Clearwater Paper Corporation · NYSE:CLW
Clearwater Paper — Q4 2016 Earnings Presentation
37 slides from Clearwater Paper's earnings presentation, Feb 8, 2017
Slide 1: Clearwater Paper Corporation Fourth Quarter and Full Year 2016 Supplemental Information
CLEARWATER PAPER CORPORATION FOURTH QUARTER 2016 AND FULL YEAR 2016 SUPPLEMENTAL INFORMATION 02/08/17 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: 2016 Full Year Highlights
2016 FULL YEAR HIGHLIGHTS $1,735 MILLION NET SALES, $111 MILLION GAAP OPERATING INCOME, DOWN 10% VS. 2015, $215 MILLION ADJUSTED EBITDA1, UP 2% VS. 2015 DILUTED GAAP EPS OF $2.90, ADJUSTED DILUTED EPS OF $3.441 ENTERED INTO A NEW REVOLVING CREDIT FACILITY TOTALING $300 MILLION, RETIRED $125 MILLION
Slide 4: Fourth Quarter Financial Highlights
FOURTH QUARTER FINANCIAL HIGHLIGHTS $426 MILLION NET SALES, DOWN 2% VS. Q3’16 $24 MILLION GAAP OPERATING INCOME $54 MILLION ADJUSTED EBITDA1, AT HIGHER END OF OUTLOOK RANGE OF $49 TO $55 MILLION DILUTED GAAP EPS OF $0.56, ADJUSTED DILUTED EPS OF $0.821 A $12 MILLION CONTRIBUTION TO OPERATING INCOME
Slide 5: Financial Summary (GAAP Basis)
FINANCIAL SUMMARY (GAAP BASIS) (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands - except per-share amounts) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 Net sales $ 434,026 $ 444,558 $ 442,222 $ 431,595 $ 437,204 $ 436,671 $ 435,320 $ 425,568 $ 1,752,401 $ 1,734,763 Gr
Slide 6: Financial Summary (Adjusted Basis)
FINANCIAL SUMMARY (ADJUSTED BASIS) (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands - except per-share amounts) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Outlook5 2015 2016 Net sales $ 434,026 $ 444,558 $ 442,222 $ 431,595 $ 437,204 $ 436,671 $ 435,320 $ 425,568 1%-3% h
Slide 7: 2016 vs. 2015 Consolidated Adjusted EBITDA Bridge
2016 VS. 2015 CONSOLIDATED ADJUSTED EBITDA1 BRIDGE ADJ. EBITDA1 Lower paperboard pricing, partly offset by a (MILLIONS) PRICE/MIX higher mix of ultra tissue sales, full year benefit of 2015 price increase in tissue $250 VOLUME Higher ultra tissue case shipments $240 Lower negotiated pulp prices, imp
Slide 8: Q4'16 vs. Q3'16 Consolidated Adjusted EBITDA Bridge
Q4’16 VS. Q3’16 CONSOLIDATED ADJUSTED EBITDA1 BRIDGE ADJ. EBITDA1 (MILLIONS) Slightly lower paperboard pricing, higher mix of $60 PRICE/MIX commodity grade paperboard sales, higher mix of tissue parent roll sales $55 $0.9 $54.1 $20.7 $0.2 Lower seasonal retail shipments partly offset by VOLUME highe
Slide 9: Q4'16 vs. Q4'15 Consolidated Adjusted EBITDA Bridge
Q4’16 VS. Q4’15 CONSOLIDATED ADJUSTED EBITDA1 BRIDGE ADJ. EBITDA1 Lower paperboard pricing partly offset by a (MILLIONS) PRICE/MIX higher mix of ultra tissue sales $70 $65 VOLUME Lower paperboard shipments $58.9 $5.2 $60 $0.4 $1.0 $1.7 $0.2 $1.8 $54.1 Lower negotiated pulp prices, partly offset by $
Slide 10: Strategic Investment and Operational Improvement Scorecard as of Q4'16
STRATEGIC INVESTMENT AND OPERATIONAL IMPROVEMENT SCORECARD AS OF Q4’16 • Strategic plan announced FULL RUN-RATE EXPECTED IMPACT (MILLIONS $)2 in Q1’15, expected capex OPERATING INCOME $23-$28 $21-$26 $16-$19 $37-$54 of $237-$249 million ADJUSTED EBITDA1 $30-$35 $27-$32 $21-$24 $37-$54 • Expected to
Slide 11: Key Segment Results – Consumer Products
KEY SEGMENT RESULTS – CONSUMER PRODUCTS (UNAUDITED) CONSUMER PRODUCTS CROSS-CYCLE Q1'15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 FINANCIAL MODEL Shipments Non-Retail (short tons)1 21,107 24,744 21,250 23,077 24,358 20,028 18,384 19,182 Retail (short tons) 71,102 71,476 76,856 73,004 75,027 79,095 8
Slide 12: Clearwater Paper Tissue Shipments and U.S. Retail Tissue Market
CLEARWATER PAPER TISSUE SHIPMENTS AND U.S. RETAIL TISSUE MARKET CLW Q4’16 by CLW Q3’16 by U.S. Retail Tissue Market ($) Market Segment Market Segment (MultiOutlet)1 (% of Tons) (% of Tons) Other Parent Other PRIVATE Parent Rolls 1% Rolls 1% CATEGORY LABEL BRANDS TOTAL 10% 12% AFH AFH 7% Total Retail
Slide 13: Consumer Products Adjusted EBITDA Bridge Q4'16 vs. Q3'16
Q4’16 VS. Q3’16 CONSUMER PRODUCTS ADJUSTED EBITDA1 BRIDGE SEGMENT ADJ. EBITDA1 (MILLIONS) PRICE/MIX Higher mix of parent roll sales $40 Lower retail sales volume partly offset by VOLUME higher parent roll volume $35 $1.7 $0.2 $0.7 $32.0 $30.9 $1.5 Increased internal inventory shipments due to $1.1 $
Slide 14: 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 Q3’16 Q4’16 FINANCIAL MODEL Shipments Paperboard (short tons) 191,635 204,983 198,535 201,580 201,340 199,132 196,271 199,415 Sales Price Paperboard ($/short ton) $1,031 $997 $97
Slide 15: Clearwater Paper Paperboard Shipments and U.S. Paperboard Market
CLEARWATER PAPER PAPERBOARD SHIPMENTS AND U.S. PAPERBOARD MARKET CLW Q4’16 by CLW Q3’16 by U.S. Paperboard Production3 Market Segment Market Segment (% of Tons) (% of Tons) CLEARWATER CATEGORY PAPER OTHER Folding Folding 58% 53% Total Domestic 14% 86% SBS1 Market Share Folding 19% 81% Food Service2
Slide 16: Pulp and Paperboard Adjusted EBITDA Bridge Q4'16 vs. Q3'16
Q4’16 VS. Q3’16 PULP AND PAPERBOARD ADJUSTED EBITDA1 BRIDGE SEGMENT ADJ. EBITDA1 (MILLIONS) Slightly lower paperboard pricing, higher mix of $40 PRICE/MIX commodity grade paperboard sales $19.0 $35.0 $35 VOLUME Higher paperboard shipments $30 $25 Lower purchased pulp usage due to no major WOOD FIBER
Slide 17: Clearwater Paper Cross-Cycle Financial Model
CLEARWATER PAPER CROSS-CYCLE FINANCIAL MODEL CLEARWATER Twelve Months Ending December 31, PAPER CROSS-CYCLE (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 FINANCIAL MODEL Net sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Adjusted gross profit margin1
Slide 18: Adjusted Return on Invested Capital
ADJUSTED RETURN ON INVESTED CAPITAL1 (UNAUDITED) 15% 14% 13% 12.9% 12.8% 12.6% 12% 11.2% 11% 10.5% 10% 9.3% 9% 8% 2 3 4 5 2011 2012 2013 2014 2015 2016 1,2,3,4,5 6 Adjusted ROIC Rolling Adjusted ROIC Average 1 Adjusted Return on Invested Capital (Adjusted ROIC) is defined as [Net Earnings + Interest
Slide 19: Q1'17 Outlook Reconciliation of Non-GAAP Financial Measures
Q1’17 OUTLOOK1 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK THREE MONTHS ENDING MARCH 31, 2017 RANGE OF ESTIMATE (Dollars in thousands) FROM TO Earnings before interest, income taxes, and depreciation & amortization (EBITDA)2: GAAP net earnings $5,900 $10,700 Interest expense, n
Slide 20: Q1'17 Outlook Reconciliation of Non-GAAP Financial Measures
Q1’17 OUTLOOK1 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK THREE MONTHS ENDING MARCH 31, 2017 RANGE OF ESTIMATE (Dollars in thousands) FROM TO GAAP Operating Income $18,000 $25,000 Directors' equity-based compensation expense $500 $500 Costs associated with Long Island facility
Slide 21: Q1'17 Outlook
Q1’17 OUTLOOK1 ADJ. EBITDA2 (MILLIONS) $65 $60 $2-$3 $1-$3 $48-$56 $54 $55 $0-$2 $1-$2 $1-$2 $1-$2 $50 $45 $40 $35 Q4'16 Manchester Shipment Price/Mix Pulp/Wood Maintenance Wages & Q1'17 2 Adj. EBITDA Volumes Fiber Benefits Adj. EBITDA Outlook 1,2 NET SALES 1%-3% higher ADJUSTED OPERATING MARGIN2,3
Slide 22: 2017 Outlook Reconciliation of Non-GAAP Financial Measures
2017 OUTLOOK1 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK TWELVE MONTHS ENDING DECEMBER 31, 2017 RANGE OF ESTIMATE (Dollars in thousands) FROM TO Earnings before interest, income taxes, and depreciation & amortization (EBITDA)2: GAAP net earnings $43,500 $58,500 Interest expens
Slide 23: 2017 Outlook
2017 OUTLOOK1,2 (ASSUMES JANUARY INPUT COST STRUCTURE AND PAPERBOARD AND TISSUE PRICING) ADJ. EBITDA2 (MILLIONS) $300 $280 $10 $15-$25 $260 $40 $20-$25 $240 $205-$225 $220 $215 $5-$10 $200 $180 2016 Productivity Manchester Volume/Price/Mix Cost Inflation APP Major 2017 Adj. EBITDA2 Outage Adj. EBITD
Slide 24: Price and Cost Sensitivities
PRICE AND COST SENSITIVITIES APPROXIMATE ANNUAL PRICE AND COST IMPACT 2016 UNITS $ CHANGE +/- COGS INPUT UNIT OF MEASURE (APPROXIMATION) PER UNIT +/- (DOLLARS IN MILLIONS) Paperboard Price Ton 800,000 $10 $8.0 Tissue Parent Roll Price Ton 50,000 $10 $0.5 Tissue Retail Price Ton 350,000 $25 $8.8 Purc
Slide 25: Appendix
ai ale APPENDIX
Slide 26: Adjusted Gross Profit & Adjusted SG&A Reconciliation
ADJUSTED GROSS PROFIT & ADJUSTED SG&A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 1 Gross profit $ 44,194 $ 60,211 $ 68,330 $ 66,817 $ 68,557 $ 74,820 $ 38,715 $ 57,044 $ 2
Slide 27: Segment Adjusted Operating Income (Loss) Reconciliation
SEGMENT ADJUSTED OPERATING INCOME (LOSS) RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 $ 18,54
Slide 28: Adjusted Net Earnings & Adjusted EPS Reconciliation
ADJUSTED NET EARNINGS & ADJUSTED NET EARNINGS PER DILUTED COMMON SHARE RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands - except per-share amounts) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 GAAP net earnings $ 5,757 $ 15
Slide 29: Adjusted Income Tax Provision Reconciliation
ADJUSTED INCOME TAX PROVISION RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 GAAP income tax provision ($1,698) ($8,702) ($9,100) ($17,005) ($11,673) ($11,905) ($859) ($6,675)
Slide 30: 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 (loss) $ 6,226 $ 12,453 $ 6,253 ($27,247) 2 Interest expense, net 10,7
Slide 31: EBITDA & Adjusted EBITDA Reconciliation
EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 Earnings before interest, income taxes, and depreciation & amortization (EBITDA)1 GAAP net earnings $ 5
Slide 32: Segment EBITDA & Adjusted EBITDA Reconciliation
SEGMENT EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) Twelve Months Ended December 31, (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 2015 2016 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 $ 18,544 $ 17,2
Slide 33: Return on Invested Capital, Tangible Stockholders' Equity & Excess Cash
RETURN ON INVESTED CAPITAL, TANGIBLE STOCKHOLDERS’ EQUITY & EXCESS CASH RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) 2011 2012 2013 2014 2015 2016 Net earnings (loss) $ 39,674 $ 64,131 $ 106,955 ($2,315) $ 55,983 $ 49,554 Interest expense, net 44,809 33,796 44,036
Slide 34: Reconciliation of GAAP to Non-GAAP: Strategic Investments
RECONCILIATION OF GAAP TO NON-GAAP: STRATEGIC INVESTMENTS1 (UNAUDITED) 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
Slide 35: Reconciliation of GAAP to Non-GAAP: Strategic Investments
RECONCILIATION OF GAAP TO NON-GAAP: STRATEGIC INVESTMENTS1 (UNAUDITED) 2 Q4'16 ADJUSTED EBITDA IMPACT CONTINUOUS WAREHOUSE OPERATIONAL (Dollars in millions) DIGESTER AUTOMATION OTHER PROJECTS IMPROVEMENTS Operating income ($ 0.2) $ 1.9 $ 0.0 $ 9.9 Depreciation $ 0.3 $ 0.2 $ 0.5 $ - EBITDA2 $ 0.1 $ 2
Slide 36: Discretionary Free Cash Flow Reconciliation
DISCRETIONARY FREE CASH FLOW RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (UNAUDITED) 1 DISCRETIONARY FREE CASH FLOW Twelve Months Ending December 31, (Dollars in thousands) 2015 2016 GAAP net cash provided by operating activities $ 159,675 $ 172,751 Payments for maintenance capital expenditures 2 (
Slide 37: For More Information: www.clearwaterpaper.com
FOR MORE INFORMATION: WWW.CLEARWATERPAPER.COM 36