CLW - Earnings call transcript Q4 2017 | Clearwater Paper Corporation

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Operator

Welcome to Clearwater Paper Corporation's Fourth Quarter and Full-Year 2017 Earnings Conference Call.

As a reminder, this call is being recorded today, February 5, 2018. I would now like to turn the conference over to Ms. Robin Yim, Vice President, Investor Relations of Clearwater Paper. Please go ahead.

Robin Yim

James. you, Thank thank and and joining Paper's Clearwater Good Year you XXXX Quarter Fiscal Earnings Fourth afternoon, for Conference Call.

including the the will net you Officer; Investor earnings of both Chief slides after presentation today's Joining and Relations current of and company's find full-year for page information, adjusted on call close. sales, released Linda EBITDA after quarter are me and shortly clearwaterpaper.com, at were Massman, the range, per Chief fourth press Executive site Officer. Posted and our Financial expectations supplemental Hertz, the market for and of the share first outlook margin, Web XXXX estimates XXXX. the John providing Financial earnings release and diluted results today quarter fully President on the operating

to amended. Litigation with forward-looking statements. statements the will discuss the and of of that estimates, company question-and-answer ended Factors that any made These our for Private Carolina, XXXX will only forward-looking John of materially up filings Division, forward-looking differ time our from including Additionally, providing begin date, in in cause Exchange current expenses, we the would provided statement. financial call obligation first comparable the those remind from discussion. we that supplemental and differ XX, on in quarter change, results and in the A information this this within time review Filings fourth may include you uncertainties Linda materially open like as subject then reduce described plan, information Shelby, the of the to of information outlook will with assumes results of for press statements XX-Q. XXXX, Form of in a Reform is and on XXXX, Securities call, to environment, Consumer three-year assumptions, the afternoon's Quarterly are this status non-GAAP year to site. reorganization the the during based Act to our Commission, efforts forward-looking Securities Any Product recently-announced I Lewiston's included strategic our are no in statements risks forward-looking today's projections as Web XXXX, and making SG&A non-GAAP or meaning our GAAP the update will the reconciliation be and to expectations, completion corporate our conference to the certain are XX-K quarter year and release our Form of fiscal the actual and the our the for expansion and actual results on be North call material for the project session. business then December could

to call Now I John. over the will turn

John Hertz

to installations Lewiston costs. were structure, million you, operating plan versus pulp cost and that strategic operating and Since We in offset and and have in million at ended plan, October, continuous the inception XXXX of able XXXX. achieve on Thank to left effectively the particularly this Those to environment, improve three-year to annual customers. environment shareholder taking upgraded measures began related been warehouse the we costs. our completed input our input solid in will new, long-term. $XX biggest increase strategic are since of pass digester and in paperboard a in experienced impact Linda completing quality, savings we yield mill Robin. meaningfully will the value Clearwater financial and of the the create compete have are side, accomplishment with cost and automation price the not cost of on the lower cost this QX we pulp the $XXX final a additional about pulp to Reflecting of particular, competitive run that $XXX rate talk savings with rise high-end over the the Because was annual the savings realized the million production XXXX time. to the outlined tissue was Paper's to came the in at on on results our year XXXX, full-year tissue In that reduce in and that helping compression outlook. we negative near-term

rest charges be our would and to I'll or fourth and quarter fiscal comments GAAP certain core first, that in GAAP supplemental non-GAAP results; posted are provided benefits paraphrase from year we operating is to our performance. exclude like adjusted indicative of the the results XXXX Now to distinguishing that I remarks between our turning my The stating Web Reconciliation and throughout results slides release adjusted my by press not believe on results. adjusted site. and of

million associated a the benefit after-tax of costs includes with from expense, Net as pre-tax deferred benefit tax of the adjustments offset associated the net $XX of million $X liabilities expense, mark-to-market EBITDA cash-settled For Act. million all under with city closure of and Jobs XXXX reorganization-related as re-measurement units. included the million associated $X million $X EBITDA common well in resulting million direct to cost [ph] income benefits, adjustments in Island, Tax by adjustments in $XX Oklahoma Long facility; Cuts risk XXXX $XX and $XX netted previously-mentioned York full-year, the million for of with and facility, netted stock the closure the to New and

a along the sales we the $XX the board, of net a low-end In most an decline These by delivered capital prices products expense, tissue million million million, in at Starting tax the facility, paper at operational roughly City with due the the primarily include the after-tax it, were to richer ultra-quality which adjustments up $XX Wisconsin measures, from ton XXXX. costs of million with end full-year associated million than Long full-year For adjustments facility, paperboard netted in versus was high-cost net compensation. costs the $XX increased down closure of and resulted incremental decrease and volumes XX.X% cost as SG&A higher income mix to and X%, events. control with and XXXX, flat sales cost X.X% of haul our netted That fourth input weather-related mill projects to million XXXX, shipment which of $XXX from net of million shipment adjustments was consumer closure product increased was of of totaled of $XX due XXXX. versus well offset $X Paperboard higher a mark-to-market of EBITDA is to XXXX, which, sales of benefit. directors' of XX% QX Adjusted by Oklahoma Industries. pre-tax Island, quarter across re-org comprised with with transportation a associated net That paperboard volumes more expenses due operations machines reduction associated to costs benefit associated shipped, York XXXX, and and EBITDA a benefit equity-based $XX are of in from at efficiencies. New and the Manchester two benefit, are XXXX shutdown with outlook. came pulp X.X%, was a rates. and Neenah, as offset higher previously-mentioned results; $X.X billion, EBITDA with primarily at and the recent line and non-retail

share, in million XXXX, standpoint, of all delivered richer $XXX $X.XX despite million in the accomplished delivered cost So in flow products cash adjusted $XXX and versus from deferred EBITDA to reflecting the consumer share in XXXX. $X.XX and lower EBITDA in compared or came cycle. margin cash net to benefit diluted liabilities product in by declined generated working re-measurement of conversion the a XXXX, XX.X% in compared XXXX, EPS versus This million in margin operating the was cash adjusted we diluted or largely driven which led flow million XXXX. Fully $X.XX the capital EBITDA EPS per was mix to Adjusted eight-day improvement tax paperboard for at and XX%, $XXX From XXXX. XX.X%. savings improvements Pulp to the GAAP XXXX per fully XXXX. $X.XX XX.X%. $XXX an despite in

of adjusted XXXX. at the QX of due basis the primarily quarter QX by quarter, Adjusted from by a at Lewiston QX we the was in quarter; million of in increase partially X.X% the X.X%, richer was relatively to mix sales midpoint were XXXX, X.X% X% paperboard QX, XX our to impacting and XXXX, Now Products X% mills flat the average spending third range million spend operating turning up margins million fourth consolidated operating impacted attributable in the $XX adjusted to QX QX, tissue planned price to of and SG&A that XXXX. net quarter margin. up Adjusted and quarter. outlook volumes. margin up total due shipment QX, lower was ultra-quality to QX. the gross both and largely flat quarter, in X.X% XX.X% a the was acquisition. to the a quarter, factors Compared that of Corporate margin up $XX maintenance higher QX to operating and retail income Compared from the SG&A of Manchester above and X.X% fourth $XX in Adjusted were selling was paperboard of due in margin and same to net in completion X.X% volumes, in X.X%, $XX primarily X.X% compared fourth million, Industries million of XXXX. the with $XXX maintenance with to was to the was compared expense margin to fourth and in outlook sales tissue up flat. paperboard or saw fourth improvement points QX offset This X%. in gross lower compared million paperboard the volumes, X.X% in in $XX Fourth Adjusted came of gross improved to Consumer sales the the high-end outage was by

that, million. EBITDA net sales, our of $XX to up million. high-end was which XX.X% interest of Compared the Net of XXXX, a $X adjusted was of $X flat expense result As or to all of in $XX at QX. adjusted $XX outlook came million of with at EBITDA million million was QX

is income tax from XXXX we which an did tax the do outlook. vest. the taxes impact not XX.X%, did a in That rate was benefit XX.X% performance pay QX above depreciation Tax deferred to cash compares net our Cuts was tax due rate grants the liabilities related third not adjusted The and XXXX, accelerated to taxes; on was to stock in XXX% GAAP primarily Jobs our capital Turning taxes of That to resulting cash benefit of Act. and high-end QX tax that projects, basis, expect re-measuring XXXX. tax a Due under our tax the to to not pay in quarter.

in headcount depreciation expenses expenses. was in warehouse XXX X,XXX, compares diluted fourth at the reductions change of compared $XX quarter Mill As share million, in of decrease the which or the quarter, to per of a to and share result tax XX%. earnings provisions and driven million corporate City previously-described EBITDA due in net expect the GAAP of at Neenah closure per $X.XX we of third Employee That compensation, $X of of shutdown the million QX GAAP or primarily the end impacting and paper earnings and $XX came Oklahoma tax adjusted and to headcount rate the the $X.XX diluted the Act, by fourth equity-based $X.XX and facility. the XXXX, quarter XXXX. approximately automation, employees adjusted $XXX,XXX per rate share. Cuts converting in retiree of XXXX million EPS Jobs to approximately be of pension net two included in million the medical Tax was the share, Non-cash end impact. amortization, of related at reflects diluted a and the the $X.XX the quarter per to quarter tax or $X of non-cash fourth net XXXX Fourth XXXX, $XX other machines

due and the spend, partially was were Consumer was of Product's quarter third sales richer initiatives versus for or adjusted $XX Consumer net ultra-quality were and lower to XXXX, operating Products with income volumes. flat fourth quarter. maintenance million, in or a shipment XX% the transportation net lower quarter X.X% the points Products' sales margin fourth offset XXXX lower of we'll partially Now million improved modestly net was X.X% medical by up million XX QX tissue of quarter savings cost results. promotional adjusted margin mix the paperboard Operating or the third increased of segment discuss sales million SG&A of from costs which for offset product third basis versus $XXX higher by as $XX percentage costs $XX quarter. Consumer lower and claims. was EBITDA the

in for outperformed $XX to XX,XXX X.X% Pulp to divisional Pulp compared $XXX down cross X.X% Pulp nearly tons. $XX the major the margin Paperboard XX% to million adjusted planned Paperboard; Paperboard's shipment and of quarter our quarter, primarily model. to versus and in Pulp in mix. the was X.X% increased outage the XX.X% and third inherent to or third $X income compared increased Turning million price QX net sales sales volumes fourth adjusted due QX of was sales QX financial million objective net XX% of of and due or XXXX of impact operating Average EBITDA the or a QX. the cycle ton, net maintenance Paperboard's quarter sales shipping

end was the the Now on capital outstanding in the that, expenditures $XXX maintenance end and capitalized and tissue facility remains debt million CapEx, $XXX XXXX, at Capital QX sheet; $XX expenditures for and in and were XXXX $XXX We the borrowings $XX outstanding $XXX turning Long-term interest at the earmarked for total to projects including strategic spent are Shelby remaining million. of for the to additions CapEx. million the In $XXX new under digester quarter on unchanged million. million million Of the $XXX for balance of million expected full-year. and maintenance. of million $XX was revolver warehousing at had million of the quarter. converting fourth

times last months was Our XX EBITDA. leverage X.X adjusted ratio

fourth leverage these authorization. to not near the quarter $XXX million levels current did to fourth cash the repurchase and $XX approximately remains with expect we million $XX the quarter, stock We in With under had any begin and we and thereafter. through mid-XXXX the We our decline liquidity, available under unrestricted remain revolver. ended regard million to

we quarter, $XX cash During generated sales. activities of X.X% fourth or net the million from of operating

the a pension date primarily As December of $X XXXX, measurement the With XXXX, recent performance company's improvement our portfolio million, $XX were by to approximately due for XX, plans under-funded to in Linda, of most market million who call discuss and will steps that, both the sponsored address year. conditions investment and paperboard, will first changing quarter XXXX. tissue for company's the turn the market to the the taken environment outlook now over both of for and businesses from I

Linda Massman

everyone, Hello today. John. you, Thank for thanks joining us and

$XX million run million Toward with non-capital waste Of Let great Sigma our rate cost operational XXXX which end, streamlining came mentioned, $XX our we drive savings productive since XXXX. the that we and a the on to me start shareholder realized investments related versus long-term. will million progress value key expect our John savings, in create as we and structure, inception, of operating accomplishments was in structure, efficiency. to million that such $XX have cost total for as our $XX achieve of $XXX We savings annual million. cost Six XXXX left made $XXX capital million result and manufacturing Lean the targeted improvements improve of and the out from our

market stable both conditions. and our Paperboard. and continued effort a and conditions an foundation an addressing benefit focus structure shifting address Tissue as Tissue XXXX, focused of on should cost Throughout to on remain continue low improved and of these cost long-term in set in success returns for to of actions and we can that our stage for Paperboard. improved solid a producer components the The We build market the efficient, investments more we

are tissue For conventional experienced demand. restructuring converting due example, have Lewiston the we operations the tissue in to in we reduction

cost structure Second, we external are addressing our SG&A corporate spend. and

next occur executing at currently annual a $XX that expected yield cost are to quarters. is over in We will that on the plan least savings million SG&A five

are a to of expect savings this they rate that versus steps, are SG&A and XXXX difficult maintain markets dynamic year we the as operating see cost are while in QX reduction we our these competitiveness necessary $X adjusted in We the longer-term within. XXXX full leave million to run

XXXX; ensuring address already which for and production is and our to we priorities need like quality full I'd projects are underway on the continuous the to major we first; savings ramped from the Now implementing that deliver and get SG&A costs digester program.

in production Shelby, the the North Carolina converting expected to for and progress. Second, in new that to but production capital start for $XX machine foundation complete that in and budget XXXX. of in delayed quarter XXXX. in to million paper construction facilities first XXXX has the manufacturing plan We to start Shelby-related and not the the quarter on-time is our spend and converting is in To end, first commenced approximately production buildings of paper the warehousing of delay within tissue

million we Third, at a operations. remain cash XXXX and due new which of flow cash thereafter we debt for most and last model value shareholders. we conditions to at reduce And our cash increase which cash important service. discretionary levels was to to free This operating focus expansion XXXX to looking yield operating improve in complexity, and to levers Discretionary used fund XX.X%. current additional free and look reduce tissue our transportation costs be improve market further return the flow flow to to continue reduce will is equates but to approximately Shelby our $XXX detailed will market includes costs relentless our are challenging

continues consumer last one previously XXXX, our Club opportunities, preferences supplier remain our to year, the to customers Online we the retail environment changing that view continues Consumer for to Turning and serve environment, we grow. the for Limited multi-source model, in our expanded with this Assortment retail segments. present channel customer to we distribution market market, new American continues started in for products In the I shifting by North to products branded tissue reasons largest starting evolve. both and competitive this taking in landscape for mentioned move is however we are preference which And acceptance business the the steps each the environment. our and winning and segments of private Within consumer's and of challenges businesses of Products to that our a emerging the tissue in

at brands which negative portion total due five-year addition ultra-capacity largely private tissue market share of brands X.X% year of For market percentage in and is deflation year brand. private brand balancing primarily customers major X.X% products price that ultra-quality the new increased compared label fixed, is at some CAGR a reflected versus brands XX% was a from enjoyed private CAGR terms trend result, we our XXXX, our were last The Clearwater to brand dollar to the five U.S. in is XXXX, retailers of growth XXXX share market the CAGR ultra-quality the are period XXXX Underlying numbers these flat about of ultra-quality for brand In premium the data, down retail tissue existing for was while and online. to a the national private compared the to sales X.X%. private negative brands. X% IRI quality And a of to until XX% as X% constraints, declined to on compared positive of X% in a estimates comes with were X.X% the in X.X% national point Paper's capacity $X.X% dollar challenged X.X% ago. new versus in year-over-year is competition. the private for our In year XXXX tissue flat due share up with market the to market in base and that for tissue category, response Based consolidation our for total brands customer capacity brands. national over IRI conventional -- five up private Shelby one XX%

from with should Looking long-term grow U.S. most continue to tons current to RISI closure from tissue believe to which market we gain QX capacity X% net forecast the in due through RISI's estimates The new for at trends see is tissue and in private we share. label XXXX XXX,XXX line a forecast quarter. XXXX, XXXX approximately is tons the the will XXXX fourth down

additions and Over XX%. RISI tons XXXX XXXX, in the that coming capacity the assuming America, scheduled years, be and ratio next in capacity demand XXX,XXX forecast comes is tons online online forecasted to using in American of two to RISI XXX,XXX capacity all as XXXX demand in for North approximately North schedule estimates

be the capacity we X% the is over to in expand months and ending November marketplace XX consistent at last is higher the demand customer to XXXX, ratio industry demand. to segment manufacturing an XXX,XXX our imports of meet [ph], remains by Paper which decade X%, totaled impressive other remain at in tier We our American private inability the which confident continue and key American declining to converting the capacity stay forecasted and premium net to our to headwinds the base. market ultra-quality If the Over capacity costs. of to will total on share ultra-quality the driven North be on XXXX, increased tons. the growing flat leader to needs are average imports grow products will to American the with demand through seen X% by retail our primarily brand X% balance net the competitiveness input per decision PORI tissue XX%, the North Clearwater private tissue is to brands year for tissue need International in pass market expected North According growing to fastest Fisher next customers.

Turning forecasting balanced SPS see X.X% Paperboard, with XXXX for averaging published a XXXX, market is for XXXX outlook while X% the since demand levels grades X.X% of by remained the to growth year. grow a X% stable of start backlog good approximately following forecast XX% operating rates a see ago, to we industry for in XXXX got certain We prices improve RISI XXXX, for to North they're in American approximately XX% higher April in off year than XXXX. with SPS to have up

While forecasting is the XXXX. better X% XX% RISI is this compared year, for decline when export the in decline volumes in a considerably to

be In X% addition, imports lower XXXX. are forecasted by to in approximately

replace of Paper, As volume conventional point to shift of Clearwater final retail inflation, extent, those outcome cost to rolls. side, case are pass-through to will our affect financial to of tissue wood our will Input quarter whose number will is input greatly of least there a XXXX. the secured to largest and and and North to we and the what volume replace American end at we look include impact believe price? based quarter within we volumes cycle lose on market, at we begin we in one on not retail cost variables from second XXXX new for by we entrants imports. opportunity the As channel ability customer bid particularly fiber our the parent on the the what that XXXX results, premium that rates XX% as sit of To impact the side we here paperboard their volume. have Paperboard to-date, shift have tissue on Tissue On ability we XXXX and last that the replaced see our exports tissue at the the Pulp exchange foreign

variables year. see XXXX through we as we out these how for update will you playing move We the on

stock we authorization. currently under existing million $XX As our repurchase remaining have mentioned, John

any However, to all debt, by in tissue our XXXX shareholders. completion will new used to cash project to with returning in devoted of the expect excess Carolina we Shelby, North cash down pay capital be being

XXXX. outlook compared quarter Now to to the our of QX fourth

in operating down X% impact business sequentially, and to material to consolidated due higher compared tax paperboard and of X% SG&A wash In $XX we $X.XX XX%, in and the be X.X% to million will adjusted to lower promotions shipments to this net range results per continue increased executing primarily costs, mill, machine, a to consolidated in reduce expect we pricing shipments of converting We two raw conclusion, and an million and on the completing based QX, warehouse contracts expense by and normalized next range initiative, sales and earnings our Arkansas years. in our at on strategic higher-than-normal and to due on of plan adjusted consumer a our the lines over net expansion executing to scheduled adjusted of margin our expect the fully share $XX adjusted already-renegotiated construction in $X.XX. maintenance water Shelby, diluted paper rate EBITDA seasonal range X% $XX in the to in to from be million

heart cash While market market challenging, improve. all closing, conditions operating In accelerate, margin value in within prepared growth remarks, listening are continue the to thank now our especially tremendous we expansion, serve. both commitment to the I'd we'll underway, expect conditions investing for Paper to your who Thank and success, unwavering our of believe take returns you and for flow, like in and the employees to shareholder invested our change ourselves consumer are we to our the we we their the in business of to questions. light Clearwater for company the areas and be markets and right creation that our position on capital. And

Operator

Thank you with Our comes question Vertical from Chip Dillon first Research. [Operator Instructions]

is line open. Your

Chip Dillon

Good afternoon.

John Hertz

Hi, Chip.

Linda Massman

Chip. Hi,

Chip Dillon

that is replaced it. you I believe tell much the the us, that of, 'XX. the were the sales you of I however, the to customer Thanks want call, remind the of second of or the seeing we lost of details. the impact of if percent tissue fourth said for And know us quarter a in guess, either Yes, you second on that on up dollars question could tons, guess the how I that's -- first start quarter, I and you last all had the just

you of get replaced made of or you sort this progress you like another why end any sounds just think you'll haven't in it So, year? further XX% by the

John Hertz

Okay.

I how to just largest are customer. XX% question, about opportunity-by-opportunity bids volume are specifically opportunity So, is year I confidence the to to guess, really play we out from meaningful going we our is. our guess your obviously the I going what as don't about regard we think see talk XX% is up, when and chances going our and that the come to from think it's in throughout looking, we first and lost what

Chip Dillon

Okay. your pulp, that's to virtually that, with and side, imagine you imagine almost roughly see the are private I the all wondering just compares in rate, prices you -- do XX% you guys as are in then up -- pricing would And I does move given on I at know, business faster a some a are how are label all company? else move just know at make you up, not, competitors that I'm you and everyone cost integrated, dynamic and would since cost seeing continuing least the

John Hertz

Yes, that's correct.

there. from ramps. internal to versus own continuous the digester and you'd the be going on or are We out our fully-integrated what stated we typically And see we open as kind spot softwood it price know, cost, a price of delta two-thirds you of market. internally typically by using, selling There's are a pulp price standpoint large, of and see

Chip Dillon

like group. if out of long a if you edge and what talk the -- think skating said industry, us gave were revolver, in banking a of are see too if you you on covenants could that's ago of and kind -- not just your you and or $XXX I is looks on reflection being case, didn't -- couldn't you it that, I there getting how and your changed that competition spend then, million if there about options with cost then year, what that just just XXX some the as to in kind that more And kind all noticed the left you the you CapEx I banking your to you CapEx -- press any is have, do close way know, put Okay. is with you through release of this that? I you can work And know through

John Hertz

Yes.

to see but four, do doing conversation right we regard have to ex-EBITDA with X.X not get and four, are attractive are bankers from question, now. a covenant And and we -- go expect that to growing to is was would the very, that cost in to to don't cost the willing we us. they So, there what intend over though be with are way actually months. over so a a work first if be it some flexibility and go standpoint, even XX we We did very for just to sounded

And over the plan as on don't so, though, we of even flexibility I going kind financial we XX. said, took

Chip Dillon

whole if And you to your revolver your you finish up? Right. then -- do as down to plan draw have -- Shelby is draw the know, again, you it

John Hertz

do it million. We sitting We an an won't get plan It now. not for be $XXX incremental go whole accordion to -- than right at more have we are at I down discussion the thing. will our feature

So, to would that, we avail plan have need be don't do ourselves but that. we with

Chip Dillon

cost? would much And that more is idea that what is, cost rate -- interest you how incurred or same us you accordion of as roughly can give an the

John Hertz

terms, similar yes. Be

Chip Dillon

details. Okay. And you then all lastly, the thank for

whatever the that which mentioned depreciation. some sounds in faster first good guess was all, beyond to spend of 'XX had of thing that you like You because and I is a you subject deferred CapEx,

out? that then pushed a to left as guess kind year? CapEx how So kind when next be years left maintenance begs good of paying what taxes it's one far will out whatever questions; is many now? is XX more much plus on is Shelby. start -- How might you So, how secondly, cash of assume I that two is And

John Hertz

Yes.

spend we to think year. I in next expect So, XXX I said CapEx

Chip Dillon

In 'XX?

John Hertz

'XX. 'XX. talking Yes. I'm talking I'm

Chip Dillon

Okay.

John Hertz

to million to it, anything up that not of production. would Shelby For $XX It's that CapEx into 'XX, there $XX about, go call related will and hold million is between be 'XX. going

how move would will see the so, we be how we through part of year And the of terms in of in versus just second is 'XX, most your it question? much but at the And that XX. 'XX

Chip Dillon

with when the think write-off a tax that I will several to like a CapEx immediate guess said, of years just for I cash these of you -- don't -- get 'XX, of just you payer, become a Oh, I years imagine I credits, you just you build that, I'm cash would believe further therefore come? guessing tax and an imagine and your would range seems some when like kind of you payer, push might of it into be

John Hertz

to As have be a we 'XX we might standpoint extend perspective. the old going or effect got RPN to I I don't That XXX%, of 'XX. said, tax a the From payer are the regime. guess, reduced 'XX tax in not timing taxed actually write-off I versus, cash from we when accelerating taxes cash in

in new position are the law, some seeing we that. are depreciation and thing able the to to other the already perspective, loss of from in tax tax with is accelerated a add are we XXXX provisions of and some and a we The

years. here going our able of some later be are a of benefit we in cash to That will the back part of perspective going so, And kind to losses mid to a couple recapture from XXXX. be

Chip Dillon

Thank Okay. you All so right, great. much.

Operator

Thank you.

Josephson Our with comes next KeyBanc. from question Adam

Your line is open.

Adam Josephson

John, afternoon. Linda good and

John Hertz

Hi, Adam.

Linda Massman

Good afternoon.

Adam Josephson

correct guidance; in Am one EBITDA, a more you just I'm this you for us to wrong, like little a couple, me looks Just from details give time. that, correct normally doing you I why? can give thinking on full-year the if so so, refrained a and it outlook if are

John Hertz

did. end We sit have our here. how did; And variables feels we being right the some today. Year are those still two highlighted we guess, I out, some are years. confidence the in variables up it's ago, comfortable, now for right comfortable as and that, prepared too before here the haven't of and it sight be to Linda some believe -- range we not. Last play in would of And feel year, we did game line like as looking of to remarks early terms years in we I years, to and that kind we going now us at of,

will we it let of to know seeing, going quarter way. in are you we we approach that of are kind kind the take variables of what and each is those handle So, talk each and about

Adam Josephson

pricing roughly amount? and all equal Is that the rolls, above or the or uncertainty related is volume or mostly to

John Hertz

it's above, above we customer. what's -- price major the the in or all marketplace you It's replace from also quickly across the dynamics in the lost volume the terms know, -- those are and what the segments how all segments. our within of will And retail

Adam Josephson

maintenance think terms -- major is lower you big case? to you normally remain give be million the in us maintenance that And previously would the year-over-year, in indicated going $XX Does of that Okay. around 'XX be John, I what versus 'XX.

John Hertz

Correct, yes.

Adam Josephson

And lower then SG&A have will by you right? five, be that

John Hertz

Correct.

Adam Josephson

Are that it? of is there us, any the buckets that span you can or give other

John Hertz

Interest?

Adam Josephson

In EBITDA? terms of Yes.

John Hertz

No… Yes.

Linda Massman

really. Not

John Hertz

our head. have skipping in is nothing my been script, It off would

Adam Josephson

Okay, those two. so just

a two; obviously mostly SPS, the question integration consolidation are your been all recent In a or you there's and in know we producer, Okay. non-integrative significant industry.

your last of really a that's do and So, non-integrative acquisition what within not know, think consolidating short-term because see large you you yourself just as of Again, position you and clearly long-term; lost where do obviously you an a this both mostly while integrated? producer, year. you're integrating, industry customer

Linda Massman

to focus. Yes. Adam. And to of we've that like marketplaces, the our good That's question. niche That's say and do we obviously do move of the tend those business converting and industry watch historically. we customers we well we we market shifts very place is, some for That's to volume as where more protect SPS tend easiest around we we course matched integrative independent will way Thanks, as to pretty lot make I on where have And players say, like are of Long-term, we carefully. are watching volume. a decisions the and basis. a ability trends our player great that been forward. access you are to a it then going supply good at guess

John Hertz

ended value our our at customers time all gets where are by watch being maybe a competitors, our it's to also stronger not And but I not little I in would a got say ideal. near-term, we obviously we think up proposition integrated of the necessarily that if

Adam Josephson

on see And flattish remain the domestic demand year? was one as SPS, last it more you John, do

John Hertz

we might it RISI little bit; up. had I No, think see up demand

Linda Massman

about Going going up year RISI the has strong backlogs. little bit. up ended with it percent. We a

good some pretty characteristics. seeing we're So demand

Adam Josephson

you that you inflation, your 'XX. expecting next, excuse down Okay. tissue, you margins up, this it's are indicating you you prices large having and And And in there, are so tissue making know you just going your obviously your are on but I asked as it, a have the difficultly 'XX; cost and me, right? while got costs squeezed a real real in are are on go before, fact saying I squeeze to for in touched at offsetting are time one same investment

least it $XXX get year industry this business, would in these confidence investment So, pretty on for considering what gives at two you the that appear? next return headwinds you'll or million good a that significant

Linda Massman

Yes.

will one. Adam, that take So, I

industry Let me in paraphrase and And long-term. in competing that that with are tissue saying the look our we decisions at strategic way. that business the

So, we will start with that.

is So, the as capacity. in investment, know, Shelby ultra you

in are customers we putting market is the of our in So are with part the asking making ultra-tissue for. growing capabilities, which the what line and

the industry growing out the over market and growing I last my the are in firm predicted with to growing really Fisher of consulting a right trying then the five to of talked we ultra-tissue is segment in prepared completely which tissue mentioned fastest market be and that XX% ultra-quality remarks, the about the is needs So, our the now, fixed on International ultra-quality American I've years going balance coupled remarks North my prepared and capacity sold market customers. as tissue our we're tissue

as going do we look disruptive have conditions So, in be American all is don't and relationships it is the be to of one at long-term. able leading the North to market our we market, to this to retail we're we not the something expect suppliers maintain or to of

our meantime, flows operating I look through is So the to taking maintain these relationships. we'll our in the at going but efficiencies cash necessary to costs market conditions, increasing while think continue we're and and retail

Adam Josephson

at think what change and point? with Last any out like do capacity you for conditions there's sounds question, 'XX will in 'XX. it is And you Linda, that, thank coming to industry respect and more

market think you dollar in in the was said 'XX. flat terms I

next that two will you're the are you next the what years? come expecting expecting to to three you're expecting or in exactly, what So to in change year then conditions or gives again industry out improve, not if demand capacity pick-up you or confidence

Linda Massman

a question and a first answer it. I'd I'll but say to difficult at Yes, crack so that's foremost, take

able that we with that to retail pass be of on those the taking do too would severe just our saw that retail to all during typical First on this inflation with of all, we see cost what that coupled along be we've that all side been of increases, say with it's at experienced able cost I the should would but place, type be not disruption least XXXX that customers. we conditions to

will XXXX sort changing environment a retail the partnerships. out, few quite eventually itself changing in think I So technologies, disruptions there were

focused become think And will the settle for a also increasingly have retailers that out brands think economics. and a I it and roadmap I so, plays private will bigger overall their strategic of better kind on of that future itself will as part

things those think happen. main the are that I will

market to their Now, out as relates I the business or same capacity as mean and with look machines of you capacity retail the take the and Neenah others some at market trends. quality do that I premium they saw look at us will it the think tissue

Adam Josephson

it. Thank you so much, Appreciate Linda.

Operator

Thank you, RBC Capital Paul Markets. Quinn next our comes from with question

is open. Your line

Paul Quinn

much. very thanks Hey,

John Hertz

Paul. Hey,

Paul Quinn

now $XX sounds guidance what made two environment in there, to paradigm of from in into in cost or I pretty ago? to competitive your add sort doing the were those decent get it story the in somewhere of you million and yourself savings terms projects, like in at probably here position that to looks look to to XXX years to you've like some maybe are XX on and pretty million and left Just get and up three the original what $XX addition you back savings cost like overall but cost on Slide sounds the a competitive it strategic flow-through it just XXX decent the if different plan, you're

John Hertz

the Yes, but look got inflation I in on at Paperboard what have we we when is XXXX. this, pricing embarked you when XXXX in you Paul, when would we've versus what heard versus when we you other saw the kind we you what that say, about the that of of talked in also XXXX cost kind XXXX

components those -- the So two those that are overcoming. we're

operational put around looking little really at to in customers addition more that, I our business where that. and maybe we're bit a and guess tissue network from So particularly JV we're particular sourcing the within

whether try taking mills well on to the Lewiston, to look operational doing minimize miles be really had, the a within So efficiencies just we like there's as the in some daily… as road to did

Linda Massman

with at driving focused very, operating as of ways an it Paul, effort goodness and our have change and the incredible but on around good Paper flow. better be incredibly we looking and at in stay just driving yes, cost believe will relates especially mill which business thank have I to very just can such thousands going we of across I and an ongoing think looking of here everyday we know processes thankfully cash are improved of we operate savings lots for it's and that efficiencies, opportunities to you And Clearwater employees and model many have operating our tissue. it those working group

Paul Quinn

based of to tissue the about the Okay. like question XX% just bid? expect your in is number sounds QX it when there's because the your year but that on Maybe last the period no of for end bids rate, the you and of a success quarter us process the out bid of on help with have you out by incremental but here. done business this And the just could customer you Chip's major just call sticking loss quarter replaced XX% understanding and nothing

John Hertz

little So that bit, I clarify a would just Paul.

line have in call XX% what to we had sight actually hand. is we've said it we think said what time we and this was of last I

the end of XX% don't by the want… if So then the I know in you and hand incremental year. that's all

Linda Massman

up their which that looked are so locations bid bid know So, so in up geographic typically for what and we given sight have tend volume that decent price at sell know quality pretty percentage and good and to to price at and going or a tend makes any alternative. all think to given we to our get what they are, year, given we a us we've their and retailers line and parent of capabilities, we what putting be price to to to what's of of mark. it that going business going have have cost our is opportunity our can I that's we other ahead a rolls pretty will it's What's structure, we vary that and sense XX%

Paul Quinn

And side, increase? bucks, Okay. on a of you're price on price for your that announce board with paperboard confirm just competitors there are can the week you number that last XX increase

Linda Massman

customers what's a have we on going healthy strategic year. healthy pretty and I'm we not we we coming our backlogs XXXX in announced always demand specific our the So consider increase start have probably to and a say into interest and in good situation but very best to those our encouraging are based company way, customer the did price decisions a of say, demand it's

be we'll about year. making the assessments throughout to proceed our So how

Paul Quinn

right, All of all that's luck. I best had;

John Hertz

Thanks, Paul.

Operator

Instructions] you. question next from Our Thank [Operator Kurt D.A. comes Davidson. Yinger with

open. is line Your

Kurt Yinger

thank Yes, you.

question… First

John Hertz

Kurt. Hi

Kurt Yinger

any Hi, big of moving some is some you at XXXX? and maintenance you could as maybe pieces obviously bigger of strategic help way the benefits look XXXX, the quantify in there offsets

John Hertz

happen Well, with going it's going be to pulp. and what to I what's think your assumption

weeds think with to into I what's that and oil how transportation. happen going

the Linda what in that's think of described variable I what watching. prepared biggest we're her remarks So that kind and

Kurt Yinger

can outlined cost the you the have we sort maintenance in of sort past as that for XXXX, look then the And think Shelby at presentation? just how of CapEx end that closely XXXX you of Okay. in guys do CapEx your approximate

John Hertz

Yes.

assume to ranges, I million look million we 'XX that what into So $XX $XX $XX won't would depend will hold fall that here maintenance we Shelby up million about right up talked those million $XX I've $XX would on and go to million million of million like. $XX we say, but of of so $XX I CapEx within think production would million where to would sit plus starting now 'XX to $XX set

Kurt Yinger

sort Okay. And any headwinds I then, talked mean the specific retail see are channels obviously you in the a there lot the of about environment, current best has been where opportunities?

John Hertz

of kind describe one do emerging is now right mean I how we that?

Linda Massman

Limited assortment.

John Hertz

interesting when private Limited for all marked they're all like that's these because label. think you about in assortment, so world,

obviously to going not pay online is know the you then and attention thing to. So

Kurt Yinger

to of then last where with online? it's tier the of some the value at place volume quality more point coming chain question impossible move a come And just products there the value ultra-quality customers some competitive Okay. price does lower that's as up

Linda Massman

going tissue. either pricing quality or for we sell make as case a a structure always years. there's as the product on as like one The have looks have premium to to depending is and rolls be at to parent nice think conventional decisions situation time of kind we'll what we thing a couple the option the place through I those progress next of it

Kurt Yinger

set I mean does get more comes do winning I the it what a new pricing would similar obviously value those competitive contracts? pretty is online those more I you contracts assume are to guess of competing though the try as people just win for as

Linda Massman

focus being our place going environment in has now on very it going it's and the to this here good depends think them, sort just in stable right will XXXX, eventually new retail so and have normal their itself I to out. battle we're is don't again this the is key think retail to of a driver expect own I so think to how much a disruption And player taken in retailers time the be see grew come. sort I think more we I years speak, is for

Kurt Yinger

you very thank much. right, All

John Hertz

Kurt. Thank you,

Operator

Dan from Jacome Sidoti. comes question with next Our

Your is open. line

Dan Jacome

how Good are morning, you?

John Hertz

how Dan, are you? Hi

Dan Jacome

of guidance bad, on my might for is gave the any you that question? still was that sense not had couple tax time, you are comments release or press think of some understanding do questions, items that today's reform like just on buckets first sounds bad. too your Not future much, too pretty Appreciate it the you or you what looking at, be

John Hertz

and through is guidance just much, to move year. gave happen different that's Yes, as obviously interpretations going there're we pretty it I rulemaking think came out the or we the

we're -- comment. with of kind that's So that that's addressing

Dan Jacome

can and and what line everyone to? just of there again transportation that mentioned at exactly flavor you heard I've about much checking in little that it give then like how the was then forest like seems is cost Okay, your you're almost talking it's sight you would I persist that, headwind, product a I long how think on if going facility us of seeing have know

John Hertz

was question transportation? The on

Dan Jacome

costs, mentioned something about Yes, you the I think freight right?

John Hertz

to impacts, having Yes, order related there you're whatever kind that obviously pay to to in some weather from where but mean permanent were move the I not of disruptions storms stuff. get caused bounties

of is up headwind. that's So that's working itself so year-over-year, a out the system. continuing Diesel

Dan Jacome

Okay.

of rear-view might most be in it So, it the and to mirror, seems be…

John Hertz

between to I'd say be think line that. it portion there's rates a through it wouldn't getting I many the elevated costs say haul would relates but and under because drivers pressure not then is weather-related as of diesel ideal. just stuff, as as I

Dan Jacome

that we just to go under difference material tissue, question Okay, case I'm for if scenario? loss be more of shift, parent if on the see to helps. would margins trying got margins for your from you contracts, not roll up segment would there had what for that sort consumer loss some scenario more to the to parent volume pick I be a to the able mix the rolls because you're have

John Hertz

is case ultra Well, it get that's have but into have more value of conventional typically than your parent parent impact about but up your versus we're here case would is margin in kind of the what you not when to kind always trading noticeable rolls roll, a the because not conventional better product talking going particularly space. that's the a space,

Dan Jacome

see typically, that you drive had go your me margin let rolls if So got correct, I that you if would parent the there? to if down, --

John Hertz

parent are That conventional as to the down quality better get you and sometimes right, general statement, rolls. stuff, just you off at the lower but a if on

Dan Jacome

to up, would conventional rolls, your to fall, in in you say, then, line if would where parent And have side? would what and you you you Okay. the area be go

John Hertz

that customer lost we conventional. at major is business the because yes, yes, Yes, the all

Dan Jacome

think? So be the might as first it as wouldn't margin bad headwind

John Hertz

Correct.

Dan Jacome

else the might just there? than said just reduced pricing missing pricing high-level per have like didn't other you a what sounds seems know se, increase or anything Okay. there for the imports, ups, I like be very announce looking you And for on thought and you to but then, is helping paperboard, on a price -- that's

John Hertz

at and the I when yes. everything, that's backlogs you think demand look there,

Dan Jacome

Okay.

great, just… Okay,

John Hertz

companies other exporting it in And them a thing, year I you U.S. a more year guess you are seeing if back go the of plus, plus when ago. way to

Dan Jacome

a me now. That's Thanks it Okay. lot. from right

John Hertz

remarks. this or does our session. call Okay. that Thank any for Ms. question-and-answer you. additional closing gentlemen, conclude Ladies and turn At to Massman I time, over the will

Linda Massman

progress another model. than forward margin look attaining more cycle and of the Great. curve target in aggressively Thank challenging across solid year environment, to when Clearwater reduce shareholders. our better customers and conditions we Thank for invest We expected, to the Paper. costs, for towards we position you. for us support We which to market which everyday, it Despite who how changed our you joining for makes your will to interest the growth continue have and believe us improve. has in projects for thank stated of rapidly continued

Operator

your do Paper XXXX Clearwater and Quarter and the We Call. participation. Ladies conclude Conference gentlemen, that Fourth Earnings does appreciate Full-Year

all disconnect. may You

Clearwater Paper (CLW) 5 Feb 182017 Q4 Earnings call transcript