8-K
Clearwater Paper Corp (CLW)
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): November 4, 2024
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 November 4, 2024, Clearwater Paper Corporation (the “Company”) announced its results of operations and financial condition for the third quarter ending September 30, 2024. A copy of the press release containing this announcement is furnished as Exhibit 99.1 hereto. In addition, a copy of the Company’s Third 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 in the attached Adjusted EBITDA from continuing and Adjusted EBITDA from total operations.which is defined as earnings before interest expense, taxes, depreciation and amortization, other operating credits and charges, net and other non-operating items from continuing operations and total operations. Adjusted EBITDA from continuing and total 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 an 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 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 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the Company's sale of it's consumer products division, the Company intends to make certain changes to our functional and leadership structure. As part of the revised structure, Steve Bowden will become the Company’s Senior Vice President, Operations. The Company also intends to establish senior vice president roles for each of the other key functions (Commercial and Supply Chain). The Company expects these changes to become effective on January 1, 2025.
Item 9.01. Financial Statements and Exhibits
(d) Exhibit Index
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: November 4, 2024
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 Third Quarter 2024 Results; Board Approves New $100M Share Repurchase Authorization
SPOKANE, Wash.--(BUSINESS WIRE)--November 4, 2024 --Clearwater Paper Corporation (NYSE:CLW), a premier independent supplier of bleached paperboard to North American converters today reported financial results for the third quarter and nine months ended September 30, 2024.
THIRD QUARTER HIGHLIGHTS
With the consummation of the sale of our tissue business on November 1, 2024, all periods presented include our former tissue segment as discontinued operations and the paperboard segment plus corporate expenses as continuing operations. Total operations includes both continuing and discontinued operations.
•Net sales from continuing operations of $393 million, up 41% from the third quarter of last year primarily due to incremental volume from our Augusta facility
•Net sales from total operations of $644 million, up 24% from the third quarter of last year
•Net loss from continuing operations of $11 million, or 0.64 per diluted share compared to net income from continuing operations of $15 million, or $0.88 per diluted share in the third quarter of last year
•Net income from total operations of $6 million, or $0.35 per diluted share compared to $37 million, or $2.17 per diluted share in the third quarter of last year
•Adjusted EBITDA from total operations of $64 million compared to $81 million in the third quarter of last year
“We delivered a strong third quarter, even as we dealt with the impact of Hurricane Helene at our Augusta, Georgia and Shelby, North Carolina facilities,” said Arsen Kitch, president and CEO. “We are also pleased that we closed on the sale of our tissue business and are now well positioned to execute on our strategy of building a premier paperboard company that is focused on servicing independent converters in North America.”
NEW $100 MILLION SHARE REPURCHASE AUTHORIZATION
Clearwater Paper's Board of Directors has approved a new $100 million share repurchase authorization, allowing the Company to opportunistically repurchase shares in addition to offsetting the dilution from employee share grants. This authorization replaces the Company’s previous authorization. The timing and amount of any repurchases of common stock will be solely at the discretion of the Company and is subject to general business and market conditions, as well as other factors. The authorization permits the Company to make repurchases of its common stock from time to time in open market or privately negotiated transactions, including accelerated share repurchase transactions and the use of Rule 10b5-1 trading plans. The authorization has no expiration date.
OVERALL RESULTS
For the third quarter of 2024, Clearwater Paper reported net sales from total operations of $644 million compared to $520 million for the third quarter of 2023. Clearwater Paper reported net income from total operations for the third quarter of 2024 of $6 million, or $0.35 per diluted share compared to $37 million, or $2.17 per diluted share in the third quarter of 2023. Adjusted EBITDA from total operations was $64 million compared to third quarter of 2023 of $81 million. The decrease in Adjusted EBITDA from total operations was primarily driven by lower sales prices and the residual impacts of the company's planned major maintenance outage at its Lewiston, Idaho facility offset by higher sales volume due to the inclusion of our Augusta facility.
For the first nine months of 2024, Clearwater Paper reported net sales from total operations of $1.7 billion, a 10% increase compared to $1.6 billion for the first nine months of 2023. Clearwater Paper reported a net loss from total operations for the first nine months of 2024 of $3 million, or $0.17 per diluted share, compared to net income from total operations for the first nine months of 2023 of $90 million, or $5.29 per diluted share. Adjusted EBITDA from total operations for the first nine months of 2024 was $160 million, compared to the first nine months of 2023 of $218 million. The decrease in Adjusted EBITDA from total operations was primarily driven by lower sales prices and the
impacts of the company's planned major maintenance outage at its Lewiston Idaho facility, partially offset by lower input costs.
Paperboard sales volumes and prices:
• Sales volumes were 314,320 tons in the third quarter of 2024, an increase of 67% compared to 187,944 tons in the third quarter of 2023. Sales volumes were 774,207 tons in the first nine months of 2024, an increase of 37% compared to 563,502 tons in the first nine months of 2023.
• Paperboard average net selling price decreased 12% to $1,192 per ton for the third quarter of 2024, compared to $1,350 per ton in the third quarter of 2023. Paperboard average net selling price decreased 13% to $1,223 per ton for the first nine months of 2024, compared to $1,401 per ton in the first nine months of 2023.
COMPANY OUTLOOK
“While we are currently experiencing challenging SBS industry conditions, we remain confident in the long-term fundamentals of paperboard packaging. We are taking actions to reduce our costs to ensure that we deliver strong cash flows regardless of where we are in the industry cycle. We used proceeds from the sale of our tissue business to de-lever our balance sheet and position ourselves to take advantage of opportunities to grow and diversify our paperboard product portfolio.”
WEBCAST INFORMATION
Clearwater Paper Corporation will discuss these results during an earnings conference call that begins at 2:00 p.m. Pacific Time today. A live webcast and accompanying supplemental information will be available on the company's website. A replay of today's conference call will be available on the website beginning at 5:00 p.m. Pacific Time today.
ABOUT CLEARWATER PAPER CORPORATION
Clearwater Paper is a premier independent supplier of paperboard packaging products to North American converters. Headquartered in Spokane, Wash., our team produces high-quality paperboard that provides sustainable packaging solutions for consumer goods and food service applications. For additional information, please visit our website at www.clearwaterpaper.com.
USE OF NON-GAAP MEASURES
In this press release, the company presents certain non-GAAP financial information for the third quarter and first nine months of 2024 and 2023, including Adjusted EBITDA from total operations which includes both continuing and discontinued operations and net sales from total operations which includes both continuing and discontinued. Because these amounts are not in accordance with GAAP, reconciliations to net income as determined in accordance with GAAP are included in the tables at the end of this press release. The company presents these non-GAAP metrics 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 from total operations: (i) as a factor 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 from total operations to measure the company's compliance with certain covenants.
FORWARD-LOOKING STATEMENTS
This press release contains certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding: the recent sale of our consumer products division (tissue business); the acquisition of the paperboard manufacturing facility and associated business in Augusta, Georgia; our expectations regarding paperboard demand; the company’s paperboard strategy, including its plans to grow and diversify its paperboard business; the company’s plans for the proceeds from the recent consumer products division (tissue business) sale transaction; and the company’s expectation that paperboard represents the best opportunity for steady and sustainable value creation. 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 press release.
Factors that could cause or contribute to such material differences in actual results include, but are not limited to: there may be unexpected costs, charges or expenses resulting from the recent tissue business sale transaction; competitive responses to the recent tissue business sale transaction; achievement of anticipated financial results and other benefits of the recent tissue business sale transaction; potential risks associated with operating without the tissue business, including less diversification in products offered; changes in our capital structure; there may be stockholder litigation in connection with the recent tissue business sale transaction or the acquisition of the Augusta, Georgia paperboard manufacturing facility or other settlements; our inability to realize the expected benefits of the Augusta, Georgia paperboard manufacturing facility acquisition because of integration difficulties or other challenges; risks relating to the integration of the Augusta, Georgia paperboard manufacturing facility and achievement of anticipated financial results and other benefits of the acquisition; competitive pricing pressures for our products, including as a result of capacity additions, demand reduction and the impact of foreign currency fluctuations on the pricing of products globally; 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 equipment malfunctions and damage to our manufacturing facilities; 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 energy, chemicals, packaging and transportation costs and disruptions in transportation services impacting our ability to receive inputs or ship products to customers; reliance on a limited number of third-party suppliers, vendors and service providers required for the production of our products and our operations; changes in customer product preferences and competitors’ product offerings; cyber-security risks; larger competitors having operational, financial and other advantages; consolidation and vertical integration of converting operations in the paperboard industry; our ability to successfully execute capital projects and other activities to operate our assets, including effective maintenance, implement our operational efficiencies and realize higher throughput or lower costs; IT system disruptions and IT system implementation failures; labor disruptions; cyclical industry conditions; changes in expenses, required contributions and potential withdrawal costs associated with our pension plans; environmental liabilities or expenditures and climate change; our ability to attract, motivate, train and retain qualified and key personnel; our ability to service our debt obligations and restrictions on our business from debt covenants and terms; changes in our banking relations, or in our customer supply chain financing; negative changes in our credit agency ratings; changes in laws, regulations or industry standards affecting our 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, 2023. 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) | ||||||||
| Quarter Ended September 30, | Nine Months Ended September 30, | |||||||
| (In millions, except per-share data) | 2024 | 2023 | 2024 | 2023 | ||||
| Net sales | $ | 393.3 | $ | 278.9 | $ | 996.5 | $ | 867.4 |
| Costs and expenses: | ||||||||
| Cost of sales | 363.2 | 228.3 | 935.1 | 702.6 | ||||
| Selling, general and administrative expenses | 31.6 | 28.3 | 90.0 | 88.0 | ||||
| Other operating charges, net 1 | (0.3) | 1.7 | 20.3 | 1.1 | ||||
| Total operating costs and expenses | 394.5 | 258.2 | 1,045.4 | 791.7 | ||||
| Income (loss) from continuing operations | (1.2) | 20.7 | (48.9) | 75.7 | ||||
| Interest expense, net | (13.1) | (2.2) | (24.0) | (7.9) | ||||
| Other non-operating income | 0.3 | 0.1 | 1.0 | 0.3 | ||||
| Total non-operating expense | (12.8) | (2.1) | (22.9) | (7.6) | ||||
| Income (loss) from continuing operations before income taxes | (14.0) | 18.6 | (71.8) | 68.1 | ||||
| Income tax provision (benefit) | (3.3) | 3.7 | (17.4) | 16.7 | ||||
| Income (loss) from continuing operations | $ | (10.7) | $ | 14.9 | $ | (54.4) | $ | 51.4 |
| Income from discontinued operations, net of tax | 16.6 | 21.7 | 51.6 | 38.8 | ||||
| Net income (loss) | $ | 5.8 | $ | 36.6 | (2.8) | 90.1 | ||
| Net income (loss) per common share: | ||||||||
| Income (loss) per share from continuing operations - basic | $ | (0.64) | $ | 0.89 | $ | (3.27) | $ | 3.06 |
| Income per share from discontinued operations -basic | 1.00 | 1.30 | 3.10 | 2.31 | ||||
| Net income (loss) per share - basic | 0.35 | 2.19 | (0.17) | 5.37 | ||||
| Income (loss) per share from continuing operations - diluted | (0.64) | 0.88 | (3.27) | 3.01 | ||||
| Income per share from discontinued operations - diluted | 1.00 | 1.29 | 3.10 | 2.27 | ||||
| Net income (loss) per share - diluted | $ | 0.35 | $ | 2.17 | $ | (0.17) | $ | 5.29 |
| Average shares outstanding (in thousands): | ||||||||
| Basic | 16,620 | 16,682 | 16,629 | 16,800 | ||||
| Diluted | 16,620 | 16,895 | 16,629 | 17,051 |
1 Other operating charges, net consist of amounts unrelated to ongoing core operating activities. Please refer to Note 12 within Clearwater Paper's Form 10-Q filed with the SEC for the period ended September 30, 2024 for the detailed breakout of this amount.
| Clearwater Paper Corporation | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Balance Sheets | |||||||||
| (Unaudited) | |||||||||
| (In millions) | September 30, 2024 | December 31, 2023 | |||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 35.5 | $ | 42.0 | |||||
| Receivables, net | 172.7 | 96.1 | |||||||
| Inventories, net | 264.6 | 161.2 | |||||||
| Other current assets | 12.9 | 17.4 | |||||||
| Current assets of discontinued operations | 246.1 | 247.5 | |||||||
| Total current assets | 731.9 | 564.1 | |||||||
| Property, plant and equipment | 2,294.2 | 1,608.6 | |||||||
| Accumulated depreciation and amortization | (1,282.2) | (1,247.9) | |||||||
| 1,012.0 | 360.7 | ||||||||
| Goodwill and intangible assets, net | 52.2 | 41.5 | |||||||
| Other assets, net | 59.1 | 47.6 | |||||||
| Long term assets of discontinued operations | 633.6 | 657.9 | |||||||
| Total assets | $ | 2,488.7 | $ | 1,671.8 | |||||
| Liabilities and stockholders' equity | |||||||||
| Current liabilities: | |||||||||
| Current portion of long-term debt | $ | 7.4 | $ | — | |||||
| Accounts payable and accrued liabilities | 301.7 | 195.5 | |||||||
| Current liabilities of discontinued operations | 103.0 | 90.5 | |||||||
| Total current liabilities | 412.1 | 286.0 | |||||||
| Long-term debt | 1,143.3 | 439.9 | |||||||
| Liability for pension and other postretirement employee benefits | 52.4 | 54.5 | |||||||
| Deferred tax liabilities and other long-term obligations | 85.8 | 84.6 | |||||||
| Long term liabilities of discontinued operations | 130.5 | 138.1 | |||||||
| Total liabilities | 1,824.1 | 1,003.0 | |||||||
| Stockholders' equity: | |||||||||
| Common stock | — | — | |||||||
| Additional paid-in capital | 13.7 | 14.9 | |||||||
| Retained earnings | 681.7 | 684.5 | |||||||
| Accumulated other comprehensive loss, net of tax | (30.8) | (30.7) | |||||||
| Total stockholders' equity | 664.6 | 668.8 | |||||||
| Total liabilities and stockholders' equity | $ | 2,488.7 | $ | 1,671.8 | |||||
| Clearwater Paper Corporation | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| Consolidated Statements of Cash Flows | |||||||||
| (Unaudited) | |||||||||
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||
| Operating activities | |||||||||
| Net income (loss) | $ | 5.8 | $ | 36.6 | $ | (2.8) | $ | 90.1 | |
| Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: | |||||||||
| Depreciation and amortization | 24.2 | 24.4 | 78.3 | 73.8 | |||||
| Equity-based compensation expense | (0.9) | 3.5 | 7.2 | 7.0 | |||||
| Deferred taxes | (4.9) | (4.4) | (10.0) | (7.3) | |||||
| Defined benefit pension and other postretirement employee benefits | (1.5) | (0.4) | (3.2) | (1.5) | |||||
| Amortization of deferred debt costs | 0.9 | 0.3 | 2.0 | 0.9 | |||||
| Loss on sale or impairment associated with assets | 0.7 | 0.3 | 1.6 | 1.4 | |||||
| Changes in operating assets and liabilities, excluding the effects of acquired business: | |||||||||
| (Increase) decrease in accounts receivable | (4.6) | 23.6 | (62.3) | 7.9 | |||||
| (Increase) decrease in inventories | (6.6) | 6.9 | (5.6) | (10.1) | |||||
| Decrease in other current assets | 3.4 | 2.9 | 3.4 | 8.6 | |||||
| Increase (decrease) in accounts payable and accrued liabilities | (0.1) | (6.0) | 89.8 | (46.9) | |||||
| Other, net | (0.4) | 0.4 | (1.9) | 1.0 | |||||
| Net cash flows provided by operating activities | 16.1 | 88.2 | 96.5 | 125.0 | |||||
| Investing activities | |||||||||
| Additions to property, plant and equipment, net | (47.0) | (14.2) | (83.6) | (48.5) | |||||
| Acquisition of business | — | — | (708.2) | — | |||||
| Net cash flows used in investing activities | (47.0) | (14.2) | (791.8) | (48.5) | |||||
| Financing activities | |||||||||
| Borrowings on long-term debt | 30.0 | — | 753.5 | 12.0 | |||||
| Repayments of long-term debt | (0.4) | (0.2) | (50.9) | (12.7) | |||||
| Repurchases of common stock | (2.5) | (5.0) | (6.0) | (15.1) | |||||
| Payments of debt issuance costs | (0.4) | (0.1) | (4.9) | (0.2) | |||||
| Other, net | 0.1 | (0.1) | (2.7) | (4.7) | |||||
| Net cash flows provided by (used in) financing activities | 26.8 | (5.5) | 688.9 | (20.7) | |||||
| Increase (decrease) in cash, cash equivalents | (4.1) | 68.5 | (6.5) | 55.8 | |||||
| Cash and cash equivalents at beginning of period | 39.6 | 41.7 | 42.0 | 54.4 | |||||
| Cash and cash equivalents at end of period | $ | 35.5 | $ | 110.2 | $ | 35.5 | $ | 110.2 | |
| Clearwater Paper Corporation | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reconciliation of Non-GAAP Financial Measures - Total Statement of Operations | |||||||||
| (Unaudited) | |||||||||
| Quarter Ended September 30, 2024 | |||||||||
| (In millions) | As reported | Discontinued operations | Adjustments | Total Operations | |||||
| Net sales | $ | 393.3 | $ | 262.4 | $ | (11.8) | a | $ | 643.9 |
| Costs and expenses: | |||||||||
| Cost of sales | 363.2 | 218.9 | (11.8) | a | 570.3 | ||||
| Selling, general and administrative expenses | 31.6 | 7.0 | 38.6 | ||||||
| Other operating charges, net | (0.3) | 6.3 | 6.0 | ||||||
| Total operating costs and expenses | 394.5 | 232.2 | 614.9 | ||||||
| Total income (loss) from operations | (1.2) | 30.1 | 28.9 | ||||||
| Total non-operating expense | (12.8) | (8.0) | (20.8) | ||||||
| Total income (loss) from operations before income taxes | (14.0) | 22.1 | 8.1 | ||||||
| Income tax provision (benefit) | (3.3) | 5.6 | 2.3 | ||||||
| Total income (loss) from operations | (10.7) | $ | 16.6 | ||||||
| Income from discontinued operations, net of tax | 16.6 | ||||||||
| Net income (loss) | $ | 5.8 | $ | 5.8 | |||||
| Quarter Ended September 30, 2023 | |||||||||
| (In millions) | As reported | Discontinued operations | Adjustments | Total Operations | |||||
| Net sales | $ | 278.9 | $ | 259.3 | $ | (18.3) | a | $ | 519.9 |
| Costs and expenses: | |||||||||
| Cost of sales | 228.3 | 217.5 | (18.4) | a | 427.4 | ||||
| Selling, general and administrative expenses | 28.3 | 8.1 | 36.4 | ||||||
| Other operating charges, net | 1.7 | 0.1 | 1.8 | ||||||
| Total operating costs and expenses | 258.2 | 225.7 | 465.6 | ||||||
| Total income (loss) from operations | 20.7 | 33.6 | 54.4 | ||||||
| Total non-operating expense | (2.1) | (4.6) | (6.8) | ||||||
| Total income (loss) from operations before income taxes | 18.6 | 29.0 | 47.6 | ||||||
| Income tax provision (benefit) | 3.7 | 7.2 | 11.0 | ||||||
| Total income (loss) from operations | 14.9 | $ | 21.7 | ||||||
| Income from discontinued operations, net of tax | 21.7 | ||||||||
| Net income (loss) | $ | 36.6 | $ | 36.6 |
a - Represents intercompany transactions between the consumer products division and our remaining entity which under discontinued operations reporting requirements are shown as sales.
| Clearwater Paper Corporation | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Reconciliation of Non-GAAP Financial Measures - Total Statement of Operations | |||||||||
| (Unaudited) | |||||||||
| Nine Months Ended September 30, 2024 | |||||||||
| (In millions) | As reported | Discontinued operations | Adjustments | Total Operations | |||||
| Net sales | $ | 996.5 | $ | 768.3 | $ | (38.3) | a | $ | 1,726.5 |
| Costs and expenses: | |||||||||
| Cost of sales | 935.1 | 646.1 | (38.3) | a | 1,542.9 | ||||
| Selling, general and administrative expenses | 90.0 | 22.7 | 112.7 | ||||||
| Other operating charges, net | 20.3 | 10.8 | 31.1 | ||||||
| Total operating costs and expenses | 1,045.4 | 679.6 | 1,686.7 | ||||||
| Total income (loss) from operations | (48.9) | 88.7 | 39.8 | ||||||
| Total non-operating expense | (22.9) | (19.7) | (42.6) | ||||||
| Total income (loss) from operations before income taxes | (71.8) | 68.9 | (2.8) | ||||||
| Income tax provision (benefit) | (17.4) | 17.4 | — | ||||||
| Total income (loss) from operations | (54.4) | $ | 51.6 | ||||||
| Income from discontinued operations, net of tax | 51.6 | ||||||||
| Net income (loss) | $ | (2.8) | $ | (2.8) | |||||
| Nine Months Ended September 30, 2023 | |||||||||
| (In millions) | As reported | Discontinued operations | Adjustments | Total Operations | |||||
| Net sales | $ | 867.4 | $ | 761.3 | $ | (58.8) | a | $ | 1,569.9 |
| Costs and expenses: | |||||||||
| Cost of sales | 702.6 | 670.9 | (58.9) | a | 1,314.6 | ||||
| Selling, general and administrative expenses | 88.0 | 23.4 | 111.5 | ||||||
| Other operating charges, net | 1.1 | 1.3 | 2.4 | ||||||
| Total operating costs and expenses | 791.7 | 695.6 | 1,428.5 | ||||||
| Total income (loss) from operations | 75.7 | 65.8 | 141.5 | ||||||
| Total non-operating expense | (7.6) | (14.1) | (21.7) | ||||||
| Total income (loss) from operations before income taxes | 68.1 | 51.7 | 119.8 | ||||||
| Income tax provision (benefit) | 16.7 | 12.9 | 29.6 | ||||||
| Total income (loss) from operations | 51.4 | $ | 38.8 | ||||||
| Income from discontinued operations, net of tax | 38.8 | ||||||||
| Net income (loss) | $ | 90.1 | $ | 90.1 | |||||
| Clearwater Paper Corporation | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| Reconciliation of Non-GAAP Financial Measures | |||||||||
| Adjusted EBITDA | |||||||||
| (Unaudited) | |||||||||
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | |||||
| Net Income | $ | 5.8 | $ | 36.6 | $ | (2.8) | $ | 90.1 | |
| Add (deduct): | |||||||||
| Less: Income from discontinued operations, net of tax | 16.6 | 21.7 | 51.6 | 38.8 | |||||
| Income from continuing operations | (10.7) | 14.9 | (54.4) | 51.4 | |||||
| Income tax provision (benefit) | (3.3) | 3.7 | (17.4) | 16.7 | |||||
| Interest expense, net | 13.1 | 2.2 | 24.0 | 7.9 | |||||
| Depreciation and amortization | 21.7 | 10.2 | 47.6 | 30.3 | |||||
| Inventory revaluation on acquired business | — | — | 6.8 | — | |||||
| Other operating charges, net 1 | (0.3) | 1.7 | 20.3 | 1.1 | |||||
| Other non-operating income | (0.3) | (0.1) | (1.0) | (0.3) | |||||
| Adjusted EBITDA from continuing operations | 20.2 | $ | 32.6 | $ | 25.9 | $ | 107.1 | ||
| Income from discontinued operations | 16.6 | 21.7 | 51.6 | 38.8 | |||||
| Depreciation and amortization included in discontinued operations | 6.7 | 14.2 | 35.0 | 43.5 | |||||
| Other operating charges, net included in discontinued operations | 6.3 | 0.1 | 10.8 | 1.3 | |||||
| Income tax provision included in discontinued operations | 5.6 | 7.2 | 17.4 | 12.9 | |||||
| Non-operating expenses included in discontinued operations | 8.0 | 4.6 | 19.7 | 14.1 | |||||
| Adjusted EBITDA from total operations | $ | 63.5 | $ | 80.6 | $ | 160.3 | $ | 217.7 |
1 Other operating charges, net consist of amounts unrelated to ongoing core operating activities. Please refer to Note 12 within Clearwater Paper's Form 10-Q filed with the SEC for the period ended September 30, 2024 for the detailed breakout of this amount.
Clearwater Paper Corporation
Investors contact:
Sloan Bohlen
Solebury Strategic Communications
509-344-5906
investorinfo@clearwaterpaper.com
News media:
Virginia Aulin, Vice President, Public Affairs
509-344-5967
Virginia.aulin@clearwaterpaper.com
q324supplementalsfinal
Third Quarter Earnings Release Materials November 4, 2024 ARSEN KITCH President, Chief Executive Officer and Director SHERRI BAKER Senior Vice President and Chief Financial Officer
2 Forward Looking Statements 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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding: the recent sale of our consumer products division (tissue business); the acquisition of the paperboard manufacturing facility and associated business in Augusta, Georgia; the expected impact, benefits and opportunities resulting from the Augusta acquisition; the Company’s intention to focus on growth in paperboard; the Company’s strategic positioning to capitalize on the paperboard industry’s cyclical nature and deliver strong returns; order patterns; product demand and industry trends; production targets; impact of inflation of raw material and energy; assumptions for Q4 2024 and full year 2025, including maintenance outage impacts, operational factors, interest, capital, lower input costs, depreciation and amortization and income tax; our capital allocation priorities; our strategy, including achieving target leverage ratio and maintaining liquidity; our focus on free cash flow generation through operational efficiencies and demand; expectations regarding the paperboard market; inventory management; our financial flexibility; and repurchases under the existing share buyback authorization. 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: there may be unexpected costs, charges or expenses resulting from the sale of our tissue business, including potential purchase price adjustments; competitive responses to the tissue business sale; achievement of anticipated financial results and other benefits of the tissue business sale; potential risks associated with operating without the tissue business, including less diversification in products offered; changes in our capital structure; there may be stockholder litigation in connection with the tissue business sale or the acquisition of the Augusta, Georgia paperboard manufacturing facility or other settlements or investigations may result in significant costs of defense, indemnification and liability; our inability to realize the expected benefits of the Augusta, Georgia paperboard manufacturing facility acquisition because of integration difficulties or other challenges; risks relating to the integration of the Augusta, Georgia paperboard manufacturing facility and achievement of anticipated financial results and other benefits of the acquisition; competitive pricing pressures for our products, including as a result of capacity additions, demand reduction 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 energy, chemicals, packaging and freight costs and disruptions in transportation services impacting our ability to receive inputs or ship products to customers; changes in customer product preferences and competitors' product offerings; larger competitors having operational, financial and other advantages; consolidation and vertical integration of converting operations in the paperboard industry; 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 equipment malfunctions and damage to our manufacturing facilities; cyber-security risks; our ability to successfully execute capital projects and other activities to operate our assets, including effective maintenance, implement our operational efficiencies and realize higher throughput or lower costs; IT system disruptions and IT system implementation failures; labor disruptions; cyclical industry conditions, including the shifting supply and demand balance; changes in expenses, required contributions and potential withdrawal costs associated with our pension plans; environmental liabilities or expenditures and climate change; reliance on a limited number of third-party suppliers, vendors and service providers required for the production of our products and our operations; our ability to attract, motivate, train and retain qualified and key personnel; our ability to service our debt obligations and restrictions on our business from debt covenants and terms; changes in our banking relations, or in our customer supply chain financing; 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 or 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 includes certain financial measures that are not calculated in accordance with GAAP, including Adjusted EBITDA. 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 Adjusted EBITDA to the most relevant GAAP measure is available in the appendix of this presentation.
3 Strategic Updates Utilized ~$850 million of net proceeds from sale to pay down debt Completed sale of tissue business for $1.06 billion1 on November 1 Transformed Clearwater into a leading paperboard packaging supplier Focused on strengthening our position as a premier, independent supplier of paperboard packaging products to North American converters $100 million share repurchase authorization approved A strong balance sheet with 1-2x net leverage ratio target across cycle Paid down all credit facilities, except $275 million of 2028 notes with interest rate of 4.75% Launching a new share repurchase program Targeting to opportunistically buy back shares when price trades at sufficient discount to inherent value 1. Subject to customary adjustments
4 Clearwater Paper at a Glance Top 3 paperboard supplier in North America Non-integrated, servicing independent converters Well positioned assets to serve customers $1.6B of 2023 net sales1 Strong balance sheet, disciplined capital allocation TX MT CA ID NV AZ OR IL NM CO WY MN SD IA ND UT KS NE WA WI OK MI MO NY PA FL IN AL GA AR LA NC VA TN KY OH MS ME SC MI WV VT NH MA CT NJ MD DE RI Corporate headquarters Paperboard manufacturing Paperboard sheeting Mill Facilities Lewiston, ID; Cypress Bend, AR; Augusta, GA Annual Capacity ~1.4 million tons of SBS paperboard across 5 paper machines Pulp integration 90%+, ~1.4 million tons of pulp capacity Employees Headquartered in Spokane, WA with 2,200 employees 1. 2023 revenue excludes discontinued operations, include estimated impact of Augusta acquisition of ~$500M of net sales 2. Based on management estimates and industry data CLW SBS Shipments2 58% Folding Carton & Other 38% Food Service 4% Liquid Packaging Industry SBS Shipments2 42% Folding Carton & Other 39% Food Service 19% Liquid Packaging
5 Paperboard is a 10 million1 ton industry with stable demand and broad consumer packaging applications 5M TONS 2.5M TONS 2.5M TONS High quality packaging applications of consumer goods and foodservice SOLID BLEACH SULFATE (SBS) COATED UNBLEACHED KRAFT (CUK) COATED RECYCLED BOARD (CRB) 10M TON TOTAL AVAILABLE SUPPLY1 Beverage carrier applications Lower cost consumer packaging applications 1. Available North American paperboard supply based on management estimates 2. Non-integrated, purchase paperboard market size based on management estimates CLEARWATER SBS CAPACITY OF 1.4M TONS ACROSS 3 MILLS AND 5 PAPER MACHINES
6 Clearwater Serves Independent Converters INDEPENDENT CONVERTERS Purchase paperboard from suppliers and convert into final packaging • 45%1 of North American paperboard market • Strong and differentiated alternative to integration converters, offering a high level of service, quality, agility and innovation • Well positioned to serve small to medium sized customers and offer a viable alternative to integrated suppliers at large accounts CLEARWATER IS A GREAT STRATEGIC FIT FOR INDEPENDENT CONVERTERS IN NORTH AMERICA INTEGRATED SUPPLIERS Produce base stock paperboard and convert into final packaging, compete with independent converters INDEPENDENT SUPPLIERS Non-integrated, produce base stock paperboard, do not own converting assets No channel conflict Prioritize our customers’ needs Footprint and scale to support growth 1 Non-integrated, purchase paperboard market size based on management estimates
7 Clearwater is Well Positioned to Deliver Strong Returns >16% Cycle peak (>95% utilization, 50-60% FCF conversion) Average across cycle (90-95% utilization, 40-50% FCF conversion) ~13 to 14% Downcycle (<85% utilization, 0-20% FCF conversion) <10% TARGETING STRONG CASH FLOW GENERATION ACROSS THE CYCLE Paperboard industry is cyclical, driven by supply and demand balance Currently in downcycle as demand recovers and new capacity is added Across the cycle Adjusted EBITDA margins targeted at around 13% to 14% Delivering a 40-50% Adjusted EBITDA to free cash flow conversion rate1, or $100M+ per year Strong position in a stable and growing industry Focused on consistently improving operating performance and reducing costs Exploring growth opportunities to expand product offering through internal investments or acquisitions Strong balance sheet creating strategic optionality across the cycle Clearwater is focused on value creation across the cycle 1. Cash flow from operating activities adjusted for other operating charges less capital, divided by Adjusted EBITDA ADJUSTED EBITDA TARGET MARGINS
8 Optimized Capital Allocation Approach Supports Value Creation $70-80M EXPECTED ANNUAL MAINTENANCE CAPEX, EXCLUDING LARGE REPLACEMENT PROJECTS 1-2x TARGET LEVERAGE RATIO Investing to maintain the long-term performance of our assets Evaluating strategic capital investments to diversify product portfolio Opportunistic M&A to support strategic priorities Return capital to shareholders through share buybacks Utilizing free cash flow (FCF) to deleverage our balance sheet
9 Q3 2024 Business Highlights NET SALES, TOTAL OPERATIONS $644M +24% YoY DRIVEN BY 67% increase in paperboard volume Primarily due to Augusta acquisition OFFSET BY 12% decline In paperboard pricing, consistent with industry trends NET INCOME $6M ADJUSTED EBITDA RESULTS FROM TOTAL OPERATIONS $64 M YoY decrease driven by lower pricing in paperboard and major Lewiston, Idaho mill maintenance costs Our former tissue segment is reflected as discontinued operations and our paperboard segment plus corporate expenses are reflected as continuing operations. Total operations includes both continuing and discontinued operations. BEGINNING IN 2025 Moving to annual outage schedule to enable smaller, more predictable maintenance outages SBS PAPERBOARD MARKET CONTINUES TO RECOVER Industry shipments1 up 2.4% Q3’24 vs. Q2’24 Industry shipments1 up 2.5% YTD 2024 vs. YTD 2023 Industry operating rates1 at 85% YTD, up 1.8% vs. YTD 2023 1. Based on data from AF&PA
10 Q3’24 VS Q3’23 Adjusted EBITDA Results from Total Operations ($ in millions) $80.6 -$10.6 -$2.6 $63.5 -$25.1 $21.2 Q3'23 Adj. EBITDA Price/Mix Volume Costs/Other SG&A Q3'24 Adj. EBITDA Lower pricing Higher tissue volume and addition of Augusta volume Maintenance outage costs partially offset by lower input costs Augusta SG&A
11 Outlook for Q4’24 and Initial 2025 Assumptions Q4 2024: $20 to $30 million of Adjusted EBITDA1 from Total Operations One month of Adjusted EBITDA from discontinued operations (tissue) in the fourth quarter Augusta planned major maintenance outage, direct cost of $15 to $20 million No major maintenance impact at Lewiston mill, improved operating performance Balancing supply to meet demand Initial FY 2025 assumptions: 8% to 10% of Adjusted EBITDA margin Capacity utilization at ~85%, with approximately $1.5 to $1.6 billion of revenue Full year impact of Augusta facility acquisition SBS continues to be in downcycle as market absorbs new capacity being added $40 to $50 million of negative price / cost impact Targeting ~10% reduction in fixed cost, SG&A at ~6% of net sales by end of 2025 Moving to annual outage cadence, $40-50 million of total direct major maintenance expense 1. As there is uncertainty in connection with calculating the adjustments necessary to prepare reconciliations from Adjusted EBITDA to the comparable GAAP financial measure, the Company is unable to reconcile the Adjusted EBITDA projections without unreasonable efforts. Therefore, no reconciliation is being provided at this time. These items could result in significant adjustments from the most comparable GAAP measure.
12 Optimistic About Long-Term Value Creation Sale of our tissue business enables sharpened focus on improving and growing our paperboard business • Meaningfully de-levered balance sheet with proceeds from sale • Focus on growing our position as a premier independent paperboard packaging supplier to North American converters Well invested asset base to support future growth • High quality paperboard assets well positioned across the U.S. to efficiently service North American converters • Strong legacy of prioritizing sustainability • Focused on expanding product portfolio through internal investment and opportunistic M&A Focused on optimizing business to deliver free cash flows • Driving improvement in operational performance • Consistently investing to maintain viability of our assets • Strategically deploy capital to create long-term shareholder value
13 Appendix
14 FINANCIAL PERFORMANCE ($ IN MILLIONS, EXCEPT PER SHARE INFORMATION) JUNE 30, 2024 2023 2024 2024 2023 Net sales 393.3$ 278.9$ 344.4$ 996.5$ 867.4$ Cost of sales 363.2 228.3 346.4 935.1 702.6 Selling, general and adminstrative 31.6 28.3 30.2 90.0 88.0 Other operating charges, net (0.3) 1.7 14.6 20.3 1.1 Income (loss) from operations (1.2) 20.7 (46.8) (48.9) 75.7 Non-operating expense (12.8) (2.1) (9.3) (22.9) (7.6) Income tax (benefit) provision (3.3) 3.7 (14.6) (17.4) 16.7 Net income (loss) continuing operations (10.7) 14.9 (41.5) (54.4) 51.4 Income from discontinued operations, net of tax 16.6 21.7 15.7 51.6 38.8 Net income (loss) 5.8$ 36.6$ (25.8)$ (2.8)$ 217.7$ Diluted income (loss) per share 0.36$ 2.17$ (1.55)$ (0.17)$ 5.29$ Net sales, total operations 643.9$ 519.9$ 586.4$ 1,726.4$ 1,569.9$ Adjusted EBITDA, total operations 63.5$ 80.6$ 35.3$ 160.3$ 217.7$ SEPTEMBER 30, SEPTEMBER 30, YEAR TO DATEQUARTER ENDED
15 Reconciliation of Adjusted EBITDA ($ IN MILLIONS) June 30, 2024 2023 2024 2024 2023 Net income (loss) $ 5.8 $ 36.6 $ (25.8) $ (2.8) $ 90.1 Less: Income from discontinued operations 16.6 21.7 15.7 51.6 38.8 Income (loss) from continuing operations (10.8) 14.9 (41.5) (54.4) 51.4 Add back: Income tax (benefit) provision (3.3) 3.7 (14.6) (17.4) 16.7 Interest expense, net 13.1 2.2 9.6 24.0 7.9 Depreciation and amortization expense 21.7 10.2 17.2 47.6 30.3 Inventory revaluation on acquired business - - 6.8 6.8 - Other operating charges, net (0.3) 1.7 14.6 20.3 1.1 Other non-operating expense (0.3) (0.1) (0.3) (1.0) (0.3) Adjusted EBITDA continuing operatons 20.2 32.6 (8.2) 25.9 107.1 Plus: Income from discontinued operations 16.6 21.7 15.7 51.6 38.8 Income tax (benefit) provision 6.8 7.2 5.2 17.4 12.9 Other non-operating expense 8.0 4.6 6.4 19.7 14.1 Depreciation and amortization expense 5.6 14.2 13.7 35.0 43.5 Other operating charges, net 6.3 0.1 2.5 10.8 1.3 Adjusted EBITDA, overall $ 63.5 $ 80.6 $ 35.3 $ 160.3 $ 217.7 September 30, September 30, Nine Months EndedQuarter Ended
16 Q2’24 VS Q3’24 Adjusted EBITDA Results from Total Operations ($ in millions) $35.3 $16.8 -$0.8 $63.5 $0.3 $11.9 Q2'24 Adj. EBITDA Price/Mix Volume Costs/Other SGA Q3'24 Adj. EBITDA Higher sales and production volume Reduced maintenance costs Higher cost due to expanded sales Change in mix