clw-20240429FALSE000144123600014412362024-04-292024-04-29
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): April 29, 2024
CLEARWATER PAPER CORPORATION
(Exact name of registrant as specified in its charter)
| | | | | | | | |
| DE | 001-34146 | 20-3594554 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer 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 April 29, 2024, Clearwater Paper Corporation (the “Company”) announced its results of operations and financial condition for the first quarter ending March 31, 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 First Quarter Supplemental Information is furnished as Exhibit 99.2 hereto.
In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), the following are disclosed 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 : April 29, 2024
CLEARWATER PAPER CORPORATION
| | | | | |
| By: | /s/ REBECCA A. BARCKLEY |
| Rebecca A. Barckley, Vice President, Corporate Controller (Principal Accounting Officer) |
| |
Exhibit 99.1
Clearwater Paper Reports First Quarter 2024 Results
SPOKANE, Wash.--(BUSINESS WIRE)--April 29, 2024 --Clearwater Paper Corporation (NYSE:CLW), a premier supplier of quality consumer tissue and bleached paperboard today reported financial results for the first quarter ended March 31, 2024.
FIRST QUARTER HIGHLIGHTS
•Strong performance driven by lower input costs and continued strength in tissue
•Continued strong demand in tissue and improved customer demand in paperboard
•Severe weather event resulting in significant disruption to production at the Lewiston site
•Net sales of $496 million, down 6% from the first quarter of last year
•Net income of $17 million, or $1.02 per diluted share, down $7 million from the first quarter of last year
•Adjusted net income of $24 million, $1 million lower than the first quarter of last year
•Adjusted EBITDA of $62 million, $4 million lower than first quarter of last year
•Reduced net debt by $33 million, repurchased $1 million of outstanding shares with $6 million remaining under program
“Despite the significant weather event that impacted the quarter, we delivered solid results that came in at the higher end of our expectations through strong operational execution,” said Arsen Kitch, president and chief executive officer. “Our Lewiston team did a tremendous job repairing damaged equipment under very difficult conditions and resuming operations."
PAPERBOARD FACILITY ACQUISITION UPDATE
Clearwater Paper previously announced that it signed a definitive agreement to acquire from Graphic Packaging International, LLC its Augusta, Georgia bleached paperboard manufacturing facility and associated business for $700 million, subject to adjustments for inventory. The transaction is currently expected to close shortly.
OVERALL RESULTS
For the first quarter of 2024, Clearwater Paper reported net sales of $496 million compared to net sales of $525 million for the first quarter of 2023. Net income for the first quarter of 2024 was $17 million, or $1.02 per diluted share, compared to net income for the first quarter of 2023 of $24 million, or $1.40 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net income in the first quarter of 2024 of $24 million, or $1.43 per diluted share, compared to first quarter 2023 adjusted net income of $25 million, or $1.47 per diluted share. Adjusted EBITDA for the first quarter of 2024 was $62 million, compared to the first quarter of 2023 Adjusted EBITDA of $66 million.
Pulp and Paperboard Segment
Net sales in the Pulp and Paperboard segment were $245 million for the first quarter of 2024, down 12% compared to first quarter 2023 net sales of $279 million. Segment operating income for the first quarter of 2024 was $25 million, compared to $57 million for the first quarter of 2023. Adjusted EBITDA for the segment was $34 million in the first quarter of 2024, compared to $66 million in the first quarter of 2023. The decrease in operating income and Adjusted EBITDA were primarily due to lower sales prices and impacts of a severe weather event at our Lewiston Idaho facility, partially offset by lower input costs, specifically in wood, energy and freight.
Pulp and Paperboard Sales Volumes and Prices:
• Paperboard sales volumes were 187,303 tons in the first quarter of 2024, a decrease of 1% compared to 189,398 tons in the first quarter of 2023.
• Paperboard average net selling price decreased 11% to $1,284 per ton for the first quarter of 2023, compared to $1,441 per ton in the first quarter of 2023.
Consumer Products Segment
Net sales in the Consumer Products segment were $253 million for the first quarter of 2024, up 2% compared to first quarter 2023 net sales of $248 million. Segment operating income for the first quarter of 2024 was $32 million compared to operating income of $4 million in the first quarter of 2023. Adjusted EBITDA for the segment was $46 million in the first quarter of 2024, compared to $19 million in the first quarter of 2023. The increases in operating income and Adjusted EBITDA were driven by higher sales volumes, lower input costs and strong operational performance.
Retail Tissue Sales Volumes and Prices:
• Retail tissue volumes sold were 79,929 tons in the first quarter of 2024, an increase of 5% compared to 76,848 tons in the first quarter of 2023.
• Retail tissue average net selling price decreased 2% to $3,138 per ton in the first quarter of 2024, compared to $3,201 per ton in the first quarter of 2023.
COMPANY OUTLOOK
“We expect continued strength in our tissue performance this year and a recovery in paperboard demand as we believe customer de-stocking is now largely behind us. We are also looking forward to completing the Augusta acquisition and personally welcoming the Augusta team to Clearwater Paper,” continued 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. 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
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 first quarter of 2024 and 2023, including adjusted income 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 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: (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 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: the pending acquisition of the paperboard facility and associated business in Augusta, Georgia, and our expectations regarding tissue performance and paperboard demand, . 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: the expansion of our business through the acquisition of a paperboard manufacturing facility and associated business may not be completed or proceed as anticipated; our inability to realize the expected benefits of the acquisition because of integration difficulties or other challenges; 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 March 31, | | |
| (In millions, except per-share data) | 2024 | 2023 | | | |
| Net sales | $ | 496.2 | | $ | 525.4 | | | | |
| Costs and expenses: | | | | | |
| Cost of sales | 421.6 | | 448.5 | | | | |
| Selling, general and administrative expenses | 36.2 | | 36.0 | | | | |
Other operating charges, net 1 | 7.9 | | 1.1 | | | | |
| Total operating costs and expenses | 465.8 | | 485.6 | | | | |
| Income from operations | 30.4 | | 39.8 | | | | |
| Interest expense, net | (6.5) | | (7.6) | | | | |
| | | | | |
| Other non-operating income | 0.3 | | 0.1 | | | | |
| Total non-operating expense | (6.2) | | (7.5) | | | | |
| Income before income taxes | 24.2 | | 32.3 | | | | |
| Income tax provision | 7.0 | | 8.4 | | | | |
| Net income | $ | 17.2 | | $ | 23.8 | | | | |
| | | | | |
| Net income per common share: | | | | | |
| Basic | $ | 1.03 | | $ | 1.42 | | | | |
| Diluted | 1.02 | | 1.40 | | | | |
| | | | | |
| Average shares outstanding (in thousands): | | | |
| Basic | 16,607 | | 16,834 | | | | |
| Diluted | 16,895 | | 17,036 | | | | |
1 Other operating charges, net consist of amounts unrelated to ongoing core operating activities. Please refer to Note 9 within Clearwater Paper's Form 10-Q filed with the SEC for the period ended March 31, 2024 for the detailed breakout of this amount.
| | | | | | | | |
| Clearwater Paper Corporation |
| Condensed Consolidated Balance Sheets |
| (Unaudited) |
| | |
| (In millions) | March 31, 2024 | December 31, 2023 |
| Assets | | |
| Current assets: | | |
| Cash and cash equivalents | $ | 55.2 | | $ | 42.0 | |
| Receivables, net | 173.1 | | 184.5 | |
| Inventories | 327.8 | | 319.8 | |
| Other current assets | 20.2 | | 17.9 | |
| Total current assets | 576.2 | | 564.1 | |
| Property, plant and equipment, net | 983.1 | | 990.1 | |
| Other assets, net | 120.4 | | 117.6 | |
| Total assets | $ | 1,679.7 | | $ | 1,671.8 | |
| | |
| Liabilities and stockholders' equity | | |
| Current liabilities: | | |
| Current portion of long-term debt | $ | 0.9 | | $ | 0.8 | |
| Accounts payable and accrued liabilities | 300.6 | | 285.1 | |
| Total current liabilities | 301.4 | | 286.0 | |
| Long-term debt | 442.3 | | 462.3 | |
| Liability for pension and other postretirement employee benefits | 55.1 | | 55.7 | |
| Deferred tax liabilities and other long-term obligations | 196.3 | | 199.1 | |
| Total liabilities | 995.2 | | 1,003.0 | |
| | |
| Stockholders' equity: | | |
| Common stock | — | | — | |
| Additional paid-in capital | 13.5 | | 14.9 | |
| Retained earnings | 701.7 | | 684.5 | |
| Accumulated other comprehensive loss, net of tax | (30.7) | | (30.7) | |
| Total stockholders' equity | 684.5 | | 668.8 | |
| Total liabilities and stockholders' equity | $ | 1,679.7 | | $ | 1,671.8 | |
| | | | | | | | | | | |
| Clearwater Paper Corporation |
| Consolidated Statements of Cash Flows |
| (Unaudited) |
| Quarter Ended March 31, | | |
| (In millions) | 2024 | 2023 | | | |
| Operating activities | | | | | |
| Net income | $ | 17.2 | | $ | 23.8 | | | | |
| Adjustments to reconcile net income to net cash flows provided by (used in) operating activities: | | | | | |
| Depreciation and amortization | 23.2 | | 24.8 | | | | |
| Equity-based compensation expense | 3.3 | | 1.9 | | | | |
| Deferred taxes | (1.6) | | (1.3) | | | | |
| Defined benefit pension and other postretirement employee benefits | (0.9) | | (0.5) | | | | |
| Loss on sale or impairment associated with assets | 0.2 | | 1.1 | | | | |
| Increase (decrease) in cash from changes in operating assets and liabilities: | | | | | |
| (Increase) decrease in accounts receivable | 7.8 | | (6.4) | | | | |
| (Increase) decrease in inventories | (8.2) | | (22.3) | | | | |
| (Increase) decrease in other current assets | (2.3) | | 0.4 | | | | |
| Increase (decrease) in accounts payable and accrued liabilities | 20.5 | | (31.7) | | | | |
| Other, net | 0.1 | | 1.0 | | | | |
| Net cash flows provided by (used in) operating activities | 59.2 | | (9.1) | | | | |
| Investing activities | | | | | |
| Additions to property, plant and equipment, net | (18.5) | | (21.5) | | | | |
| Net cash flows used in investing activities | (18.5) | | (21.5) | | | | |
| Financing activities | | | | | |
| Borrowings on long-term debt | — | | 12.0 | | | | |
| Repayments of long-term debt | (23.5) | | (12.2) | | | | |
| Taxes paid related to net share settlement of equity awards | (3.1) | | (4.2) | | | | |
| Repurchases of common stock | (0.5) | | (1.7) | | | | |
| Other, net | (0.4) | | (0.1) | | | | |
| Net cash flows used in financing activities | (27.6) | | (6.3) | | | | |
| | | | | |
| Increase (decrease) in cash, cash equivalents and restricted cash | 13.2 | | (37.0) | | | | |
| Cash, cash equivalents and restricted cash at beginning of period | 42.0 | | 54.4 | | | | |
| Cash, cash equivalents and restricted cash at end of period | $ | 55.2 | | $ | 17.4 | | | | |
| | | | | | | | | | | |
| Clearwater Paper Corporation |
| Segment Information |
| (Unaudited) |
| | | | |
| Quarter Ended March 31, | | |
| (In millions) | 2024 | 2023 | | | |
| Segment net sales: | | | | | |
| Pulp and Paperboard | $ | 244.5 | | $ | 278.8 | | | | |
| Consumer Products | 253.1 | | 248.3 | | | | |
| Eliminations | (1.4) | | (1.7) | | | | |
| Total segment net sales | $ | 496.2 | | $ | 525.4 | | | | |
| | | | | |
| Operating income (loss): | | | | | |
| Pulp and Paperboard | $ | 25.3 | | $ | 57.1 | | | | |
| Consumer Products | 31.5 | | 4.2 | | | | |
| Corporate and eliminations | (18.5) | | (20.4) | | | | |
Other operating charges, net 1 | (7.9) | | (1.1) | | | | |
| Income from operations | $ | 30.4 | | $ | 39.8 | | | | |
1 Other operating charges, net consist of amounts unrelated to ongoing core operating activities. Please refer to Note 9 within Clearwater Paper's Form 10-Q filed with the SEC for the period ended March 31, 2024 for the detailed breakout of this amount.
| | | | | | | | | | | |
| Clearwater Paper Corporation |
| Reconciliation of Non-GAAP Financial Measures |
| Adjusted EBITDA |
| (Unaudited) |
| | | |
| Quarter Ended March 31, | | |
| (In millions) | 2024 | 2023 | | | |
| Net income | $ | 17.2 | | $ | 23.8 | | | | |
| Add back: | | | | | |
| Income tax provision | 7.0 | | 8.4 | | | | |
| Interest expense, net | 6.5 | | 7.6 | | | | |
| Depreciation and amortization | 23.2 | | 24.8 | | | | |
Other operating charges, net 1 | 7.9 | | 1.1 | | | | |
| | | | | |
| Other non-operating income | (0.3) | | (0.1) | | | | |
| Adjusted EBITDA | $ | 61.5 | | $ | 65.7 | | | | |
| | | | | |
| Pulp and Paperboard segment income | $ | 25.3 | | $ | 57.1 | | | | |
| Depreciation and amortization | 8.4 | | 9.1 | | | | |
| Adjusted EBITDA Pulp and Paperboard | $ | 33.7 | | $ | 66.2 | | | | |
| | | | | |
| Consumer Products segment income | $ | 31.5 | | $ | 4.2 | | | | |
| Depreciation and amortization | 14.2 | | 15.0 | | | | |
| Adjusted EBITDA Consumer Products | $ | 45.7 | | $ | 19.2 | | | | |
| | | | | |
| Corporate and other expenses | $ | (18.5) | | $ | (20.4) | | | | |
| Depreciation and amortization | 0.6 | | 0.6 | | | | |
| Adjusted EBITDA Corporate and other | $ | (17.9) | | $ | (19.8) | | | | |
| | | | | |
| Pulp and Paperboard segment | $ | 33.7 | | $ | 66.2 | | | | |
| Consumer Products segment | 45.7 | | 19.2 | | | | |
| Corporate and other | (17.9) | | (19.8) | | | | |
| Adjusted EBITDA | $ | 61.5 | | $ | 65.7 | | | | |
1 Other operating charges, net consist of amounts unrelated to ongoing core operating activities. Please refer to Note 9 within Clearwater Paper's Form 10-Q filed with the SEC for the period ended March 31, 2024 for the detailed breakout of this amount.
| | | | | | | | | | | |
| Clearwater Paper Corporation |
| Reconciliation of Non-GAAP Financial Measures |
| (Unaudited) |
| | | |
| Quarter Ended March 31, | | |
| (In millions, except per share data) | 2024 | 2023 | | | |
| | | | | |
| Adjusted net income: | | | | | |
| Net income | $ | 17.2 | | $ | 23.8 | | | | |
| Add back: | | | | | |
| Income tax provision | 7.0 | | 8.4 | | | | |
| Income before income taxes | 24.2 | | 32.3 | | | | |
| | | | | |
| Add back: | | | | | |
| Other operating charges, net | 7.9 | | 1.1 | | | | |
| Adjusted income before tax | $ | 32.1 | | $ | 33.4 | | | | |
| Normalized income tax provision | 8.0 | | 8.3 | | | | |
| Adjusted net income | $ | 24.1 | | $ | 25.0 | | | | |
| | | | | |
| Weighted average diluted shares (thousands) | 16,895 | | 17,036 | | | | |
| | | | | |
| Adjusted income per diluted share | $ | 1.43 | | $ | 1.47 | | | | |
| | | | | |
| March 31, 2024 | December 31, 2023 | | | |
| Calculation of net debt: | | | | | |
| Current portion of long-term debt | $ | 0.9 | | $ | 0.8 | | | | |
| Long-term debt | 442.3 | | 462.3 | | | | |
| Add back: | | | | | |
| Unamortized deferred debt costs | 4.9 | | 5.1 | | | | |
| Less: | | | | | |
| Cash and cash equivalents | 55.2 | | 42.0 | | | | |
| Net debt | $ | 392.9 | | $ | 426.3 | | | | |
Clearwater Paper Corporation
Investors contact:
Sloan Bohlen
Solebury Strategic Communications
509-344-5906
News media:
Jules Joy, Director, Corporate Communications
509-344-5967
