Clearwater Paper Corporation · NYSE:CLW
Clearwater Paper — Vertical Partners Global Paper & Packaging Conference (March 2012)
52 slides from Clearwater Paper's conference presentation, Mar 8, 2012
Slide 1: Clearwater Paper Corporation
Clearwater Paper Corporation Vertical Partners Global Paper & Packaging Conference March 8, 2012
Slide 2: Forward-Looking Statements
Forward-Looking Statements • difficulties with the completion of our new tissue manufacturing and converting facilities, including the completion of our new through-air-dried paper machine; • difficulties with the integration process or the realization of the benefits expected from our acquisition o
Slide 3: Introduction to Clearwater Paper
• We are a company formed in late 2008 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 ¹ – Pulp and Paper
Slide 4: Our Strategy
Build a High Performance Culture Optimize Profitability of Paperboard Business Grow our Tissue Business • Lead Private Label quality • Expand geographically • Expand retail channel penetration Our Strategy • Improve sales mix • Reduce costs • Continue to improve quality • Develop common culture • Dr
Slide 5: Accomplishments Since the 2008 Spin-off
• Expansion of the Consumer Products Segment: – acquisition of Cellu Tissue, and – start up of two new converting lines and initiation of construction of our new TAD paper machine in Shelby, NC • Continuing to optimize the pulp and paperboard mills to improve cost structure • First U.S. Private Labe
Slide 6: 2012 Objectives
• Complete new paper machine and corresponding converting lines in Shelby, NC on time and on budget • Expand customer base to align with the expected start up of the paper machine in fourth quarter 2012 • Launch Lean Manufacturing program company-wide to reduce costs and improve efficiencies • Achie
Slide 7: New Paper Machine
New Paper Machine
Slide 8: Shelby Paper Machine – Our Accomplishments and Goals
Shelby Paper Machine – Our Accomplishments and Goals • Remain ON BUDGET with original estimate of $260-$280 million • Remain ON TIME with paper machine estimated to start up in fourth quarter 2012 • Manufacture and deliver QUALITY products • Remain ON TASK with dedicated project team to ensure resul
Slide 9: Clearwater Paper
4 CLEARWATER PAPER
Slide 10: CLEARWATER:
4 CLEARWATER:
Slide 11: see ARWWATER
4 see ARWWATER
Slide 12: Cellu Tissue Acquisition
Cellu Tissue Acquisition
Slide 13: Strategic Benefits of Acquisition
The acquisition of Cellu Tissue has provided us with: Strategic Benefits of Acquisition • A national manufacturing footprint that allows greater operational efficiencies • New retail channel opportunities • An estimated $15-$20 million in cost synergies in 2012 and an estimated cost synergies annual
Slide 14: Breakdown of Estimated Annual Acquisition Cost Synergies
Breakdown of Estimated Annual Acquisition Cost 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 pul
Slide 15: Consumer Tissue
Consumer Tissue
Slide 16: Attractive Industry Characteristics
Attractive Industry Characteristics Within the tissue market, Private Label penetration has also grown substantially since ² The tissue market has grown an average of 2% annually since ¹ Source: RISI and IRI 1 Based on converted short tons 2 Represents market share as a % of sales in U.S. grocery ch
Slide 17: 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 18: Tissue is an Important Category for U.S. Retailers
Segment % Category (cases) Annual Sales Tissue is an Important Category for U.S. Retailers Bath Tissue 53% $4.2B Paper Towels 32% $2.5B Facial Tissue 10% $795MM Paper Napkins 5% $360MM Est. Total Category $7.86B SOURCE: 52 Week Sales Food, Drug, Mass without Wal-Mart, May 29, 2011, Symphony IRI
Slide 19: Private Label Quality is More Important Than Ever Before
Private Label Quality is More Important Than Ever Before Mid 60’s to 70’s • Private Label 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 20: Complex Segmentation Requires Expertise
Complex Segmentation Requires Expertise • Clearwater Paper is well represented in all segments of the tissue category, including a leading presence in the value/economy product tier • Clearwater Paper is the category leader in providing a full-range of product tier Private Label offerings nationwide
Slide 21: Clearwater Paper Adds Unique Value Through FSC and Rainforest Alliance Certification
Clearwater Paper Adds Unique Value Through FSC and Rainforest Alliance Certification
Slide 22: AY CLEARWATER
AY CLEARWATER
Slide 23: Attractive Industry Characteristics
Attractive Industry Characteristics Source: RISI 1 Top 5 manufacturers in 1998 were International Paper, Westvaco, Temple-Inland, Georgia-Pacific and Potlatch. Top 5 manufacturers in 2011 were International Paper, MeadWestvaco, Georgia-Pacific, Evergreen Packaging and Clearwater Paper 2 Based on ton
Slide 24: Estimated Industry Mix
Estimated Industry Mix SOURCE: RISI / Company Websites / Internal Estimates Cup Liquid Packaging Folding/CIS
Slide 25: Efficiency and Optimization
Efficiency and Optimization • Lean manufacturing initiatives focusing on non-capital solutions for driving out waste and improving quality • Sold our sawmill in late 2011 for approximately $30 million and signed a long-term residual supply agreement • Cost reduction projects such as: • Lower Columbi
Slide 26: Clearwater Paper
4 CLEARWATER PAPER
Slide 27: Financial Overview
Financial Overview
Slide 28: Financial Goals and Priorities
Financial Goals and Priorities • Create strong shareholder return • Grow free cash flow through strong operating performance • Maintain modest leverage in the range of Net Debt/EBITDA of 1x – 4x • Deploy capital effectively • Focus on appropriate liquidity levels for growth and business cycles
Slide 29: Capital Allocation
Our objective is to allocate capital using a dynamic framework to create strong returns to shareholders while providing appropriate liquidity to meet growth objectives and compete effectively. Capital Allocation Return Timeframe Greenfield M&A Stock Repurchase Debt Pay Down Pension Payments Dividend
Slide 30: Share Repurchase
Share Repurchase • Authorization to repurchase up to $30 million of common stock • Purchases help offset share dilution from equity incentive plans • During the fourth quarter of 2011 we repurchased 41,700 shares of outstanding common stock at an average price of $32.30 per share • Through year-end
Slide 31: Financial Track Record
$34 $53 $128 $104 $93 $80 $35 $51 $94 $134 $452 $504 $554 $570 $1,092 $731 $751 $696 $803 $836 $196 Financial Track Record 8.8% 6.0% 13.9% 12.2% 10.1% Adjusted EBITDA and Segment Adjusted EBITDA 5 Yr. Average: $143 ($ in millions) Net Sales and Segment Net Sales $1,183 $1,255 $1,250 $104 $75 5 Yr. A
Slide 32: Historical Cost Drivers – Wood Fiber
Wood Fiber Historical Cost Drivers – Wood Fiber Total Cost : % of Total Cost of Sales $325.4 M 28% $259.6 M 25% $304.5 M 26% Excludes intersegment amounts and Cellu Tissue amounts prior to acquisition • Wood fiber includes pulp, wood chips, sawdust and saw logs (until the November 28, 2011 sale of o
Slide 33: Historical Cost Drivers – All Other
Energy Maintenance & Repairs 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 M 10% $97.3 M 9% $92.0 M 8% $123.2 M 10% $100.3 M 9% $117.3 M 10% $ 61.9 M 5%
Slide 34: Estimated Annual Cost Sensitivities
Estimated Annual Cost Sensitivities Change EBITDA Variable Units $/Unit Units Purchased Pulp $/Tonne $50.00 450,000 +/- $23 Chips/Sawdust $/Ton $5.00 1,750,000 +/- $9 Transportation $/Gallon $1.00 8,820,000 +/- $9 Chemicals $/Prod Ton $5.00 1,300,000 +/- $7 Natural Gas $/mmbtu $0.50 10,400,000 +/- $
Slide 35: EBITDA and Free Cash Flow
EBITDA/Adjusted EBITDA ¹ $103.7 $75.4 $174.3 $166.8 $195.5 Free Cash Flow ¹ $88.0 $20.8 $87.2 $120.0 $(76.3) ($ 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 measures. 2009, 201
Slide 36: Balance Sheet
Total Assets $947.5 $1,545.3 $1,571.3 Total Liabilities $583.8 $1,077.0 $1,086.4 Total Stockholders' Equity $363.7 $468.3 $484.9 Total Liabilities & Stockholders' Equity $947.5 $1,545.3 $1,571.3 ($ in millions) Balance Sheet December 31, December 31, December 31, Assets Current Assets Cash, Restrict
Slide 37: Appendix: Detailed Financials
Appendix: Detailed Financials
Slide 38: Income Statement
Income from Operations $52.4 $28.5 $297.4 $98.8 $115.4 EBITDA 1 $103.7 $75.4 $338.6 $146.5 $192.7 Net Earnings $25.3 $9.7 $182.5 $73.8 $39.7 Income Statement ($ in millions) See Appendix for definition of EBITDA and a reconciliation to most comparable GAAP measure Net Sales $1,183.0 $1,255.3 $1,250.
Slide 39: Net Cash from Operating Activities to Free Cash Flow
Net Cash Provided by Operating Activities $108.5 $42.1 $54.2 $185.6 $68.4 Free Cash Flow $88.0 $20.8 $87.2 $120.0 $(76.3) Reconciliation of GAAP to Non-GAAP: Net Cash from Operating Activities to Free Cash Flow ($ in millions) amount excludes $170.6 million of alternative fuel mixture tax credits fo
Slide 40: ee see ARWWATER
ee 4 see ARWWATER
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Slide 42: EBITDA and Adjusted EBITDA Reconciliation
EBITDA 1 $103.7 $75.4 $338.6 $146.5 $192.7 Adjusted EBITDA¹ $103.7 $75.4 $174.3 $166.8 $195.5 Reconciliation of GAAP to Non-GAAP: Clearwater Paper EBITDA and Adjusted EBITDA See last page of this Appendix for definitions of EBITDA and Adjusted EBITDA ($ in millions) Net Earnings $25.3 $9.7 $182.5 $7
Slide 43: Segment EBITDA and Segment Adjusted EBITDA
Segment EBITDA 1 $33.9 $53.0 $128.2 $97.8 $93.3 Segment Adjusted EBITDA 1 $33.9 $53.0 $128.2 $104.2 $93.3 Segment EBITDA 1 $79.6 $35.3 $231.7 $93.6 $118.9 Segment Adjusted EBITDA 1 $79.6 $35.3 $51.1 $93.6 $134.3 Reconciliation of GAAP to Non-GAAP: Clearwater Paper Segment EBITDA and Segment Adjusted
Slide 44: 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 45: Appendix: Estimated Pulp Flow and Synergy Example
Appendix: Estimated Pulp Flow and Synergy Example
Slide 46: Pulp Flows 2011
Pulp Flows 2011 (MT) 36% 64% Pulp Sources Internal 90% 10% By Division 26% 74% Recycled/Virgin Recycled DIP, Other 38% 62% Virgin Hardwood • BEK Softwood Consumer Products Idaho Pulp and Paperboard External 450,000 MT • NBHK • SBHK • NBSK • NBHK • NBSK • SBSK • SOP,
Slide 47: Synergy Opportunity Example
Synergy Opportunity Example Underutilized 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 underutiliz
Slide 48: Appendix: Other Information
Appendix: Other Information
Slide 49: 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 2010 North American Tissue Market by Producer Source: Equity research. Represents Clearwater Paper tissue parent roll capacity
Slide 50: National Manufacturing Footprint
Clearwater Paper Capacities 1 1 Clearwater Paper capacities exclude expected tissue parent roll manufacturing in Shelby, NC of 70,000 tons annual capacity expected to be operational in 2012 National Manufacturing Footprint Bleached Paperboard 775,000 tons Tissue Parent Roll 586,000 tons Tissue Conve
Slide 51: Expansion Opportunities
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 Ending May 29, 2011. Data
Slide 52: North American Tissue Capacity Change
North American Tissue Capacity Change * Estimated Source: RISI and Other Industry COMPANY LOCATION CONV/TAD TONS STARTUP DATE CHANNEL/BUSINESS/PRODUCTS Procter and Gamble Box Elder, UT TAD 80,000 4th Q, 2012 Retail/Brand/Bounty First Quality Anderson, SC TAD 70,000 3rd Q, 2012 Retail/P.L./BRT Florel
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