CLW 8-K
Clearwater Paper Corp (CLW)
8-K
2022-08-02
For: 2022-08-02
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Added on
April 06, 2026
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): August 02, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
| (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):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchanged on which registered | ||||||
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 August 2, 2022 , Clearwater Paper Corporation (the “Company”) announced its results of operations and financial condition for the second quarter ending June 30, 2022. A copy of the press release containing this announcement is furnished as Exhibit 99.1 hereto. In addition, a copy of the Company’s Second 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 which is defined as earnings before interest expense, taxes, depreciation and amortization, other operating credits and charges, net and other non-operating items. Adjusted net income which is calculated by excluding from net income, other operating credits and charges, net, and adjusts for a normalized tax rate. Adjusted EBITDA and Adjusted net income 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 Company believes that adjusted net income, 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 net income 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 | |||||
| 99.2 | |||||
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 : August 2, 2022
CLEARWATER PAPER CORPORATION
| By: | /s/ Rebecca A. Barckley | ||||
| Rebecca A. Barckley, Vice President, Corporate Controller | |||||
| (Principal Accounting Officer) | |||||
Exhibit 99.1
Clearwater Paper Reports Second Quarter 2022 Results
SPOKANE, Wash.--(BUSINESS WIRE)--August 2, 2022 --Clearwater Paper Corporation (NYSE:CLW), a premier supplier of quality tissue and bleached paperboard products, today reported financial results for the second quarter and six months ended June 30, 2022.
SECOND QUARTER HIGHLIGHTS
•Delivered strong performance due to continued strength in paperboard and improvements in tissue
•Higher pricing in both businesses helping offset inflation
•Net sales of $526 million, up 30% compared to the second quarter of last year
•Net income of $15 million, or $0.86 per diluted share
•Adjusted EBITDA of $63 million
•Reduced net debt by $68 million in the quarter and nearly $100 million year to date, achieved leverage target
•Repurchased nearly $4 million of shares, with $26 million remaining under program
"We continued our trend of strong performance in the second quarter due to solid operational execution and improved pricing in both businesses,” said Arsen Kitch, president and chief executive officer. “Our paperboard business continued to experience strong demand and pricing, while our tissue volumes increased due to stronger consumer demand for private branded products.”
OVERALL RESULTS
For the second quarter of 2022, Clearwater Paper reported net sales of $526 million, a 30% increase compared to net sales of $406 million for the second quarter of 2021. Net income for the second quarter of 2022 was $15 million, or $0.86 per diluted share, compared to net loss for the second quarter of 2021 of $52 million, or $3.10 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net income in the second quarter of 2022 of $19 million, or $1.11 per diluted share, compared to second quarter 2021 adjusted net loss of $18 million, or $1.07 per diluted share. Adjusted EBITDA for the quarter was $63 million, compared to the second quarter of 2021 Adjusted EBITDA of $15 million.
For the first six months of 2022, Clearwater Paper reported net sales of $1 billion, a 22% increase compared to net sales of $832 million for the first six months of 2021. Net income for the first six months of 2022 was $31 million, or $1.83 per diluted share, compared to net loss for the first six months of 2021 of $40 million, or $2.37 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net income in the first six months of 2022 of $36 million, or $2.13 per diluted share, compared to first six months of 2021 adjusted net loss of $6 million, or $0.37 per diluted share. Adjusted EBITDA for the first six months was $122 million, compared to the first six months of 2021 Adjusted EBITDA of $69 million.
Impacting the second quarter and first half of 2021, Clearwater Paper incurred impairment and other closure costs associated with the closure of its Neenah, Wisconsin facility of $41.7 million and completed planned major maintenance at its Lewiston, Idaho paperboard facility.
Pulp and Paperboard Products Segment
Net sales in the Pulp and Paperboard Products segment were $296 million for the second quarter of 2022, up 30% compared to second quarter 2021 net sales of $227 million. Segment operating income for the second quarter of 2022 was $52 million, compared to $13 million for the second quarter of 2021. Adjusted EBITDA for the segment was $61 million in the second quarter of 2022, compared to $22 million in the second quarter of 2021. The increase in operating income and Adjusted EBITDA was driven by higher sales prices and the absence of planned major maintenance, partly offset by higher input costs specifically related to chemicals, freight and energy.
Net sales in the Pulp and Paperboard Products segment were $562 million for the first six months of 2022, up 26% compared to net sales of $447 million in the first six months of 2021. Segment operating income for the first six months of 2022 was $102 million, compared to $38 million for the first six months of 2021. Adjusted EBITDA for the segment was $121 million in the first six months of 2022, compared to $56 million in the first six months of 2021. The increase in operating income and Adjusted EBITDA was driven by higher sales prices and the absence of planned major maintenance, partly offset by higher input costs, specifically related to chemicals, freight and energy.
Paperboard Sales Volumes and Prices:
• Paperboard sales volumes were 215,903 tons in the second quarter of 2022, an increase of 8% compared to 200,551 tons in the second quarter of 2021. Paperboard sales volumes were 417,259 tons in the first six months of 2022, an increase of 2% compared to 407,263 tons in the first six months of 2021.
• Paperboard average net selling price increased 26% to $1,332 per ton for the second quarter of 2022, compared to $1,058 per ton in the second quarter of 2021. Paperboard average net selling price increased 25% to $1,299 per ton for the first six months of 2022, compared to $1,043 per ton in the first six months of 2021.
Consumer Products Segment
Net sales in the Consumer Products segment were $232 million for the second quarter of 2022, up 29% compared to the second quarter 2021 net sales of $181 million. Segment operating income for the second quarter of 2022 was $3 million compared to operating loss of $10 million in the second quarter of 2021. Adjusted EBITDA for the segment was $19 million in the second quarter of 2022, compared to $7 million in the second quarter of 2021. The increase in operating income and Adjusted EBITDA was driven by higher sales prices partly offset by higher input costs, specifically related to pulp, transportation and energy.
Net sales in the Consumer Products segment were $455 million for the first six months of 2022, up 17% compared to net sales of $389 million in the first six months of 2021. Segment operating income for the first six months of 2022 was $4 million compared to operating income of $8 million in the first six months of 2021. Adjusted EBITDA for the segment was $35 million in the first six months of 2022, compared to $41 million in the first six months of 2021. The decrease in operating income and Adjusted EBITDA was driven by higher input costs, specifically related to pulp and transportation partly offset by higher sales prices.
Retail Tissue Sales Volumes and Prices:
• Retail tissue volumes sold were 76,604 tons in the second quarter of 2022, an increase of 25% compared to 61,497 tons in the second quarter of 2021. Retail tissue volumes sold were 152,030 tons in the first six months of 2022, an increase of 25% compared to 132,259 tons in the first six months of 2021.
• Retail tissue selling prices increased 8% to $2,984 per ton in the second quarter of 2022, compared to $2,755 per ton in the second quarter of 2021. Retail tissue selling prices increased 8% to 2,928 per ton in the first six months of 2022, compared to $2,757 per ton in the first six months of 2021.
COMPANY OUTLOOK
"Inflation remains a key theme in both of our businesses and is expected to persist into the third quarter. We are continuing with our efforts to offset these cost pressures with operational improvements and pricing. In addition, our focus on cashflow generation has enabled us to achieve our leverage target and we expect to discuss our capital allocation priorities later in the year,” concluded Kitch.
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 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 brand tissue to major retailers, including grocery, club, 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 second quarter and first six months of 2022 and 2021, including adjusted income (loss) and Adjusted EBITDA. 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 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 product demand, cash generation, performance improvements, market conditions, debt reduction and share repurchases, and mitigation of inflationary pressures. 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: impact of the COVID-19 pandemic on our 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; 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; 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; 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 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 we operate; manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunctions and damage to our manufacturing facilities; 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 and climate change; reliance on a limited number of third-party suppliers for raw materials; our ability to attract, motivate, train and retain qualified and key personnel; changes in our banking relations and our customer supply chain financing; negative changes in our credit agency ratings; and 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, 2021. 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 June 30, | Six Months Ended June 30, | ||||||||||||||||
| (In millions, except per-share data) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net sales | $ | 526.4 | $ | 406.4 | $ | 1,014.6 | $ | 832.3 | |||||||||
| Costs and expenses: | |||||||||||||||||
| Cost of sales | 455.2 | 392.2 | 877.2 | 762.8 | |||||||||||||
| Selling, general and administrative expenses | 33.9 | 26.3 | 66.7 | 54.1 | |||||||||||||
| Other operating charges, net | 5.7 | 44.5 | 6.3 | 44.9 | |||||||||||||
| Total operating costs and expenses | 494.9 | 463.0 | 950.2 | 861.8 | |||||||||||||
| Income (loss) from operations | 31.5 | (56.6) | 64.4 | (29.5) | |||||||||||||
| Interest expense, net | (10.7) | (9.3) | (19.3) | (18.6) | |||||||||||||
| Debt retirement costs | (0.3) | — | (0.5) | — | |||||||||||||
| Other non-operating expense | (1.4) | (2.5) | (2.8) | (5.0) | |||||||||||||
| Total non-operating expense | (12.4) | (11.8) | (22.7) | (23.6) | |||||||||||||
| Income (loss) before income taxes | 19.1 | (68.4) | 41.7 | (53.1) | |||||||||||||
| Income tax provision (benefit) | 4.4 | (16.7) | 10.4 | (13.5) | |||||||||||||
| Net income (loss) | $ | 14.7 | $ | (51.6) | $ | 31.3 | $ | (39.6) | |||||||||
| Net income (loss) per common share: | |||||||||||||||||
| Basic | $ | 0.87 | $ | (3.10) | $ | 1.86 | $ | (2.37) | |||||||||
| Diluted | 0.86 | (3.10) | 1.83 | (2.37) | |||||||||||||
| Average shares of common stock used to compute net income (loss) per share: (in thousands) | |||||||||||||||||
| Basic | 16,849 | 16,685 | 16,788 | 16,678 | |||||||||||||
| Diluted | 17,078 | 16,685 | 17,080 | 16,678 | |||||||||||||
| Clearwater Paper Corporation | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Unaudited) | ||||||||
| (In millions) | June 30, 2022 | December 31, 2021 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 69.5 | $ | 25.2 | ||||
| Receivables, net | 187.3 | 167.4 | ||||||
| Inventories | 287.7 | 277.7 | ||||||
| Other current assets | 12.8 | 16.9 | ||||||
| Total current assets | 557.2 | 487.2 | ||||||
| Property, plant and equipment | 2,961.8 | 2,961.5 | ||||||
| Accumulated depreciation | (1,921.0) | (1,879.7) | ||||||
| Property, plant and equipment, net | 1,040.7 | 1,081.8 | ||||||
| Other assets, net | 114.8 | 121.1 | ||||||
| Total Assets | $ | 1,712.7 | $ | 1,690.1 | ||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 1.0 | $ | 1.6 | ||||
| Accounts payable and accrued liabilities | 299.3 | 252.5 | ||||||
| Total current liabilities | 300.3 | 254.1 | ||||||
| Long-term debt | 589.9 | 637.6 | ||||||
| Liability for pension and other postretirement employee benefits | 72.1 | 73.6 | ||||||
| Deferred tax liabilities and other long-term obligations | 205.7 | 213.1 | ||||||
| Total liabilities | 1,168.0 | 1,178.3 | ||||||
| Stockholders' equity: | ||||||||
| Common stock | — | — | ||||||
| Additional paid-in capital | 23.0 | 23.6 | ||||||
| Retained earnings | 562.0 | 530.7 | ||||||
| Accumulated other comprehensive loss, net of tax | (40.3) | (42.6) | ||||||
| Total stockholders' equity | 544.7 | 511.7 | ||||||
| Total liabilities and stockholders' equity | $ | 1,712.7 | $ | 1,690.1 | ||||
| Clearwater Paper Corporation | |||||||||||||||||
| Consolidated Statements of Cash Flows | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating activities | |||||||||||||||||
| Net income (loss) | $ | 14.7 | $ | (51.6) | $ | 31.3 | $ | (39.6) | |||||||||
| Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | 25.7 | 26.8 | 51.2 | 53.7 | |||||||||||||
| Equity-based compensation expense | 4.9 | 0.7 | 5.5 | 3.1 | |||||||||||||
| Deferred taxes | (1.9) | (21.4) | (4.1) | (21.8) | |||||||||||||
| Defined benefit pension and other postretirement employee benefits | 0.8 | 1.5 | 1.5 | 3.2 | |||||||||||||
| Amortization of deferred debt costs and debt retirement | 0.7 | 0.5 | 1.3 | 0.9 | |||||||||||||
| Loss on sale or impairment associated with assets | 4.6 | 37.1 | 4.6 | 37.1 | |||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| (Increase) decrease in accounts receivable | (11.3) | (12.9) | (21.8) | 12.8 | |||||||||||||
| (Increase) decrease in inventory | (5.8) | 4.9 | (10.0) | (24.8) | |||||||||||||
| Decrease in other current assets | 4.2 | 4.5 | 4.2 | 4.4 | |||||||||||||
| Increase in accounts payable and accrued liabilities | 40.6 | 24.8 | 54.5 | 18.6 | |||||||||||||
| Other, net | 1.3 | (0.6) | 1.4 | 0.5 | |||||||||||||
| Net cash flows provided by operating activities | 78.5 | 14.3 | 119.5 | 48.1 | |||||||||||||
| Investing activities | |||||||||||||||||
| Additions to property, plant and equipment, net | (5.4) | (9.9) | (13.2) | (21.1) | |||||||||||||
| Net cash flows used in investing activities | (5.4) | (9.9) | (13.2) | (21.1) | |||||||||||||
| Financing activities | |||||||||||||||||
| Repayments of long-term debt | (35.1) | (0.4) | (55.5) | (0.8) | |||||||||||||
| Taxes paid related to net share settlement of equity awards | (1.0) | (0.1) | (2.5) | (1.7) | |||||||||||||
| Repurchases of common stock | (3.9) | — | (3.9) | — | |||||||||||||
| Other | — | — | — | 0.5 | |||||||||||||
| Net cash flows used in financing activities | (40.0) | (0.5) | (61.9) | (2.0) | |||||||||||||
| Increase in cash, cash equivalents and restricted cash | 33.1 | 3.8 | 44.4 | 25.0 | |||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 37.5 | 58.2 | 26.2 | 36.9 | |||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 70.6 | $ | 62.0 | $ | 70.6 | $ | 62.0 | |||||||||
| Clearwater Paper Corporation | |||||||||||||||||
| Segment Information | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Segment net sales: | |||||||||||||||||
| Pulp and Paperboard | $ | 295.8 | $ | 227.4 | $ | 562.0 | $ | 447.2 | |||||||||
| Consumer Products | 232.1 | 180.7 | 455.2 | 389.0 | |||||||||||||
| Eliminations | (1.5) | (1.7) | (2.6) | (3.9) | |||||||||||||
| Net sales | $ | 526.4 | $ | 406.4 | $ | 1,014.6 | $ | 832.3 | |||||||||
| Operating income (loss): | |||||||||||||||||
| Pulp and Paperboard | $ | 52.0 | $ | 13.0 | $ | 102.3 | $ | 38.0 | |||||||||
| Consumer Products | 3.5 | (10.0) | 4.4 | 7.9 | |||||||||||||
| Corporate and eliminations | (18.2) | (15.0) | (36.0) | (30.5) | |||||||||||||
Other operating charges, net 1 | (5.7) | (44.5) | (6.3) | (44.9) | |||||||||||||
| Income (loss) from operations | $ | 31.5 | $ | (56.6) | $ | 64.4 | $ | (29.5) | |||||||||
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 June 30, 2022 for the detailed breakout of this amount.
| Clearwater Paper Corporation | |||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net income (loss) | $ | 14.7 | $ | (51.6) | $ | 31.3 | $ | (39.6) | |||||||||
| Add back: | |||||||||||||||||
| Income tax provision (benefit) | 4.4 | (16.7) | 10.4 | (13.5) | |||||||||||||
| Interest expense, net | 10.7 | 9.3 | 19.3 | 18.6 | |||||||||||||
| Depreciation and amortization | 25.7 | 26.8 | 51.2 | 53.7 | |||||||||||||
Other operating charges, net1 | 5.7 | 44.5 | 6.3 | 44.9 | |||||||||||||
| Debt retirement costs | 0.3 | — | 0.5 | — | |||||||||||||
| Other non-operating expense | 1.4 | 2.5 | 2.8 | 5.0 | |||||||||||||
| Adjusted EBITDA | $ | 63.0 | $ | 14.8 | $ | 121.9 | $ | 69.1 | |||||||||
| Pulp and Paperboard segment income | $ | 52.0 | $ | 13.0 | $ | 102.3 | $ | 38.0 | |||||||||
| Depreciation and amortization | 9.2 | 9.0 | 18.5 | 18.0 | |||||||||||||
| Adjusted EBITDA Pulp and Paperboard | $ | 61.2 | $ | 22.0 | $ | 120.8 | $ | 56.0 | |||||||||
| Consumer Products segment income (loss) | $ | 3.5 | $ | (10.0) | $ | 4.4 | $ | 7.9 | |||||||||
| Depreciation and amortization | 15.6 | 16.8 | 30.9 | 33.5 | |||||||||||||
| Adjusted EBITDA Consumer Products | $ | 19.1 | $ | 6.7 | $ | 35.3 | $ | 41.4 | |||||||||
| Corporate and other expenses | $ | (18.2) | $ | (15.0) | $ | (36.0) | $ | (30.5) | |||||||||
| Depreciation and amortization | 0.9 | 1.0 | 1.8 | 2.2 | |||||||||||||
| Adjusted EBITDA Corporate | $ | (17.3) | $ | (14.0) | $ | (34.2) | $ | (28.3) | |||||||||
| Pulp and Paperboard segment | $ | 61.2 | $ | 22.0 | $ | 120.8 | $ | 56.0 | |||||||||
| Consumer Products segment | 19.1 | 6.7 | 35.3 | 41.4 | |||||||||||||
| Corporate and other | (17.3) | (14.0) | (34.2) | (28.3) | |||||||||||||
| Adjusted EBITDA | $ | 63.0 | $ | 14.8 | $ | 121.9 | $ | 69.1 | |||||||||
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 June 30, 2022 for the detailed breakout of this amount.
| Clearwater Paper Corporation | |||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| (In millions, except per-share data) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Adjusted net income (loss): | |||||||||||||||||
| Net income (loss) | $ | 14.7 | $ | (51.6) | $ | 31.3 | $ | (39.6) | |||||||||
| Add back: | |||||||||||||||||
| Income tax provision (benefit) | 4.4 | (16.7) | 10.4 | (13.5) | |||||||||||||
| Income (loss) before income taxes | 19.1 | (68.4) | 41.7 | (53.1) | |||||||||||||
| Add back: | |||||||||||||||||
| Debt retirement costs | 0.3 | — | 0.5 | — | |||||||||||||
| Other operating charges, net | 5.7 | 44.5 | 6.3 | 44.9 | |||||||||||||
| Adjusted income (loss) before tax | $ | 25.2 | $ | (23.8) | $ | 48.5 | $ | (8.2) | |||||||||
| Normalized income tax provision | 6.3 | (6.0) | 12.1 | (2.0) | |||||||||||||
| Adjusted net income (loss) | $ | 18.9 | $ | (17.9) | $ | 36.4 | $ | (6.1) | |||||||||
| Weighted average diluted shares (thousands) | 17,078 | 16,685 | 17,080 | 16,678 | |||||||||||||
| Adjusted income (loss) per diluted share | $ | 1.11 | $ | (1.07) | $ | 2.13 | $ | (0.37) | |||||||||
| June 30, 2022 | March 31, 2022 | December 31, 2021 | |||||||||||||||
| Calculation of net debt: | |||||||||||||||||
| Current portion long-term debt | $ | 1.0 | $ | 1.6 | $ | 1.6 | |||||||||||
| Long-term debt | 589.9 | 617.7 | 637.6 | ||||||||||||||
| Add back: | |||||||||||||||||
| Unamortized deferred debt costs | 3.8 | 4.4 | 4.8 | ||||||||||||||
| Less: | |||||||||||||||||
| Financing leases | 24.7 | 18.7 | 19.1 | ||||||||||||||
| Cash and cash equivalents | 69.5 | 36.4 | 25.2 | ||||||||||||||
| Net debt | $ | 500.5 | $ | 568.6 | $ | 599.8 | |||||||||||
Clearwater Paper Corporation
Investors contact:
Sloan Bohlen
Solebury Trout
509.344.5906
News media:
Shannon Myers
509.344.5967
CLEARWATER PAPER CORPORATION SECOND QUARTER EARNINGS RELEASE MATERIALS AUGUST 2, 2022 ARSEN S. KITCH President, Chief Executive Officer And Director MICHAEL J. MURPHY Senior Vice President And Chief Financial Officer
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 order patterns; consumer demand and industry trends; production targets; impact of announced price increases, including expectations of implementation; impact of inflation of raw material, energy and freight; assumptions for Q3 2022 and full year 2022 and 2023, including maintenance outage impacts, operational factors, interest, capital, inflation, depreciation and amortization and income tax; our capital allocation objectives; our strategy, including achieving target level ratio, maintaining liquidity, debt reduction, and prioritizing free cash flow; expectations regarding the paperboard markets and tissue markets; repurchases under existing share buyback authorization; and future growth opportunities. 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; 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 and climate change; 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; changes in our banking relations; 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 include certain financial measures that are not calculated in accordance with GAAP, including Adjusted EBITDA, Adjusted Income, Adjusted income per diluted share, free cash flow 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 shou ld 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, Adjusted income per share, free cash flow and net debt) to the most relevant GAAP measure is available in the appendix of this presentation. FORWARD LOOKING STATEMENTS © Clearwater Paper Corporation 2022 2
Overall • Net sales $526 million, up 30% compared to prior year • Net income $15 million • Adjusted net income $19 million • Adjusted EBITDA $63 million • Inflation pressures across both businesses Pulp and Paperboard • Continued strong customer demand • SBS prices increased Consumer Products • Demand for private branded products increasing • Tissue prices increased • Successfully renewed key customer agreements Capital Structure • Reduced net debt by $68 million • Achieved leverage target • Shares repurchased $4 million Q2 2022 BUSINESS HIGHLIGHTS © Clearwater Paper Corporation 2022 3
Industry • Order backlogs remain strong • RISI reported market price increases $250/ton in 2021, $100/ton in Q1 2022, and $100/ton in Q2 2022 • Folding carton: April $50/ton and June $50/ton • Cupstock and food service: April $50/ton and June $50/ton • Strong demand across various end markets Clearwater Paper • Demand and order backlogs remain strong, with demand outpacing supply • Continued expected benefit of previously announced price increases • Can take up to two quarters to implement • Inflation across raw materials, energy and freight BUSINESS UPDATE – PULP AND PAPERBOARD PRICING DRIVING OVERALL STRONG RESULTS © Clearwater Paper Corporation 2022 4
Industry • Consumer buying behavior being affected by inflation • Private brand market share rising, now above 35%1 Clearwater Paper • Strong demand with Q2 2022 shipments of 12.6 million cases compared to 10.2 million in Q2 20212, 12.0 million in Q1 2022 • Production without meaningful market related downtime • Inflation across raw materials, energy, and freight • Implementing previously announced price increases • Successfully renewed key customer agreements expiring this year BUSINESS UPDATE – CONSUMER PRODUCTS SHIPMENTS STRENGTHEN © Clearwater Paper Corporation 2022 5 1 IRI panel data for dollar share as of June 2022 2.Includes 0.5 million cases of away from home shipments
© Clearwater Paper Corporation 2022 FINANCIAL PERFORMANCE ($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2022 2021 2022 2021 Net sales 526.4$ 406.4$ 1,014.6$ 832.3$ Cost of sales 455.2 392.2 877.2 762.8 Selling, general and adminstrative 33.9 26.3 66.7 54.1 Other operating charges, net 5.7 44.5 6.3 44.9 Income from operations 31.5 (56.6) 64.4 (29.5) Non-operating expense (12.4) (11.8) (22.7) (23.6) Income tax provision (benefit) 4.4 (16.7) 10.4 (13.5) Net income (loss) 14.7$ (51.6)$ 31.3$ (39.6)$ Diluted income (loss) per share 0.86$ (3.10)$ 1.83$ (2.37)$ Adjusted income per share 1.11$ (1.07)$ 2.13$ (0.37)$ Adjusted EBITDA 63.0$ 14.8$ 121.9$ 69.1$ Quarter Ended June 30, Six Months Ended June 30, 6
© Clearwater Paper Corporation 2022 SEGMENT PROFIT AND LOSS AND ADJUSTED EBITDA ($ IN MILLIONS) 2022 2021 2022 2021 Net Sales Pulp and Paperboard 295.8$ 227.4$ 562.0$ 447.2$ Consumer Products 232.1 180.7 455.2 389.0 Eliminations (1.5) (1.7) (2.6) (3.9) 526.4$ 406.4$ 1,014.6$ 832.3$ Operating Income Pulp and Paperboard 52.0$ 13.0$ 102.3$ 38.0$ Consumer Products 3.5 (10.0) 4.4 7.9 Corporate and other (18.2) (15.0) (36.0) (30.5) Other operating charges, net (5.7) (44.5) (6.3) (44.9) 31.5$ (56.6)$ 64.4$ (29.5)$ Adjusted EBITDA Pulp and Paperboard 61.2$ 22.0$ 120.8$ 56.0$ Consumer Products 19.1 6.7 35.3 41.4 Corporate and other (17.3) (14.0) (34.2) (28.3) 63.0$ 14.8$ 121.9$ 69.1$ Quarter Ended June 30, Six Months Ended June 30, 7
PULP AND PAPERBOARD RESULTS Q2 2022 VS. Q2 2021 SEGMENT ADJUSTED EBITDA ($ IN MILLIONS) Higher pricing Higher input costs including fiber, energy, chemicals and transportation, partly offset by lack of major maintenance outage © Clearwater Paper Corporation 2022 8 Higher volume due to lack major maintenance outage
CONSUMER PRODUCTS RESULTS Q2 2022 VS. Q2 2021 SEGMENT ADJUSTED EBITDA ($ IN MILLIONS) Higher sales and production volume Higher input costs including pulp, energy, and transportation partly offset by Neenah closure © Clearwater Paper Corporation 2022 9 Price increases and mix
© Clearwater Paper Corporation 2022 CAPITAL STRUCTURE AND ALLOCATION Capital structure: supportive and stable • Ample liquidity • No material near-term debt maturities • Corporate/Issuer ratings: Ba2/BB- Capital allocation objectives: • Fund typical maintenance and business improvement capital investments of approximately $60 million/year • Share repurchases: • $4 million repurchased in Q2 2022 • $26 million remaining on authorization • Retire debt • Repaid term loan and $5 million of the notes due in 2025 $0.0 $0.0 $0.0 $295.0 $0.0 $0.0 $275.0 2022 2023 2024 2025 2026 2027 2028 Scheduled Debt Maturity Profile ($ in millions)2 Liquidity Profile ($ in millions)1 ABL Availability $250.0 Less Utilization (3.7) Plus Unrestricted Cash 69.5 Liquidity $315.8 1. ABL availability based on borrowing base calculations and consolidated balance sheet as of June 30, 2022, and utilization includes ABL borrowing of $0 million and outstanding letters of credit of $3.7 million. 2. This chart excludes finance leases as of June 30, 2022. Current debt maturities include $295 million of 5.375% notes due 2025 and $275 million of 4.75% notes due 2028. 10
OUTLOOK FOR Q3 AND 2022 OVERALL ASSUMPTIONS © Clearwater Paper Corporation 2022 Q3 2022: $64 to $72 million of Adjusted EBITDA • Positive impact of previously announced price increases in paperboard and tissue • Tissue volumes higher, paperboard sales volume lower • No major maintenance outage • Raw material and freight inflation impacting Adjusted EBITDA by $18 to $22 million relative to Q2 2022 2022 Operational Assumptions vs. 2021 • Price/mix – $255 to $275 million impact from previously announced price increases • Volume – stability in paperboard, recovery in tissue • Inflation – raw material, freight and energy inflation expected impact of $185 to $205 million • Labor inflation greater than $10 million 2022 Other • Interest expense: $35 to $37 million • Depreciation and amortization expense: $101 to $104 million • CAPEX: $45 to $55 million • Taxes: effective rate 26% to 27% 11
CLEARWATER PAPER VALUE PROPOSITION KEY PRIORITIES FOR VALUE CREATION © Clearwater Paper Corporation 2022 12 Generate free cash flow • Achieve commercial, operational and supply chain improvements across our businesses • Invest to sustain our assets and higher return projects • Demonstrate an attractive free cash flow story to our investors Enhance financial flexibility • Maintain liquidity and reduce net debt Evaluate future value creation opportunities • Return of capital to shareholders • M&A and other growth options Communicate capital allocation priorities later in 2022
APPENDIX © Clearwater Paper Corporation 2022 13
PULP AND PAPERBOARD SEQUENTIAL QUARTER RESULTS Q2 2022 VS. Q1 2022 SEGMENT ADJUSTED EBITDA ($ IN MILLIONS) Higher input costs including fiber, chemicals and transportation Higher pricing © Clearwater Paper Corporation 2022 14 Higher volume due to increased demand
CONSUMER PRODUCTS SEQUENTIAL QUARTER RESULTS Q2 2022 VS. Q1 2022 SEGMENT ADJUSTED EBITDA ($ IN MILLIONS) Higher input costs including transportation, chemicals and energy partially offset by lack of outage © Clearwater Paper Corporation 2022 15 Price increase and mix
KEY SEGMENT INFORMATION 1. Includes both retail and away-from-home (AFH) cases. AFH was exited in Q3, 2021. 1.5 million in 2020 and 0.8 million in 2021. 2. Non-retail includes away-from-home and parent rolls. Q3’2020 Q4’2020 Q1’2021 Q2’2021 Q3’2021 Q4’2021 Q1’2022 Q2’2022 Pulp and Paperboard Sales ($ millions) $217.2 $220.4 $219.7 $227.4 $237.5 $261.3 $266.2 $295.8 Adjusted EBITDA ($ millions) $41.8 $42.8 $34.0 $22.0 $43.5 $61.9 $59.5 $61.2 Paperboard shipments (short tons) 205.3 206.2 206.7 200.6 203.4 211.5 201.4 215.9 Paperboard sales price ($/short ton) $ 1,010 $ 1,002 $1,028 $1,058 $1,102 $1,164 $1,263 $1,332 Consumer Products Sales ($ millions) $245.9 $238.9 $208.4 $180.7 $214.2 $231.8 $223.0 $232.1 Adjusted EBITDA ($ millions) $48.5 $44.7 $34.7 $6.7 $19.6 $8.0 $16.2 $19.1 Shipments Retail (short tons in thousands) 86.3 83.3 70.8 61.5 76.2 79.4 75.4 76.6 Non-Retail (short tons in thousands) 3.8 6.5 9.4 7.4 5.7 6.2 5.1 2.6 Converted Products (cases in millions)1 14.5 13.9 11.7 10.2 12.3 12.4 12.0 12.6 Sales Price ($ per short ton) Retail $ 2,766 $ 2,745 $ 2,758 $2,755 $2,732 $2,831 $2,872 $2,984 Non-Retail2 $ 1,820 $ 1,552 $ 1,404 $1,508 $988 $1,054 $1,143 $1,365 Production Converted Products (cases in millions) 15.3 13.9 13.5 9.6 11.4 11.9 12.2 12.1 © Clearwater Paper Corporation 2022 16
RECONCILIATION OF ADJUSTED EBITDA ($ IN MILLIONS) March 31, 2022 2021 2022 2022 2021 Net income $ 14.7 $ (51.6) $ 16.6 $ 31.3 $ (39.6) Income tax provision 4.4 (16.7) 6.0 10.4 (13.5) Interest expense, net 10.7 9.3 8.6 19.3 18.6 Depreciation and amortization expense 25.7 26.8 25.4 51.2 53.7 Other operating charges, net 5.7 44.5 0.5 6.3 44.9 Other non-operating expense 1.4 2.5 0.2 2.8 5.0 Debt retirement costs 0.3 - 1.4 0.5 - Adjusted EBITDA $ 63.0 $ 14.8 $ 58.9 $ 121.9 $ 69.1 Pulp and Paperboard segment income $ 52.0 $ 13.0 $ 50.3 $ 102.3 $ 38.0 Depreciation and amortization 9.2 9.0 9.3 18.5 18.0 Adjusted EBITDA Paperboard segment $ 61.2 $ 22.0 $ 59.5 $ 120.8 $ 56.0 Consumer Products segment income $ 3.5 $ (10.0) $ 0.9 $ 4.4 $ 7.9 Depreciation and amortization 15.6 16.8 15.3 30.9 33.5 Adjusted EBITDA Consumer Products segment $ 19.1 $ 6.7 $ 16.2 $ 35.3 $ 41.4 Corporate and other expense $ (18.2) $ (15.0) $ (17.8) $ (36.0) $ (30.5) Depreciation and amortization 0.9 1.0 0.9 1.8 2.2 Adjusted EBITDA Corporate and other $ (17.3) $ (14.0) $ (16.9) $ (34.2) $ (28.3) Pulp and Paperboard segment $ 61.2 $ 22.0 $ 59.5 $ 120.8 $ 56.0 Consumer Products segment 19.1 6.7 16.2 35.3 41.4 Corporate and other (17.3) (14.0) (16.9) (34.2) (28.3) Adjusted EBITDA $ 63.0 $ 14.8 $ 58.9 $ 121.9 $ 69.1 June 30, June 30, Six Months EndedQuarter Ended © Clearwater Paper Corporation 2022 17
© Clearwater Paper Corporation 2022 RECONCILIATION OF ADJUSTED INCOME ($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2022 2021 2022 2021 Net income (loss) 14.7$ (51.6)$ 31.3$ (39.6)$ Add back: Income tax provision (benefit) 4.4 (16.7) 10.4 (13.5) Income (loss) before income taxes 19.1 (68.4) 41.7 (53.1) Add back: Debt retirement costs 0.3 - 0.5 - Other operating charges, net 5.7 44.5 6.3 44.9 Adjusted income before tax 25.2 (23.8) 48.5 (8.2) Normalized income tax provision (benefit) 6.3 (6.0) 12.1 (2.0) Adjusted income 18.9$ (17.9)$ 36.4$ (6.1)$ Weighted average diluted shares (thousands) 17,078 16,685 17,080 16,678 Adjusted income per diluted share 1.11$ (1.07)$ 2.13$ (0.37)$ Six Months Ended June 30,Quarter Ended June 30, 18
ADDITIONAL RECONCILIATIONS Net Debt Dec 31, 2020 Mar 31, 2021 June 30, 2021 Sept 30, 2021 Dec 31, 2021 Mar 31, 2022 June 30, 2022 Cash $ 35.9 $ 57.1 $ 60.9 $ 27.8 $ 25.2 $ 36.4 $69.5 Current debt 1.7 1.7 1.7 1.6 1.6 1.6 1.0 Long term debt 716.4 716.3 716.2 676.5 637.6 617.7 589.9 add: Deferred debt costs 6.9 6.6 6.4 5.6 4.8 4.4 3.8 less: Financing leases (20.8) (20.4) (20.0) (19.5) (19.1) (18.7) (24.7) Subtotal 704.2 704.2 704.3 664.2 624.9 605.0 570.0 Net debt $ 668.4 $ 647.1 $ 643.3 $ 636.4 $ 599.8 $568.6 $500.5 Free Cash Flow Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Cash from operations $ 70.8 $ 33.8 $ 14.8 $ 16.3 $ 32.1 $41.1 $78.5 Additions to property, plant and equipment, net of proceeds from sales (12.2) (11.1) (10.5) (8.9) 4.8 (7.9) (5.4) Free cash flow $ 58.6 $ 22.7 $ 4.3 $ 7.4 $ 36.9 $33.2 $73.1 ($ IN MILLIONS) © Clearwater Paper Corporation 2022 19
MAJOR MAINTENANCE SCHEDULE ADJUSTED EBITDA IMPACT ($ IN MILLIONS) 1. This information is based upon management’s assumptions and estimates. 2. Estimates assume major maintenance outages at both Cypress Bend, AR and Lewiston, ID mills. The Lewiston recovery boiler screen tube replacement project is likely to occur in 2024, which may result in the 2023 Lewiston major maintenance outage being moved to 2024. See “Forward-Looking Statements” on page 2. Idaho $2 $10 $22 $4 $20 $17 $5 $7 $30 $24 $27 $35 - $40 2017 2018 2019 2020 2021 2022e 2023e Q1 Q2 Q3 Q4 Total $25 - $29 1,2 © Clearwater Paper Corporation 2022 20 1 2023 or 2024 expected