Clearwater Paper Corporation (NYSE:CLW) today reported financial
results for the second quarter of 2018.
The company reported net sales of $432.1 million for the second quarter
of 2018, up 0.6% compared to net sales of $429.7 million for the second
quarter of 2017. Net earnings determined in accordance with generally
accepted accounting principles, or GAAP, for the second quarter of 2018
were $7.0 million, or $0.42 per diluted share, compared to net earnings
for the second quarter of 2017 of $8.0 million, or $0.48 per diluted
share. The decrease in net earnings was due to a weaker product mix in
tissue products, higher input costs for transportation, wood fiber, and
external pulp and reorganization expenses, all of which were partially
offset by improved price and shipment volumes for paperboard, no planned
major maintenance and lower expense associated with profit dependent
accruals. Excluding certain non-core items identified in the attached
Reconciliation of Non-GAAP Financial Measures, second quarter 2018
adjusted net earnings were $7.1 million, or $0.43 per diluted share,
compared to second quarter 2017 adjusted net earnings of $7.9 million,
or $0.48 per diluted share.
Earnings before interest, taxes, depreciation and amortization, or
EBITDA, were $42.4 million for the second quarter of 2018, compared to
$45.7 million for the second quarter of 2017. Adjusted EBITDA for the
quarter was $42.6 million, down 5.4% compared to second quarter 2017
Adjusted EBITDA of $45.0 million.
“We met our expectations in the second quarter due to record paperboard
production and shipments, continued strong demand for paperboard and
ultra-quality tissue, and cost savings from strategic capital and
operational efficiency initiatives,” said Linda K. Massman, president
and chief executive officer. “Those results were achieved in spite of a
competitive tissue market, and high external pulp prices and
transportation costs. For the second half of 2018, we are acutely
focused on improving operating profit, generating cash, completing the
expansion work at our Shelby, North Carolina facility and optimizing our
network of assets to reduce costs and improve service to customers.”
SECOND QUARTER 2018 SEGMENT PERFORMANCE
Consumer Products
Net sales in the Consumer Products segment were $221.6 million for the
second quarter of 2018, down 4.5% compared to second quarter 2017 net
sales of $231.9 million. This decrease was due primarily to lower prices
and weaker product mix reflected in a 6.0% reduction in retail converted
case tissue shipment volumes offset by a 26.1% increase in non-retail
parent roll shipments as we work to recover converted case business in
the second half of 2018.
Operating loss for the second quarter of 2018 was $3.6 million, compared
to operating income and margin of $10.7 million and 4.6% respectively,
in the second quarter of 2017. After adjusting for certain non-core
items identified in the attached Reconciliation of Non-GAAP Financial
Measures, adjusted operating loss of $2.6 million for the second quarter
of 2018 was down from $11.9 million and 5.1% of adjusted operating
income and margin, respectively, for the same period in 2017. Adjusted
EBITDA for the segment was $11.6 million in the second quarter of 2018,
down from $27.7 million in the second quarter of 2017. These decreases
were primarily due to lower average selling prices, the absorption of
fixed costs over lower volumes of retail shipments and higher
transportation costs.
Tissue Sales Volumes and Prices:
Pulp and Paperboard
Net sales in the Pulp and Paperboard segment were $210.5 million for the
second quarter of 2018, up 6.5% compared to second quarter 2017 net
sales of $197.8 million. The increase was due to record production
levels and volume shipments coupled with higher paperboard prices.
Operating income and margin for the second quarter of 2018 were $34.2
million and 16.2%, compared to $21.1 million and 10.7%, respectively,
for the second quarter of 2017. Adjusted EBITDA for the segment was
$43.6 million in the second quarter of 2018, compared to $29.4 million
in the second quarter of 2017. The improvement was primarily due to
higher average selling prices and lower major maintenance spending,
which more than offset increased costs for wood fiber in the Pacific
Northwest and higher transportation costs.
Paperboard Sales Volumes and Prices:
Taxes
The company’s consolidated tax rate for the second quarter of 2018 was
26.5%. This compares to a 33.0% tax rate in the second quarter of 2017.
The favorable tax rate for the second quarter of 2018 was primarily the
result of the federal corporate rate reduction enacted with the Tax Cuts
and Jobs Act.
Note Regarding Use of Non-GAAP Financial Measures
In this press release, the company presents certain non-GAAP financial
information for the second quarters of 2018 and 2017, including adjusted
net earnings, adjusted net earnings per diluted share, EBITDA, adjusted
EBITDA, adjusted operating income and adjusted operating margin. Because
these amounts are not in accordance with GAAP, reconciliations to net
earnings, net earnings per diluted share and operating 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 EBITDA and Adjusted EBITDA: (i) as factors in evaluating
management’s performance when determining incentive compensation,
(ii) to evaluate the effectiveness of our business strategies, and
(iii) because our credit agreement and the indentures governing our
outstanding notes use metrics similar to EBITDA to measure our
compliance with certain covenants.
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 http://ir.clearwaterpaper.com/results.cfm
beginning at 5:00 p.m. Pacific Time today.
ABOUT CLEARWATER PAPER
Clearwater Paper manufactures quality consumer tissue, away-from-home
tissue, parent roll tissue, bleached paperboard and pulp at
manufacturing facilities across the nation. The company is a premier
supplier of private label 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 customer
partnerships through quality and service.
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 future financial results and
cash generation, completion of Shelby, N.C. expansion, optimization and
cost reduction initiatives, and customer service. 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:
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
regards to, or a reduction in orders from, a significant customer;
changes in customer product preferences and competitors’ product
offerings; the company’s ability to successfully implement its
operational efficiencies and cost savings strategies, including related
capital projects and achieve the expected operational or financial
results of those projects, including from the continuous digester at our
Lewiston facility; the company’s ability to execute on its growth and
expansion strategies, including on-time completion of the company’s
planned new tissue manufacturing and converting operations in Shelby,
North Carolina; 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 expanded Shelby,
North Carolina operations when completed; changes in the U.S. and
international economies and in general economic conditions in the
regions and industries in which the company operates; labor disruptions;
changes in transportation costs and disruptions in transportation
services; changes in the cost and availability of wood fiber and wood
pulp; manufacturing or operating disruptions, including IT system and IT
system implementation failures, equipment malfunction and damage to the
company’s manufacturing facilities; changes in costs for and
availability of packaging supplies, chemicals, energy and maintenance
and repairs; cyclical industry conditions; changes in expenses and
required contributions associated with the company’s pension plans;
environmental liabilities or expenditures; cyber-security risks;
reliance on a limited number of third-party suppliers for raw materials;
the company’s inability to service its debt obligations; restrictions on
the company’s business from debt covenants and terms; 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,
2017. 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.
EBITDA is a non-GAAP measure that management uses to
evaluate the cash generating capacity of the company. The most
directly comparable GAAP measure is net earnings. EBITDA is net
earnings adjusted for net interest expense, income taxes, and
depreciation and amortization. It should not be considered as an
alternative to net earnings computed under GAAP.
Adjusted EBITDA excludes the impact of the items listed
that the Company does not believe are indicative of its core
operating performance.
Adjusted net earnings and Adjusted net earnings per
diluted share exclude the impact of the items listed that the
Company does not believe are indicative of its core operating
performance.
Segment EBITDA is segment operating income adjusted for
depreciation and amortization.
Segment Adjusted EBITDA excludes the impact of the items
listed that the Company does not believe are indicative of its
core operating performance.
Segment EBITDA margin is defined as Segment EBITDA divided
by Segment Net sales.
Segment Adjusted EBITDA margin is defined as Segment
Adjusted EBITDA divided by Segment Net sales.
Pulp and Paperboard Adjusted operating income1,3
Segment Adjusted operating income excludes the impact of
the items listed that the Company does not believe are indicative
of its core operating performance.
Segment Adjusted operating margin is defined as Segment
Adjusted operating income divided by Segment Net sales.
Adjusted income tax provision excludes the impact of the
items listed that the Company does not believe are indicative of
its core operating performance.
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