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| 8-K - FORM 8-K - Clearwater Paper Corp | d495710d8k.htm |
 Clearwater Paper Corporation
March 2013
Exhibit 99.1 |
 1
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
our
strategies
to
grow
our
business,
optimize
profitability
and
build
a
high
performance
culture,
North
American
tissue
and
paperboard market demand, expected tissue capacity increases, production and shipments from our new
tissue machine and converting lines in Shelby, North Carolina, expected future savings from
cost synergies relating to our Cellu Tissue acquisition, the aggregate dollar value of shares authorized to be repurchased pursuant to the
stock repurchase program, uses and sufficiency of the company's cash, the company's future generation
of discretionary free cash flow, the execution period for the stock repurchase program,
shareholder returns, and the expected amount and timing of the additional return of capital to shareholders, efficiency projects and reductions to our
cost structure, future growth and market opportunities, including in the Midwestern and Eastern U.S.
regions and non-grocery channels, market segment dynamics, internal pulp production and
requirements, customer purchases of private label tissue, production capacity of operating divisions and the expected benefit thereof, our
capital allocation objectives, our EBITDA margins, our planned expansion into other product types, our
financial priorities, including plans to de-lever through EBITDA expansion and revenue
growth, our estimated Adjusted EBITDA run-rate, our implied enterprise value, equity value and share price, sales volumes, production, product
volumes
shipped,
pricing
for
our
products,
pulpcosts,
wood
fiber
costs
and
supply,
chemical
costs,
transportation
costs,
energy
costs,
including
natural
gas,
costs
and
timing of major maintenance and repairs, and our financial condition and results of operations.
Words such as “anticipate,” “expect,” “intend,” “will,” “plan,” “goals,”
“objectives,”
“target,”
“project,”
“believe,”
“schedule,”
“estimate,”
“may,”
and
similar
expressions
are
intended
to
identify
such
forward-looking
statements.
These
forward-
looking
statements
are
based
on
management’s
current
expectations,
estimates,
assumptions
and
projections
that
are
subject
to
change.
Our
actual
results
of
operations
may differ materially from those expressed or implied by the forward-looking statements contained
in this presentation. Important factors that could cause or contribute to such differences
include the risk factors described in Item 1A of Part I of our Form 10-K for the year ended December 31, 2012, as well as the following:
•
difficulties
with
the
optimization
and
realization
of
the
benefits
expected
from
our
new
through-air-dried
paper
machine
and
converting
lines
in
Shelby,
North
Carolina;
•
increased dependence on wood pulp;
•
changes in the cost and availability of wood fiber and wood pulp;
•
changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and
repairs; •
changes in transportation costs and disruptions in transportation services;
•
competitive pricing pressures for our products, including as a result of increased capacity as
additional manufacturing facilities are operated by our competitors;
•
changes in customer product preferences and competitors' product offerings;
•
manufacturing or operating disruptions, including equipment malfunction and damage to our
manufacturing facilities; •
changes in the U.S. and international economies and in general economic conditions in the regions and
industries in which we operate; •
cyclical industry conditions;
•
reliance on a limited number of third-party suppliers for raw materials;
•
labor disruptions
•
our ability to generate cash;
•
fluctuations and volatility in the company's stock price; and
•
inability to successfully implement our expansion strategies.
Forward-looking statements contained in this presentation present management’s views only as
of the date of this presentation. We undertake no obligation to publicly update
forward-looking statements, whether as a result of new information, future events or otherwise. |
 Agenda
2 |
 3
Overview of Clearwater Paper |
 4
•
We are a company formed in late 2008 with more than
60 years of operating history
•
Operate two business segments of similar size
–
Pulp and Paperboard: 39% of 2012 net sales
–
Consumer Products: 61% of 2012 net sales
•
Financial overview
–
2012 Net Sales: $1.9 billion
–
2012 Adjusted EBITDA¹: $227.8
million –
2008 to 2012 Adjusted EBITDA¹
CAGR: 32%
•
Approximately 3,860 employees
Introduction to Clearwater Paper
Note: As of 31-Dec-2012
¹
See Appendix for the definition of Adjusted EBITDA as well as the reconciliation to
the most comparable GAAP measure. |
 Overview of Consumer Tissue Division
5
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
Key Products
Overview of Facilities
2012 U.S. Tissue Industry Retail Channel Mix²
2012 Clearwater Paper Retail Channel Mix²
Clearwater Paper Tissue
Converting
Clearwater Paper Tissue
Parent Roll
Tissue Production¹: 585,000 tons
Tissue Conversion¹: 477,000 tons
Source: Company estimates, IRI Infoscan
¹
Represents 2012 production and conversion volumes including
machine-glazed. ²
Retail channel share by dollar amount sold.
Grocery
37%
Mass +
Supercenter
27%
Club
21%
Drug
7%
Dollar
4%
All Other
4% |
 6
Clearwater Paper is Well Positioned to Capitalize on Favorable
Tissue Market Dynamics
Stable Growth -
The tissue market has grown an average of 2% annually since 1996,
consistent with population growth
Source: U.S. Tissue demand per RISI, U.S. Population per U.S. Census
Note: Projected U.S. Tissue Demand based on North American tissue demand estimates.
|
 7
Private Label Continues to Capture Market Share in Tissue
Clearwater Paper ranks as one of the largest North American private label tissue
manufacturers
Source: SymphonyIRI InfoScan, 52 Weeks Ending Feb 3, 2013.
Based on volume of equalized cases. |
 8
Significant Opportunity Still Exists for Clearwater Paper To Expand
Across the U.S. Private Label Market
•
Clearwater Paper led the development of private label tissue in
the Western U.S.
•
The Company is focused on growing the private label category and market share in
the Eastern U.S.
•
If Clearwater could replicate its West model across the U.S.:
–26% share in Midwest would be an incremental 28 million cases
–26% share in East would be an incremental 44 million cases
2012 Multi-Outlet1
West
Midwest
East
Total
Equalized Case Volumes (mm)
84
178
230
493
% of U.S. Population
23%
34%
43%
100%
% Private Label (PL)
33%
25%
25%
26%
% Clearwater Paper of PL
81%
40%
28%
38%
Source: SymphonyIRI InfoScan, 52 Weeks Ending Feb 3, 2013.
1
Multi-Outlet includes Grocery, Drug, Mass, Dollar and Military.
Based on volume of equalized cases. |
 North American Market Demand Expected to Absorb Projected
Capacity Increases
9
Source: RISI and company estimates
Note: Projected capacity changes represents both virgin and recycled tissue capacity
changes. Please
see
Appendix
for
breakdown
of
specific
projects
reflected
in
the
capacity
changes.
(in thousands of short tons)
2012 Demand to Capacity
Ratio of 95%
2014E Demand to Capacity
Ratio of 96%
Healthy market dynamics remain intact |
 Overview of Pulp and Paperboard Division
10
Clearwater
Paper
ranks
as
one
of
the
top
five
largest
paperboard
manufacturers
in
North
America
Key Products
Overview of Facilities
2012E North American Bleached
Paperboard Production by Product Type²
2012E North American Bleached Paperboard
Production by Market Share
Pulp Production¹: 842,000 tons
Paperboard Production¹: 771,000 tons
Clearwater Paper Pulp
Clearwater Paper SBS
Source: Company estimates, RISI
¹
Represents 2012 production volumes.
²
Represents ~6.0 million tons. |
 11
Paperboard Demand Remains Stable and Pricing Outlook is
Favorable in the U.S.
Source: RISI, Projected GDP growth estimates represent Bloomberg median
estimates as of Feb-2013 ¹
Based on tons produced. Projections based on North American Packaging papers and
board demand estimates per RISI. ²
Average price per short ton of 16 pt. SBS folding carton C1S. Price estimates per
RISI. Bleached paperboard prices are expected to remain at attractive levels
through 2016 |
 12
Clearwater Paper’s
Strategic Plan |
 13
•
Lead private label quality
•
Expand geographically
•
Expand retail channel penetration
Our Macro Strategy to Create Shareholder Value
Grow our Tissue
Business
•
Improve sales mix
•
Reduce costs
•
Continue to improve quality |
 14
Our 3 Year Strategy |
 Key
Initiatives Expected to Significantly Improve Earnings Power 15
($ in millions)
Shelby
Ramp-up
•
Expected
benefit from
full ramp-up of
TAD paper
machine, 5
converting
lines and LV
PM Upgrades
Realization of Full
Cellu Tissue
Synergies
•
Incremental
savings
expected from
Cellu Tissue
acquisition
Cost
Savings
Programs
•
Expected benefit
from lean
manufacturing
and cost
optimization
initiatives
Note: Assumes no change in prices or input costs from 2011.
¹
See Appendix for the definition of Adjusted EBITDA as well as the reconciliation to
the most comparable GAAP measure. 2
Defined as Adjusted EBITDA less Capex of $138 million.
3
Defined as Adjusted EBITDA less expected Capex of $75 million.
|
 16
Clearwater Paper’s
Value Proposition |
 Clearwater Paper Leads its Peer Groups in Value Creation…
17
Source: Bloomberg as of 22-Feb-2013
1
Small cap tissue peers include Cascades, Orchids, and Wausau.
²
Paperboard peers include International Paper, Graphic Packaging, Kapstone,
MeadWestvaco, RockTenn, Packaging Corp, and Sonoco. ³
Large cap consumer product peers include Kimberly-Clark and Procter &
Gamble. Note. Total Shareholder Return includes dividend reinvestment and
stock price performance. 365%+ Total Return Since Spin-off
Spin Date
(20)%
40%
100%
160%
220%
280%
340%
400%
460%
520%
Dec-2008
Aug-2009
May-2010
Jan-2011
Oct
-2011
Jun-2012
Feb-2013
Clearwater Paper
Small Cap Tissue¹
Paperboard²
Large Cap Consumer³
S&P 500
369.5%
343.5%
103.4%
91.4%
81.7% |
 …Through a Proven Track Record of EBITDA Growth
18
($ in millions)
Source: RISI
1
See Appendix for the definition of Adjusted EBITDA as well as the reconciliation to
the most comparable GAAP measure. ²
Does not include amounts related to the Alternative Fuel Mixture Tax Credit, or
AFMTC. Adjusted EBITDA
1,2
•
We participate in the premier segments of the paper market: Bleached
Paperboard and Tissue
•
Strong integration across business groups creates synergistic value
|
 …And Successful Execution on Its Previously Stated Goals
19
Stated Goal
Timeframe
Current Status
Complete New Paper Machine and
Corresponding Converting Lines at
Shelby, NC Facilities
2010 –
2013
Shelby TAD machine was on budget with startup in Q4 2012 with
expected full capacity run rate by end of 2013
Operating 4 new converting lines at Shelby
5
line expected in 2013
Successfully Integrate Cellu Tissue
Acquisition
2010 –
2013
Increased anticipated Cellu Tissue run-rate synergies from $15-
20 million per annum to $35-40 million per annum by end of 2012
Achieved $30 million in synergies in 2012, up from initial estimate
of $20 million
Expand the Geographic and Channel
Reach of Clearwater Paper
2010 –
Ongoing
Cellu Tissue acquisition and Shelby, NC Facilities give Clearwater
Paper a national footprint with expansion in the Eastern U.S.
Increase penetration in grocery, drug, club and mass retail
markets in the Eastern U.S.
Expansion into away-from-home, parent roll sales, and machine
glazed sales product types
Optimize the Paperboard Business
Ongoing
Enhanced access to fiber supply with Lewiston chipping facility
acquisition
Sold Lewiston sawmill
Installed chip screening at Lewiston pulp mill
Maintain a Prudent Capital Structure
Ongoing
Conservative capital structure with target leverage through the
cycle of 2.5x and ample liquidity
Clearwater Paper continues to de-lever through EBITDA
expansion
th |
 …Which Has Led to Multiple Expansion Since the Spin
20
Source: Bloomberg, Capital IQ, market data as of 22-Feb-2013
1
Small cap tissue peers include Cascades, Orchids, and Wausau.
²
Paperboard peers include International Paper, Graphic Packaging, Kapstone,
MeadWestvaco, RockTenn, Packaging Corp and Sonoco. ³
Large cap consumer product peers include Kimberly-Clark and Procter &
Gamble. Spin Date
6.5x
6.1x
7.1x
11.1x
0x
2x
4x
6x
8x
10x
12x
Dec-2008
Jul-2009
Jan
-2010
Aug-2010
Feb-2011
Sep-2011
Mar
-2012
Oct-2012
Clearwater Paper
Small Cap Tissue¹
Paperboard²
Large Cap Consumer Products³
Strong
upward trend in multiple over time |
 …And Multiple Growth Rate Higher than Industry
21
Source: Bloomberg, Capital IQ, market data as of 22-Feb-2013
Note: Represents current 1-year forward EBITDA multiple divided by forward
1-year EBITDA at 15-Jan-2009 less 100% (first reported IBES EBITDA estimate per Capital IQ).
1
Small cap tissue peers include Cascades, Orchids, and Wausau.
²
Paperboard peers include International Paper, Graphic Packaging, Kapstone,
MeadWestvaco, RockTenn, Packaging Corp and Sonoco. ³
Large cap consumer product peers include Kimberly-Clark and Procter &
Gamble. Change in 1-Year Forward EBITDA Multiple Since Clearwater
Spin 109.3%
1.4%
42.2%
23.9%
Clearwater Paper
Small Cap Tissue¹
Paperboard²
Large Cap Consumer Products ³ |
 •
Attractive, growing and stable tissue market with increasing adoption of private
label products driving overall market growth
•
Strong competitive position in stable bleached paperboard market
•
Strategic capital investments, lean optimization initiatives and
ongoing
integration synergies driving revenue growth and margin expansion
•
Track record of robust adjusted EBITDA growth with a 32% CAGR
over 2008-
2012 poised to generate strong free cash flow
•
$100 million share buyback authorization in place with plans to complete by year
end 2013 with commitment to return 50% of discretionary free cash flow to
shareholders in 2014 and 2015
22
¹
Based on 2008 -2012 adjusted EBITDA.
The Value Proposition for Clearwater Paper Shareholders
1 |
 23
Clearwater Paper’s
Outlook |
 First Quarter 2013 Outlook (Compared to
Q4-2012)¹
24
Consumer Products
Pulp and Paperboard
Total
Company
Production volumes
Expecting Shelby paper
machine production of ~12k
tons
Stable
Shipment volumes
Approximately 134,000 tons;
up ~3,000 tons due to higher
retail and parent roll
shipments
Down ~14k tons due to
implementing consignment
program with a major
customer
Price/Mix
Stable
Stable
Pulp/Wood/Fiber
costs²
Expecting pulp costs up
slightly along with higher
purchased paper of ~4-5k
tons
Improving Idaho fiber supply
Chemical costs²
Stable
Stable
Transportation costs²
Expecting higher internal
transportation costs
Stable
Energy costs²
Consumption higher due to
Shelby TAD paper machine
Stable
Maintenance & repairs
Stable
Scheduled Arkansas outage
~$3 million
Operating Margins
1 to 3 points of downward
pressure due to higher pulp,
transportation and energy
Stable
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 results may differ materially from the information set forth above. See “Forward-Looking
Statements”
on page 1.
2
Based on production costs |
 2013
Outlook (Compared to 2012)¹
25
Consumer Products
Pulp and Paperboard
Production volumes
Expecting Shelby paper machine
production of ~55k tons
70k ton run rate by year end
Stable
Shipment volumes
Expecting shipments to be ~4.6
million cases (25k tons) higher
due mainly to higher TAD retail
Stable
Price/Mix
Higher % of TAD expected to
improve net sales avg.
Stable
Pulp/Wood/Fiber
costs²
Expecting pulp cost increase
partially offset by higher internal
pulp consumption
Improving Idaho fiber supply
Chemical costs²
Stable
Stable
Transportation costs²
Improved internal transportation
as regional balance improves
Stable
Energy costs²
Higher natural gas unit cost and
Shelby paper machine usage
Higher natural gas unit cost
Maintenance & repairs
Stable
Q1–Scheduled Arkansas outage
~$3 MM
Q3–Scheduled Idaho outage
~$11 MM
1
This information is based upon management’s current expectations and
estimates, which are in part based on market and industry data. Many factors are outside the control
of management, including particularly input costs for commodity products, and
actual results may differ materially from the information set forth above. See “Forward-Looking
Statements”
on page 1.
2
Based on production costs |
 26
Appendix |
 27
Reconciliation of GAAP to Non-GAAP:
Clearwater Paper EBITDA and Adjusted EBITDA
1
See last page of this Appendix for definitions of EBITDA and Adjusted EBITDA.
($ in millions)
2008
2009
2010
2011
2012
Net Earnings
$9.7
$182.5
$73.8
$39.7
$64.1
Income Tax Provision
5.6
93.2
2.4
31.2
47.5
Interest Expense
13.1
15.5
22.6
44.8
33.8
Earnings Before Interest and
Income Taxes
28.5
$291.2
$98.8
$115.7
$145.4
Depreciation & Amortization
47.0
47.4
47.7
76.9
79.3
EBITDA
1
$75.4
$338.6
$146.5
$192.7
$224.7
Alternative Fuel Mixture Tax
Credit
-
(170.6)
-
-
-
Debt Retirement Costs
-
6.2
-
-
-
Cellu Tissue Acquisition
Related Expenses
-
-
20.3
-
-
Lewiston, Idaho Sawmill Sale
Related Adjustments
-
-
-
2.9
-
Loss on sale of foam assets
-
-
-
-
1.0
Expenses Associated with
Metso Litigation
-
-
-
-
2.0
Adjusted EBITDA¹
$75.4
$174.3
$166.8
$195.5
$227.7 |
 28
Reconciliation of GAAP to Non-GAAP:
Clearwater Paper Pro Forma Adjusted EBITDA
($ in millions)
1
See page 35 of this Appendix for definitions of EBITDA and Adjusted EBITDA.
Shelby
Cellu
Tissue
Synergies
Cost
Optimization
Pro Forma
Adjusted
EBITDA
Operating Income
$37.0
$35.0
$16.0
$210.0
Depreciation & Amortization
13.0
-
3.0
90.0
EBITDA
1
$50.0
$35.0
$19.0
$300.0
-
-
-
-
Adjusted EBITDA¹
$50.0
$35.0
$19.0
$300.0 |
 29
Definitions of Non-GAAP Measures
Clearwater Paper Definitions of Non-GAAP Measures
EBITDA
is
a
non-GAAP
measure
that
Clearwater
Paper
management
uses
to
evaluate
the
cash
generating
capacity
of
Clearwater
Paper.
The
most
directly
comparable
GAAP
measure
is
net
earnings.
EBITDA,
as
defined
by
Clearwater
Paper
management,
is
net
earnings
adjusted
for
net
interest
expense,
income
taxes,
and
depreciation
and
amortization.
It
should
not
be
considered
as
an
alternative
to
net
earnings
computed
under
GAAP.
Adjusted
EBITDA
is
a
non-GAAP
measure
that
Clearwater
Paper
management
defines
as
EBITDA
adjusted
for
items
that
we
do
not
believe
are
indicative
of
our
core
operating
performance,
including
acquisition
and
disposition
related
expenses,
alternative
fuel
mixture
tax
credits
and
expenses
associated
with
the
Metso
litigation.
The
most
directly
comparable
GAAP
measure
is
net
earnings.
It
should
not
be
considered
as
an
alternative
to
net
earnings
computed
under
GAAP. |
 North American Tissue Projected Capacity Change
30
Source: RISI and Other Industry
Company
Mill/Location
Conv/TAD
Capacity
Change
Date
Channel/Business/Products
Announced New Capacity
K.T.G. (USA)/Kruger
Memphis, Tennessee
TAD
70,000
2013:Q1
Retail/Brand/P.L.
Florelle Tissue
Brownville, New York
Conv
15,000
2013:Q3*
New PM from Elite Tissue Machine, China
First Quality Tissue
Anderson, South Carolina
ATMOS
75,000
2014:Q1*
Retail/P.L./BRT
Procter & Gamble
Box Elder, Utah (?)
TAD
80,000
2014:Q3*
Retail/Brand/Bounty
Announced Shutdowns
No announced shutdowns
Announced Rebuilds
Tak Investments
Franklin, Virginia
Conv
70,000
2013:Q1
Rebuild of a fine paper PM to tissue by
PMT Italia and other suppliers
Net Capacity Change
310,000
South Georgia Tissue
Snelling, Barnwell County, South
Carolina
32,000
2014:Q2*
New mill for parent rolls only; investment
incentives approved but not yet fully
committed
Potential Projects |