Clearwater Paper Corporation Jefferies 2011 Global Industrial and A&D Conference August 9, 2011 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, the benefits of, and synergies from, our Cellu Tissue acquisition, internal and external pulp purchases and transfers, internal pulp production and requirements, customer purchases of Private Label tissue, production capacity of operating divisions, completion of additional converting and paper making capacity and the expected financial returns from these investments, efficiency projects and reductions to our cost structure, our share repurchase program and stock split and the expected benefit thereof, our capital allocation objectives, our financial priorities, such as growing free cash flow and maintaining modest leverage, estimated annual EBITA sensitivities, the cost and timing to complete new facilities, future growth and market opportunities, sales volumes, input costs, and our financial condition and results of operations. Words such as “anticipate,” “expect,” “intend,” “will,” “plan,” “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, 2010, as well as the following: • an inability to successfully implement our expansion and operating strategies; • difficulties with the integration process or the realization of the benefits expected from the acquisition of Cellu Tissue; • difficulties with the completion of our new tissue making and converting facilities; • the Cellu Tissue acquisition may expose our operations to unidentified liabilities; • changes in the cost and availability of wood fiber used in the production of our products; • changes in freight costs and disruptions in transportation services; • changes in raw material costs and energy availability and costs; • changes in customer product preferences and competitors’ product offerings; • changes in the United States and international economies and in general economic conditions in the regions and industries in which we operate; • cyclical industry conditions; • the loss of business from any of our three largest Consumer Products segment customers or a large Pulp and Paperboard segment customer; • competitive pricing pressures for our products; • reliance on a limited number of third party suppliers for raw materials; • our qualification to retain, or ability to utilize, tax credits associated with alternative fuels or cellulosic biofuels and the tax treatment associated with such credits; • unforeseen environmental liabilities or expenditures; • unanticipated manufacturing or operating disruptions, including equipment malfunction and damage to our manufacturing facilitates caused by fire or weather-related events and IT system failures; • changes in the relationship between supply and demand in the forest products industry, including the amount of available manufacturing capacity and wood fiber used in manufacturing our products; • changes in expenses and required contributions associated with our pension plans; • labor disruptions; • an inability to fund our debt obligations; • restrictions on our business from debt covenants and terms; • changes in laws, regulations or industry standards affecting our business; and • changes in exchange rates between the U.S. dollar and other currencies. 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. |
2 • We are a company formed two years ago with more than 60 years of operating history • A leader in Private Label consumer tissue and bleached paperboard • Focused on producing high quality products that help our customers build their brands • Operate in two segments of similar size 1 – Pulp and Paperboard – 51% – Consumer Products – 49% • Financial overview – LTM 6/30/11 Net Sales: $1.7 billion – LTM 6/30/11 Adjusted EBITDA: $189.4 million – 5 year average annual Free Cash Flow (FCF) generation (2006-2010): $76.9 million 1 Last twelve months (LTM) net sales as of 6/30/11 Introduction to Clearwater Paper |
3 • Lead Private Label quality • Expand geographically • Expand retail channel penetration Our Strategy Grow our Tissue Business New Shelby Facility and CLU Acquisition • Improve sales mix • Reduce costs • Continue to improve quality LEAN Manufacturing and Capital Improvements = = Build a High Performance Culture • Develop common culture • Drive for results • Attract and retain high performers Core Values and Talent Management = Optimize Profitability of Paperboard Business |
4 New Shelby Facility |
Shelby • ON BUDGET with original estimate of $260- $280 million • ON TIME with original construction projections • ON QUALITY with selection of Metso technology • ON TASK with dedicated project team to ensure results 5 • First two converting lines operational • Consolidate third-party warehouse to Shelby • Paper machine and remaining converting lines operational • Commence product trials |
Shelby 6 |
Shelby 7 |
Shelby 8 |
9 Cellu Tissue Acquisition |
of the total category 10 Expansion Opportunities Clearwater Paper has been a strong influence in the development of private label tissue in the Western U.S. An opportunity exists to grow private label category development and company share in the Eastern U.S. Source: SymphonyIRI InfoScan. 52 Weeks Ending May 29, 2011 Data excludes Cellu Tissue WESTERN GROCERY 23% of the U.S. Population Corporate Brand 39% of the total category Clearwater Paper 91% of total corporate brand MID-WESTERN GROCERY 33% of the U.S. Population Corporate Brand 27% of the total category Clearwater Paper 66% of total corporate brand EASTERN GROCERY 44% of the U.S. Population Corporate Brand 24% of the total category Clearwater Paper 28% of total corporate brand TOTAL U.S. GROCERY 100% of the U.S. Population Corporate Brand 28% Clearwater Paper 57% of total corporate brand |
11 The acquisition of Cellu Tissue provides us with . . . • A national manufacturing footprint that allows greater efficiencies • New retail channel opportunities • Estimated annual run rate synergies of $35-$40 million by the end of 2012 Strategic Benefits of Acquisition |
Estimated Breakdown of Acquisition Synergies* 12 Manufacturing – Moving parent rolls to converted cases Transportation – Product spec changes and lower miles Warehousing – Closing duplicate facilities Procurement – Purchasing power and economies of scale Fiber – Increased use of internal pulp Wages – Streamlining processes and overhead Dedicated team focused on delivering synergies! * Estimated annual run rate synergies of $35-$40 million by the end of 2012 |
13 Consumer Tissue |
14 Attractive Industry Characteristics Within the tissue market, Private Label penetration has also grown substantially since 2002 2 The tissue market has grown an average of 2% annually since 1996 1 Source: RISI and IRI 1 Based on converted short tons 2 Represents market share as a % of sales in U.S. grocery channel |
15 Therefore they require: • National brand-like quality to support high quality store brands • High quality packaging and branding support • Complete mix of product offerings to support retailer assortment objectives • Category management support and expertise • Experience and execution to deliver a comprehensive Private Label tissue program Private Label is a Strategic Focus for Retailers |
Private Label Packaging Quality is More Important Than Ever Before 16 Mid 60’s to 70’s 2011 • Private Label tissue packaging has become more brand-like in quality since the early days of generic store brand tissue • Clearwater Paper manages over 1,300 retail package sku’s for its customers |
Tissue is an Important Category for Retailers SOURCE: 52 Week Sales Food, Drug, Mass without Wal-Mart, May 29, 2011, Symphony IRI 17 Segment % Category (cases) Annual Sales Bath Tissue 55% $4.2B Paper Towels 32% $2.5B Facial Tissue 7% $795MM Paper Napkins 6% $360MM Est. Total Category $7.86B |
The Tissue Category – Lots of Options For Consumers . . . . • Single Ply • Double Ply • Triple Ply • Ultra Quality • Premium Quality • Value Quality • Economy Quality • Virgin Fiber • Recycled Fiber 18 |
The Tissue Category – even more options… 19 |
20 Complex Category Segmentation Requires Expertise • Clearwater Paper is well represented in all segments of the tissue category, including a leading presence in the value and economy product tier • Clearwater Paper is the category leader in providing a full-range of product tier offerings nationwide Quality Tier Bathroom Tissue Household Towels Facial Tissue Napkins 3 National Brands Private Label 4, 6, 9, 12, 18, 24, 30 roll packs Private Label 1,2,6,8,12,15 roll packs Private Label Multiple standard count cartons 2 National Brands Private Label 40,60,100,200 count packs 30% of Bath Segment 53% of Towel Segment 24% of Facial Segment 30% of Napkin Segment Private Label 4, 6, 9, 12, 18, 24, 30 roll packs Private Label 1,2,3,6,8,12 roll packs Private Label Multiple standard count cartons Private Label 160,200 count packs 45% of Bath Segment 24% of Towel Segment 71% of Facial Segment 10% of Napkin Segment No Leading National Brand Private Label 1, 4, 6, 9, 12, 24 roll packs No Leading National Brand Private Label 1,3,6,8,12,15 roll packs No Leading National Brand Private Label No standard counts No Leading National Brand Private Label Multiple standard counts 23% of Bath Segment 20% of Towel Segment 4% of Facial Segment 56% of Napkin Segment Small Niche Brands Private Label 4, 6, 12 roll packs Private Label 1,3,6 roll packs Small Niche Brands Private Label No standard counts Small Niche Brands Private Label No standard counts 2% of Bath Segment 3% of Towel Segment 1% of Facial Segment 4% of Napkin Segment ULTRA highest quality attributes PREMIUM higher quality attributes VALUE / ECONOMY lower quality, price driven value GREEN RECYCLED Niche segment for green consumers 2 National Brands 2 National Brands 2 National Brands 2 National Brands 2 National Brands Small Niche Brands 2 National Brands |
Clearwater Paper Adds Unique Value Through FSC and Rainforest Alliance Certification 21 |
22 Paperboard |
23 Attractive Industry Characteristics 100 99 105 103 108 102 100 100 101 106 108 108 109 108 97 101 $880 $760 $810 $740 $713 $773 $728 $700 $727 $713 $772 $718 $861 $961 $1,031 $1,082 600 800 1,000 1,200 60 80 100 120 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 U.S. Bleached Paperboard Demand (Indexed)² U.S. Bleached Paperboard Price ($/short ton)³ Source: RISI. 1 Top 5 manufacturers in 1998 were International Paper, Westvaco, Temple-Inland, Georgia-Pacific and Potlatch. Top 5 manufacturers in 2010 were International Paper, MeadWestvaco, Georgia-Pacific, Evergreen Packaging and Clearwater Paper 2 Based on tons produced 3 Average price per short ton of 16 pt. SBS folding carton C1S 2010 North American Bleached Paperboard (SBS) Production Pulp and Paperboard 1 Capacity Top 5 Manufacturers Stable demand for U.S. paperboard products Demand Price |
Estimated Industry Mix 24 SOURCE: RISI / Company Websites / Internal Estimates Cup Liquid Packaging Folding/CIS |
25 Efficiency and Optimization • Lean initiatives focusing on non-capital solutions for driving out waste and improving quality • Cost reduction projects: • Lower Columbia reload facility for sawdust to increase fiber supply • Chip screening at Lewiston to improve quality • Refocusing pulp mill operations as cost centers to concentrate resources on improving efficiency • Strong pulp integration – we produce 68% of our pulp requirements |
Lower Columbia Reload Facility 26 |
27 Financial Overview |
Financial Priorities • Grow free cash flow through strong operating performance • Maintain modest leverage in the range of Net Debt/EBITDA of 1x – 4x • Focus on appropriate liquidity levels for growth and business cycles • Deploy capital effectively and perform post audits 28 |
Stock Repurchase Debt Pay Down Pension Payments Dividend Shorter Longer Illustrative of Projects Meeting Return Hurdle Rates Greenfield M&A 29 Our objective is to allocate capital using a dynamic framework to create strong returns to shareholders while providing appropriate liquidity to meet growth objectives and compete effectively Capital Allocation Return Timeframe Capital allocation CLW has deployed Capital |
Recent Financial Announcements Share Repurchase • Repurchase of up to $30 million of common stock • Expect to fund repurchase with cash on hand • May repurchase shares in the open market or as otherwise may be determined by management, subject to market conditions, business opportunities, and other factors • Purchases would help offset share dilution from equity incentive plans 2-for-1 Stock Split • Stock dividend payable on August 26, 2011 to shareholders of record on August 12, 2011 • 11,519,260 shares outstanding at June 30, 2011. Immediately following the distribution of the stock dividend, approximately 23 million shares outstanding • Split intended to improve share liquidity • Significant share price appreciation since spin also a factor 30 |
CPD PPD Adj. EBITDA Margin % Financial Track Record Adjusted EBITDA and Segment Adjusted EBITDA 5 Yr. Average (excluding LTM): $124 $41 $34 $53 $138 $87 $78 $70 $80 $35 $51 $111 $139 9.0% 8.8% 6.0% 13.9% 12.2% 11.4% 2006 2007 2008 2009 2010 LTM $445 $452 $504 $554 $570 $825 $672 $731 $751 $696 $803 $876 2006 2007 2008 2009 2010 LTM 31 ($ in millions) Net Sales and Segment Net Sales $1,117 $1,183 $1,255 $1,250 $101 $104 $75 $174 $1,373 $167 $1,701 $189 3 1 2 1 Excludes intersegment net sales and transfers. Net sales for 2010 for CPD includes four days of Cellu Tissue results. Prior periods have no Cellu Tissue amounts 2 See Appendix: “Detailed Financials” for the definition of Adjusted EBITDA and Segment Adjusted EBITDA as well as the reconciliation to the most comparable GAAP measures 3 Adjusted EBITDA margin percentage calculated by dividing Adjusted EBITDA by Net Sales 5 Yr. Average (excluding LTM): $1,236 |
Historical Cost Drivers - Wood Fiber 32 Total Cost : % of Total Cost of Sales 2009 2010 2008 $325.4 M 28% $269.7 M 26% $314.3 M 27% 1 Excludes intersegment amounts and CLU amounts prior to acquisition • Wood fiber includes pulp, wood chips, sawdust and saw logs • Historically, we were a net buyer of approximately 85,000 tons of pulp annually. Going forward, we expect to be a net buyer of approximately 400,000 tons of pulp annually • Historically and prior to the Cellu Tissue acquisition, we produced approximately 800,000 tons of pulp representing about 92% of our total annual pulp needs. We expect to continue to produce the same amount of pulp going forward, which would represent approximately 68% of our total anticipated annual pulp needs • Generally we use a mix of pulp including northern softwood, southern softwood, northern hardwood, eucalyptus and recycled • Commencing on January 1, 2011, we began accounting for the transfer of pulp from the Pulp and Paperboard division to the Consumer Products division at cost instead of market price because, over time, we intend to use all of our pulp internally. Accordingly, there will be no intersegment sales for this item going forward $124.9 M 29% Q2’11 LTM 6/30/11 $394.5 M 28% Wood Fiber 1 |
Historical Cost Drivers – All Other 33 Total Cost: % of Total Cost of Sales 2009 2010 Energy 2008 Total Cost: % of Total Cost of Sales Total Cost : % of Total Cost of Sales $143.0 M 12% $114.7 10% $97.3 9% $92.0 8% $123.2 10% $100.3 9% $117.3 10% $ 61.9 5% $70.0 7% $82.4 7% $123.2 M 12% $132.3 M 11% Maintenance & Repair Total Cost: % of Total Cost of Sales Chemicals 1 Excludes related labor costs Transportation Q2’11 $31.8 7% $36.6 8% $22.3 5% $44.3 M 10% $111.5 8% $131.1 9% $87.4 6% $151.8 M 11% LTM 6/30/11 1 |
34 Cost Sensitivities Change EBITDA Variable Metric $/Unit ($ Millions) Purchased Pulp $/Ton $50.00 +/- $20 Chips/Sawdust $/Ton $5.00 +/- $9 Transportation $/Gallon $1.00 +/- $9 Chemicals $/Prod Ton $5.00 +/- $7 Natural Gas $/mmbtu $0.50 +/- $5 Estimated Annual EBITDA Sensitivities $0 $5 $10 $15 $20 $25 +/- +/- +/- +/- +/- |
35 ($ in millions) 1 See Appendix “Detailed Financials” for the definition of EBITDA, Adjusted EBITDA and Free Cash Flow as well as a reconciliation to the most comparable GAAP measures. 2009, 2010 and LTM amounts are Adjusted EBITDA and all other periods represent EBITDA 2 See Appendix “Detailed Financials” or supporting schedules 3 We converted gallons previously claimed un the Alternative Fuel Mixture Tax Credit, or AFMTC, to Cellulosic Biofuel Producer Credit, or CBPC Free Cash Flow Free cash flow on an LTM basis was impacted by Shelby capital, taxes paid in connection with our transition to CBPC and pension funding 2006 2007 2008 2009 2010 LTM through 6/30/11 EBITDA/Adjusted EBITDA 1 $100.6 $103.7 $75.4 $174.3 $166.8 $189.4 Capital Expenditures (27.5) (20.5) (21.3) (19.3) (46.1) (94.9) Cash Taxes Paid 2 (12.4) (14.1) (5.6) (41.3) (28.6) (55.3) Cash Net Interest Expense (13.0) (13.0) (13.1) (15.1) (15.9) (30.1) Working Capital Dec (Inc) 2 13.9 37.6 (21.2) (99.6) 88.5 (57.6) Other Cash Flow Items 2 6.9 (5.7) 6.6 88.2 (44.7) (31.2) Free Cash Flow 1 $68.5 $88.0 $20.8 $87.2 $120.0 (79.7) 3 |
36 ($ in millions) Balance Sheet 2009 2010 Q2 2011 Current Assets Cash & Short-Term Investments $190.8 $148.7 $128.1 Receivables, net 94.5 153.3 182.0 Taxes Receivable 101.3 10.4 12.2 Inventories 169.8 228.3 223.6 Prepaid Expenses and Other 15.9 48.8 50.2 $572.3 $589.5 $596.1 Long-Term Assets Property, Plant & Equipment 364.0 654.5 696.8 Goodwill & Intangibles - 285.9 282.5 Other 11.2 15.4 13.5 375.2 955.8 992.8 Total Assets $947.5 $1,545.3 $1,588.9 Current Liabilities Accounts Payable & Accrued Liabilities 109.8 184.6 183.2 Other 9.9 10.5 25.0 Long Term Liabilities Long Term Debt 148.3 538.3 523.6 Deferred Taxes - 61.1 75.5 Other Long Term Obligations 242.3 210.5 215.5 Accrued Taxes 73.5 72.0 73.4 Total Liabilities $583.8 $1,077.0 $1,096.2 Total Stockholders' Equity $363.7 $468.3 $492.7 Total Liabilities & Stockholders' Equity $947.5 $1,545.3 $1,588.9 Cash and Short-Term Investments $190.8 $148.7 $128.1 Available Revolver Amount 106.8 121.0 116.6 Total Liquidity $297.6 $269.7 $244.7 Adjusted EBITDA to Interest Expense, net 1 11.2X 7.4X 4.8X Total Debt/Adjusted EBITDA 0.9 3.2 NA 1 See Appendix “Detailed Financials” for the definition of EBITDA, Adjusted EBITDA and Free Cash Flow as well as a reconciliation to the most comparable GAAP measures. 2009, 2010 and LTM amounts are Adjusted EBITDA and all other periods represent EBITDA Assets Liabilities 1 |
37 Appendix: Detailed Financials |
38 Income Statement ($ in millions) 1 See Appendix for definition of EBITDA and a reconciliation to most comparable GAAP measure 2006 2007 2008 2009 FY 2010 Q2 2011 LTM Through 6/30/11 Net Sales $1,116.9 $1,183.0 $1,255.3 $1,250.1 $1,373.0 $494.6 $1,658.9 Costs & Expenses Materials, Labor, & Other Operating Expenses 1,033.6 1,083.8 1,179.4 1,052.2 1,173.8 433.3 1,433.6 Selling, General, & Administrative 45.5 46.8 47.4 71.1 100.4 27.5 117.0 Income from Canadian Lumber Settlement 8.5 - - - - - - Alternative fuel mixture tax credit - - - 170.6 - - - Earnings (Loss) Before Interest, Other, Debt Retirement Costs and Income Taxes $46.3 $52.4 $28.5 $297.4 $98.8 $33.8 $108.3 Margin (%) 4.1% 4.4% 2.3 % 23.8 % 7.2% 6.8% 6.5% Depreciation and Amortization 54.3 51.3 47.0 47.4 47.7 18.9 61.5 EBITDA 1 $100.6 $103.7 $75.4 $338.7 $146.5 $52.4 $169.1 Margin (%) 9.0% 8.8% 6.0 % 27.1 % 10.7% 10.6% 10.2% Interest Expense 13.0 13.0 13.1 15.5 22.6 11.0 36.5 Debt Retirement Cost - - - 6.2 - - - Other - - - - - 0.2 0.7 Earnings Before Income Taxes $33.3 $39.4 $15.3 $275.7 $76.2 $22.6 $71.1 Income Tax provision 12.4 14.1 5.6 93.2 2.4 8.6 (1.2) Net Earnings $20.9 $25.3 $9.7 $182.5 $73.8 $13.9 $72.3 |
39 Reconciliation of GAAP to Non-GAAP: Net Cash from Operating Activities to Free Cash Flow ($ in millions) 1 2009 amount excludes $170.6 million of alternative fuel mixture tax credits for the period late January through December 31, 2009 2006 2007 2008 2009 2010 LTM through 6/30/11 Net Cash Provided by Operating Activities 1 $96.0 $108.5 $42.1 $54.2 $185.6 $65.4 Capital Expenditures (27.5) (20.5) (21.3) (19.3) (46.1) (94.9) Non-cash Net Interest Expense - - - 0.4 6.7 6.4 Non-cash Tax Expense - - - 51.9 (26.2) (56.6) Free Cash Flow 1 $68.5 $88.0 $20.8 $87.2 $120.0 (79.7) |
40 Free Cash Flow – Working Capital ($ in millions) 2006 2007 2008 2009 2010 LTM through 6/30/11 Dec (Inc) in Receivables $(21.2) $18.8 $(8.8) $9.5 $(9.9) $(23.0) Dec (Inc) in Tax Receivables - - - (101.3) $93.8 $(9.4) Dec (Inc) in Inventories 32.1 (8.5) (14.0) (16.8) (3.9) (25.4) Dec (Inc) in Prepaid Expenses (0.7) 0.4 (0.5) 0.1 (5.0) (0.9) Inc (Dec) in Taxes Payable 4.6 18.1 0.8 (0.8) - (2.7) Inc (Dec) in Accounts Payable and Accrued Liabilities (0.8) 8.9 1.3 9.7 13.5 3.8 Working Capital Dec (Inc) $13.9 $37.6 $(21.2) $(99.6) $88.5 $(57.6) |
41 Free Cash Flow – Other ($ in millions) 2006 2007 2008 2009 2010 LTM through 6/30/11 Equity-Based Compensation Expense $1.4 $3.3 $2.3 $5.6 $8.5 $8.4 Employee Benefit Plans 3.0 (1.0) 1.1 14.1 15.0 13.9 (Gain) Loss on Disposal of Plant and Equipment 0.3 0.1 (0.2) 0.2 0.5 1.1 Change in Other Assets - - (1.6) (0.5) 0.1 6.0 Funding of Qualified Pension Plans (6.1) - - - (25.1) (24.6) Excess Tax Benefit from Share- based Payment Arrangements - - - (0.1) (0.9) 1.7 Change in Non-current Accrued Taxes - - - 73.5 (4.3) (3.7) Change in Deferred Taxes 8.3 (8.1) 4.9 (4.6) (15.0) (7.1) Other - 0.1 0.1 - (23.5) (26.9) Other Cash Flow Items $6.9 $(5.7) $6.6 $88.2 $(44.7) $(31.2) |
42 Reconciliation of GAAP to Non-GAAP: Clearwater Paper EBITDA and Adjusted EBITDA 1 See last page of this Appendix for definitions of EBITDA and Adjusted EBITDA ($ in millions) 2006 2007 2008 2009 2010 Q2 2011 LTM through 6/30/11 Net Earnings $20.9 $25.3 $9.7 $182.5 $73.8 $13.9 $72.3 Income Tax Provision (Benefit) 12.4 14.1 5.6 93.2 2.4 8.6 (1.2) Interest Expense 13.0 13.0 13.1 15.5 22.6 11.0 36.5 Earnings Before Interest and Income Taxes 46.3 52.4 28.5 291.2 98.8 33.5 107.6 Depreciation & Amortization 54.3 51.3 47.0 47.4 47.7 18.9 61.5 EBITDA 1 $100.6 $103.7 $75.4 $338.7 $146.5 $52.4 $169.1 Alternative Fuel Mixture Tax Credit - - - (170.6) - - - Debt Retirement Costs - - - 6.2 - - - Cellu Tissue Acquisition Related Expenses - - - - 20.3 - 20.3 Adjusted EBITDA¹ $100.6 $103.7 $75.4 $174.3 $166.8 $52.4 $189.4 |
43 Reconciliation of GAAP to Non-GAAP: Clearwater Paper Segment EBITDA and Segment Adjusted EBITDA ($ in millions) 1 See last page of this Appendix for definitions of Segment EBITDA and Segment Adjusted EBITDA 2006 2007 2008 2009 2010 Q2 2011 LTM Through 6/30/11 Consumer Products Operating Income $25.7 $17.6 $37.3 $122.1 $63.7 $6.9 $38.8 Depreciation 15.8 16.3 15.7 16.0 17.0 12.2 33.0 Other, net - - - - - 0.3 (0.2) Segment EBITDA 1 $41.5 $33.9 $53.0 $138.1 $80.7 $19.4 $71.6 Cellu Tissue Acquisition Related Expenses - - - - 6.4 - 6.4 Segment Adjusted EBITDA 1 $41.5 $33.9 $53.0 $138.1 $87.2 $19.4 $78.0 Pulp & Paperboard Operating Income $32.2 $45.0 $4.4 $191.9 $81.9 $34.5 $111.4 Depreciation 38.1 34.6 30.9 29.9 28.7 6.5 27.2 Segment EBITDA 1 $70.2 $79.6 $35.3 $221.8 $110.6 $41.0 $138.6 Alternative Fuel Mixture Tax Credits - - - (170.6) - - - Segment Adjusted EBITDA 1 $70.2 $79.6 $35.3 $51.1 $110.6 $41.0 $138.6 |
44 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 related expenses and alternative fuel mixture tax credits. The most directly comparable GAAP measure is net earnings. It should not be considered as an alternative to net earnings computed under GAAP. Segment EBITDA is a non-GAAP measure used by Clearwater Paper management. The most directly comparable GAAP measure is segment operating income. Segment EBITDA, as defined by Clearwater Paper management, is segment operating income adjusted for segment depreciation and amortization. It should not be considered as an alternative to segment operating income computed under GAAP. Segment Adjusted EBITDA is a non-GAAP measure that Clearwater Paper management defines as Segment EBITDA adjusted for nonrecurring expenses or income, including alternative fuel mixture tax credits. The most directly comparable GAAP measure is segment operating income. It should not be considered as an alternative to segment operating income computed under GAAP. Free Cash Flow is a non-GAAP measure that Clearwater Paper management uses to evaluate the financial performance of Clearwater Paper. The most directly comparable GAAP measure is net cash from operating activities. Free Cash Flow, as defined by Clearwater Paper management, is net cash from operating cash flows adjusted for capital expenditures, non-cash interest expense and non-cash tax expense. It should not be considered as an alternative to net cash from operating activities computed under GAAP. |
45 Appendix: Estimated Pulp Flow and Synergy Example |
46 Pulp Flows 1 Note: Assumes 60,000 tons in external pulp sales 32% 68% Pulp Sources Internal External 1 460,000 MT 87% 13% By Division Consumer Products 30% 70% Recycled/Virgin 40% 60% Virgin Idaho Pulp + Paperboard NBSK NBHK Hardwood BEK NBHK SBHK Recycled SOP, DIP, Other Softwood NBSK SBSK |
Synergy Opportunity Example large converting winder in Neenah, WI (formerly Cellu Tissue) can more efficiently produce Away-from-Home products and 1000 count bathroom tissue Actions: 1. Relocate a wrapper machine from Elwood, IL (formerly CLW) to Neenah, WI 2. Reposition an underutilized case packer in Neenah, WI 3. Redirect the existing 1000 count product from Lewiston, ID (formerly CLW) and Thomaston, GA (formerly CLU) to Neenah, WI 4. Increase the production schedule of the existing underutilized large converting winder in Neenah, WI from 5 to 7 days Expected Results: 1. Creates new case capacity in the systems at Neenah, Lewiston and Thomaston 2. Reduces freight 3. Improves paper machine trim 47 Underutilized |
48 Appendix: Other Information |
30% 17% 16% 7% 6% 5% 4% 2% 2% 2% 1% 1% 1% 1% 1% 1% 0% 0% 0% 4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 49 2010 North American Tissue Market by Producer Remaining Manufacturing Base Highly Fragmented Large Brand Manufacturers Source: Equity research. 1 Represents Clearwater Paper tissue parent roll capacity combined on a pro forma basis with Cellu Tissue tissue parent roll production. 1 The Combined Company was the Sixth-Largest Manufacturer in the North American Tissue Market in 2010 |
1 Clearwater Paper capacities exclude tissue facility under construction in Shelby, NC expected to have 70,000 tons of annual capacity and converting facility expected to be operational in FY 2012. 2 Excludes foam capacity. 3 MG stands for machine-glazed paper. 50 National Manufacturing Footprint Clearwater Paper Cellu Tissue Complementary Geographic Asset Bases Bleached Paperboard 765,000 tons Tissue Parent Roll 227,000 tons Tissue Converting 221,000 tons Pulp 845,000 tons Sawmill 215,000 mbf Clearwater Paper Capacities¹ Clearwater Paper Pulp Clearwater Paper Sawmill Clearwater Paper SBS Cellu Tissue Tissue/MG Parent Roll3 Clearwater Paper Tissue Converting Clearwater Paper Tissue Parent Roll Cellu Tissue Headquarters Cellu Tissue Tissue/MG Converting3 Clearwater Paper Headquarters Spokane, WA Corporate Headquarters Lewiston, ID Converting Capacity: 102,000 tons Lewiston, ID (Sawmill) Capacity: 215,000 mbf Lewiston, ID (Pulp) Capacity: 540,000 tons Lewiston, ID (SBS) Capacity: 435,000 tons Lewiston, ID (Tissue) Capacity: 189,000 tons Las Vegas, NV (TAD) Capacity: 38,000 tons Las Vegas, NV Converting Capacity: 51,000 tons Cypress Bend, AR (Pulp) Capacity: 305,000 tons Cypress Bend, AR (SBS) Capacity: 330,000 tons Elwood, IL Converting Capacity: 68,000 tons Wiggins, MS Capacity: 57,000 tons Neenah, WI Capacity: 85,000 tons Ladysmith, WI Capacity: 55,000 tons Oklahoma City, OK Converting Capacity: 19,000 tons East Hartford, CT Capacity: 29,000 tons Gouverneur, NY Capacity: 33,000 tons Alpharetta, GA Corporate Headquarters Thomaston, GA Converting Capacity: 58,000 tons Long Island, NY Converting Capacity: 38,000 tons Shelby, NC (TAD) Announced Capacity: 70,000 tons Neenah, WI Converting Capacity: 99,000 tons Menominee, MI Capacity: 32,000 tons St. Catharines, ON (TAD) Capacity: 46,000 tons Cellu Tissue Capacities ² Tissue Parent Roll 250,000 tons Tissue Converting 214,000 tons MG Parent Roll 4 87,000 tons MG Converting 4 27,000 tons Menominee, MI Converting Capacity: 27,000 tons |
North American Tissue Capacity Change 51 Company Date Capacity Furnish Notes Announced: First Quality – Anderson SC Q3 2011 70,000 V TAD GP - Crossett Q2 2012 25,000* V TAD First Quality – Anderson SC Q3 2012 70,000 V TAD CLW – Shelby NC Q4 2012 70,000 V TAD GP - Pt. Hudson Q4 2012 35,000* V TAD Wausau Q1 2013 75,000 R AFH P&G – Box Elder, UT Q3 2013 80,000 V TAD 425,000 Potentials: Kruger 70,000* V TAD South Carolina Tissue 33,000* V or R South Georgia Tissue 33,000* V or R ST Paper – Franklin, VA 70,000* R Empire 70,000* R * Estimated Source: RISI and Other Industry |