our performance or ability to meet our future debt service obligations, capital expenditures and
working capital requirements. Free cash flow per share is provided to facilitate the comparison of our financial results to other companies on a per share basis.
This non-GAAP financial information should be considered in addition to, and not as a substitute for, or superior to, results prepared in accordance with GAAP.
Moreover, this non-GAAP information may not be comparable to EBITDA, adjusted EBITDA, adjusted earnings per share, free cash flow or free cash flow per
share reported by other companies because the items that affect net earnings that we exclude when calculating EBITDA, adjusted EBITDA and adjusted
earnings per share or because items that we add to reported net cash provided by operating activities in computing free cash flow and free cash flow per
share may differ from the items taken into consideration by other companies. The non-GAAP financial information included in this earnings release has been
reconciled to the nearest GAAP measure in the tables at the end of this presentation
• 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.

Company overview for website may 2014

More Related Content

What's hot

Viewers also liked

Similar to Company overview for website may 2014

Company overview for website may 2014