Clearwater Paper Corporation · NYSE:CLW
Clearwater Paper — Investor Presentation (March 2018)
42 slides from Clearwater Paper's investor presentation, Mar 28, 2018
Slide 1: Clearwater Paper Corporation March 2018
Clearwater Paper Corporation March 2018 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 operating and free cash flow, capital structure and allocation,
Slide 3: Agenda
- Company overview - Why Clearwater Paper? - Strategy - Consumer products overview - pulp and paperboard overview AGENDA
Slide 4: Company Overview - Our Business
Company Overview - Our Business CLEARWATER PAPER (NYSE: CLW) Publicly-traded since 2008 (NYSE: CLW) with over 70 years of operating history Market capitalization of $609,000,000 as of March 23, 2018 with 16.4 million shares outstanding Investor base largely composed of small-cap, low-turnover, value
Slide 5: Why Clearwater Paper?
Why Clearwater Paper? We are a leader in the growing North American private label tissue segment Approximately 1/3 market share in private label1 National footprint allowing for appropriate scale and partnership with major retailers vs. competitors who are primarily regional We are well positioned i
Slide 6: Strong Cash Flow
1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. Strong Cash Flow Cash Flow From Operations (CFFO) as % of Revenues improved from 7.1% in 2014 to 10.3% in 2017 Revenues declined from 2014 due to sale of Specialty mills CFFO CAGR = 8.5% Disc
Slide 7: Balanced Capital Allocation
1 As of year-end. Balanced Capital Allocation 2011-2017 Repurchased 34% of total shares outstanding from 2011 through 2017 Continued investment in the business while returning capital to investors Capital Allocation 2011-2017 2011–2017 Capex 31% TAD Expansion & Strategic Capex 41% Stock Repurchase 2
Slide 8: Strategy
STRATEGY New graphic?
Slide 9: Our Strategy to Create Shareholder Value
Our Strategy to Create Shareholder Value 1 Non-GAAP measure – See Appendix for the definition. Enhance our leading position in at home private label tissue Aggressively reduce cost structure through capital enabled and organic projects Protect SBS paperboard business and industry leading margins Mai
Slide 10: Enhance Leading Private Label Position
Enhance Leading Private Label Position New Ultra-Quality Tissue Capacity Coming On-line Q1-2019 Adding capacity to meet market demand for fastest growing ultra-tier segment Clearwater Paper’s existing ultra-tier capacity is sold-out Current customers expected to account for 50% of incremental capaci
Slide 11: Aggressively Reduce Cost Structure
Aggressively Reduce Cost Structure Achieve Cross-Cycle Financial Model Resetting Consumer Products Cost Structure Strategic transformation began in 2015 Position Clearwater Paper as a cost-efficient, agile and strategic partner to customers Improve our network of assets to aggressively control cost
Slide 12: Cross Cycle Financial Model
Cross Cycle Financial Model 1 Net sales for the twelve months ending December 31, 2016 and 2017 were $1,7354.8M and $1,730.4M, respectively. 2 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. TWELVE MONTHS ENDING December 31, 2016 2017 100% 1
Slide 13: 2018 Focus: Path to 15% Adjusted EBITDA Target Margin
2018 Focus Path for Achieving a 15% Adjusted EBITDA Cross Cycle Target Margin1 1 Non-GAAP measure – See Appendix for the definition. GOAL Implement corporate SG&A cost savings of at least $20M GOAL Identify additional opportunities to reduce costs in consumer business GOAL Complete construction of p
Slide 14: Protect Paperboard Business and Industry Leading Margins
Protect Paperboard Business and Industry Leading Margins Maintain Top 5 Position in SBS Paperboard Well diversified product applications for SBS Packaging of premium consumer goods Pharmaceuticals Food and liquid products Food service folding cartons, cup and plate Stable demand and improving market
Slide 15: Maintain Prudent Capital Structure
Maintain Prudent Capital Structure Provide Return on Invested Capital Continue to Generate Strong Operating Cash Flow Cash flow from operations CAGR = 8.5% since 2014 Strong cash flow from operations has helped to fund capital projects Sold non-core assets and used proceeds to fund strategic capital
Slide 16: Clearwater Paper Consumer Products
Clearwater Paper Consumer Products 16
Slide 17: Consumer Products – Market Drivers
Despite the historical fluctuations in capacity, the tissue market has grown an average of ~1% annually since 1996, consistent with population growth. Supply comes online in large blocks and it generally takes 12-18 months for demand to catch up 1Source: RISI estimates as of December 2017, U.S. Popu
Slide 18: U.S. Private Label Tissue Landscape
Consumer Products – U.S. Private Label Tissue Landscape Private Label Market Share of Total U.S. ($) 2017 U.S. Retail Tissue Industry Product Mix 2017 Bath Tissue 54% Paper Towels 32% Facial Tissue 10% Napkins 4% Source: IRI Worldwide through week ending December 31, 2017 2013 2014 2015 2016 2017 Ba
Slide 19: Consumer Products – Capacity and Retail Channels
Consumer Products – Capacity and Retail Channels ● Clearwater Paper Tissue Parent Roll ● Clearwater Paper Tissue Converting 1 Annual capacity is an estimate based on assumptions and judgement concerning, among other things, both market demand and product mix, which changes from time-to-time. 2 IRI P
Slide 20: Key Value Drivers & Challenges – Tissue
LEADING PRIVATE LABEL TISSUE MANUFACTURER Growth opportunity in private label market share gains Potential for supply expansion to outpace demand Facility expansion expected to meet market demand for fastest growing ultra-tier segment HIGH-QUALITY BRAND EQUIVALENT TISSUE PRODUCTS Nationwide footprin
Slide 21: Clearwater Paper Pulp and Paperboard
Clearwater Paper Pulp and Paperboard
Slide 22: Paperboard Demand Expected to Remain Stable
Paperboard Demand Expected to Remain Stable U.S. Bleached Paperboard total production (Indexed)1 Source: RISI estimates as of March 2018 ¹ Actual and estimated production was obtained from RISI – Total tons bleached paperboard produced in US ² Average price per short ton of 16 pt. SBS folding carton
Slide 23: Pulp and Paperboard – Overview
Source: Company estimates, RISI, AF&PA 1 Annual capacity is an estimate based on assumptions and judgement concerning, among other things, both market demand and product mix, which changes from time-to time. 2 Represents ~5.7 million tons. 3 Based on RISI capacity data 2017 North American Bleached P
Slide 24: Key Value Drivers & Challenges – Paperboard
Leading supplier of high quality premium bleached board Diversified end market applications Raw material cost inflation Wood Fiber Transportation Chemicals $160M investment in pulp digester Expected annual cost savings $30-$35M Higher yield and improved quality pulp Long-standing customer relationsh
Slide 25: Appendix
ty CLEARWATER, PAPER, Appendix
Slide 26: 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
Slide 27: Definitions of Non-GAAP Measures (continued)
Definitions of Non-GAAP Measures Clearwater Paper Definitions of Non-GAAP Measures Discretionary Free Cash Flow is a non-GAAP measure that Clearwater Paper management defines as net cash provided by operating activities less payments for maintenance capital expenditures. Management uses free cash fl
Slide 28: Reconciliation of GAAP to Non-GAAP: EBITDA and Adjusted EBITDA
Reconciliation of GAAP to Non-GAAP: Clearwater Paper EBITDA1 and Adjusted EBITDA1 ¹ Non-GAAP measure – See Appendix for the definition. 2 Interest expense, net for 2009, 2013, 2014 and 2016 includes debt retirement costs of $6.2, $17.1, $24.4 and $0.4 million respectively. ($ in millions) 2009 2010
Slide 29: Quarterly EBITDA Reconciliation
¹ Non-GAAP measure – See Appendix for the definition. 2 Interest expense, net for the fourth quarter and twelve months ended 2016 includes debt retirement costs of $0.4 million. 3 Non-GAAP measure – See Appendix for the definition. Twelve Months Ended December 31, (Dollars in thousands) Q1'16 Q2'16
Slide 30: Segment EBITDA Reconciliation
1 Segment EBITDA is a non-GAAP measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is segment operating income (loss). Segment EBITDA is segment operating income (loss) adjusted for depreciation and amortization. It should not be considered a
Slide 31: Adjusted Gross Profit and SG&A Reconciliation
1 Gross profit is defined as net sales minus cost of sales. 2 Adjusted gross profit and Adjusted selling, general and administrative expenses exclude the impact of the items listed that we do not believe are indicative of our core operating performance. 3 Selling, general and administrative expenses
Slide 32: Adjusted Operating Income Reconciliation
1 Adjusted operating income (loss) excludes the impact of the items listed that we do not believe are indicative of our core operating performance. Twelve Months Ended December 31, (Dollars in thousands) Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 2016 2017 Consumer Products Operating income $18
Slide 33: Adjusted Net Earnings Reconciliation
1 All non-tax items are tax effected at the expected annual rate for that period. 2 Adjusted net earnings and Adjusted net earnings per diluted common share exclude the impact of the items listed that we do not believe are indicative of our core operating performance. 3 The federal tax rate change i
Slide 34: Pulp and Paperboard Cross-Cycle Financial Model
1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. 2 Non-GAAP measure – Segment Adjusted EBITDA margin is defined as Segment Adjusted EBITDA divided by Segment net sales. 3 Results include the impact of Manchester Industries acquisition, whic
Slide 35: Consumer Products Cross-Cycle Financial Model
1 Includes away-from-home (AFH), contract and parent roll tissue products. 2 Includes retail, AFH, and contract tissue case products. 3 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. 4 Non-GAAP measure – Segment Adjusted EBITDA margin is de
Slide 36: Company Overview – Financial Highlights (Adjusted Basis)
Company Overview – Financial Highlights (Adjusted Basis) (Unaudited) Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Net Sales $437,204 $436,671 $435,320 $425,568 $437,525 $429,663 $426,504 $436,716 Adjusted operating income (loss)1 $38,920 $44,308 $11,562 $30,300 $25,426 $19,505 $12,181 $32,021 Con
Slide 37: Reconciliation of GAAP to Non-GAAP: Shelby Expansion
Reconciliation of GAAP to Non-GAAP: SHELBY EXPANSION1 (Unaudited) 1 Based on Q1’15 prices, input costs, and market and industry data. Many factors are outside the control of management, including particularly market pricing, input costs for commodity products, and actual results may differ materiall
Slide 38: Shelby Expansion: $340 Million
Shelby Expansion: $340 Million PAPER MACHINE Install NTT tissue machine and converting equipment location Shelby, NC adjacent to current tissue plant Capacity 70,000 Tons Expected Cost $283 Million Expected START of PRODUCTION Q1-2019 Expected Full SHIPMENT RUN-Rate Late 2020 WAREHOUSE CONSOLIDATION
Slide 39: Rationale for Adding Capacity
Rationale for Adding Capacity Needed to meet our customers' growth forecasts Critical part of ultra-quality consumer tissue growth plan Helps to geographically match various quality categories with our customers' needs The NTT paper machine was selected for its technology that enables us to produce
Slide 40: Discretionary Free Cash Flow Reconciliation
1 Non-GAAP measure — See Appendix for the definition. 2 Maintenance capital expenditures consists of non-discretionary capital expenditures for purposes of replacing or maintaining current assets or that are essential in nature for health, safety or environmental purposes. DISCRETIONARY FREE CASH FL
Slide 41: Major Maintenance Schedule
1 This information is based upon management’s expectations and estimates as of February 5, 2018. 2015 2016 2017 2018 2019 2020 2021 2022 Major Maintenance $ Millions $22 $18 $30 $0 TBD TBD TBD TBD Lewiston Q1 Q3 Q3 Q1 Q3 Q1 Cypress Bend Q2 Q2 Q3 Q2 Major Maintenance Schedule1
Slide 42: North American Tissue Announced Capacity Change
North American Tissue Announced Capacity Change Source: RISI and Sofidel Press Release dated March 16, 2018 Company Mill/Location Conv/TAD Capacity Change Estimated Date Channel/Business/Products Announced New Capacity through 2019 Von Drehle Corporation Natchez, MS Conv 35,000 2016:Q1 Valmet Advant
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