Clearwater Paper Corporation · NYSE:CLW
Clearwater Paper — Investor Presentation (March 2015)
38 slides from Clearwater Paper's investor presentation, Mar 17, 2015
Slide 1: Clearwater Paper Corporation
Exhibit 99.1 CLEARWATER PAPER CORPORATION MARCH 2015
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, paperboard demand, Ch
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: 40% of 2014 net sales Consumer products: 60% of 2014 net sales FINANCIAL OVERVIEW FOR 2014 Net Sales: $2.0 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. Source: U.S. Tissue demand per RISI for North America only from US Tissue Data January 2014, U.S. Population per U.S. Census December 20
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% Las Vegas,NV Drug 7% 5% Shelby, NC Dollar 3% 4% Ok
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 2014 U.S. Retail Tissue of Total U.S. Market Industry Product Mix 2014 Bath Tissue 60% Paper Towels 29% Facial Tissue 7%
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 Market Share by Region Source: IRIWorldwide. January 2015 9
Slide 10: North American Tissue Market Demand vs. Capacity
NORTH AMERICAN TISSUE MARKET DEMAND VS. CAPACITY Longer Term Market Remains in Equilibrium Source: RISI August 2013 update for Outlook for World Tissue Business, RISI Feb 2015 US Tissue Monthly Data, and Company estimates 1 It is assumed that any productivity improvements (approximately 100k per yea
Slide 11: Paperboard Division Overview
PAPERBOARD DIVISION OVERVIEW LEADING MANUFACTURER OF SBS 1 used in packaging of premium consumer goods, pharmaceuticals, food and liquid, and food service plates, cups and folding cartons. 11 1 Solid Bleach Sulfate paperboard
Slide 12: Paperboard Demand Remains Stable and Outlook Is Favorable in the U.S.
PAPERBOARD DEMAND REMAINS STABLE AND OUTLOOK IS FAVORABLE IN THE U.S. DEMAND FOR SBS BASED PRODUCTS EXPECTED TO REMAIN STABLE THROUGH 2016 • Secular trend away from foam (polystyrene) cups and products is in the early innings and the SBS market is expected to be a beneficiary • Strong economy bodes
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 Type 2 2014 Lewiston Mill Folding 36% ID Liquid Packaging 23% Cup 17% Plate, Dish, & Tray 13% 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 • Sold 5 specialty mills in December 2014 for $114 million ongoing COST INFRASTRUCTURE • Closure of Long Island and Thomaston converting operations in 2013-2014 • Established cross divisional supply chain fu
Slide 16: Updated Adjusted EBITDA Target in Light of Changes in 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
Slide 17: Clearwater Paper Cross Cycle Financial Model
CLEARWATER PAPER CROSS CYCLE FINANCIAL MODEL 2014 RESULTS 100% 13.9% (6.3%) 7.5% 3.5% 11.5% 1 Includes Corporate SG&A percentage of net sales of 2.5% 17 2 Non-GAAP measure – See definition and reconciliation to most comparable GAAP measure. .
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 2015 • Pulp optimization at mills FOCUS COST STRUCTURE • Standardize the back end of our converting lines • Bring new swi
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 • Funding in Year 1 from sale proceeds of specialty mills (MILLIONS
Slide 20: Expected Adjusted EBITDA from Strategic Investments and Operational Improvements
EXPECTED ADJUSTED EBITDA FROM STRATEGIC INVESTMENTS AND OPERATIONAL IMPROVEMENTS 1,2 • Expected to yield a $115-$145 million Adjusted EBITDA increase over the $230M reset run rate 1 • Assumes an annual $10-15 million of margin pressure • Implies $285-$335 million Adjusted EBITDA run rate in 2018 1 1
Slide 21: Clearwater Paper's Value Proposition
CLEARWATER PAPER’S VALUE PROPOSITION 21
Slide 22: Balanced Capital Allocation
BALANCED CAPITAL ALLOCATION 2011-2014 • 20% of total shares outstanding from 2011 through 2014 Capital Allocation • Continued investment in the business 2011-2014 while returning capital to investors Cumulative Shares Repurchased Total Shares Outstanding (As of Dec 31st) Commitment to return at leas
Slide 23: Clearwater Paper Is a Leader Amongst Its Peers in Value Creation
CLEARWATER PAPER IS A LEADER AMONGST ITS PEERS IN VALUE CREATION 489% Total Shareholder Return Since Spin-off Source: Bloomberg, market data as of October 24, 2014 ² Paperboard peers include International Paper, Graphic Packaging, Kapstone, MeadWestvaco, RockTenn, Packaging Corp Note: Total Sharehol
Slide 24: Which Has Led to Multiple Expansion Since the Spin
WHICH HAS LED TO MULTIPLE EXPANSION SINCE THE SPIN Strong Upward Trend in Multiple Over Time Source: Bloomberg, Capital IQ, market data as of October 24, 2014 1 Small cap tissue peers include Cascades, Orchids, and Wausau. ² Paperboard peers include International Paper, Graphic Packaging, Kapstone,
Slide 25: Return on Invested Capital
RETURN ON INVESTED CAPITAL 1,5 (UNAUDITED) 1 Return on Invested Capital (ROIC) is defined as [Net Earnings + Interest Expense] / [Tangible Stockholders’ Equity5 + Debt – Excess (Deficit) Cash] 2 Weighted Average Cost of Capital (WACC) is defined as [(Debt x Cost of Debt x {1-Marginal Tax Rate})/(Deb
Slide 26: Clearwater Paper's Outlook
CLEARWATER PAPER’S OUTLOOK 26
Slide 27: First Quarter 2015 Outlook
FIRST QUARTER 2015 OUTLOOK 1,2 (COMPARED TO Q4’14, EXCLUDING SPECIALTY MILLS) CONSUMER PRODUCTS (EXCLUDING SPECIALTY MILLS) PULP AND PAPERBOARD CORPORATE • Slightly higher: • Improved shipments: SHIPMENT VOLUMES 0–1% higher 1–5% higher • Slightly Higher: • Slightly Higher: PRICE/MIX 0–1% higher 0–1%
Slide 28: Bridge to Q1'15 Adjusted EBITDA Outlook
BRIDGE TO Q1’15 ADJUSTED EBITDA OUTLOOK 1,2 1 This information is based upon management’s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual
Slide 29: Appendix
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Slide 30: Reconciliation of GAAP to Non-GAAP: Clearwater Paper 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 Net earnings/(loss) $9.7 $182.5 $73.8 $39.7 $64.1 $107.0 $(2.3) $ $ $ $ $ $ Income tax provision (benefit) 5.6 93.2 2.4 31.2 47.5 (68.7) $ (18.6) Interest expense, n
Slide 31: Reconciliation of GAAP to Non-GAAP: Clearwater Paper EBITDA and Adjusted EBITDA
RECONCILIATION OF GAAP TO NON-GAAP: CLEARWATER PAPER EBITDA1 AND ADJUSTED EBITDA 1 Twelve Months Ended December 31, (Dollars in thousands) Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 2012 2013 2014 Earnings before interest, income taxes, and depreciation & amortization (EBITDA)¹ GAAP net (loss)
Slide 32: Return on Invested Capital Reconciliation of Non-GAAP Financial Measures
RETURN ON INVESTED CAPITAL TANGIBLE STOCKHOLDERS’ EQUITY & EXCESS CASH RECONCILIATION OF NON- GAAP FINANCIAL MEASURES (Dollars in thousands) 2009 2010 2011 2012 2013 2014 1 Net earnings $ 69,520 $ 73,800 $ 39,674 $ 64,131 $ 106,955 ($2,315) Interest expense, net 15,505 22,571 44,809 33,796 44,036 39
Slide 33: Key Segment Results Pulp and Paperboard
KEY SEGMENT RESULTS PULP AND PAPERBOARD Pulp and Paperboard Cross-Cycle Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Financial Model Shipments Paperboard (short tons) 186,350 190,518 199,408 188,776 200,665 195,924 201,609 176,467 Sales Price Paperboard ($/short ton) $ 935 $ 946 $ 973 $ 978 $ 988
Slide 34: Pro Forma Impact of Sale of Specialty Mills
PRO FORMA IMPACT OF SALE OF SPECIALTY MILLS Consumer Products Specialty Mills Consumer Products Including Specialty Mills Pro Forma Excluding Specialty Mills Twelve Months Ended Twelve Months Ended (Dollars in millions) December 31, 2014 November 30, 2014 Pro Forma Net sales $ 1,183.4 $ 217.7 $ 965.
Slide 35: Reconciliation of GAAP to Non-GAAP: Q1'15 Outlook
RECONCILIATION OF GAAP TO NON- GAAP: Q1’15 OUTLOOK Outlook Three Months Ending March 31, 2015 Range of Estimate (Dollars in thousands) From To Earnings before interest, income taxes, and 1 depreciation & amortization (EBITDA) GAAP net earnings $4,500 $7,500 Interest expense, net 8,000 8,000 Income t
Slide 36: Reconciliation of GAAP to Non-GAAP: Strategic Investments
RECONCILIATION OF GAAP TO NON- GAAP: STRATEGIC INVESTMENTS Warehouse Paper Machine Operating Sales & marketing Stranded Pulp Optimization Automation Upgrades Converting Line Efficiencies Efficiency Overhead Operating Income $37.5 -$42.5 $32.7 -$37.7 $14.9 -$15.9 $11.4 -$13.4 $20 - $32 $10 - $15 $7 D
Slide 37: 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 38: 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 Double Tree/Royal Gila Bend, AZ Conv 32,000 2015:Q1 PrimeLine PM from Adritz Orchids P
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