Slide 1: Clearwater Paper Corporation Third Quarter 2016 Supplemental Information
CLEARWATER PAPER CORPORATION THIRD QUARTER 2016 SUPPLEMENTAL INFORMATION 10/20/16 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: Third Quarter Financial Highlights
THIRD QUARTER FINANCIAL HIGHLIGHTS $435 MILLION NET SALES, FLAT VS. Q2’16, $9 MILLION GAAP OPERATING INCOME 1 $34 MILLION ADJUSTED EBITDA , AT HIGHER END OF OUTLOOK OF $30 TO $35 MILLION HIGHEST TISSUE SHIPMENTS AND NET SALES SINCE SALE OF SPECIALTY MILLS IN Q4’14 COMPLETED MAJOR MAINTENANCE AT OUR
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 Q3'16 Net sales $ 434,026 $ 444,558 $ 442,222 $ 431,595 $ 437,204 $ 436,671 $ 435,320 Selling, general and administrative expenses ($28,957) ($28,138) ($28,284) ($30,308)
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 Q4'16 Outlook5 Net sales $ 434,026 $ 444,558 $ 442,222 $ 431,595 $ 437,204 $ 436,671 $ 435,320 5%-7% lower 1 Adjusted gross profit $ 46,478 $ 60,946 $ 69,170 $ 6
Slide 6: Q3'16 vs. Q2'16 Consolidated Adjusted EBITDA Bridge
Q3’16 VS. Q2’16 CONSOLIDATED ADJUSTED EBITDA1 BRIDGE ADJ. EBITDA1 (MILLIONS) Lower paperboard pricing and higher mix of $70 PRICE/MIX commodity grade paperboard sales, partly offset $66.3 $2.0 $1.2 $0.5 $0.7 $3.0 by higher mix of retail tissue sales $65 $25.3 Slightly lower paperboard shipments and
Slide 7: Q3'16 vs. Q3'15 Consolidated Adjusted EBITDA Bridge
Q3’16 VS. Q3’15 CONSOLIDATED ADJUSTED EBITDA1 BRIDGE ADJ. EBITDA1 (MILLIONS) Lower paperboard pricing, partly offset by PRICE/MIX higher mix of retail tissue sales $70 $65 Slightly lower paperboard shipments, partly $63.2 $8.9 VOLUME offset by higher retail tissue shipments $3.5 $1.6 $21.2 $60 $3.2
Slide 8: Strategic Investment and Operational Improvement Scorecard as of Q3'16
STRATEGIC INVESTMENT AND OPERATIONAL IMPROVEMENT SCORECARD AS OF Q3’16 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-$249 million • Expected to
Slide 9: Key Segment Results – Consumer Products
KEY SEGMENT RESULTS – CONSUMER PRODUCTS (UNAUDITED) CONSUMER PRODUCTS CROSS-CYCLE Q1'15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 FINANCIAL MODEL Shipments Non-Retail (short tons)1 21,107 24,744 21,250 23,077 24,358 20,028 18,384 Retail (short tons) 71,102 71,476 76,856 73,004 75,027 79,095 82,216 Total T
Slide 10: Clearwater Paper Tissue Shipments and U.S. Retail Tissue Market
CLEARWATER PAPER TISSUE SHIPMENTS AND U.S. RETAIL TISSUE MARKET CLW Q3’16 by CLW Q2’16 by U.S. Retail Tissue Market ($) Market Segment Market Segment (MultiOutlet)1 (% of Tons) (% of Tons) Parent Other Parent Other PRIVATE Rolls 1% Rolls 2% CATEGORY LABEL BRANDS TOTAL 10% 11% AFH AFH 7% Total Retail
Slide 11: Q3'16 vs. Q2'16 Consumer Products Adjusted EBITDA Bridge
Q3’16 VS. Q2’16 CONSUMER PRODUCTS ADJUSTED EBITDA1 BRIDGE SEGMENT ADJ. EBITDA1 (MILLIONS) $40 PRICE/MIX Higher mix of retail tissue sales $1.2 $2.0 $2.0 $0.5 $2.0 $35 $2.9 Higher retail shipments, partly offset by lower VOLUME parent roll shipments $33.3 $0.8 $30.9 $30 PULP Lower external pulp prici
Slide 12: Key Segment Results – Pulp and Paperboard
KEY SEGMENT RESULTS – PULP AND PAPERBOARD (UNAUDITED) PULP AND PAPERBOARD CROSS-CYCLE Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 FINANCIAL MODEL Shipments Paperboard (short tons) 191,635 204,983 198,535 201,580 201,340 199,132 196,271 Sales Price Paperboard ($/short ton) $1,031 $997 $979 $956 $952 $9
Slide 13: Clearwater Paper Paperboard Shipments and U.S. Paperboard Market
CLEARWATER PAPER PAPERBOARD SHIPMENTS AND U.S. PAPERBOARD MARKET CLW Q3’16 by CLW Q2’16 by U.S. Paperboard Production3 Market Segment Market Segment (% of Tons) (% of Tons) CLEARWATER CATEGORY PAPER OTHER Folding Folding 58% 57% Total Domestic 14% 86% SBS1 Market Share Folding 19% 81% Food Service2
Slide 14: Q3'16 vs. Q2'16 Pulp and Paperboard Adjusted EBITDA Bridge
Q3’16 VS. Q2’16 PULP AND PAPERBOARD ADJUSTED EBITDA1 BRIDGE SEGMENT ADJ. EBITDA1 (MILLIONS) Lower paperboard pricing and higher mix of PRICE/MIX commodity grade paperboard sales $50 $46.5 $2.5 $45 $1.2 VOLUME Slightly lower paperboard shipments $1.0 $22.4 $40 ENERGY Higher natural gas pricing $35 Id
Slide 15: Clearwater Paper Cross-Cycle Financial Model
CLEARWATER PAPER CROSS-CYCLE FINANCIAL MODEL CLEARWATER Nine Months Ending PAPER September 30, CROSS-CYCLE (Dollars in thousands) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 2015 2016 FINANCIAL MODEL Net sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Adjusted gross profit margin1 10.7% 13.7%
Slide 16: 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% 9.9% 10% 9% 8% 2 3 4 2011 2012 2013 2014 2015 LTM Ending 5 9/30/16 1,2,3,4,5 6 Adjusted ROIC Rolling Adjusted ROIC Average 1 Adjusted Return on Invested Capital (Adjusted ROIC) is defined as [Net Earni
Slide 17: Fourth Quarter 2016 Outlook
FOURTH QUARTER 2016 OUTLOOK (COMPARED TO Q3’16)1 CONSUMER PRODUCTS PULP AND PAPERBOARD CORPORATE • Lower • Lower REVENUE CHANGE 6%-8% lower 4%-6% lower • Lower • Lower SHIPMENT VOLUMES • Lower • Lower PRICE/MIX • Cost/shipped ton: • Cost/shipped ton: PULP/WOOD FIBER COSTS stable higher • Cost/shippe
Slide 18: Q4'16 Outlook Reconciliation of Non-GAAP Financial Measures
Q4’16 OUTLOOK1 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) OUTLOOK THREE 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 $11,000 $15,000 Interest expens
Slide 19: Bridge to Q4'16 Adjusted EBITDA Outlook
BRIDGE TO Q4’16 ADJUSTED EBITDA OUTLOOK1,2 ADJ. EBITDA2 (MILLIONS) $75 $65 $49-$55 $55 $25-$27 $1 $1 $1 $45 $34 $2-$4 $35 $4-$6 $25 $1 $15 Q3'16 Shipment Volumes Price/Mix Pulp/Wood Fiber Maintenance Chemicals/Energy Transportation Op. & Pkg. Supplies Q4'16 Adj. EBITDA 2 Adj. EBITDA Outlook 1,2 1 Th
Slide 20: Appendix
ai ale APPENDIX
Slide 21: 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 Q3'16 Gross profit1 $ 44,194 $ 60,211 $ 68,330 $ 66,817 $ 68,557 $ 74,820 $ 38,715 Costs associated with Long Island facility closure 554 735 728
Slide 22: 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 Q3'16 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 $ 18,544 $ 17,201 Costs associated with Long Island faci
Slide 23: 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 Q2'16 Q3'16 GAAP net earnings $ 5,757 $ 15,597 $ 23,064 $ 11,565 $ 18,446 $ 20,864 $ 901 Sp
Slide 24: 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 Q3'16 GAAP income tax provision ($1,698) ($8,702) ($9,100) ($17,005) ($11,673) ($11,905) ($859) Special items, tax impact: Directors' equity-based compens
Slide 25: 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 26: 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 Q3'16 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
Slide 27: 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 Q3'16 Consumer Products Operating income $ 12,395 $ 17,032 $ 15,521 $ 10,756 $ 18,390 $ 18,544 $ 17,201 Depreciation and amortization expense 12,977 1
Slide 28: 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 (Dollars in thousands) 2011 2012 2013 2014 2015 September 30, 2016 Net earnings (loss) $ 39,674 $ 64,131 $ 106,955 ($2,315) $ 55,983 $ 51,776 Interes
Slide 29: 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 30: Reconciliation of GAAP to Non-GAAP: Strategic Investments
RECONCILIATION OF GAAP TO NON-GAAP: STRATEGIC INVESTMENTS1 2 Q3'16 ADJUSTED EBITDA IMPACT CONTINUOUS WAREHOUSE OPERATIONAL (Dollars in millions) DIGESTER AUTOMATION OTHER PROJECTS IMPROVEMENTS Operating income $ 0.1 $ 1.7 $ 0.7 $ 9.4 Depreciation $ 0.1 $ 0.2 $ 0.6 $ - EBITDA2 $ 0.2 $ 1.9 $ 1.3 $ 9.4
Slide 31: For More Information: www.clearwaterpaper.com
FOR MORE INFORMATION: WWW.CLEARWATERPAPER.COM 30