Hicks Acquisition CO II, Inc. - FORM 8-K - EX-99.2 - PRESENTATION FOR INVESTOR CONFERENCE

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8-K - FORM 8-K - Hicks Acquisition CO II, Inc.	d365760d8k.htm
EX-99.1 - ROAD SHOW MATERIALS - Hicks Acquisition CO II, Inc.	d365760dex991.htm

Innovative Coating & Microencapsulation Product Solutions

Business Combination with Hicks Acquisition Company II, Inc.

June 2012

Exhibit 99.2

Disclaimer

Securities Law Information

In connection with the proposed transactions with Appleton Papers Inc. (together with its successor after converting into a limited liability company, “Appvion”) and its current owner, Paperweight Development

Corp. (“PDC”), Hicks Acquisition Company II, Inc. (“HACII”) intends to file with the SEC a proxy statement and mail a definitive proxy statement and other relevant documents to HACII stockholders. HACII

stockholders and other interested persons are advised to read, when available, HACII’s preliminary proxy statement, and any amendments thereto, and the definitive proxy statement in connection with HACII’s

solicitation of proxies for the special meeting to be held to approve the transactions because these proxy statements will contain important information about Appvion, HACII, and the proposed transactions.

The definitive proxy statement will be mailed to HACII stockholders as of a record date to be established for voting on the proposed transactions. Stockholders will also be able to obtain a copy of the

preliminary and definitive proxy statements once they are available, without charge, at the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov or by directing a request to Hicks

Acquisition Company II, Inc., 100 Crescent Court, Suite 1200, Dallas, Texas 75201, telephone 214-615-2300.

HACII and its directors and officers may be deemed participants in the solicitation of proxies to HACII’s stockholders. A list of the names of those directors and officers and a description of their interests in

HACII is contained in HACII’s annual report on Form 10-K for the fiscal year ended December 31, 2011, which is filed with the SEC, and will also be contained in HACII’s proxy statement when it becomes

available. HACII’s stockholders may obtain additional information about the interests of the directors and officers of HACII in the transactions in reading HACII’s proxy statement and other materials to be filed

with the SEC when such information becomes available.

Safe Harbor Statement

This presentation has been prepared exclusively for the purpose of providing summary information about Appvion and its business to HACII stockholders pending the distribution of the definitive proxy

statement. It does not constitute a solicitation for or an offer by or, on behalf of HACII or Appvion or, of any securities or investment advisory services.

This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “expect,”

“estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “poised”, “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such

forward-looking statements. Forward-looking statements in this presentation include matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of

activity, performance or achievements to differ materially from results expressed or implied by this presentation. Such risk factors include, among others: uncertainties as to the timing of the transaction,

approval of the transaction by HACII’s stockholders; the satisfaction of other closing conditions to the transaction, including the receipt of any required regulatory approvals; costs related to the transaction; costs

and potential liabilities of Appvion relating to environmental regulation and litigation (including Lower Fox River); potential failure of Appvion’s former parent to comply with its indemnification obligations; costs of

compliance with environmental laws; Appvion’s substantial amount of indebtedness; the ability of Appvion to develop and introduce new and enhanced products, improve productivity and reduce operating

costs; Appvion’s reliance on a relatively small number of customers and third parties suppliers; the cessation of papermaking and transition to base stock supplied under the long-term supply agreement with

Domtar; the global credit market crisis and economic weakness; competitors in its various markets; volatility of raw materials costs; Appvion’s underfunded pension plans; future legislation or regulations

intended to reform pension and other employee benefit plans; and Appvion’s current owner PDC’s legal obligations to repurchase common stock from employees and former employees, which may lead to a

default under the Appvion’s agreements governing its indebtedness or constrain Appvion’s ability to reinvest and make new investments. Actual results may differ materially from those contained in the forward-

looking statements in this presentation. Appvion and HACII undertake no obligation and do not intend to update these forward-looking statements to reflect events or circumstances occurring after the date of

this presentation. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. All forward-looking statements are qualified in their

entirety by this cautionary statement.

Notes Regarding Financial Information of Appvion

The financial information and data contained in this presentation is derived from Appvion’s unaudited financial statements and may not conform to Regulation S-X. Accordingly, such information and data may

be adjusted and presented differently in the proxy statement materials to be mailed to HACII stockholders.

Non-GAAP Information

Appvion is providing Adjusted EBITDA information, which is defined as net income of Appvion, including net income attributable to any non-controlling interest, determined in accordance with all applicable and

effective U.S. generally accepted accounting principles (“GAAP”) pronouncements up to December 31, 2011, before interest income or expense, income taxes and any gains or losses resulting from the change

in estimate relating to the Tax Receivable Agreement, depreciation, amortization, losses or gains resulting from adjustments to the fair value of the contingent consideration, stock-based compensation expense

extraordinary or non-recurring expenses and all other extraordinary non-cash items for the applicable period as a complement to GAAP results. Adjusted EBITDA measures are commonly used by

management and investors as a measure of leverage capacity, debt service ability and liquidity. Adjusted EBITDA is not considered a measure of financial performance under GAAP, and the items excluded

from Adjusted EBITDA are significant components in understanding and assessing our financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or superior to, such

GAAP measures as net income, cash flows provided by or used in operating, investing, or financing activities or other financial statement data presented in our consolidated financial statements as an indicator

of financial performance or liquidity. Reconciliations of non-GAAP financial measures are provided in the accompanying tables. Since Adjusted EBITDA is not a measure determined in accordance with GAAP

and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

Why Appvion?

•

Company focused on specialty coating formulations, microencapsulation and related know-how

•

#1 market position in all markets with >50% share

•

High growth areas including direct thermal coated products and Encapsys segment

Appvion

Leadership

•

Asset-light model freeing up capital for growth investments

•

Low execution risk on business plan (Domtar strategic alliance, non-core asset divestitures

complete)

•

HACII merger accelerates balance sheet transformation / deleveraging

Transformation

Complete

•

Successfully repositioned company for growth

•

Senior management rolling equity into the combined company

Management

Invested in Future

Success

•

Best-in-class margins (+549bps since 2009) and FCF (+$63 million/yr)

•

Conservative 2012PF EBITDA target of $131 million

•

Enhanced FCF available to fund growth, debt reduction, and shareholder value (equity

repurchases/dividends)

Strong Free Cash

Flow

(1)

Profile

(1) Defined as PF Adj. EBITDA less Capital Expenditures

Global Leader in Specialty Coating Formulation and Microencapsulation

•

Appvion was created from over 100 years of Appleton experience, technology and know-how

•

Leading global converter of direct thermal coated paper and specialty carbonless products

–

Market leading innovative products and services

–

#1 North American market position with over 50% share

–

Exclusive distribution with key partners

•

High-growth

Encapsys

business

with

leadership

position

chemical

microencapsulation

technology

–

Highly attractive global P&G partnership

–

Robust growth profile with blue chip partners in established brands

–

Validation

strategic

plan

and

growth

outlook

from

widely

recognized

party

industry

consultant

–

Expanded business to other commercial customers

•

Globally recognized brands with blue-chip customers across diverse and attractive end markets

–

Include

NCR

Paper*,

Appleton

and

Encapsys

•

Low-cost, high velocity, flexible, lean inspired business model

–

Established culture of excellence with demonstrated ability to reduce operating costs and improve quality and service

•

High margins, low capital intensity and working capital needs

•

Reputable

and

trusted

history

operating

public

reporting

company

–

Seasoned public filer and Sarbanes-Oxley (SOX) compliant

–

Independent board; adhere to best practices in corporate governance

* NCR Paper is a registered trademark of NCR Corporation licensed to Appleton Papers Inc.

Appvion: Successfully Repositioned

•

Domtar

strategic

alliance

–

paradigm

shift

(2012)

–

Industry comments: “Elegant”, “innovative”, “creative”

–

Strips out fixed costs and substantially reduces go forward capital expenditures

–

Facilitates a significant reduction of working capital

–

Frees up cash flow and management attention to focus on growth areas

•

Direct

thermal

market

leadership

–

investing

our

future

(2008)

–

State-of-the-art asset base installed and operating

–

Expanding margins and cash flow with mix shift, Domtar alliance and lean sigma operational excellence

–

Demonstrated ability to grow 2-3x market using coating capabilities and geographic growth

•

Encapsys

–

leveraging

core

technology

(2007)

–

50+ years of microencapsulation expertise applied to a broad range of attractive, high-growth, global markets

–

Rich in intellectual property and technical know-how; robust development pipeline

–

Proven lower capital intensity, high cash flow, scalable business model

•

Optimize balance of the portfolio (ongoing)

–

Carbonless is redirecting substantial cash flow into growing, global and profitable segments

–

Divested non-core assets

(1) Defined as Adj. EBITDA less Capital Expenditures.

ASSET-LIGHT SPECIALTY

TRADITIONAL

COATING, FORMULATION

PAPER BUSINESS

& APPLICATION BUSINESS

MODEL

FOCUS ON GROWING,

GLOBAL DIRECT THERMAL

AND

MICROENCAPSULATION

+$107 million revenue growth (4.5% CAGR)

+549 bps EBITDA margin expansion

+20% reduction in CapEx

+$63 million increase in Free Cash Flow

(1)

Appvion: Delivering Results

2009

2012

(1) Defined as Adj. EBITDA less Capital Expenditures.

Note: Segment figures do not include corporate overhead.

(EBITDA in $ Millions)

$141

$131

$73

Appvion’s Business Transformation

15.9%

15.1%

9.6%

% Margin

Appvion: Attractive Long-Term Equity Returns

•

Compelling

free

cash

flow

(1)

across

Appvion

portfolio

–

Well positioned in growing end markets

–

Improving margins through direct thermal mix shift

–

Domtar

strategic

alliance

strengthens

free

cash

flow

(1)

–

Provides opportunity to reinvest, pay down debt and consider a dividend

•

Transaction substantially enhances Appvion’s balance sheet and credit profile

–

Enables accelerated growth

–

Eliminates ESOP repurchase obligations

–

Provides a significant deleveraging event

–

Opportunity to refinance existing indebtedness and further increase free cash flow

•

Potential for additional upside returns

–

Encapsys

technology and operating model scalable across global markets and blue chip companies

–

Scale and market position provide opportunity for international expansion

–

Opportunistically

acquire

and

integrate

additional

technological

capabilities

(1) Defined as PF Adj. EBITDA less Capital Expenditures.

Business Overview

Direct Thermal Products: A Phenomenal Growth Story

•

A global leader with #1 market position in North America

–

Trusted partner to leading global customers

–

Well-invested, state-of-the-art low cost coating

capabilities

–

Robust proprietary technology developed over 50+

years

•

Produced by applying a complex thermal sensitive coating

to paper or film base stocks

–

Developed the technology in late 1960’s

–

Led market with every major enhancement

•

+$2.1bn global market growing at 4-7% annually

–

Demand driven by consumer transactions

–

Not susceptible to typical paper industry cycles

•

Primary applications include:

–

POS products for retail receipts and coupons

–

Mission-critical label, tag and ticket products

–

Transportation and gaming products

•

Key Customers

–

Avery Dennison, RR Donnelley and UPM Raflatac

Demonstrated Revenue Growth

Substantial Adj. EBITDA Improvement

($ Millions)

(Margin %)

July 2008:

Coater startup

$280

$281

$342

$371

$417

$442

$100

$300

$400

$500

2008

2009

2010

2011

2012PF

2013E

$200

$18

$34

$64

$68

12%

16%

20%

$20

$40

$60

$80

2008

2009

2010

2011

2012PF

2013E

Note: 2012PF and 2013E projections based on management guidance. Excludes intercompany eliminations and corporate overhead.

Carbonless Paper: The Market Leader

Leader in a mature, global $2.5bn market

#1 market share in North America and worldwide

Top two industry participants account for over 90% of the

domestic market

Exclusive distribution with largest merchants

Technology innovator with demonstrated ability to manage

market decline

Introduced digital product that can run on offset or digital

press

Selective export opportunities

Carbonless products used in multipart business forms (i.e.,

invoices, packing lists, application forms and receipts)

Most recognized global brand:

Security products incorporate secure technologies

(watermarks,

taggants,

embedded

fibers,

machine-readable)

Significant free cash flow generation

Minimal ongoing capital expenditure requirements

Ability

redeploy

into

growth

segments,

debt

reduction

or dividends

Historical and Projected Revenue

Stable Adj. EBITDA Profile

($ Millions)

(Margin %)

Note: 2012PF and 2013E projections based on management guidance.

Excludes intercompany eliminations and corporate overhead.

Key Event: Transformational Base Stock Supply Agreement

•

15-year strategic alliance with Domtar provides access to high

quality, integrated base stock

–

Announced February 2012

–

Provides ~$30 million in annual EBITDA improvement

–

Eliminates high-cost, out-dated manufacturing facility

–

No net cash costs

~$30 million working capital reduction funds shutdown

costs

•

Continues transformation to a higher-margin, higher value-add,

lower fixed-cost converter

–

Focus management and capital on core competencies

–

Reduces

commodity

exposures

and

“locks-in”

purchasing

of base stock paper

–

Shutter high-cost, non-integrated base stock paper

production assets in West Carrollton

–

Significantly improves cash flow generation profile

•

Contractual;

implementation

underway

–

substantially

complete by Q4 2012

Base Stock Transformation

•

Microencapsulation is the delivery of chemistry in very small capsules to provide for the controlled release

of active ingredients

•

Produced using a chemical wall polymerization process

–

Low capital intensity process

•

Leveraged technical know how from carbonless business to

commercialize technology

–

Original technology introduced in the 1950s

–

Refreshed technology with over 60 granted patents in the

last five years

–

Rapidly expanding capabilities with new capsule wall technologies

•

Technology delivers significant value by improving product

performance at a lower cost

–

Extends existing product useful life by adding new benefits

–

Enabling technology for new products

–

Drives reformulations that lower product costs

–

Many proven applications including fragrances, flavor masking,

nutraceuticals, adhesives, biocides, and herbicides

•

Encapsys®

recognized as industry leader

–

Trusted partner to leading global customer base

–

Well-invested, state-of-the-art, scalable coating capabilities

–

“Big”

company friendly with best-in-class operating controls

and processes

(5-15 microns)

Microencapsulation: Proven technology

Encapsys

Partners

Procter & Gamble

•

Launched

partnership

with

P&G

2007

encapsulating

fragrance

for

laundry

products

•

Encapsys

provided unique solution for P&G product line

•

Encapsys

partnered with P&G and perfected fragrance encapsulation for Liquid Downy

–

Improved efficacy

–

Significant reduction in product cost

•

Relationship began with one product and proliferated across multiple business units and

product lines

•

P&G has adopted Encapsys as a strategic business platform, deploying it across its global

business units

Other Partners

Priority

Markets

Products

Household

•

Laundry care

•

Toilet products

•

Acquisition targets

Food / Pharma

•

Physical encapsulation

•

FDA compliant

•

Phase change material

Industrial

•

Biocides

•

Paints and coatings

Personal Care

•

Antiperspirants

•

Hair care

•

Herbicides

AgChem

•

Insecticides

•

Fungicides

Microencapsulation: Serving a sizeable growing market

•

$4 billion global market growing 10% annually

–

Wide market appeal with applications in food, pharma,

AgChem, industrial, paints & coatings, oil & gas,

personal and household care, and nutraceuticals

•

Strategic review by widely recognized specialty chemical

consulting firm

–

Endorsed

projections

that

Encapsys®

can

grow

multiples of its current size by 2016

–

Addressable market increased from $2 billion to $4

billion

–

Opportunity to grow faster than current model by

acquiring capabilities and products

•

Focused on large joint development pipeline to drive

growth

–

16 development partners and greater than 20 active

projects under development (preponderance with

Fortune 500 companies)

–

Partners include Troy, Entropy and a global Fortune

500 consumer packaged goods companies

Demonstrated Revenue Growth

Robust Adj. EBITDA Growth Profile

($ Millions)

(Margin %)

Note:

2012PF

and

2013E

projections

based

management

guidance.

Excludes

intercompany

eliminations

and

corporate

overhead.

Financial Summary

Consolidated Financial Summary

Revenue

Adjusted EBITDA

Capital Expenditures

(1)

Free Cash Flow

(1)(2)

Note:

2012PF

and

2013E

projections

based

management

guidance.

2012

Adj.

EBITDA

and

capital

expenditures

Pro

Forma

for

Domtar

transaction.

See

EBITDA

reconciliation on page 29.

(1) Excludes Capital Expenditures related to Domtar transaction implementation in 2012 and 2013.

(2) Defined as Adj. EBITDA less Capital Expenditures.

($ Millions)

(EBITDA Margin %)

Transaction Summary

Transaction Overview

•

Appvion

become

publicly

traded

through

business

combination

with

Hicks

Acquisition Company II, Inc. (Nasdaq: HKAC)

•

Post-closing Appvion will trade on Nasdaq under ticker APVN

•

Appvion

enterprise

value

$675

million

(1)

Transaction

•

Appvion will receive up to $149.3 million in cash, less fees, expenses and HACII

redemptions, which will be used to delever balance sheet

•

Pro Forma net debt of $413 million (3.1x 2012E PF Adjusted EBITDA) at close

•

Appvion employee shareholders will receive 9.6 million shares and retain

approximately

37%

ownership

(2)

•

Earn-out shares provide significant shareholder-aligned incentive

Consideration

•

Management team led by Mark Richards, Chairman and CEO

•

Management intends to roll a substantial portion of its long-term incentive earnings

•

Board will be comprised of 9 members (6 independent directors with the remaining

representatives from Appvion and Hicks)

Management and Board

•

July 2012

Expected Closing

(1)

Excludes value of 3.0 million earnout shares issued in connection with the transaction.

(2)

Ownership percentages are calculated as basic ownership and exclude warrants, options and redemptions from the ownership calculation. Any redemptions by HACII

shareholders would proportionally lower HACII’s ownership percentage and raise the ownership percentage of ESOP participants.

Transaction Valuation and Ownership

Pro Forma Valuation

Pro Forma Appvion Ownership

(1)

Excludes 1.0 million earnout shares with a strike price of $12.50 and 2.0 million earnout shares with a strike price of $15.00 issued in connection with the transaction.

(2)

Based on PF Adj. EBITDA of $131 and $141 million and capital expenditures of $20 and $15 million in 2012E and 2013E, respectively.

(3)

Includes current and former employees.

Implied Enterprise Value

675

Pro Forma Net Debt

(413)

Pro Forma Fully Diluted Equity Value

262

Fully

Diluted

(mm)

(1)

26.3

Implied Share Price

9.95

Implied Multiple

(2)

2012PF

2013E

TEV / PF Adj. EBITDA

5.1x

4.8x

TEV / PF Adj. EBITDA -

CapEx

6.1x

5.4x

Appleton

Employees

37%

(3)

HAC

Founders

Public

57%

Comparable Companies –

Valuation Benchmarking

(1)

Note: As of 6/8/2012. Comparable companies include Specialty Paper peers: Wausau Paper (WPP), Neenah Paper (NP), Schweitzer-Mauduit (SWM), Glatfelter Paper (GLT) and

Specialty Chemical / Microencapsulation peers: Balchem Corp. (BCPC).

(1)

As presented in the offering contemplated herein. Assumes 0% HACII shareholder redemptions.

(2)

Based on PF Adj. EBITDA of $131 and $141 million in 2012E and 2013E, respectively.

(3)

Excludes $152 million of capital expenditures related to tissue expansion.

(1)

(1)(2)

(3)

12.4x

12.7x

13.0x

Appvion

Specialty Paper Comparables

Specialty Chemical /

Microencapsulation Comparables

TEV / 2012E EBITDA

TEV / 2013E EBITDA

TEV / 2012E EBITDA -

CapEx

Multiple Avenues to Deliver Shareholder Value

Asset Light

Model

Blue Chip

Sponsor

Leading

Market

Positions in

Growth

Markets

Deleveraging

Story

Strong Free

Cash Flow

Technology

Innovator

Proven and

Experienced

Management

Team

Attractively

Priced

Appendix

Hicks Equity Partners

•

Led by Tom Hicks, Chairman of the Board

–

Founder of one of the most successful private investment firms with 35+ years of

private equity investing experience

•

Supported by team of experienced investment professionals who, combined with Tom

Hicks, have over 150 years of private equity and public company experience

•

Extensive relationships with other financial sponsors, management teams and financial

intermediaries

•

Raised $150 million in October 2010 for Hicks Acquisition Company II, Inc. (“HAC II”)

•

Successfully raised $552 million for Hicks Acquisition Company I, Inc. in September 2007

–

Merged with Resolute Energy in September 2009

–

One of the most successful transactions for SPACs of similar size

Blue Chip Sponsor

Sources & Uses and Historical Financial Summary

($ Millions)

(1)

Figures do not reflect the impact of the Business Combination with Hicks Acquisition Company II, Inc.

(2)

Excludes Capital Expenditures related to Domtar transaction implementation in 2012 and 2013.

(3)

Based on actual cash held in trust as of April 1, 2012, net of assumed redemption of 0%. Net of Deferred Underwriting & Selling Group fees of $6.7 million.

(4)

Assumes

net

proceeds

from

the

transaction

are

applied

cash

balance

sheet

that

will

utilized

for

general

corporate

purposes,

debt

reduction

and

potential

warrant repurchases.

(5)

Includes costs associated with existing incentive plans and necessary consents.

Sources & Uses

Financial Summary

2008A

2009A

2010A

2011A

2012PF

2013E

(1)

Revenue

855

762

850

857

869

887

% Growth

(10.9%)

11.6%

0.9%

1.3%

2.1%

Gross Profit

171

159

165

170

216

229

% Margin

20.1%

20.8%

19.5%

19.8%

24.9%

25.8%

Adjusted EBITDA

131

141

% Margin

7.7%

9.6%

9.3%

10.4%

15.1%

15.9%

Adjusted EBIT

% Margin

1.5%

2.2%

3.5%

4.7%

10.4%

11.1%

Capital Expenditures

(2)

% Sales

11.1%

3.2%

2.1%

1.8%

2.3%

3.0%

Sources of Funds

Cash Held in Trust

(3)

143

Total Sources

143

Uses of Funds

Cash to Balance Sheet

(4)

110

Change of Control Payments

(5)

Legal & Accounting

Fees, incl. ESOP Advisory

Other Transaction Costs

Total Uses

143

Pro Forma Adjusted EBITDA Reconciliation

($ Millions)

2009

2010

2011

2012PF

2013E

(1)

(Loss) Income from Continuing Operations Before Income Taxes

(35)

(2)

(103)

Depreciation, Amortization and Other

Net Interest Expense

(43)

Restructuring Expense

123

(5)

Net Debt Extinguishment Expense

Litigation Settlement, net

(23)

Foreign Exchange (Gain) Loss

(2)

Other Income

(1)

EBITDA

117

141

Environmental Insurance Expense Recovery

(9)

Debt Extinguishment Expenses

Alternative Fuels Tax Credit

(18)

Litigation Settlement, net

Domtar Suppy Agreement Run-Rate Adjustment

Adjusted EBITDA

131

141

(1) Represents the median of management forecast. Figures do not reflect the impact of the Business Combination with Hicks Acquisition Company II, Inc.

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