Clearwater Paper Corporation · NYSE:CLW
Clearwater Paper — Deutsche Bank 2016 Global Industrials and Materials Summit
43 slides from Clearwater Paper's conference presentation, Jun 8, 2016
Slide 1: Clearwater Paper Corporation
CLEARWATER PAPER CORPORATION JUNE 2016
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This 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, private label tissue market share growth, North Ame
Slide 3: Overview of Clearwater Paper
OVERVIEW OF CLEARWATER PAPER 3
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: 45% of 2015 net sales Consumer products: 55% of 2015 net sales FINANCIAL OVERVIEW FOR 2015 Net Sales: $1.8 Billion Adjusted EBITDA1
Slide 5: Consumer Products Division Overview
CONSUMER PRODUCTS DIVISION OVERVIEW Clearwater Paper is one of the LARGEST NORTH AMERICAN MANUFACTURERS OF PRIVATE LABEL TISSUE, focused on high value tissue products across all categories, retail channels and geographies. 5
Slide 6: Consumer Products Division Market Drivers
CONSUMER PRODUCTS DIVISION MARKET DRIVERS STABLE GROWTH – The tissue market has grown an average of 1% − 2% annually since 1996, consistent with population growth. 144 146 140 142 135 137 131 133 129 130 127 127 124 124 124 119 121 117 113 114 107 104 100 313 315 318 320 323 325 326 329 296 298 301
Slide 7: Consumer Products Division Capacity and Retail Channels
CONSUMER PRODUCTS DIVISION CAPACITY AND RETAIL CHANNELS Change in Industry Lewiston,ID Lady Smith, WI Retail Channel Mix U.S. TISSUE INDUSTRY RETAIL CHANNEL MIX2 2009 2015 Neenah, WI Grocery 37% 32% Elwood, IL Mass+ Supercenter 28% 29% Club 22% 23% Drug 7% 4% Las Vegas,NV Shelby, NC Dollar 3% 4% Okl
Slide 8: Private Label Continues to Capture Market Share in Tissue
PRIVATE LABEL CONTINUES TO CAPTURE MARKET SHARE IN TISSUE Clearwater Paper ranks as one of the LARGEST NORTH AMERICAN PRIVATE LABEL TISSUE MANUFACTURERS Private Label Market Share 2015 U.S. Retail Tissue of Total U.S. ($) Industry Product Mix 60% 49% 50% 45% 43% 43% 41% 40% 2015 Bath Tissue 54% 30%
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 17.5% 6.5% 4.6% Brand Names 72.8% 76.5% 76.9% Other Private Label 9.7% 17.0% 18.5% Clearwater 17.5% 18.1% 18.0% 17.5% Paper Market 7.0% 7.1% 7.4% 7.5% Share by 5.4% 5.7% 6.3% 6.5% 4
Slide 10: North American Market Demand vs. Capacity
NORTH AMERICAN MARKET DEMAND VS. CAPACITY 2014 DEMAND TO CAPACITY 2016E DEMAND TO CAPACITY RATIO OF 97% RATIO OF 97% 12,000 2931 10,000 10,081 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 New Capacity Tissue Capacity Tiss
Slide 11: Paperboard Division Overview
PAPERBOARD DIVISION OVERVIEW LEADING MANUFACTURER OF SBS1 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
Slide 12: Paperboard Demand Expected to Remain Stable
PAPERBOARD DEMAND EXPECTED TO REMAIN STABLE DEMAND FOR SBS PRODUCED IN THE UNITED STATES EXPECTED TO REMAIN STABLE THROUGH 2018 • North American industry backlogs are below seasonal averages • The strong U.S. dollar is attracting European SBS manufacturers, pressuring U.S. exports • China’s ivory bo
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 2015 North American Bleached Paperboard Production by Type2 2015 Lewiston Mill ID Folding 37% Liquid Packaging 23% Cup 16% Plate, Dish, & Tray 14% Coated
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
Slide 15: Successful Execution of Previously Stated Goals
SUCCESSFUL EXECUTION OF PREVIOUSLY STATED GOALS GOAL ASSET RATIONALIZATION/ TIMEFRAME STATUS • Established cross divisional supply chain function to drive out costs system wide ongoing • Certified 41 Green Belts, added 3 Black Belts and completed 1,600 continuous COST INFRASTRUCTURE improvement pr
Slide 16: Clearwater Paper Cross Cycle Financial Model
CLEARWATER PAPER CROSS CYCLE FINANCIAL MODEL 2015 Q1’16 RESULTS RESULTS NET SALES1 100% 100% 100% ADJUSTED GROSS PROFIT % OF NET SALES2 17.0% 13.9% 15.8% ADJUSTED SG&A % OF NET SALES2 (6.0%) (6.7%) (6.9%) ADJUSTED OPERATING PROFIT % OF NET SALES2 11.0% 7.2% 8.9% ADJUSTED NET EARNINGS % OF NET SALES2
Slide 17: Path to 15% Adjusted EBITDA Cross Cycle Target Margin
PATH TO 15% ADJUSTED EBITDA CROSS CYCLE TARGET MARGIN1 GOAL IMPROVE OUR MANUFACTURING 2016 • Pulp optimization at mills FOCUS COST STRUCTURE • Startup of new swing-line in Las Vegas • Standardize the back end of our converting lines GOAL ACHIEVE SUPPLY CHAIN 2016 • Reduce supply chain costs through
Slide 18: 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 years1, 3 • Funding in Year 1 from sale proceeds of specialty mills (MILLIO
Slide 19: Strategic Investment and Operational Improvement Scorecard as of Q1'16
STRATEGIC INVESTMENT AND OPERATIONAL IMPROVEMENT SCORECARD AS OF Q1’16 FULL RUN-RATE EXPECTED ADJUSTED EBITDA1 IMPACT (MILLIONS $) $30-$35 $27-$32 $21-$24 $37-$54 • Strategic plan announced in Q1’15, expected capex 100% of $237-$249 million 80% • Expected to yield a $115-$145 million Adjusted EBITDA
Slide 20: Expected Adjusted EBITDA from Strategic Investments and Operational Improvements
EXPECTED ADJUSTED EBITDA FROM STRATEGIC INVESTMENTS AND OPERATIONAL IMPROVEMENTS1, 2 ADJ. EBITDA1,2 (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 • Expect
Slide 21: Clearwater Paper's Value Proposition
CLEARWATER PAPER’S VALUE PROPOSITION 21
Slide 22: Balanced Capital Allocation
BALANCED CAPITAL ALLOCATION 2011-2015 • Repurchased 28% of total shares Capital Allocation outstanding from 2011 through 2015 2011-2015 2011–2015 • Continued investment in the business Capex 33% while returning capital to investors TAD Expansion & 34% Strategic Capex Stock Repurchase 33% Cumulative
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% 600% Indexed Total Return 551.7 % 500% 473.2 % 400% 300% 246.8 % 200% 176.8 % 154.3 % CLEARWATER PAPER 100% SMALL-CAP TISSUE1 0% PAPERBOARD2 LARGE-CAP CONSUMER3 (100)% Dec-2008 Mar-2010 Jun-2011 Aug
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 12.8 x 12x 2-Year Forward EBITDA Multiple 10x 8x 7.4 x 6.6 x 6x 6.5 x CLEARWATER PAPER 4x SMALL-CAP TISSUE1 PAPERBOARD2 LARGE-CAP CONSUMER3 2x Dec-2008 Mar-2010 Jun-2011 Aug-2012 Nov-2013 Feb-2015 May-2016 SPIN DAT
Slide 25: Adjusted Return on Invested Capital
ADJUSTED RETURN ON INVESTED CAPITAL1 (UNAUDITED) 15% 14% 13% 12.9% 12.8% 12.6% 12.0% 12% 11.2% 11% 10.5% 10% 9% 8% 2 3 4 2011 2012 2013 2014 2015 LTM Ending 5 3/31/16 1,2,3,4,5,6 Adjusted ROIC 1 Adjusted Return on Invested Capital (Adjusted ROIC) is defined as [Net Earnings + Interest Expense] / [Ta
Slide 26: Clearwater Paper's Outlook
CLEARWATER PAPER’S OUTLOOK 26
Slide 27: Second Quarter 2016 Outlook
SECOND QUARTER 2016 OUTLOOK (COMPARED TO Q1’16)1 ARROWS REPRESENT ADJUSTED EBITDA2 IMPACT CONSUMER PRODUCTS PULP AND PAPERBOARD CORPORATE • Slightly lower • Slightly higher: SHIPMENT VOLUME IMPACT ON ADJUSTED 2-4% lower 1-3% higher EBITDA2 • Higher: • Slightly lower: PRICE/MIX IMPACT ON ADJUSTED EBI
Slide 28: Q2'16 Outlook Reconciliation of Non-GAAP Financial Measures
Q2’16 OUTLOOK1 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK THREE MONTHS ENDING JUNE 30, 2016 RANGE OF ESTIMATE (Dollars in thousands) FROM TO Earnings before interest, income taxes, and depreciation & amortization (EBITDA)2: GAAP net earnings $17,000 $22,000 Interest expense, n
Slide 29: Bridge to Q2'16 Adjusted EBITDA Outlook
BRIDGE TO Q2’16 ADJUSTED EBITDA OUTLOOK1,2 ADJ. EBITDA2 (MILLIONS) $75 $65 $56-$64 $60 $1-($1) $0-$2 $2-$3 $2-$4 $0-$1 $55 $45 $35 $25 $15 Q1'16 Shipment Volumes Price/Mix Wood Fiber Energy Maintenance Q2'16 2 Adj. EBITDA & Repairs Adj. EBITDA Outlook 1,2 1 This information is based upon management’
Slide 30: Appendix
4 EE APPENDIX
Slide 31: Definitions of Non-GAAP Measures
DEFINITIONS OF NON-GAAP MEASURES CLEARWATER PAPER DEFINITIONS OF NON-GAAP MEASURES EBITDA is a non-GAAP measure that Clearwater Paper management uses as a supplemental performance measure to evaluate the cash generating capacity of Clearwater Paper. The most directly comparable GAAP measure is net e
Slide 32: Reconciliation of GAAP to Non-GAAP: EBITDA and Adjusted EBITDA
RECONCILIATION OF GAAP TO NON-GAAP: CLEARWATER PAPER EBITDA1 AND ADJUSTED EBITDA1 ($ in millions) 2008 2009 2010 2011 2012 2013 2014 2015 Q1’16 Net earnings/(loss) $9.7 $182.5 $73.8 $39.7 $64.1 $107.0 $(2.3) $56.0 $18.4 Income tax provision (benefit) $5.6 $93.2 $2.4 $31.2 $47.5 $(68.7) $18.6 $36.5 $
Slide 33: 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 Earnings before interest, income taxes, and depreciation & amortization (EBITDA)1 GAAP net earnings $ 5,757 $ 15,597 $ 23,064 $ 11,565 $ 18,446 Interest expense, ne
Slide 34: 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 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 Depreciation and amortization expense 12,977 13,438 14,048 14,132 13,759 Seg
Slide 35: 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) Twelve Months Ending March 31, (Dollars in thousands) 2011 2012 2013 2014 2015 2016 Net earnings (loss) $ 39,674 $ 64,131 $ 106,955 ($2,315) $ 55,983 $ 68,672 Interest ex
Slide 36: 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 Gross profit1 $ 44,194 $ 60,211 $ 68,330 $ 66,817 $ 68,557 Costs associated with Long Island facility closure 554 735 728 446 432 Costs associated with
Slide 37: 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 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 Costs associated with Long Island facility closure 554 735 728 446 4
Slide 38: 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) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 GAAP net earnings $ 5,757 $ 15,597 $ 23,064 $ 11,565 $ 18,446 Special items, after tax:1 Di
Slide 39: 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 FINANCIAL MODEL Shipments Paperboard (short tons) 191,635 204,983 198,535 201,580 201,340 Sales Price Paperboard ($/short ton) $1,031 $997 $979 $956 $952 Segment net sales ($ in thousa
Slide 40: 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 FINANCIAL MODEL Shipments Non-Retail (short tons)1 21,107 24,744 21,250 23,077 24,358 Retail (short tons) 71,102 71,476 76,856 73,004 75,027 Total Tissue Tons 92,209 96,220 98,106 96,081 9
Slide 41: 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 42: Major Maintenance Schedule
MAJOR MAINTENANCE SCHEDULE1 2014 2015 2016 2017 2018 2019 2020 2021 Major Maintenance $MMs $0 $22 $17 TBD $0 TBD TBD TBD Lewiston Q1 Q3 Q3 Q1 Q3 Cypress Bend Q2 Q2 Q2 Q2 1 This information is based upon management’s expectations and estimates as of April 28, 2016. 42
Slide 43: North American Tissue Projected Capacity Change
NORTH AMERICAN TISSUE PROJECTED CAPACITY CHANGE 2015-2017 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 P
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