Description of Clearwater Paper's Business Segments
Our Pulp and Paperboard segment operates facilities in Idaho, which has two
paperboard machines, and Arkansas, which has one paperboard machine.
Our overall pulp and paperboard production consists primarily of folding carton,
liquid packaging, cup, plate, commercial printing grades and hardwood and softwood
pulp.
Folding carton board used in pharmaceuticals, cosmetics and other premium packaging,
such as those that incorporate foil and holographic lamination, accounts for
the largest portion of our total paperboard sales. We focus on high-end folding
carton applications where the heightened product quality requirements provide
for differentiation among suppliers, resulting in margins that are more attractive
than less critical packaging applications.
Our liquid packaging paperboard is known for its cleanliness and printability,
and is engineered for long-lived performance due to its three-ply, softwood
construction. Our reputation for producing liquid packaging meeting the most
demanding standards for paperboard quality and cleanliness has resulted in meaningful
sales in Japan, where consumers have a particular tendency to associate blemish-free,
vibrant packaging with the cleanliness, quality and freshness of the liquids
contained inside.
We also sell cup stock and plate stock grades for use in food service products.
A majority of our sales in this area consist of premium clay coated cup stock
grades used for high-end food packaging, such as premium ice cream.
We do not produce converted paperboard end-products, so we are not simultaneously
a supplier of and a competitor to our customers. Of the five largest SBS paperboard
producers in the U.S., we are the only producer that does not also convert SBS
paperboard into end products. We believe our position as a non-integrated supplier
has resulted in a diverse group of loyal customers because when there is decreased
market supply of paperboard, we do not divert our production to internal uses.
At our Idaho facility we produce bleached softwood pulp primarily for internal
use, including in our Consumer Products segment.
Our pulp mills are currently capable of producing approximately 856,000 tons
of pulp on an annual basis. In 2015, we produced approximately 802,000 tons
of pulp in the aggregate and utilized approximately 81% of that production,
or approximately 650,000 tons, to produce approximately 773,000 tons of paperboard.
The increase in tonnage from pulp to paperboard production is due to the addition
of coatings and other manufacturing processes. We also used approximately 19%
of our pulp production, or approximately 150,000 tons, in our Consumer Products
segment to produce tissue products. The remaining pulp production of less than
1%, or approximately 2,000 tons, was sold externally by our Consumer Products
segment.
We utilize various methods for the sale and distribution of our paperboard and
softwood pulp. The majority of our paperboard is sold to packaging converters
domestically through sales offices located throughout the U.S., with a smaller
percentage channeled through distribution to commercial printers. The majority
of our international paperboard sales are conducted through sales agents and
are primarily denominated in U.S. dollars. Our principal methods of competing
are product quality, customer service and price.
Consumer Products Segment
Our Consumer Products segment manufactures and sells a complete line of at-home
tissue products as well as AFH products. Our integrated manufacturing and converting
operations and geographic footprint enable us to deliver a broad range of cost-competitive
products with brand equivalent quality to our customers.
We believe that we are the only U.S. consumer tissue manufacturer that solely
produces a full line of quality private label tissue products for large retail
trade channels. Most U.S. tissue producers manufacture only branded products,
or both branded and private label products, or in the case of certain smaller
or midsize manufacturers, only produce a limited range of tissue products or
quality segments. Branded producers generally manufacture their private label
products at a quality grade or two below their branded products so as not to
impair sales of the branded products. Because we do not produce and market branded
tissue products, we believe we are able to offer products that match the quality
of leading national brands, but generally at lower prices. We utilize independent
companies to routinely test our product quality.
In bathroom tissue, the majority of our sales are high quality two-ply ultra
and premium products, including TAD tissue products. In paper towels, we produce
and sell ultra quality TAD towels as well as premium and value towels. In the
facial category, we sell ultra-lotion three-ply and a complete line of two-ply
premium products as well as value facial tissue. In napkins, we manufacture
ultra two- and three-ply dinner napkins, as well as premium and value one-ply
luncheon napkins. Recycled fiber value grade products are also available to
customers who wish to further diversify their product portfolio.
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