Clearwater Paper Corporation · NYSE:CLW

Clearwater Paper — Investor Presentation (September 2015)

44 slides from Clearwater Paper's investor presentation, Sep 9, 2015

  1. Slide 1: Clearwater Paper Corporation

    Exhibit 99.1 CLEARWATER PAPER CORPORATION SEPTEMBER 2015

  2. 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 North American tissue demand and capacity, U.S. paperboard deman

  3. Slide 3: Overview of Clearwater Paper

    OVERVIEW OF CLEARWATER PAPER 3

  4. Slide 4: Introduction to Clearwater Paper

    INTRODUCTION TO CLEARWATER PAPER WE ARE A COMPANY FORMED IN LATE 2008 WITH MORE THAN 60 YEARS OF OPERATING HISTORY WE OPERATE TWO BUSINESS SEGMENTS Pulp and paperboard: 40% of 2014 net sales Consumer products: 60% of 2014 net sales FINANCIAL OVERVIEW FOR 2014 Net Sales: $2.0 Billion Adjusted EBITDA¹

  5. Slide 5: Consumer Products Division Overview

    CONSUMER PRODUCTS DIVISION OVERVIEW Clearwater Paper is one of the LARGEST NORTH AMERICAN MANUFACTURERS OF PRIVATE LABEL TISSUE, focused on high value tissue products across all categories, retail channels and geographies. 5

  6. Slide 6: Consumer Products Division Market Drivers

    CONSUMER PRODUCTS DIVISION MARKET DRIVERS STABLE GROWTH – The tissue market has grown an average of 1% – 2% annually since 1996, consistent with population growth. 141 143 137 139 132 134 129 130 127 127 124 124 124 119 121 117 113 114 107 104 100 307 311 313 315 316 319 321 324 288 290 293 296 298

  7. Slide 7: Consumer Products Division Capacity and Retail Channels

    CONSUMER PRODUCTS DIVISION CAPACITY AND RETAIL CHANNELS Change in Industry Lewiston,ID Lady Smith, WI Retail Channel Mix U.S. TISSUE INDUSTRY RETAIL CHANNEL MIX ² 2009 2014 Neenah, WI % Grocery 37 33% Elwood, IL + Mass Supercenter 28% 31% Club 22% 23% Drug 7% 5% Las Vegas,NV Shelby, NC Dollar 3% 4%

  8. Slide 8: Private Label Continues to Capture Market Share in Tissue

    PRIVATE LABEL CONTINUES TO CAPTURE MARKET SHARE IN TISSUE Clearwater Paper ranks as one of the LARGEST NORTH AMERICAN PRIVATE LABEL TISSUE MANUFACTURERS 60% Private Label Market Share 2014 U.S. Retail Tissue of Total U.S. Industry Product Mix 60% 54% 52% 49% 50% 48% 43% 40% 32% 32% 33% 33% 31% 30% 3

  9. Slide 9: Opportunity for Private Label and Clearwater Paper to Grow Market Share Nationally

    OPPORTUNITY FOR PRIVATE LABEL AND CLEARWATER PAPER TO GROW MARKET SHARE NATIONALLY WEST MID-WEST EAST Clearwater Paper 17.2% 8.0% 5.3% Brand Names 69.3% 73.6% 73.0% Other Private Label 13.5% 18.4% 21.7% Clearwater Paper 14.7% 16.4% 16.8% 17.2% Market Share by 5.2% 5.9% 6.3% 8.0% 5.3% 6.3% 6.9% 7.3%

  10. Slide 10: North American Market Demand vs. Capacity

    NORTH AMERICAN MARKET DEMAND VS. CAPACITY E 2014 DEMAND TO CAPACITY 2016 DEMAND TO CAPACITY RATIO OF 97% RATIO OF 94% 12,000 1 594 10,382 9,788 9,803 9,506 10,000 5941 10,382 9,788 9,803 9,506 8,000 6,000 4,000 2,000 0 2014 2014 Projected Projected 2016 Projected 2016 Tissue Demand Tissue Capacity N

  11. Slide 11: Paperboard Division Overview

    PAPERBOARD DIVISION OVERVIEW 1 LEADING MANUFACTURER OF SBS used in packaging of premium consumer goods, pharmaceuticals, food and liquid, and food service plates, cups and folding cartons. 1 Solid Bleach Sulfate paperboard 11

  12. Slide 12: Paperboard Demand Remains Stable

    PAPERBOARD DEMAND REMAINS STABLE NORTH AMERICA DEMAND FOR SBS BASED PRODUCTS EXPECTED TO REMAIN STABLE THROUGH 2016 • North American industry backlogs are below seasonal averages and Clearwater Paper expectations in Q3 2015 • The strong U.S. dollar is attracting European SBS manufacturers, pressurin

  13. Slide 13: Pulp and Paperboard Division Capacity and Markets

    PULP AND PAPERBOARD DIVISION CAPACITY AND MARKETS Clearwater Paper ranks as one of the top five largest paperboard manufacturers in North America 2014 North American Bleached Paperboard Production by Type² 2014 Lewiston Mill 36% ID Packaging 23% 17% 13% Bristols 8% 3% Cypress Bend Mill 2014 North Am

  14. Slide 14: Our Macro Strategy to Create Shareholder Value

    OUR MACRO STRATEGY TO CREATE SHAREHOLDER VALUE GROW OUR TISSUE BUSINESS > Lead private label in quality > Expand geographically > Diversify retail channel penetration OPTIMIZE PROFITABILITY OF PAPERBOARD AND TISSUE BUSINESSES > Improve sales mix > Reduce costs > Continue to improve quality 14

  15. Slide 15: Successful Execution of Previously Stated Goals

    SUCCESSFUL EXECUTION OF PREVIOUSLY STATED GOALS GOAL ASSET RATIONALIZATION/ Sold 5 specialty mills in December 2014 for $114 million Closure of Long Island and Thomaston converting operations in 2013-2014 COST INFRASTRUCTURE Established cross divisional supply chain function to drive out costs syste

  16. Slide 16: Updated Adjusted EBITDA Target in Light of Market Conditions and Divestiture

    UPDATED ADJUSTED EBITDA TARGET IN LIGHT OF CHANGES IN MARKET CONDITIONS AND DIVESTITURE PRICING AND INPUT COSTS VS. 2011 • Pricing pressure for conventional tissue products • Competitive market environment a barrier to passing through input cost inflation to customers • Key input costs up $46 millio

  17. Slide 17: Clearwater Paper Cross Cycle Financial Model

    CLEARWATER PAPER CROSS CYCLE FINANCIAL MODEL 2014 Q2’15 RESULTS RESULTS 1 NET SALES 100% 100% 100% 2 ADJUSTED GROSS PROFIT % OF NET SALES 17.0% 13.9% 13.7% 2 ADJUSTED SG&A % OF NET SALES (6.0%) (6.3%) (7.0%) 2 ADJUSTED OPERATING PROFIT % OF NET SALES 11.0% 7.5% 6.8% 2 ADJUSTED NET EARNINGS % OF NET

  18. Slide 18: Path to 15% Adjusted EBITDA Cross Cycle Target Margin

    PATH TO 15% ADJUSTED EBITDA CROSS CYCLE TARGET MARGIN • Reallocate $107M net specialty proceeds to strategic investments • Operational improvements GOAL IMPROVE OUR MANUFACTURING • Pulp optimization at mills COST STRUCTURE • Standardize the back end of our converting lines • Bring new swing-line in

  19. Slide 19: Strategic Investments Expected to Achieve Adjusted EBITDA Margin Target

    STRATEGIC INVESTMENTS EXPECTED TO ACHIEVE ADJUSTED EBITDA MARGIN TARGET • High return/low risk investments • Expected to permanently reduce cost structure • Expected Adjusted EBITDA improvement of $115 to $145 million in 2-3 years 1, 3 • Funding in Year 1 from sale proceeds of specialty mills (MILLI

  20. Slide 20: Expected Adjusted EBITDA from Strategic Investments and Operational Improvements

    EXPECTED ADJUSTED EBITDA FROM STRATEGIC INVESTMENTS AND OPERATIONAL IMPROVEMENTS 1, 2 ADJ. EBITDA 1,2 (MILLIONS) $160 $140 $30-$60 $115-$145 $120 $100 $40-$60 $80 $60 $40-$50 $40 $20 $5-$10 $- 2015 2016 2017 2018 Expected Adjusted EBITDA Benefit From Investment and Operational Improvements1 1 • Expe

  21. Slide 21: Clearwater Paper's Value Proposition

    CLEARWATER PAPER’S VALUE PROPOSITION 21

  22. Slide 22: Balanced Capital Allocation

    BALANCED CAPITAL ALLOCATION 2011-2014 • 20% of total shares outstanding from Capital Allocation 2011 through 2014 2011-2014 2011 – 2014 • Continued investment in the business Capex 34% while returning capital to investors TAD Expansion 35% Stock Repurchase 31% Cumulative Shares Repurchased Total Sha

  23. Slide 23: Clearwater Paper Is a Leader Amongst Its Peers in Value Creation

    CLEARWATER PAPER IS A LEADER AMONGST ITS PEERS IN VALUE CREATION INDEXED TOTAL RETURNS 900% 800% 700% 633.0% 600% 500% 400% 406.2% 300% 200% 158.3% 148.4% CLEARWATER PAPER 100% 104.1% SMALL-CAP TISSUE 1 0% 2 PAPERBOARD LARGE-CAP CONSUMER 3 (100)% S&P 500 Dec-2008 Apr-2010 Aug-2011 Dec-2012 Apr-2014

  24. Slide 24: Which Has Led to Multiple Expansion Since the Spin

    WHICH HAS LED TO MULTIPLE EXPANSION SINCE THE SPIN 2-YEAR FORWARD EBITDA MULTIPLE 14x 12x 10.9x 10x 8x 6.9x 6.5x 6.0x 6x CLEARWATER PAPER 4x SMALL-CAP TISSUE 1 PAPERBOARD 2 LARGE-CAP CONSUMER 3 2x Dec-2008 Apr-2010 Aug-2011 Dec-2012 Apr-2014 Aug-2015 SPIN DATE Clearwater Paper Small Cap Tissue¹ Pape

  25. Slide 25: Return on Invested Capital

    RETURN ON INVESTED CAPITAL1,6 (UNAUDITED) 20% 16.7% 15% 12.7% 12.4% 12.7% 12.2% 11.1% 10% 8.3% 4.7% 7.7% 6.5% 4.3% 5% 4.5% 3.7% 0% 2011 2012 2013 3 2014 4 LTM Ending 6/30/15 5 ROIC 1 Adjusted ROIC 3,4,5 WACC 2 1 Return on Invested Capital (ROIC) is defined as [Net Earnings + Interest Expense] / [Tan

  26. Slide 26: Clearwater Paper's Outlook

    CLEARWATER PAPER’S OUTLOOK 26

  27. Slide 27: Updated Third Quarter 2015 Outlook

    UPDATED THIRD QUARTER 2015 OUTLOOK 1 (COMPARED TO Q2’15) CONSUMER PRODUCTS PULP AND PAPERBOARD CORPORATE • Higher 2 : • Lower 2 : SHIPMENT VOLUMES 2–4% higher 3-4% lower • Slightly higher: • Slightly lower 2 : PRICE/MIX 0–2% higher 0-1% lower • Cost/shipped ton: • Cost/shipped ton: PULP/WOOD FIBER C

  28. Slide 28: Updated Bridge to Q3'15 Adjusted EBITDA Outlook

    UPDATED BRIDGE TO Q3’15 ADJUSTED EBITDA OUTLOOK 1,2 2 ADJ. EBITDA (MILLIONS) $75 $62-$66 $65 $1 $1 $1 $7 $2-$3 $2-$3 $55 $3-$4 $51 $1-$2 $45 $35 $25 $15 Q2'15 2 PPD CPD Chemicals Energy Maintenance Labor Transportation AR Electrical Q3'15 Adj. EBITDA Price/Volume Price/Volume Disruptions Adj. EBITDA

  29. Slide 29: Appendix

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  30. Slide 30: Reconciliation of GAAP to Non-GAAP: EBITDA and Adjusted EBITDA

    RECONCILIATION OF GAAP TO NON-GAAP: CLEARWATER PAPER EBITDA 1 AND ADJUSTED EBITDA 1 ($ in millions) 2008 2009 2010 2011 2012 2013 2014 Q1’15 Q2’15 earnings/(loss) $9.7 $182.5 $73.8 $39.7 $64.1 $107.0 $(2.3) $5.8 $15.6 $5.6 $93.2 $2.4 $31.2 $47.5 $(68.7) $(18.6) $1.7 $8.7 2 $ $ $ $ $ $ $ $ $ 13.1 21.

  31. Slide 31: EBITDA & Adjusted EBITDA Reconciliation of Non-GAAP Financial Measures

    EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Earnings before interest, income taxes, and depreciation & amortization (EBITDA) 1 GAAP net earnings (loss) $ 6,226 $ 12,453 $ 6,253 ($27,247) $ 5,757 $ 15,59

  32. Slide 32: Segment EBITDA & Adjusted EBITDA Reconciliation

    SEGMENT EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Consumer Products Operating (loss) income ($523) $ 12,705 $ 12,535 $ (30,745) $ 12,395 $ 17,032 Depreciation and amortization expense 15,490 15,071 15

  33. Slide 33: Adjusted Gross Profit & Adjusted SG&A Reconciliation

    ADJUSTED GROSS PROFIT & ADJUSTED SG&A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Gross profit 1 $ 58,291 $ 64,648 $ 76,685 $ 58,675 $ 44,194 $ 60,211 Costs associated with Thomaston facility closure 750 374 42 91 - - Costs ass

  34. Slide 34: Segment Adjusted Operating Income (Loss) Reconciliation

    SEGMENT ADJUSTED OPERATING INCOME (LOSS) RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Consumer Products Operating (loss) income ($523) $ 12,705 $ 12,535 ($30,745) $ 12,395 $ 17,032 Costs associated with Thomaston facility closur

  35. Slide 35: Adjusted Net Earnings & Adjusted Net Earnings Per Diluted Share

    ADJUSTED NET EARNINGS & ADJUSTED NET EARNINGS PER DILUTED COMMON SHARE RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands - except per-share amounts) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 GAAP net earnings (loss) $ 6,226 $ 12,453 $ 6,253 ($27,247) $ 5,757 $ 15,597 Special

  36. Slide 36: Key Segment Results – Pulp and Paperboard

    KEY SEGMENT RESULTS – PULP AND PAPERBOARD (UNAUDITED) PULP AND PAPERBOARD CROSS-CYCLE Q1'14 Q2'14 Q3'14 Q4'14 Q1’15 Q2’15 FINANCIAL MODEL (short tons) 200,665 195,924 201,609 176,467 191,635 204,983 $988 $1,017 $1,016 $1,017 $1,031 $997 in thousands) $198,412 $199,629 $205,038 $180,675 $198,850 $205

  37. Slide 37: Key Segment Results – Consumer Products

    KEY SEGMENT RESULTS – CONSUMER PRODUCTS (UNAUDITED) 5 RESULTS WITHOUT CONSUMER RESULTS INCLUDE SPECIALTY MILLS SPECIALTY MILLS PRODUCTS CROSS-CYCLE Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2’15 FINANCIAL MODEL Shipments 1 Non-Retail (short tons) 56,839 59,832 59,703 57,765 21,107 24,744 Retail (short tons) 70

  38. Slide 38: Return on Invested Capital, Tangible Equity & Excess Cash Reconciliation

    RETURN ON INVESTED CAPITAL, TANGIBLE STOCKHOLDERS’ EQUITY & EXCESS CASH RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Twelve Months Ending June 30, (Dollars in thousands) 2011 2012 2013 2014 2015 Net earnings (loss) $ 39,674 $ 64,131 $ 106,955 ($2,315) $ 360 Interest expense, net 44,809

  39. Slide 39: Pro Forma Impact of Sale of Specialty Mills

    PRO FORMA IMPACT OF SALE OF SPECIALTY MILLS (UNAUDITED) CONSUMER CONSUMER PRODUCTS PRODUCTS INCLUDING SPECIALTY SPECIALTY MILLS EXCLUDING MILLS PRO FORMA SPECIALTY MILLS TWELVE MONTHS ENDED TWELVE MONTHS ENDED (Dollars in millions) DECEMBER 31, 2014 NOVEMBER 30, 2014 PRO FORMA Net sales $1,183.4 $21

  40. Slide 40: Q3'15 Outlook Reconciliation of Non-GAAP Financial Measures

    1 Q3’15 OUTLOOK RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK THREE MONTHS ENDING SEPTEMBER 30, 2015 RANGE OF ESTIMATE (Dollars in thousands) FROM TO Earnings before interest, income taxes, and depreciation & 2 amortization (EBITDA) GAAP net earnings $21,000 $23,000 Interest expe

  41. Slide 41: Reconciliation of GAAP to Non-GAAP: Strategic Investments

    RECONCILIATION OF GAAP TO NON-GAAP: STRATEGIC INVESTMENTS PULP WAREHOUSE PAPER MACHINE CONVERTING OPERATING SALES & MARKETING STRANDED OPTIMIZATION AUTOMATION UPGRADES LINE EFFICIENCIES EFFICIENCY OVERHEAD Operating Income $22.5-27.5 $21.3-26.3 $7.1-8.1 $8.6-10.6 $20 - $32 $10 - $15 $7 Depreciation

  42. Slide 42: 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 as a supplemental performance measure to evaluate the cash generating capacity of Clearwater Paper. The most directly comparable GAAP measure is net e

  43. Slide 43: Major Maintenance Schedule

    MAJOR MAINTENANCE SCHEDULE¹ 2014 2015 2016 2017 2018 2019 2020 2021 Major Maintenance $MMs $0 $22 TBD TBD TBD TBD $0 TBD Lewiston Q1 Q3 Q1 Q3 Q1 Cypress Bend Q2 Q2 Q2 Q2 1 43 This information is based upon management’s current expectations and estimates.

  44. Slide 44: North American Tissue Projected Capacity Change

    NORTH AMERICAN TISSUE PROJECTED CAPACITY CHANGE Capacity Changes in the North American Tissue Industry CAPACITY COMPANY MILL/LOCATION CONV/TAD CHANGE ESTIMATED DATE CHANNEL/BUSINESS/PRODUCTS Announced New Capacity through 2016 Double Tree/Royal Gila Bend, AZ Conv 32,000 2015:Q1 PrimeLine PM from Adr

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