Slide 1: Clearwater Paper Corporation Second Quarter 2016 Supplemental Information
CLEARWATER PAPER CORPORATION SECOND QUARTER 2016 SUPPLEMENTAL INFORMATION 7/21/16 LINDA MASSMAN PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR JOHN HERTZ SENIOR VICE PRESIDENT FINANCE AND CHIEF FINANCIAL OFFICER
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation of supplemental information 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 financial models; the costs, timing
Slide 3: Second Quarter Financial Highlights
SECOND QUARTER FINANCIAL HIGHLIGHTS $437 MILLION NET SALES, FLAT VS. Q1’16 $40 MILLION GAAP OPERATING INCOME, UP 6% VS. Q1’16 1 $66 MILLION ADJUSTED EBITDA , UP 10% VS. Q1’16, ABOVE HIGH END OF OUR OUTLOOK OF $56 TO $64 MILLION DILUTED GAAP EPS OF $1.21, RECORD HIGH ADJUSTED DILUTED EPS OF 1 $1.37 P
Slide 4: Financial Summary (GAAP Basis)
FINANCIAL SUMMARY (GAAP BASIS) (UNAUDITED) (Dollars in thousands - except per-share amounts) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Net sales $ 434,026 $ 444,558 $ 442,222 $ 431,595 $ 437,204 $ 436,671 Selling, general and administrative expenses ($28,957) ($28,138) ($28,284) ($30,308) ($30,795) ($34,6
Slide 5: Financial Summary (Adjusted Basis)
FINANCIAL SUMMARY (ADJUSTED BASIS) (UNAUDITED) (Dollars in thousands - except per-share amounts) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Outlook5 Net sales $ 434,026 $ 444,558 $ 442,222 $ 431,595 $ 437,204 $ 436,671 0%-1% higher 1 Adjusted gross profit $ 46,478 $ 60,946 $ 69,170 $ 67,280 $ 68,989
Slide 6: Q2'16 vs. Q1'16 Consolidated Adjusted EBITDA Bridge
Q2’16 VS. Q1’16 CONSOLIDATED ADJUSTED EBITDA1 BRIDGE ADJ. EBITDA1 (MILLIONS) Higher mix of retail tissue sales, partly offset by $70 PRICE/MIX lower paperboard pricing $3.0 $0.2 $66.3 Lower tissue parent roll shipments and lower $65 $0.9 $1.0 VOLUME demand in paperboard commodity grades $3.0 $0.9 $0
Slide 7: Q2'16 vs. Q2'15 Consolidated Adjusted EBITDA Bridge
Q2’16 VS. Q2’15 CONSOLIDATED ADJUSTED EBITDA1 BRIDGE ADJ. EBITDA1 (MILLIONS) Lower paperboard pricing, partly offset by a PRICE/MIX higher mix of retail tissue sales $70 $3.0 $0.8 $66.3 $65 $1.9 $0.9 Higher retail tissue shipments, partly offset by $7.0 VOLUME lower paperboard shipments $60 $5.8 $55
Slide 8: Strategic Investment and Operational Improvement Scorecard as of Q2'16
STRATEGIC INVESTMENT AND OPERATIONAL IMPROVEMENT SCORECARD AS OF Q2’16 FULL RUN-RATE EXPECTED IMPACT (MILLIONS $)2 • Strategic plan announced OPERATING INCOME $23-$28 $21-$26 $16-$19 $37-$54 in Q1’15, expected capex ADJUSTED EBITDA1 $30-$35 $27-$32 $21-$24 $37-$54 of $237-$249 million • Expected to
Slide 9: Key Segment Results – Consumer Products
KEY SEGMENT RESULTS – CONSUMER PRODUCTS (UNAUDITED) CONSUMER PRODUCTS CROSS-CYCLE Q1'15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 FINANCIAL MODEL Shipments Non-Retail (short tons)1 21,107 24,744 21,250 23,077 24,358 20,028 Retail (short tons) 71,102 71,476 76,856 73,004 75,027 79,095 Total Tissue Tons 92,209 96
Slide 10: Clearwater Paper Tissue Shipments and U.S. Retail Tissue Market
CLEARWATER PAPER TISSUE SHIPMENTS AND U.S. RETAIL TISSUE MARKET CLW Q2’16 by CLW Q1’16 by U.S. Retail Tissue Market ($) Market Segment Market Segment (MultiOutlet)1 (% of Tons) (% of Tons) Other Other PRIVATE Parent Parent 2% Rolls 1% CATEGORY LABEL BRANDS TOTAL Rolls 11% 15% AFH Total Retail 7% AFH
Slide 11: Q2'16 vs. Q1'16 Consumer Products Adjusted EBITDA Bridge
Q2’16 VS. Q1’16 CONSUMER PRODUCTS ADJUSTED EBITDA1 BRIDGE SEGMENT ADJ. EBITDA1 (MILLIONS) $40 PRICE/MIX Higher mix of retail sales $0.9 $1.0 $35 $1.7 $0.2 $0.7 $33.3 $32.6 Lower parent roll shipments, partly offset by VOLUME higher retail shipments $30 WAGES & BENEFITS Lower benefit expense $25 SG&A
Slide 12: Key Segment Results – Pulp and Paperboard
KEY SEGMENT RESULTS – PULP AND PAPERBOARD (UNAUDITED) PULP AND PAPERBOARD CROSS-CYCLE Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 FINANCIAL MODEL Shipments Paperboard (short tons) 191,635 204,983 198,535 201,580 201,340 199,132 Sales Price Paperboard ($/short ton) $1,031 $997 $979 $956 $952 $948 Segment net
Slide 13: Clearwater Paper Paperboard Shipments and U.S. Paperboard Market
CLEARWATER PAPER PAPERBOARD SHIPMENTS AND U.S. PAPERBOARD MARKET CLW Q2’16 by CLW Q1’16 by U.S. Paperboard Production3 Market Segment Market Segment (% of Tons) (% of Tons) CLEARWATER CATEGORY PAPER OTHER Folding Folding 57% 55% Total Domestic 15% 85% SBS1 Market Share Folding 20% 80% Food Service2
Slide 14: Q2'16 vs. Q1'16 Pulp and Paperboard Adjusted EBITDA Bridge
Q2’16 VS. Q1’16 PULP AND PAPERBOARD ADJUSTED EBITDA1 BRIDGE SEGMENT ADJ. EBITDA1 (MILLIONS) PRICE/MIX Slightly lower paperboard pricing $50 VOLUME Lower demand in commodity grades $3.0 $46.5 $45 CHEMICALS Lower usage and pricing $3.0 $0.8 $41.5 Lower natural gas prices, higher internal $0.8 $1.0 ENE
Slide 15: Projected 2016 Pulp and Paperboard Maintenance Expense of $68 Million
PROJECTED 2016 PULP AND PAPERBOARD MAINTENANCE EXPENSE OF $68 MILLION (DIRECT AND INDIRECT COSTS) Projected 2016 Pulp and Paperboard Maintenance Expense (Millions $) $40 $34 $30 $20 $12 $12 $10 $10 $- Q1'16 Q2'16 Q3'16 Q4'16 Major outage at Idaho, projected cost of $15-$18 million 14
Slide 16: Clearwater Paper Cross-Cycle Financial Model
CLEARWATER PAPER CROSS-CYCLE FINANCIAL MODEL CLEARWATER PAPER CROSS-CYCLE (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 FINANCIAL MODEL Net sales 100% 100% 100% 100% 100% 100% 100% Adjusted gross profit margin1 10.7% 13.7% 15.6% 15.6% 15.8% 17.3% 17.0% Adjusted SG&A expenses1 as % of ne
Slide 17: Adjusted Return on Invested Capital
ADJUSTED RETURN ON INVESTED CAPITAL1 (UNAUDITED) 15% 14% 13% 12.9% 12.8% 12.6% 12.6% 12% 11.2% 11% 10.5% 10% 9% 8% 2 3 4 2011 2012 2013 2014 2015 LTM Ending 5 6/30/16 1,2,3,4,5 6 Adjusted ROIC Rolling Adjusted ROIC Average 1 Adjusted Return on Invested Capital (Adjusted ROIC) is defined as [Net Earn
Slide 18: Third Quarter 2016 Outlook
THIRD QUARTER 2016 OUTLOOK (COMPARED TO Q2’16)1 ARROWS REPRESENT ADJUSTED EBITDA2 IMPACT CONSUMER PRODUCTS PULP AND PAPERBOARD CORPORATE • Higher Lower REVENUE CHANGE 0-1% higher 0-1% lower • Lower • Stable SHIPMENT VOLUME IMPACT ON ADJUSTED 2-4% lower EBITDA2 • Higher: • Lower: PRICE/MIX IMPACT ON
Slide 19: Q3'16 Outlook Reconciliation of Non-GAAP Financial Measures
Q3’16 OUTLOOK1 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK THREE MONTHS ENDING SEPTEMBER 30, 2016 RANGE OF ESTIMATE (Dollars in thousands) FROM TO Earnings before interest, income taxes, and depreciation & amortization (EBITDA)2: GAAP net earnings $0 $3,000 Interest expense, ne
Slide 20: 2016 Outlook Reconciliation of Non-GAAP Financial Measures
2016 OUTLOOK1 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK TWELVE MONTHS ENDING DECEMBER 31, 2016 RANGE OF ESTIMATE (Dollars in thousands) FROM TO Earnings before interest, income taxes, and depreciation & amortization (EBITDA)2 GAAP net earnings $56,000 $61,000 Interest expense
Slide 21: Bridge to Q3'16 Adjusted EBITDA Outlook
BRIDGE TO Q3’16 ADJUSTED EBITDA OUTLOOK1,2 ADJ. EBITDA2 (MILLIONS) $75 $66 $1-$2 $1-$3 $4-$5 $65 $2 $21-$22 $55 $45 $2 $30-$35 $35 $1 $3 $25 $15 Q2'16 Shipment Volumes Price/Mix Unplanned Idaho Wood Fiber Maintenance Chemicals/Energy Wages & Benefits Arkansas Boiler Q3'16 Adj. EBITDA 2 Power Outage
Slide 22: Appendix
ai ale APPENDIX
Slide 23: Adjusted Gross Profit & Adjusted SG&A Reconciliation
ADJUSTED GROSS PROFIT & ADJUSTED SG&A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Gross profit1 $ 44,194 $ 60,211 $ 68,330 $ 66,817 $ 68,557 $ 74,820 Costs associated with Long Island facility closure 554 735 728 446 432 533 Co
Slide 24: Segment Adjusted Operating Income (Loss) Reconciliation
SEGMENT ADJUSTED OPERATING INCOME (LOSS) RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 $ 18,544 Costs associated with Long Island facility closure 55
Slide 25: Adjusted Net Earnings & Adjusted EPS Reconciliation
ADJUSTED NET EARNINGS & ADJUSTED NET EARNINGS PER DILUTED COMMON SHARE RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands - except per-share amounts) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 GAAP net earnings $ 5,757 $ 15,597 $ 23,064 $ 11,565 $ 18,446 $ 20,864 Special items,
Slide 26: Adjusted Income Tax Provision Reconciliation
ADJUSTED INCOME TAX PROVISION RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (UNAUDITED) (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 GAAP income tax provision ($1,698) ($8,702) ($9,100) ($17,005) ($11,673) ($11,905) Special items, tax impact: Directors' equity-based compensation benefit
Slide 27: EBITDA & Adjusted EBITDA Reconciliation
EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'14 Q2'14 Q3'14 Q4'14 Earnings before interest, income taxes, and depreciation & amortization (EBITDA)1 GAAP net earnings $ 6,226 $ 12,453 $ 6,253 ($27,247) Interest expense, net 10,734 10,688
Slide 28: EBITDA & Adjusted EBITDA Reconciliation
EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Earnings before interest, income taxes, and depreciation & amortization (EBITDA)1 GAAP net earnings $ 5,757 $ 15,597 $ 23,064 $ 11,565 $ 18,446 $ 20,864 Inter
Slide 29: Segment EBITDA & Adjusted EBITDA Reconciliation
SEGMENT EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 $ 18,544 Depreciation and amortization expense 12,977 13,438 14,048 14
Slide 30: ROIC, Tangible Stockholders' 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 2016 Net earnings (loss) $ 39,674 $ 64,131 $ 106,955 ($2,315) $ 55,983 $ 73,939 Interest exp
Slide 31: Reconciliation of GAAP to Non-GAAP: Strategic Investments
RECONCILIATION OF GAAP TO NON-GAAP: STRATEGIC INVESTMENTS1 FULL RUN-RATE EXPECTED ADJUSTED EBITDA 2 IMPACT OTHER PROJECTS OPERATIONAL IMPROVEMENTS CONTINUOUS WAREHOUSE PAPER MACHINE CONVERTING OPERATIONAL SALES & MARKETING STRANDED (Dollars in millions) DIGESTER AUTOMATION UPGRADES LINE EFFICIENCY E
Slide 32: For More Information: www.clearwaterpaper.com
FOR MORE INFORMATION: WWW.CLEARWATERPAPER.COM 31