Clearwater Paper Corporation · NYSE:CLW
Clearwater Paper — Jefferies 2011 Global Industrial and A&D Conference
52 slides from Clearwater Paper's conference presentation, Aug 9, 2011
Slide 1: Clearwater Paper Corporation
Clearwater Paper Corporation Jefferies 2011 Global Industrial and A&D Conference August 9, 2011 Exhibit 99.1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our strategies to grow our business, the benefits of, and synerg
Slide 3: Introduction to Clearwater Paper
• We are a company formed two years ago with more than 60 years of operating history • A leader in Private Label consumer tissue and bleached paperboard • Focused on producing high quality products that help our customers build their brands • Operate in two segments of similar size – Pulp and Paperb
Slide 4: Our Strategy
Grow our Tissue Business New Shelby Facility and CLU Acquisition LEAN Manufacturing and Capital Improvements Build a High Performance Culture Core Values and Talent Management Optimize Profitability of Paperboard Business • Lead Private Label quality • Expand geographically • Expand retail channel p
Slide 5: New Shelby Facility
New Shelby Facility
Slide 6: Shelby
Shelby • ON BUDGET with original estimate of $260- $280 million • ON TIME with original construction projections • ON QUALITY with selection of Metso technology • ON TASK with dedicated project team to ensure results • First two converting lines operational • Consolidate third-party warehouse to She
Slide 7: see ARWWATER
4 see ARWWATER
Slide 8: see ARWWATER
4 see ARWWATER
Slide 9: Wii
Wii Wii) AY CLEARWATER
Slide 10: Cellu Tissue Acquisition
Cellu Tissue Acquisition
Slide 11: Expansion Opportunities
of the total category Expansion Opportunities Clearwater Paper has been a strong influence in the development of private label tissue in the Western U.S. An opportunity exists to grow private label category development and company share in the Eastern U.S. Source: SymphonyIRI InfoScan. 52 Weeks Endi
Slide 12: The acquisition of Cellu Tissue provides us with...
The acquisition of Cellu Tissue provides us with . . . • A national manufacturing footprint that allows greater efficiencies • New retail channel opportunities • Estimated annual run rate synergies of $35-$40 million by the end of 2012 Strategic Benefits of Acquisition
Slide 13: Estimated Breakdown of Acquisition Synergies
Estimated Breakdown of Acquisition Synergies* Manufacturing – Moving parent rolls to converted cases Transportation – Product spec changes and lower miles Warehousing – Closing duplicate facilities Procurement – Purchasing power and economies of scale Fiber – Increased use of internal pulp Wages – S
Slide 14: Consumer Tissue
Consumer Tissue
Slide 15: Attractive Industry Characteristics
Attractive Industry Characteristics Within the tissue market, Private Label penetration has also grown substantially since The tissue market has grown an average of 2% annually since Source: RISI and IRI 1 Based on converted short tons 2 Represents market share as a % of sales in U.S. grocery channe
Slide 16: Private Label is a Strategic Focus for Retailers
Therefore they require: • National brand-like quality to support high quality store brands • High quality packaging and branding support • Complete mix of product offerings to support retailer assortment objectives • Category management support and expertise • Experience and execution to deliver a c
Slide 17: Private Label Packaging Quality is More Important Than Ever Before
Private Label Packaging Quality is More Important Than Ever Before Mid 60’s to 70’s • Private Label tissue packaging has become more brand-like in quality since the early days of generic store brand tissue • Clearwater Paper manages over 1,300 retail package sku’s for its customers
Slide 18: Tissue is an Important Category for Retailers
Segment % Category (cases) Annual Sales Tissue is an Important Category for Retailers SOURCE: 52 Week Sales Food, Drug, Mass without Wal-Mart, May 29, 2011, Symphony IRI Bath Tissue 55% $4.2B Paper Towels 32% $2.5B Facial Tissue 7% $795MM Paper Napkins 6% $360MM Est. Total Category $7.86B
Slide 19: The Tissue Category - Lots of Options For Consumers
The Tissue Category – Lots of Options For Consumers . . . . • Single Ply • Double Ply • Triple Ply • Ultra Quality • Premium Quality • Value Quality • Economy Quality • Virgin Fiber • Recycled Fiber
Slide 20: The Tissue Category - even more options
The Tissue Category – even more options…
Slide 21: Complex Category Segmentation Requires Expertise
Complex Category Segmentation Requires Expertise • Clearwater Paper is well represented in all segments of the tissue category, including a leading presence in the value and economy product tier • Clearwater Paper is the category leader in providing a full-range of product tier offerings nationwide
Slide 22: FSC and Rainforest Alliance Certification
Clearwater Paper Adds Unique Value Through FSC and Rainforest Alliance Certification
Slide 23: AY CLEARWATER
AY CLEARWATER
Slide 24: Attractive Industry Characteristics
97 101 $880 $760 $810 $740 $713 $773 $728 $700 $727 $713 $772 $718 $861 $961 Attractive Industry Characteristics $1,031 $1,082 1,000 1,200 U.S. Bleached Paperboard Demand (Indexed)² U.S. Bleached Paperboard Price ($/short ton)³ Source: RISI. 1 Top 5 manufacturers in 1998 were International Paper, We
Slide 25: Estimated Industry Mix
Estimated Industry Mix SOURCE: RISI / Company Websites / Internal Estimates Cup Liquid Packaging Folding/CIS
Slide 26: Efficiency and Optimization
Efficiency and Optimization • Lean initiatives focusing on non-capital solutions for driving out waste and improving quality • Cost reduction projects: • Lower Columbia reload facility for sawdust to increase fiber supply • Chip screening at Lewiston to improve quality • Refocusing pulp mill operati
Slide 27: Lower Columbia Reload Facility
Lower Columbia Reload Facility
Slide 28: Financial Overview
Financial Overview
Slide 29: Financial Priorities
Financial Priorities • Grow free cash flow through strong operating performance • Maintain modest leverage in the range of Net Debt/EBITDA of 1x – 4x • Focus on appropriate liquidity levels for growth and business cycles • Deploy capital effectively and perform post audits
Slide 30: Capital Allocation
Stock Repurchase Debt Pay Down Pension Payments Dividend Shorter Longer Illustrative of Projects Meeting Return Hurdle Rates Greenfield M&A Our objective is to allocate capital using a dynamic framework to create strong returns to shareholders while providing appropriate liquidity to meet growth obj
Slide 31: Recent Financial Announcements
Recent Financial Announcements Share Repurchase • Repurchase of up to $30 million of common stock • Expect to fund repurchase with cash on hand • May repurchase shares in the open market or as otherwise may be determined by management, subject to market conditions, business opportunities, and other
Slide 32: Financial Track Record
$41 $34 $53 $138 $87 $78 $70 $80 $35 $51 $111 $139 $445 $452 $504 $554 $570 $825 $672 $731 $751 $696 $803 $876 CPD PPD Adj. EBITDA Margin % Financial Track Record Adjusted EBITDA and Segment Adjusted EBITDA 5 Yr. Average (excluding LTM): $124 9.0% 8.8% 6.0% 13.9% 12.2% 11.4% LTM LTM ($ in millions)
Slide 33: Wood Fiber
Wood Fiber Historical Cost Drivers - Wood Fiber Total Cost : % of Total Cost of Sales $325.4 M 28% $269.7 M 26% $314.3 M 27% 1 Excludes intersegment amounts and CLU amounts prior to acquisition • Wood fiber includes pulp, wood chips, sawdust and saw logs • Historically, we were a net buyer of approx
Slide 34: Historical Cost Drivers - All Other
Energy Maintenance & Repair Chemicals Transportation Historical Cost Drivers – All Other Total Cost: % of Total Cost of Sales Total Cost: % of Total Cost of Sales Total Cost : % of Total Cost of Sales $143.0 M 12% $114.7 10% $97.3 9% $92.0 8% $123.2 10% $100.3 9% $117.3 10% $ 61.9 5% $70.0 7% $82.4
Slide 35: Cost Sensitivities
Cost Sensitivities Change EBITDA Variable Metric $/Unit ($ Millions) Purchased Pulp $/Ton $50.00 +/- $20 Chips/Sawdust $/Ton $5.00 +/- $9 Transportation $/Gallon $1.00 +/- $9 Chemicals $/Prod Ton $5.00 +/- $7 Natural Gas $/mmbtu $0.50 +/- $5 Estimated Annual EBITDA Sensitivities $0 $5 $10 $15 $20 $2
Slide 36: EBITDA and Free Cash Flow
EBITDA/Adjusted EBITDA 1 $100.6 $103.7 $75.4 $174.3 $166.8 $189.4 Free Cash Flow 1 $68.5 $88.0 $20.8 $87.2 $120.0 (79.7) ($ in millions) See Appendix “Detailed Financials” for the definition of EBITDA, Adjusted EBITDA and Free Cash Flow as well as a reconciliation to the most comparable GAAP measure
Slide 37: Balance Sheet
Total Assets $947.5 $1,545.3 $1,588.9 Total Liabilities $583.8 $1,077.0 $1,096.2 Total Stockholders' Equity $363.7 $468.3 $492.7 Total Liabilities & Stockholders' Equity $947.5 $1,545.3 $1,588.9 ($ in millions) Balance Sheet Q2 2011 Current Assets Cash & Short-Term Investments $190.8 $148.7 $128.1 R
Slide 38: Appendix: Detailed Financials
Appendix: Detailed Financials
Slide 39: Income Statement
Earnings (Loss) Before Interest, Other, Debt Retirement Costs and Income Taxes $46.3 $52.4 $28.5 $297.4 $98.8 $33.8 $108.3 EBITDA 1 $100.6 $103.7 $75.4 $338.7 $146.5 $52.4 $169.1 Net Earnings $20.9 $25.3 $9.7 $182.5 $73.8 $13.9 $72.3 Income Statement ($ in millions) See Appendix for definition of EB
Slide 40: Net Cash from Operating Activities to Free Cash Flow
Net Cash Provided by Operating Activities 1 $96.0 $108.5 $42.1 $54.2 $185.6 $65.4 Free Cash Flow 1 $68.5 $88.0 $20.8 $87.2 $120.0 (79.7) Reconciliation of GAAP to Non-GAAP: Net Cash from Operating Activities to Free Cash Flow ($ in millions) amount excludes $170.6 million of alternative fuel mixture
Slide 41: AG CLEARWATER
$$ —__ ae AG CLEARWATER
Slide 42: Free Cash Flow - Other
Other Cash Flow Items $6.9 $(5.7) $6.6 $88.2 $(44.7) $(31.2) Free Cash Flow – Other ($ in millions) LTM through 6/30/11 Equity-Based Compensation Expense $1.4 $3.3 $2.3 $5.6 $8.5 $8.4 Employee Benefit Plans 3.0 (1.0) 1.1 14.1 15.0 13.9 (Gain) Loss on Disposal of Plant and Equipment 0.3 0.1 (0.2) 0.2
Slide 43: Clearwater Paper EBITDA and Adjusted EBITDA
EBITDA 1 $100.6 $103.7 $75.4 $338.7 $146.5 $52.4 $169.1 Adjusted EBITDA¹ $100.6 $103.7 $75.4 $174.3 $166.8 $52.4 $189.4 Reconciliation of GAAP to Non-GAAP: Clearwater Paper EBITDA and Adjusted EBITDA 1 See last page of this Appendix for definitions of EBITDA and Adjusted EBITDA ($ in millions) Q2 20
Slide 44: Segment EBITDA and Segment Adjusted EBITDA
Segment EBITDA 1 $41.5 $33.9 $53.0 $138.1 $80.7 $19.4 $71.6 Segment Adjusted EBITDA 1 $41.5 $33.9 $53.0 $138.1 $87.2 $19.4 $78.0 Segment EBITDA 1 $70.2 $79.6 $35.3 $221.8 $110.6 $41.0 $138.6 Segment Adjusted EBITDA 1 $70.2 $79.6 $35.3 $51.1 $110.6 $41.0 $138.6 Reconciliation of GAAP to Non-GAAP: Cle
Slide 45: Definitions of Non-GAAP Measures
Definitions of Non-GAAP Measures Clearwater Paper Definitions of Non-GAAP Measures EBITDA is a non-GAAP measure that Clearwater Paper management uses to evaluate the cash generating capacity of Clearwater Paper. The most directly comparable GAAP measure is net earnings. EBITDA, as defined by Clearwa
Slide 46: Appendix: Estimated Pulp Flow and Synergy Example
Appendix: Estimated Pulp Flow and Synergy Example
Slide 47: Pulp Flows
Pulp Flows Note: Assumes 60,000 tons in external pulp sales 32% 68% Pulp Sources Internal External 460,000 MT 87% 13% By Division Consumer Products 30% 70% Recycled/Virgin 40% 60% Virgin Idaho Pulp + Paperboard NBSK NBHK Hardwood BEK NBHK SBHK Recycled SOP, DIP, Other Softwood NBSK SBSK
Slide 48: Synergy Opportunity Example
Synergy Opportunity Example large converting winder in Neenah, WI (formerly Cellu Tissue) can more efficiently produce Away-from-Home products and 1000 count bathroom tissue Actions: 1. Relocate a wrapper machine from Elwood, IL (formerly CLW) to Neenah, WI 2. Reposition an underutilized case packer
Slide 49: Appendix: Other Information
Appendix: Other Information
Slide 50: 2010 North American Tissue Market by Producer
Remaining Manufacturing Base Highly Fragmented Large Brand Manufacturers The Combined Company was the Sixth-Largest Manufacturer in the North American Tissue Market in 2010 30% 17% 16% 7% 6% 5% 4% 2% 2% 2% 1% 1% 1% 1% 1% 1% 0% 0% 0% 4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 2010 North America
Slide 51: National Manufacturing Footprint
Clearwater Paper Clearwater Paper Capacities ¹ 1 Clearwater Paper capacities exclude tissue facility under construction in Shelby, NC expected to have 70,000 tons of annual capacity and converting facility expected to be operational in FY 2012. 2 Excludes foam capacity. 3 MG stands for machine-glaze
Slide 52: North American Tissue Capacity Change
Company Date Capacity Furnish Notes North American Tissue Capacity Change Announced: First Quality – Anderson SC Q3 2011 70,000 V TAD GP - Crossett Q2 2012 25,000* V TAD First Quality – Anderson SC Q3 2012 70,000 V TAD CLW – Shelby NC Q4 2012 70,000 V TAD GP - Pt. Hudson Q4 2012 35,000* V TAD Wausau
Clearwater Paper — Jefferies 2011 Global Industrial and A&D Conference on 6ix