Clearwater Paper Corporation (NYSE:CLW), a premier
supplier of quality tissue and bleached paperboard products, today
reported financial results for the third quarter and first nine
months of 2020.
THIRD QUARTER HIGHLIGHTS
- Delivered strong performance due to elevated demand for tissue
products, steady demand for paperboard, and solid operational
execution
- Net income of $21 million, or $1.28 per diluted share and
Adjusted EBITDA of $77 million
- Net debt reduction of over $40 million and refinancing of 2023
notes with new 2028 notes
"We remain committed to the health and safety of our employees
and continuing to safely operate our facilities to meet the needs
of our customers,” said Arsen Kitch, president and chief executive
officer. “In the third quarter, we achieved strong results due to
continued elevated demand and production in tissue, although at
lower levels than the earlier phases of the COVID-19 pandemic,
stable paperboard performance and benign input costs.”
OVERALL RESULTS
For the third quarter of 2020, Clearwater Paper reported net
sales of $457 million, a 3% increase compared to net sales of $445
million for the third quarter of 2019. Net income for the third
quarter of 2020 was $21 million, or $1.28 per diluted share,
compared to net loss for the third quarter of 2019 of $11 million,
or $0.66 per diluted share. On a non-GAAP basis, Clearwater Paper
reported adjusted net income in the third quarter of 2020 of $27
million, or $1.59 per diluted share, compared to third quarter 2019
adjusted net loss of $11 million, or $0.68 per diluted share.
Adjusted EBITDA for the quarter was $77 million, compared to the
third quarter of 2019 Adjusted EBITDA of $32 million.
For the first nine months of 2020, Clearwater Paper reported net
sales of $1.4 billion, a 7% increase compared to net sales of $1.3
billion for the first nine months of 2019. Net income for the first
nine months of 2020 was $55 million, or $3.27 per diluted share,
compared to net loss for the first nine months of 2019 of $8
million, or $0.46 per diluted share. On a non-GAAP basis,
Clearwater Paper reported adjusted net income in the first nine
months of 2020 of $64 million, or $3.81 per diluted share, compared
to the first nine months of 2019 adjusted net loss of $6 million,
or $0.34 per diluted share. Adjusted EBITDA for the first nine
months of 2020 was $212 million, compared to the first nine months
of 2019 Adjusted EBITDA of $116 million.
Consumer Products Segment
Net sales in the Consumer Products segment were $248 million for
the third quarter of 2020, up 9% compared to the third quarter 2019
net sales of $229 million. In the third quarter of 2020, converted
case shipments reached 14.5 million cases, an increase of 10%
compared to 13.2 million cases shipped in the third quarter of
2019. Segment operating income for the third quarter of 2020 was
$31 million compared to operating loss of $4 million in the third
quarter of 2019. Adjusted EBITDA for the segment was $48 million in
the third quarter of 2020, up from $15 million in the third quarter
of 2019. The increase in operating income and Adjusted EBITDA was
primarily due to increased production and shipment volumes from
continued elevated demand, which drove improvement in fixed cost
absorption. The segment also realized benefits from lower external
pulp prices.
Net sales in the Consumer Products segment were $789 million for
the first nine months of 2020, up 17% compared to the first nine
months 2019 net sales of $676 million. In the first nine months of
2020, converted case shipments reached 45.7 million cases, an
increase of 20% compared to 38.0 million cases shipped in the first
nine months of 2019. Segment operating income for the first nine
months of 2020 was $82 million, compared to operating loss of $8
million in the first nine months of 2019. Adjusted EBITDA for the
segment was $134 million in the first nine months of 2020, up from
$43 million in the first nine months of 2019.
Tissue Sales Volumes and Prices:
- Total tissue volumes sold were 90,091 tons in the third quarter
of 2020, an increase of 4% compared to 86,408 tons in the third
quarter of 2019. Retail volumes represented 96% of total volumes
sold in the third quarter of 2020, an increase from 92% in the
third quarter of 2019. Total tissue volumes sold were 291,128 tons
in the first nine months of 2020, an increase of 15% compared to
252,828 tons in the first nine months of 2019. Retail volumes
represented 94% of total volumes sold in the first nine months of
2020, an increase from 91% in the first nine months of 2019.
- Average tissue net selling prices increased 3% to $2,726 per
ton in the third quarter of 2020, compared to $2,635 per ton in the
third quarter of 2019. Average tissue net selling prices increased
to $2,672 per ton in the first nine months of 2020, compared to
$2,664 per ton in the first nine months of 2019.
Paperboard Products Segment
Net sales in the Paperboard Products segment were $209 million
for the third quarter of 2020, down 3% compared to third quarter
2019 net sales of $217 million. The decrease in sales was due to
lower sales volume and pricing partially offset with a positive
mix. Segment operating income for the third quarter of 2020 was $33
million compared to $17 million for the third quarter of 2019.
Adjusted EBITDA for the segment was $42 million in the third
quarter of 2020, compared to $28 million in the third quarter of
2019. The improvement in segment operating income and Adjusted
EBITDA is primarily due to no planned major outage in the third
quarter of 2020 versus a planned outage at our Lewiston, Idaho
facility in 2019.
Net sales in the Paperboard Products segment were $627 million
for the first nine months of 2020, down 4% compared to the first
nine months 2019 net sales of $650 million. Segment operating
income for the first nine months of 2020 was $92 million compared
to $80 million for the first nine months of 2019. Adjusted EBITDA
for the segment was $119 million in the first nine months of 2020,
compared to $110 million in the first nine months of 2019. The
improvement in segment operating income and Adjusted EBITDA is
primarily due to no planned major outage in the first nine months
of 2020 versus a planned outage at our Lewiston, Idaho facility in
2019.
Paperboard Sales Volumes and Prices:
- Paperboard sales volumes were 211,820 tons in the third quarter
of 2020, a decrease of 1% compared to 214,537 tons in the third
quarter of 2019. Paperboard sales volumes were 630,526 tons in the
first nine months of 2020, a decrease of 2% compared to 642,559
tons in the first nine months of 2019.
- Paperboard average net selling price decreased 2% to $982 per
ton for the third quarter of 2020, compared to $1,004 per ton in
the third quarter of 2019. Paperboard average net selling price
decreased 1% to $988 per ton for the first nine months of 2020,
compared to $1,003 per ton in the first nine months of 2019.
COMPANY OUTLOOK
"For the fourth quarter, our primary focus will remain on our
top priorities - the health and safety of our employees while we
continue to operate our facilities and service customers. Demand
for tissue products is expected to soften relative to the third
quarter of 2020 as retail in-stock conditions and inventories have
improved. We are also closely monitoring economic conditions and
assessing the impact on our business for the balance of the year,”
Kitch concluded.
WEBCAST INFORMATION
Clearwater Paper Corporation will discuss these results during
an earnings conference call that begins at 2:00 p.m. Pacific
Standard Time today. A live webcast and accompanying supplemental
information will be available on the company's website at
http://ir.clearwaterpaper.com. A replay of today's conference call
will be available on the website at
http://ir.clearwaterpaper.com/results.cfm beginning at 5:00 p.m.
Pacific Standard Time today.
ABOUT CLEARWATER PAPER
Clearwater Paper is a premier supplier of private-branded tissue
to major retailers and wholesale distributors, including grocery,
drug, mass merchants and discount stores. In addition, the company
produces bleached paperboard used by quality-conscious printers and
packaging converters, and offers services that include custom
sheeting, slitting and cutting. Clearwater Paper's employees build
shareholder value by developing strong relationships through
quality and service.
USE OF NON-GAAP MEASURES
In this press release, the company presents certain non-GAAP
financial information for the third quarter and first nine months
of 2020 and 2019, including adjusted income (loss) and Adjusted
EBITDA. Because these amounts are not in accordance with GAAP,
reconciliations to net income (loss) as determined in accordance
with GAAP are included in the tables at the end of this press
release. The company presents these non-GAAP amounts because
management believes they assist investors and analysts in comparing
the company's performance across reporting periods on a consistent
basis by excluding items that the company does not believe are
indicative of its core operating performance. In addition, the
company uses Adjusted EBITDA: (i) as factors in evaluating
management’s performance when determining incentive compensation,
(ii) to evaluate the effectiveness of the company's business
strategies, and (iii) because the company's credit agreement and
the indentures governing the company's outstanding notes use
metrics similar to Adjusted EBITDA to measure the company's
compliance with certain covenants.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995 as amended, including statements regarding the health and
safety of company’s employees, product demand, retail in-stock
conditions and inventories and general economic conditions. These
forward-looking statements are based on current expectations,
estimates, assumptions, and projections that are subject to change,
and actual results may differ materially from the forward-looking
statements. Factors that could cause actual results to differ
materially include, but are not limited to: the impacts of the
COVID-19 pandemic on our business and operations; competitive
pricing pressures for the company’s products, including as a result
of increased capacity, as additional manufacturing facilities are
operated by the company’s competitors; 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 the company’s tissue products,
including the existence of sufficient demand for and the quality of
tissue produced by the company’s expanded Shelby, North Carolina
operations; consolidation and vertical integration of converting
operations in the paperboard industry; the company’s ability to
successfully implement its operational efficiencies and cost
savings strategies, along with related capital projects, and
achieve the expected operational or financial results of those
projects, including from the continuous digester at the company’s
Lewiston, Idaho facility; changes in the U.S. and international
economies and in general economic conditions in the regions and
industries in which the company operates; manufacturing or
operating disruptions, including IT system and IT system
implementation failures, equipment malfunctions and damage to the
company’s manufacturing facilities; cyber-security risks; changes
in costs for and availability of packaging supplies, chemicals,
energy, and maintenance and repairs; labor disruptions; cyclical
industry conditions; changes in expenses, required contributions,
and potential withdrawal costs associated with the company’s
pension plans; environmental liabilities or expenditures; reliance
on a limited number of third-party suppliers for raw materials; the
company’s ability to attract, motivate, train and retain qualified
and key personnel; material weaknesses in the company’s internal
control over financial reporting; the company’s substantial
indebtedness and ability to service its debt obligations;
restrictions on the company’s business from debt covenants and
terms; negative changes in the company’s credit agency ratings;
changes in laws, regulations or industry standards affecting the
company’s business; and other risks and uncertainties described
from time to time in the company's public filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for the year ended December 31, 2019 and subsequently
filed periodic reports on Form 10-Q. The forward-looking statements
are made as of the date of this press release and the company does
not undertake to update any forward-looking statements based on new
developments or changes in the company's expectations after the
date of this press release.
Clearwater Paper
Corporation
Consolidated Statements of
Operations
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
(In millions, except per-share
data)
2020
2019
2020
2019
Net sales
$
457.4
$
445.2
$
1,415.8
$
1,326.0
Costs and expenses:
Cost of sales
378.6
418.7
1,198.3
1,212.8
Selling, general and administrative
expenses
29.3
27.0
89.4
83.9
Other operating charges, net
0.3
1.9
11.9
2.1
Total operating costs and expenses
408.2
447.6
1,299.6
1,298.7
Income (loss) from operations
49.2
(2.4
)
116.2
27.2
Interest expense, net
(12.2
)
(13.1
)
(37.0
)
(32.5
)
Other non-operating expense
(1.9
)
(1.4
)
(5.7
)
(4.3
)
Debt retirement costs
(3.9
)
(2.7
)
(4.8
)
(2.7
)
Total non-operating expense
(17.9
)
(17.2
)
(47.5
)
(39.5
)
Income (loss) before income
taxes
31.3
(19.7
)
68.7
(12.2
)
Income tax provision (benefit)
9.9
(8.7
)
14.1
(4.7
)
Net income (loss)
$
21.4
$
(11.0
)
$
54.5
$
(7.6
)
Net income (loss) per common share:
Basic
$
1.29
$
(0.66
)
$
3.29
$
(0.46
)
Diluted
1.28
(0.66
)
3.27
(0.46
)
Average shares outstanding (in
thousands):
Basic
16,595
16,539
16,581
16,531
Diluted
16,783
16,539
16,689
16,531
Clearwater Paper
Corporation
Condensed Consolidated Balance
Sheets
(Unaudited)
(In millions, except share
data)
September 30, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
47.5
$
20.0
Restricted cash
—
1.4
Receivables, net
179.5
159.4
Inventories
256.4
281.4
Other current assets
8.5
3.6
Total current assets
492.0
465.8
Property, plant and equipment, net
1,200.9
1,257.7
Operating lease right-of-use assets
66.0
73.1
Goodwill and intangibles, net
49.6
52.0
Other assets, net
18.5
29.1
TOTAL ASSETS
$
1,826.9
$
1,877.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt
$
1.7
$
17.9
Trade payables
140.5
158.2
Accrued compensation
50.1
45.0
Other accrued liabilities
47.3
59.3
Total current liabilities
239.6
280.4
Long-term debt
785.5
884.5
Long-term operating lease liabilities
57.3
65.6
Liability for pension and other
postretirement employee benefits
73.2
76.6
Other long-term obligations
22.6
17.3
Deferred tax liabilities
152.5
121.3
TOTAL LIABILITIES
1,330.8
1,445.7
Common stock
—
—
Paid in capital
13.9
9.8
Retained earnings
536.3
481.7
Accumulated other comprehensive loss, net
of tax
(54.0
)
(59.5
)
TOTAL STOCKHOLDERS' EQUITY
496.2
432.0
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
1,826.9
$
1,877.7
Clearwater Paper
Corporation
Consolidated Statements of
Cash Flows
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)
2020
2019
2020
2019
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)
$
21.4
$
(11.0
)
$
54.5
$
(7.6
)
Adjustments to reconcile net income (loss)
to net cash flows provided by (used in) operating activities:
Depreciation and amortization
27.7
32.0
83.5
86.3
Stock-based compensation expense
2.5
0.9
7.3
3.0
Deferred taxes
12.8
(11.2
)
23.5
(6.0
)
Pension and other postretirement benefit
plans
0.9
0.7
2.9
1.0
Debt retirement costs
3.9
2.7
4.8
2.7
Gain on divested assets
—
—
(1.4
)
—
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable
12.8
13.4
(5.7
)
(12.5
)
(Increase) decrease in inventory
(21.0
)
4.0
25.0
(21.1
)
(Increase) decrease in other current
assets
0.6
0.6
(4.8
)
(5.2
)
Increase (decrease) in trade payables
4.1
(54.4
)
(16.2
)
(61.7
)
Increase (decrease) in accrued
compensation
(0.5
)
0.1
5.1
(4.0
)
Increase (decrease) in other accrued
liabilities
(9.3
)
(10.5
)
(3.3
)
5.8
Other, net
(0.1
)
1.8
0.8
3.0
Net cash flows provided by (used in) by
operating activities
55.7
(31.0
)
176.1
(16.2
)
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property, plant and
equipment
(9.7
)
(17.4
)
(27.5
)
(125.8
)
Net cash flows used in investing
activities
(9.7
)
(17.4
)
(27.5
)
(125.8
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Borrowings of short-term debt
—
98.0
108.5
534.9
Repayments of short-term debt
—
(276.0
)
(122.0
)
(598.7
)
Borrowings of long-term debt
275.0
296.1
275.0
296.1
Repayments of long-term debt
(317.6
)
(101.7
)
(379.0
)
(101.7
)
Payments for debt issuance costs
(4.3
)
(1.8
)
(4.3
)
(1.8
)
Other, net
0.2
(0.3
)
(0.7
)
(1.4
)
Net cash flows provided by (used in)
financing activities
(46.7
)
14.3
(122.5
)
127.4
Increase (decrease) in cash, cash
equivalents and restricted cash
(0.6
)
(34.0
)
26.1
(14.7
)
Cash, cash equivalents and restricted cash
at beginning of period
49.2
44.3
22.4
24.9
Cash, cash equivalents and restricted cash
at end of period
$
48.6
$
10.3
$
48.6
$
10.3
Clearwater Paper
Corporation
Segment Information
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
(In millions)
2020
2019
2020
2019
Segment net sales:
Consumer Products
$
248.3
$
228.5
$
789.1
$
676.2
Paperboard
209.1
216.6
626.6
649.7
Total segment net sales
$
457.4
$
445.2
$
1,415.8
$
1,326.0
Operating income (loss):
Consumer Products
$
31.3
$
(4.4
)
$
82.1
$
(8.3
)
Paperboard
32.8
17.1
91.6
80.1
Corporate
(14.6
)
(13.2
)
(45.6
)
(42.5
)
Other operating charges, net
(0.3
)
(1.9
)
$
(11.9
)
(2.1
)
Income (loss) from operations
$
49.2
$
(2.4
)
$
116.2
$
27.2
Clearwater Paper
Corporation
Reconciliation of Non-GAAP
Financial Measures
Adjusted EBITDA
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
(In millions)
2020
2019
2020
2019
Net income (loss)
$
21.4
$
(11.0
)
$
54.5
$
(7.6
)
Add back:
Income tax provision (benefit)
9.9
(8.7
)
14.1
(4.7
)
Interest expense, net
12.2
13.1
37.0
32.5
Depreciation and amortization expense
27.7
32.0
83.5
86.3
Other operating charges, net1
0.3
1.9
11.9
2.1
Other non-operating expense
1.9
1.4
5.7
4.3
Debt retirement costs
3.9
2.7
4.8
2.7
Adjusted EBITDA
$
77.2
$
31.5
$
211.6
$
115.6
Consumer Products income (loss)
$
31.3
$
(4.4
)
$
82.1
$
(8.3
)
Depreciation and amortization
17.1
19.0
51.4
51.2
Consumer Products Adjusted EBITDA
$
48.3
$
14.6
$
133.6
$
42.9
Paperboard income
$
32.8
$
17.1
$
91.6
$
80.1
Depreciation and amortization
9.2
11.2
27.6
30.1
Paperboard Adjusted EBITDA
$
42.0
$
28.3
$
119.2
$
110.2
Corporate expenses
$
(14.6
)
$
(13.2
)
$
(45.6
)
$
(42.5
)
Depreciation and amortization
1.5
1.8
4.4
5.0
Corporate Adjusted EBITDA
$
(13.1
)
$
(11.4
)
$
(41.2
)
$
(37.5
)
Consumer Products
$
48.3
$
14.6
$
133.6
$
42.9
Paperboard
42.0
28.3
119.2
110.2
Corporate
(13.1
)
(11.4
)
(41.2
)
(37.5
)
Adjusted EBITDA
$
77.2
$
31.5
$
211.6
$
115.6
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 end September 30, 2020 for the detailed breakout
of this amount.
Clearwater Paper
Corporation
Reconciliation of Non-GAAP
Financial Measures
Adjusted Net Income
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
(In millions, except per-share
data)
2020
2019
2020
2019
Net income (loss)
$
21.4
$
(11.0
)
$
54.5
$
(7.6
)
Add back:
Income tax provision (benefit)
9.9
(8.7
)
14.1
(4.7
)
Income (loss) before income taxes
31.3
(19.7
)
68.7
(12.2
)
Add back:
Debt retirement costs
3.9
2.7
4.8
2.7
Other operating charges, net
0.3
1.9
11.9
2.1
Adjusted income (loss) before tax
$
35.5
$
(15.0
)
$
85.3
$
(7.4
)
Normalized income tax provision
(benefit)
8.9
(3.7
)
21.3
(1.9
)
Adjusted income (loss)
$
26.6
$
(11.2
)
$
64.0
$
(5.6
)
Weighted average diluted shares
16,783
16,539
16,689
16,531
Adjusted income (loss) per diluted
share
$
1.59
$
(0.68
)
$
3.81
$
(0.34
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005678/en/
Clearwater Paper Corporation
Investors contact: Sloan Bohlen Solebury Trout
509.344.5906
News media: Shannon Myers 509.344.5967
investorinfo@clearwaterpaper.com
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