8-K
Clearwater Paper Corp (CLW)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2021
CLEARWATER PAPER CORPORATION
(Exact name of registrant as specified in its charter)
| DE | 001-34146 | 20-3594554 | ||||
|---|---|---|---|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) | 601 West Riverside, | Suite 1100 | 99201 | |
| --- | --- | --- | ||||
| Spokane, | WA | |||||
| (Address of principal executive offices) | (Zip Code) |
(509) 344-5900
(Registrant’s telephone number, including area code)
Not Applicable
(Former name of former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchanged on which registered |
|---|---|---|
| Common Stock, par value $0.0001 per share | CLW | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On May 5, 2021, Clearwater Paper Corporation (the “Company”) announced its results of operations and financial condition for the first quarter ending March 31, 2021. A copy of the press release containing this announcement is furnished as Exhibit 99.1 hereto. In addition, a copy of the Company’s First Quarter Supplemental Information is furnished as Exhibit 99.2 hereto.
In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), the following are disclosed the attached Adjusted EBITDA which is defined as earnings before interest expense, taxes, depreciation and amortization, other operating credits and charges, net and other non-operating items. Adjusted income from operations which is calculated by excluding from income from operations, other operating credits and charges, net, and adjusts for a normalized tax rate. Adjusted EBITDA and Adjusted income from operations are not a substitute for the GAAP measure of net income or other GAAP measures of operating performance.
The Company discloses Adjusted EBITDA in the attached because it is used as important supplemental measure of its performance and believes that similarly-titled measures are frequently used by securities analysts, investors and other interested persons in the evaluation of companies in its industry, some of which present similarly-titled measures when reporting their results. The Company uses Adjusted EBITDA to evaluate its performance as compared to other companies in its industry that have different financing and capital structures and/or tax rates. It should be noted that companies calculate similarly-titled measures differently and, therefore, as presented by the Company may not be comparable to similarly-titled measures reported by other companies. In addition, Adjusted EBITDA has material limitations as a performance measure because it excludes interest expense, income tax expense and depreciation and amortization which are necessary to operate the Company's business or which the Company otherwise incurred or experienced in connection with the operation of its business.
The Company believes that Adjusted income from operations, which excludes other operating credits and charges, net, adjusted for a normalized tax rate is a useful measure for evaluating our ability to generate earnings and that providing this measure will allow investors to more readily compare the earnings referred to in the press release to the Company's earnings for past and future periods. The Company believes that this measure is particularly useful where the amounts of the excluded items are not consistent between the periods presented. It should be noted that other companies may present similarly-titled measures differently and, therefore, as presented by the Company may not be comparable to similarly-titled measures reported by other companies. In addition, Adjusted income from operations has material limitations as a performance measure because it excludes items that are actually incurred or experienced in connection with the operations of the Company's business.
The information in Item 2.02, including Exhibits 99.1 and 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibit Index
| Exhibit | Description |
|---|---|
| 99.1 | Press release issued by Clearwater Paper Corporation regarding the first quarter 2021 financial results |
| 99.2 | Supplemental financial information for the first quarter 2021 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 5, 2021
CLEARWATER PAPER CORPORATION
| By: | /s/ Rebecca A. Barckley |
|---|---|
| Rebecca A. Barckley, Vice President, Corporate Controller | |
| (Principal Accounting Officer) |
Document
Exhibit 99.1
Clearwater Paper Reports First Quarter 2021 Results
SPOKANE, Wash.--(BUSINESS WIRE)--May 5, 2021 --Clearwater Paper Corporation (NYSE:CLW), a premier supplier of quality tissue and bleached paperboard products, today reported financial results for the first quarter of 2021.
FIRST QUARTER HIGHLIGHTS
•Net income of $12 million, or $0.71 per diluted share
•Adjusted EBITDA of $54 million
•Reduced net debt by $21 million
•Strong demand for paperboard products
“Both of our businesses performed well in the first quarter, despite some headwinds. For paperboard, we experienced strong demand and robust backlogs. The tissue business saw a decrease in demand as consumers de-stocked their pantries and retailers reduced orders to manage their inventories,” said Arsen Kitch, president and chief executive officer. “While the decrease in tissue demand is a short-term phenomenon, we remain focused on generating cash, reducing debt, and driving long-term performance improvements.”
OVERALL RESULTS
For the first quarter of 2021, Clearwater Paper reported net sales of $426 million, an 11% decrease compared to net sales of $478 million for the first quarter of 2020. Net income for the first quarter of 2021 was $12 million, or $0.71 per diluted share, compared to net income for the first quarter of 2020 of $10 million, or $0.62 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net income in the first quarter of 2021 of $12 million, or $0.69 per diluted share, compared to first quarter 2020 adjusted net income of $10 million, or $0.57 per diluted share. Adjusted EBITDA for the quarter was $54 million, compared to the first quarter of 2020 Adjusted EBITDA of $55 million.
Pulp and Paperboard Products Segment
Net sales in the Paperboard Products segment were $220 million for the first quarter of 2021, down 2% compared to first quarter 2020 net sales of $223 million. Segment operating income for the first quarter of 2021 was $25 million compared to $26 million for the first quarter of 2020. Adjusted EBITDA for the segment was $34 million in the first quarter of 2021, compared to $35 million in the first quarter of 2020. The decrease in operating income and Adjusted EBITDA was driven by lower production, higher natural gas and other input costs related to the weather event at our Cypress Bend location which were partially offset by higher sales prices.
Paperboard Sales Volumes and Prices:
• Paperboard sales volumes were 206,712 tons in the first quarter of 2021, a decrease of 1% compared to 207,916 tons in the first quarter of 2020.
• Paperboard average net selling price increased 1% to $1,028 per ton for the first quarter of 2021, compared to $1,013 per ton in the first quarter of 2020.
Consumer Products Segment
Net sales in the Consumer Products segment were $208 million for the first quarter of 2021, down 21% compared to the first quarter 2020 net sales of $263 million. In the first quarter of 2021, converted case shipments totaled 11.7 million cases, a decrease of 23% compared to 15.2 million cases shipped in the first quarter of 2020. Segment operating income for the first quarter of 2021 was $18 million compared to operating income of $15 million in the first quarter of 2020. Adjusted EBITDA for the segment was $35 million in the first quarter of 2021, up from $32 million in the first quarter of 2020. The increase in operating income and Adjusted EBITDA was driven by lower input costs, primarily in packaging and chemicals and higher throughput creating improved operating efficiencies in our operations, partially offset by lower sales volume.
Retail Tissue Sales Volumes and Prices:
• Retail tissue volumes sold were 70,762 tons in the first quarter of 2021, a decrease of 22% compared to 90,791 tons in the first quarter of 2020. Retail volumes represented 88% of total volumes sold in the first quarter of 2021, a decrease from 91% in the first quarter of 2020.
• Retail tissue selling prices increased 1% to $2,758 per ton in the first quarter of 2021, compared to $2,732 per ton in the first quarter of 2020.
COMPANY OUTLOOK
“We are continuing to position our businesses for long-term success, while taking actions that will help offset cost inflation and the short-term market driven adjustment in tissue demand. Our paperboard business continues to perform well with favorable market dynamics. We are confident that our focus on business improvements will deliver sustained performance in the long run,” Kitch concluded.
WEBCAST INFORMATION
Clearwater Paper Corporation will discuss these results during an earnings conference call that begins at 2:00 p.m. Pacific Standard Time today. A live webcast and accompanying supplemental information will be available on the company's website at http://ir.clearwaterpaper.com. A replay of today's conference call will be available on the website at https://ir.clearwaterpaper.com/investors/events-and-presentations beginning at 5:00 p.m. Pacific Time today.
ABOUT CLEARWATER PAPER
Clearwater Paper is a premier supplier of private-branded tissue to major retailers and wholesale distributors, including grocery, drug, mass merchants and discount stores. In addition, the company produces bleached paperboard used by quality-conscious printers and packaging converters, and offers services that include custom sheeting, slitting and cutting. Clearwater Paper's employees build shareholder value by developing strong relationships through quality and service.
USE OF NON-GAAP MEASURES
In this press release, the company presents certain non-GAAP financial information for the first quarter of 2021 and 2020, including adjusted income (loss) and Adjusted EBITDA. Because these amounts are not in accordance with GAAP, reconciliations to net income (loss) as determined in accordance with GAAP are included in the tables at the end of this press release. The company presents these non-GAAP amounts because management believes they assist investors and analysts in comparing the company's performance across reporting periods on a consistent basis by excluding items that the company does not believe are indicative of its core operating performance. In addition, the company uses Adjusted EBITDA: (i) as factors in evaluating management’s performance when determining incentive compensation, (ii) to evaluate the effectiveness of the company's business strategies, and (iii) because the company's credit agreement and the indentures governing the company's outstanding notes use metrics similar to Adjusted EBITDA to measure the company's compliance with certain covenants.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding cash generation, debt reduction, performance improvements, and market conditions, product demand and dynamics. These forward-looking statements are based on current expectations, estimates, assumptions, and projections that are subject to change, and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to: the impact of the COVID-19 pandemic on our business and operations, our suppliers' operations and our customer demand; competitive pricing pressures for our products, including as a result of increased capacity, as additional manufacturing facilities are operated by our competitors and the impact of foreign currency fluctuations on the pricing of products globally; the loss of, changes in prices in regard to, or reduction in, orders from a significant customer; changes in the cost and availability of wood fiber and wood pulp; changes in transportation costs and disruptions in transportation services; changes in customer product preferences and competitors' product offerings; larger competitors having operational, financial and other advantages; customer acceptance and timing and quantity of purchases of our tissue products, including the existence of sufficient demand for and the quality of tissue produced by the company’s expanded Shelby, North Carolina operations; consolidation and vertical integration of converting operations in the paperboard industry; our ability to successfully implement our operational efficiencies and cost savings strategies, along with related capital projects; changes in the U.S. and international economies and in general economic conditions in the regions and industries in which the company operates; manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunctions and damage to the company’s manufacturing facilities; cyber-security risks; changes in costs for and availability of packaging supplies, chemicals, energy, and maintenance and repairs; labor disruptions; cyclical industry conditions; changes in expenses, required contributions, and potential withdrawal costs associated with our pension plans; environmental liabilities or expenditures; reliance on a limited number of third-party suppliers for raw materials; our ability to attract, motivate, train and retain qualified and key personnel; our substantial indebtedness and ability to service our debt obligations and restrictions on our business from debt covenants and terms; negative changes in our credit agency ratings; changes in laws, regulations or industry standards affecting the company’s business; and other risks and uncertainties described from time to time in the company's public filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2020 and
subsequently filed periodic reports on Form 10-Q. The forward-looking statements are made as of the date of this press release and the company does not undertake to update any forward-looking statements based on new developments or changes in the company's expectations after the date of this press release.
| Clearwater Paper Corporation | |||||
|---|---|---|---|---|---|
| Consolidated Statements of Operations | |||||
| (Unaudited) | |||||
| Three Months Ended March 31, | |||||
| (In millions, except per-share data) | 2021 | 2020 | |||
| Net sales | $ | 425.9 | $ | 477.9 | |
| Costs and expenses: | |||||
| Cost of sales | 370.6 | 423.0 | |||
| Selling, general and administrative expenses | 27.8 | 27.5 | |||
| Other operating charges, net | 0.4 | 8.6 | |||
| Total operating costs and expenses | 398.8 | 459.1 | |||
| Income from operations | 27.1 | 18.8 | |||
| Interest expense, net | (9.3) | (12.8) | |||
| Other non-operating expense | (2.5) | (1.9) | |||
| Total non-operating expense | (11.8) | (14.7) | |||
| Income before income taxes | 15.3 | 4.1 | |||
| Income tax provision (benefit) | 3.2 | (6.2) | |||
| Net income | $ | 12.1 | $ | 10.3 | |
| Net income per common share: | |||||
| Basic | $ | 0.73 | $ | 0.62 | |
| Diluted | 0.71 | 0.62 | |||
| Average shares outstanding (in thousands): | |||||
| Basic | 16,647 | 16,555 | |||
| Diluted | 16,979 | 16,615 | |||
| Clearwater Paper Corporation | |||||
| --- | --- | --- | --- | --- | |
| Condensed Consolidated Balance Sheets | |||||
| (Unaudited) | |||||
| (In millions) | March 31, 2021 | December 31, 2020 | |||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 57.1 | $ | 35.9 | |
| Receivables, net | 134.9 | 160.6 | |||
| Inventories | 293.1 | 263.3 | |||
| Other current assets | 15.3 | 15.2 | |||
| Total current assets | 500.4 | 474.9 | |||
| Property, plant and equipment, net | 1,173.2 | 1,191.5 | |||
| Operating lease right-of-use assets | 60.9 | 63.5 | |||
| Goodwill and intangibles, net | 48.0 | 48.8 | |||
| Other assets, net | 21.3 | 21.7 | |||
| TOTAL ASSETS | $ | 1,803.9 | $ | 1,800.4 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Current portion of long-term debt | $ | 1.7 | $ | 1.7 | |
| Accounts payable and accrued liabilities | 233.5 | 243.1 | |||
| Total current liabilities | 235.3 | 244.8 | |||
| Long-term debt | 716.3 | 716.4 | |||
| Long-term operating lease liabilities | 51.0 | 54.3 | |||
| Liability for pension and other postretirement employee benefits | 79.6 | 80.5 | |||
| Deferred tax liabilities and other long-term obligations | 185.6 | 183.3 | |||
| TOTAL LIABILITIES | 1,267.8 | 1,279.3 | |||
| Common stock | — | — | |||
| Paid in capital | 17.6 | 16.6 | |||
| Retained earnings | 570.9 | 558.8 | |||
| Accumulated other comprehensive loss, net of tax | (52.4) | (54.3) | |||
| TOTAL STOCKHOLDERS' EQUITY | 536.1 | 521.1 | |||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,803.9 | $ | 1,800.4 | |
| Clearwater Paper Corporation | |||||
| --- | --- | ||||
| Consolidated Statements of Cash Flows | |||||
| (Unaudited) | |||||
| Three Months Ended March 31, | |||||
| (In millions) | 2021 | 2020 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||
| Net income | $ | 12.1 | $ | 10.3 | |
| Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||
| Depreciation and amortization | 26.8 | 28.0 | |||
| Stock-based compensation expense | 2.4 | 1.5 | |||
| Deferred and other income taxes | (0.4) | 1.8 | |||
| Pension and other postretirement benefit plans | 1.7 | 0.8 | |||
| Gain on divested assets | — | (1.4) | |||
| Changes in operating assets and liabilities: | |||||
| (Increase) decrease in accounts receivable | 25.7 | (37.3) | |||
| (Increase) decrease in inventory | (29.7) | 40.9 | |||
| Increase in other current assets | (0.2) | (9.0) | |||
| Decrease in accounts payable and accrued liabilities | (6.2) | (24.0) | |||
| Other, net | 1.7 | 0.1 | |||
| Net cash flows provided by operating activities | 33.8 | 11.7 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||
| Additions to property, plant and equipment | (11.1) | (10.5) | |||
| Net cash flows used in investing activities | (11.1) | (10.5) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||
| Borrowings of short-term debt | — | 88.5 | |||
| Repayments of short-term debt | — | (48.5) | |||
| Repayments of long-term debt | (0.4) | (1.1) | |||
| Proceeds from sale of stock under employee awards | 0.5 | — | |||
| Taxes paid related to net share settlement of equity awards | (1.6) | (0.7) | |||
| Other, net | — | (0.2) | |||
| Net cash flows provided by (used in) financing activities | (1.4) | 38.1 | |||
| Increase in cash, cash equivalents and restricted cash | 21.2 | 39.3 | |||
| Cash, cash equivalents and restricted cash at beginning of period | 36.9 | 22.4 | |||
| Cash, cash equivalents and restricted cash at end of period | $ | 58.2 | $ | 61.7 | |
| Clearwater Paper Corporation | |||||
| --- | --- | --- | --- | --- | |
| Segment Information | |||||
| (Unaudited) | |||||
| Three Months Ended March 31, | |||||
| (In millions) | 2021 | 2020 | |||
| Segment net sales: | |||||
| Pulp and Paperboard | $ | 219.7 | $ | 223.1 | |
| Consumer Products | 208.4 | 262.5 | |||
| Eliminations | (2.2) | (7.8) | |||
| Total segment net sales | $ | 425.9 | $ | 477.9 | |
| Operating income: | |||||
| Pulp and Paperboard | $ | 25.0 | $ | 26.2 | |
| Consumer Products | 17.9 | 14.6 | |||
| Corporate and eliminations | (15.5) | (13.4) | |||
| Other operating charges, net | (0.4) | (8.6) | |||
| Income from operations | $ | 27.1 | $ | 18.8 |
Note: Certain amounts have been reclassed from the prior year presentation to reflect the realignment of Clearwater Paper’s baled pulp sales to record inter-segment sales at market price and the realignment of outside pulp sales to the producing segment.
| Clearwater Paper Corporation | ||||
|---|---|---|---|---|
| Reconciliation of Non-GAAP Financial Measures | ||||
| Adjusted EBITDA | ||||
| (Unaudited) | ||||
| Three Months Ended March 31, | ||||
| (In millions) | 2021 | 2020 | ||
| Net income | $ | 12.1 | $ | 10.3 |
| Add back: | ||||
| Income tax provision (benefit) | 3.2 | (6.2) | ||
| Interest expense, net | 9.3 | 12.8 | ||
| Depreciation and amortization expense | 26.8 | 28.0 | ||
| Other operating charges, net1 | 0.4 | 8.6 | ||
| Other non-operating expense | 2.5 | 1.9 | ||
| Adjusted EBITDA | $ | 54.3 | $ | 55.4 |
| Pulp and Paperboard income | $ | 25.0 | $ | 26.2 |
| Depreciation and amortization | 9.0 | 9.3 | ||
| Paperboard Adjusted EBITDA | $ | 34.0 | $ | 35.5 |
| Consumer Products income | $ | 17.9 | $ | 14.6 |
| Depreciation and amortization | 16.8 | 17.3 | ||
| Consumer Products Adjusted EBITDA | $ | 34.7 | $ | 31.9 |
| Corporate expenses | $ | (15.5) | $ | (13.4) |
| Depreciation and amortization | 1.1 | 1.4 | ||
| Corporate Adjusted EBITDA | $ | (14.4) | $ | (12.0) |
| Pulp and Paperboard | $ | 34.0 | $ | 35.5 |
| Consumer Products | 34.7 | 31.9 | ||
| Corporate | (14.4) | (12.0) | ||
| Adjusted EBITDA | $ | 54.3 | $ | 55.4 |
1 Other operating charges, net consist of amounts unrelated to ongoing core operating activities. Please refer to Note 8 within Clearwater Paper's Form 10-Q filed with the SEC for the period end March 31, 2021 for the detailed breakout of this amount.
| Clearwater Paper Corporation | ||||
|---|---|---|---|---|
| Reconciliation of Non-GAAP Financial Measures | ||||
| (Unaudited) | ||||
| Three Months Ended March 31, | ||||
| (In millions, except per-share data) | 2021 | 2020 | ||
| Adjusted Net Income: | ||||
| Net income | $ | 12.1 | $ | 10.3 |
| Add back: | ||||
| Income tax provision (benefit) | 3.2 | (6.2) | ||
| Income before income taxes | 15.3 | 4.1 | ||
| Add back: | ||||
| Other operating charges, net | 0.4 | 8.6 | ||
| Adjusted income before tax | 15.7 | 12.7 | ||
| Normalized income tax provision | 3.9 | 3.2 | ||
| Adjusted net income | $ | 11.7 | $ | 9.5 |
| Weighted average diluted shares | 16,979 | 16,615 | ||
| Adjusted income per diluted share | $ | 0.69 | $ | 0.57 |
| March 31, 2021 | December 31, 2020 | |||
| Calculation of Net Debt: | ||||
| Current portion long-term debt | $ | 1.7 | $ | 1.7 |
| Long-term debt | 716.3 | 716.4 | ||
| Add back: | ||||
| Unamortized deferred debt costs | 6.6 | 6.9 | ||
| Less: | ||||
| Financing leases | 20.4 | 20.8 | ||
| Cash | 57.1 | 35.9 | ||
| Net Debt | $ | 647.1 | $ | 668.4 |
Clearwater Paper Corporation
Investors contact:
Sloan Bohlen
Solebury Trout
509.344.5906
News media:
Shannon Myers
509.344.5967
investorinfo@clearwaterpaper.com
q12021supplementals
Clearwater Paper Corporation First Quarter 2021 Earnings Release Materials May 5, 2021 ARSEN S. KITCH President, Chief Executive Officer And Director MICHAEL J. MURPHY Senior Vice President And Chief Financial Officer
© Clearwater Paper Corporation 2021Page 2 Cautionary Statement Regarding Forward Looking Statements This presentation of supplemental information contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our response to COVID-19 and the impact of COVID-19 on consumer behavior and our business and operations; industry trends in response to COVID-19 and other factors; backlogs and inventory overhang; assumptions for Q2 2021 and full year 2021, including operational factors, interest, capital, depreciation and amortization and income tax; the operational and financial benefits from the Shelby expansion; capital structure and liquidity; capital allocation objectives; scheduled debt maturity; value proposition; and near-term strategic positioning. 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 risks and uncertainties described from time to time in the company's public filings with the Securities and Exchange Commission, including but not limited to the following: impact of COVID-19 on our operations and our supplier’s operations and on customer demand; competitive pricing pressures for our products, including as a result of increased capacity as additional manufacturing facilities are operated by our competitors and the impact of foreign currency fluctuations on the pricing of products globally; the loss of, changes in prices in regard to, or reduction in, orders from a significant customer; changes in the cost and availability of wood fiber and wood pulp; changes in transportation costs and disruptions in transportation services; changes in customer product preferences and competitors' product offerings; larger competitors having operational and other advantages; customer acceptance and timing and quantity of purchases of our tissue products, including the existence of sufficient demand for and the quality of tissue produced by our expanded Shelby, North Carolina operations; consolidation and vertical integration of converting operations in the paperboard industry; our ability to successfully implement our operational efficiencies and cost savings strategies, along with related capital projects, and achieve the expected operational or financial results of those projects, including from the continuous digester at our Lewiston, Idaho facility; changes in the U.S. and international economies and in general economic conditions in the regions and industries in which we operate; manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunctions and damage to our manufacturing facilities; cyber-security risks; changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs; labor disruptions; cyclical industry conditions; changes in expenses, required contributions and potential withdrawal costs associated with our pension plans; environmental liabilities or expenditures; reliance on a limited number of third-party suppliers for raw materials; our ability to attract, motivate, train and retain qualified and key personnel; our substantial indebtedness and ability to service our debt obligations; restrictions on our business from debt covenants and terms; negative changes in our credit agency ratings; and changes in laws, regulations or industry standards affecting our business. 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, to retract future revisions of management's views based on events or circumstances occurring after the date of this presentation. Non-GAAP Financial Measures This presentation include certain financial measures that are not calculated in accordance with GAAP, including Adjusted EBITDA, Adjusted Income and Net debt. The Company’s management believes that the presentation of these financial measures provides useful information to investors because these measures are regularly used by management in assessing the Company’s performance. These financial measures should be considered in addition to results prepared in accordance with GAAP but should not be considered substitutes for or superior to GAAP results. In addition, these non-GAAP financial measures may not be comparable to similarly-titled measures utilized by other companies, since such other companies may not calculate such measure in the same manner as we do. A reconciliation of these measures (Adjusted EBITDA, Adjusted Income and Net debt) to the most relevant GAAP measure is available in the appendix of this presentation.. FORWARD-LOOKING STATEMENTS
© Clearwater Paper Corporation 2021Page 3 Overall Net Income of $12 million Adjusted EBITDA of $54 million Pulp and Paperboard Continued strong customer demand Prices increasing and mix improving Weather event impacted business directly by $6.5 million Consumer Products Sales dropped due to pull back in consumer demand and retailers managing inventory Tissue production exceeded demand Taking proactive steps to address demand decline Capital Structure Reduced net debt by $21 million Q1 2021 BUSINESS HIGHLIGHTS
© Clearwater Paper Corporation 2021Page 4 Industry We estimate ~2/3 of industry demand is driven by recession resilient end-market segments, such as food packaging and other consumer goods ~1/3 of demand is exposed to discretionary end-market segments, including food service, commercial print, luxury packaging, etc. Clearwater Paper Demand and order backlogs remain strong Fastmarkets RISI reflected market price increases • $50/ton on folding carton grades, collectively in March and April • $20/ton on cupstock and food service grades in April Impact from cold weather in the South was $6.5 million BUSINESS UPDATE – PULP AND PAPERBOARD Diversified range of end-market products and flexibility in our supply chain provided overall strong results
© Clearwater Paper Corporation 2021Page 5 Industry (North America) Pre-COVID: ~10 million ton demand with ~2/3 at home, ~1/3 away from home Initially: COVID pandemic led to shift to at-home demand and consumer pantry stocking Now: excess inventory in consumer pantries and retail supply chains • At home tissue shipments likely exceeded consumption in 2020, suggesting over a month of excess inventory between consumers and retailers • Inventory overhang being is worked down, timing and trajectory of return to normal is unclear Clearwater Paper Q1 2021 shipments were 11.7 million cases compared to 15.2 million in Q1 2020, 13.9 million in Q4 2020 and 12.3 million in Q1 2019 • Slowing order patterns in Q1 2021 as retailers managed inventories and consumers pulled back on purchases from our customers Q1 2021 production exceeded sales, actions underway to address impact from weaker demand Monitoring channel and customer trends to determine altered consumer buying patterns BUSINESS UPDATE – CONSUMER PRODUCTS Demand for retail tissue dropped significantly in Q1 2021
© Clearwater Paper Corporation 2021Page 6 FINANCIAL PERFORMANCE ($ in millions, except per share amounts) 2021 2020 Net Sales 425.9$ 477.9$ Cost of Sales 370.6 423.0 Selling, general and adminstrative 27.8 27.5 Other operating charges, net 0.4 8.6 Income from operations 27.1 18.8 Non-operating expense (11.8) (14.7) Income tax provision (benefit) 3.2 (6.2) Net income (loss) 12.1$ 10.3$ Diluted income per share 0.71$ 0.62$ Adjusted income per share 0.69$ 0.57$ Quarter Ended March 31,
© Clearwater Paper Corporation 2021Page 7 SEGMENT PROFIT AND LOSS AND ADJUSTED EBITDA ($ in millions) 2021 2020 Net Sales Pulp and Paperboard 219.7$ 223.1$ Consumer Products 208.4 262.5 Eliminations (2.2) (7.8) 425.9$ 477.9$ Operating Income Pulp and Paperboard 25.0$ 26.2$ Consumer Products 17.9 14.6 Corporate and other (15.5) (13.4) Other operating charges, net (0.4) (8.6) 27.1$ 18.8$ Adjusted EBITDA Pulp and Paperboard 34.0$ 35.5$ Consumer Products 34.7 31.9 Corporate and other (14.4) (12.0) 54.3$ 55.4$ Quarter Ended March 31,
© Clearwater Paper Corporation 2021Page 8 PULP AND PAPERBOARD RESULTS Q1 2021 vs. Q1 2020 Segment Adjusted EBITDA ($ in millions) Higher pricing with favorable mix Lower volume Weather event offset by lower input cost
© Clearwater Paper Corporation 2021Page 9 CONSUMER PRODUCTS RESULTS Q1 2021 vs. Q1 2020 Segment Adjusted EBITDA ($ in millions) Favorable mix Lower volume Lower input costs, Shelby improvements and lower transportation costs
© Clearwater Paper Corporation 2021Page 10 Capital Structure: Supportive and Stable Capital structure provides ample liquidity No material near-term debt maturities Corporate/Issuer ratings: Ba2/BB- Capital Allocation Objectives Utilize free cash flow to reduce debt Target net debt to Adjusted EBITDA ratio of 2.5x Targeted business improvements and maintenance capital • Normalized $60 million / year CAPITAL STRUCTURE AND ALLOCATION Liquidity Profile ($ in millions)1 ABL Availability $229.2 Less Utilization (3.6) Plus Unrestricted Cash 57.1 Liquidity $282.7 1 Note: ABL availability based on borrowing base calculations and consolidated balance sheet as of March 31, 2021, and utilization includes ABL borrowing of $0 million and outstanding letters of credit of $3.6 million. 2 Note: This chart excludes finance leases as of March 31, 2021 and assumes that the 2025 notes are repaid or refinanced at least 91 days prior to their maturity. Current debt maturities include $300 million of 5.375% notes due 2025; Term Loan due 2026; and $275 million of 4.75% notes due 2028 $0.0 $0.0 $0.0 $0.0 $300.0 $129.3 $0.0 $275.0 2021 2022 2023 2024 2025 2026 2027 2028 Scheduled Debt Maturity Profile ($ in millions)2
© Clearwater Paper Corporation 2021Page 11 Q2 2021 Operational Impact of announced price increase in paperboard No cold weather event impact - $6.5 million Lewiston planned major maintenance $21 to $24 million impact to Adjusted EBITDA in the quarter Lower expected tissue sales, more substantial production reduction impacting fixed cost leverage Inflation impact $9 to $13 million relative to first quarter 2021 FY 2021 Operational Impact of announced price increase in paperboard Planned major maintenance outages $25 to $30 million impact to Adjusted EBITDA Lower expected tissue volumes Inflation impact of $65 to $75 million, with pulp representing over half the total Taking proactive measures to reduce cost, improve sales, and manage inventories FY 2021 Other Interest expense: $36 to $38 million Depreciation and amortization expense: $106 to $110 million CAPEX: $55 to $60 million Taxes: Effective rate 25 to 26% with $16 million of current refunds / credits, $8 million received in Q1 OUTLOOK FOR 2021 - ASSUMPTIONS
© Clearwater Paper Corporation 2021Page 12 Pulp and Paperboard: Diversified range of end-market, well-invested national footprint Focused on non-integrated customers with strong service and quality commitment Well positioned for trends towards sustainable packaging with a healthy balance of folding carton and food service products Consumer Products: Leading private-brand provider with national scale and superior supply chain performance Shift to private-branded over branded product continues with long runway Tissue is need-based and economically resilient Near-term Strategy is to Prioritize Free Cash Flow, Reduce Debt: Deliver benefits from Shelby investment including incremental converting, sales and supply chain Operational improvements Manage working capital Prudent capital allocation CLEARWATER PAPER VALUE PROPOSITION Well positioned across two attractive businesses
© Clearwater Paper Corporation 2020 Appendix
© Clearwater Paper Corporation 2021Page 14 PULP AND PAPERBOARD SEQUENTIAL QUARTER RESULTS Q1 2021 vs. Q4 2020 Segment Adjusted EBITDA ($ in millions) Weather event, higher input costs and production inefficiencies Favorable mix and higher pricing
© Clearwater Paper Corporation 2021Page 15 CONSUMER PRODUCTS SEQUENTIAL QUARTER RESULTS Q1 2021 vs. Q4 2020 Segment Adjusted EBITDA ($ in millions) Reduced demand Lower SGA offset by higher input costs
© Clearwater Paper Corporation 2021Page 16 KEY SEGMENT INFORMATION Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Pulp and Paperboard Sales ($ millions) $212.1 $235.4 $223.6 $214.3 $223.1 $216.5 $217.2 $220.4 $219.7 Adjusted EBITDA ($ millions) $38.9 $42.9 $28.2 $44.0 $35.5 $41.2 $41.8 $42.8 $34.0 Shipments (short tons) 197,761 220,613 210,465 199,074 207,916 201,728 205,445 206,232 206,712 Sales price ($/short ton) $1,024 $ 1,023 $ 1,021 $ 1,023 $ 1,013 $ 1,009 $ 1,009 $ 1,002 $1,028 Consumer Products Sales ($ millions) $223.1 $222.8 $227.9 $228.7 $262.5 $271.3 $245.9 $238.9 $208.4 Adjusted EBITDA ($ millions) $16.0 $12.4 $14.7 $20.7 $31.9 $53.9 $48.5 $44.7 $34.7 Shipments Retail (short tons) 73,356 76,175 79,526 79,748 90,791 95,432 86,292 83,347 70,762 Non-Retail (short tons) 10,266 6,623 6,882 8,393 9,002 5,812 3,799 6,498 9,423 Converted Products (cases in thousands) 12,320 12,488 13,162 13,290 15,204 16,016 14,507 13,870 11,665 Sales Price ($ per short ton) Retail $2,789 $ 2,764 $ 2,707 $ 2,698 $ 2,732 $ 2,729 $ 2,766 $ 2,745 $ 2,758 Non-Retail $1,799 $ 1,851 $ 1,805 $ 1,590 $ 1,548 $ 1,746 $ 1,820 $ 1,552 $ 1,404 Production Converted Produces (cases in thousands) 12,387 12,755 12,858 13,574 13,922 15,868 15,283 13,901 13,466 Note: Non-retail includes away-from-home and parent rolls
© Clearwater Paper Corporation 2021Page 17 RECONCILIATION OF ADJUSTED EBITDA ($ in millions) December 31, 2021 2020 2020 Net income $ 12.1 $ 10.3 $ 22.6 Income tax provision (benefit) 3.2 (6.2) 7.0 Interest expense, net 9.3 12.8 9.5 Depreciation and amortization expense 26.8 28.0 27.5 Other operating charges, net 0.4 8.6 2.1 Other non-operating expense 2.5 1.9 1.9 Debt retirement costs - - 1.1 Adjusted EBITDA $ 54.3 $ 55.4 $ 71.6 Pulp and Paperboard segment income $ 25.0 $ 26.2 $ 33.7 Depreciation and amortization 9.0 9.3 9.1 Adjusted EBITDA Paperboard segment $ 34.0 $ 35.5 $ 42.8 Consumer Products segment income $ 17.9 $ 14.6 $ 27.6 Depreciation and amortization 16.8 17.3 17.1 Adjusted EBITDA Consumer Products segment $ 34.7 $ 31.9 $ 44.7 Corporate and other expense $ (15.5) $ (13.4) $ (17.3) Depreciation and amortization 1.1 1.4 1.4 Adjusted EBITDA Corporate and other $ (14.4) $ (12.0) $ (16.0) Pulp and Paperboard segment $ 34.0 $ 35.5 $ 42.8 Consumer Products segment 34.7 31.9 44.7 Corporate and other (14.4) (12.0) (16.0) Adjusted EBITDA $ 54.3 $ 55.4 $ 71.6 March 31, Three Months Ended
© Clearwater Paper Corporation 2021Page 18 RECONCILIATION OF ADJUSTED INCOME ($ in millions income, except per share amounts) 2021 2020 Net income 12.1$ 10.3$ Add back: Income tax provision 3.2 (6.2) Income before income taxes 15.3 4.1 Add back: Other operating charges, net 0.4 8.6 Adjusted net income before tax 15.7 12.7 Normalized income tax provision (benefit) 3.9 3.2 Adjusted income 11.7$ 9.5$ Weighted average diluted shares 16,979 16,615 Adjusted income per diluted share 0.69$ 0.57$ Quarter Ended March 31,
© Clearwater Paper Corporation 2021Page 19 ADDITIONAL RECONCILIATIONS ($ in millions) Reconciliation of Net Debt Mar 31, 2020 June 30, 2020 Sept 30, 2020 Dec 31, 2020 Mar 31, 2021 Cash $ 60.8 $ 48.2 $ 47.5 $ 35.9 $ 57.1 Current debt 58.1 1.6 1.7 1.7 1.7 Long term debt 883.9 827.9 785.5 716.4 716.3 add: Deferred debt costs 7.7 6.4 8.2 6.9 6.6 less: Financing leases (22.0) (21.6) (21.2) (20.8) (20.4) 927.7 814.3 774.2 704.2 704.2 Net debt $ 866.9 $ 766.1 $ 726.7 $ 668.3 $ 647.1 Reconciliation of Free Cash Flow Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Cash from operations $ 11.7 $ 109.0 $ 55.7 $ 70.8 $ 33.8 Additions to property, plant and equipment (10.5) (7.3) (9.7) (12.2) (11.1) Free cash flow $ 1.2 $ 101.7 $ 46.0 $ 58.6 $ 22.7
© Clearwater Paper Corporation 2021Page 20 MAJOR MAINTENANCE SCHEDULE ($ in millions) Idaho $7 $10 $18 $20 $17 $7 $22 $18 $30 None $24 None $25 - $30 $19 - $23 2015 2016 2017 2018 2019 2020 2021e 2022e Q1 Q2 Q3 Q4 Total 1 1 1 This information is based upon management’s current expectations and estimates, as well as historical averages. Many factors are outside the control of management, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 2.
© Clearwater Paper Corporation 2021Page 21 1 Approximated annual volume and expense amounts are based on historical average consumption and management's current expectations and estimates with respect to future volumes, and these amounts may be significantly influenced by general market conditions and other factors outside of our control. Actual results may differ materially from the information set forth above. See "Forward-Looking Statements" on page 2. KEY COMMODITY CONSUMPTION VOLUMES COGS Input Unit of Measure Approximate Annual Volume1 (in millions) Purchased Pulp Ton 0.3 Fiber Bone Dry Ton 1.7 Diesel Gallon 10 Electric MWh 1.0 Natural Gas MMBTU 10 Polyethylene Pound 30 Caustic Pound 90 Chlorate Pound 30 1