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): February
8, 2017
_________________
CLEARWATER
PAPER CORPORATION
(Exact
name of registrant as specified in its charter)
_________________
Delaware |
001-34146 |
20-3594554 |
(State or other jurisdiction |
(Commission File Number) |
(IRS Employer |
601 West Riverside Ave., Suite 1100
Spokane, WA 99201
(Address
of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (509) 344-5900
_________________
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:
⃞ 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))
Item 2.02. Results of Operations and Financial Condition.
On February 8, 2017, Clearwater Paper Corporation (the “Company”) announced its results of operations and financial condition for the fourth quarter and full year ending December 31, 2016. A copy of the press release containing this announcement is furnished as Exhibit 99.1 hereto. In addition, a copy of the Company’s Fourth Quarter and Full Year 2016 Supplemental Information is furnished as Exhibit 99.2 hereto.
The information in this 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
7.01. Regulation FD.
On February 8, 2017, the Company issued a press release entitled “Clearwater Paper Announces Second Tissue Machine and Converting Facility at Shelby, North Carolina,” a copy of which is furnished as Exhibit 99.3 hereto.
The information in this Item 7.01, including Exhibit 99.3, 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) Exhibits.
99.1 |
Press release issued by Clearwater Paper Corporation, dated February 8, 2017: CLEARWATER PAPER REPORTS FOURTH QUARTER AND FULL YEAR 2016 RESULTS |
|
99.2 |
Clearwater Paper Corporation Fourth Quarter and Full Year 2016 Supplemental Information |
|
99.3 |
Press release issued by Clearwater Paper Corporation, dated February 8, 2017: CLEARWATER PAPER ANNOUNCES SECOND TISSUE MACHINE AND CONVERTING FACILITY AT SHELBY, NORTH CAROLINA |
|
|
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: |
February 8, 2017 |
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CLEARWATER PAPER CORPORATION |
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By: |
/s/ Michael S. Gadd |
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Michael S. Gadd, Corporate Secretary |
EXHIBIT INDEX
Exhibit |
Description |
99.1 |
Press release issued by Clearwater Paper Corporation, dated February 8, 2017: CLEARWATER PAPER REPORTS FOURTH QUARTER AND FULL YEAR 2016 RESULTS |
99.2 |
Clearwater Paper Corporation Fourth Quarter and Full Year 2016 Supplemental Information |
99.3 |
Press release issued by Clearwater Paper Corporation, dated February 8, 2017: CLEARWATER PAPER ANNOUNCES SECOND TISSUE MACHINE AND CONVERTING FACILITY AT SHELBY, NORTH CAROLINA |
Exhibit 99.1
Clearwater Paper Reports Fourth Quarter 2016 Results
SPOKANE, Wash.--(BUSINESS WIRE)--February 8, 2017--Clearwater Paper Corporation (NYSE:CLW) today reported financial results for the fourth quarter of 2016.
The company reported net sales of $425.6 million for the fourth quarter of 2016, down 1.4% compared to net sales of $431.6 million for the fourth quarter of 2015 due primarily to lower paperboard prices and shipment volumes. Net earnings determined in accordance with generally accepted accounting principles, or GAAP, for the fourth quarter of 2016 were $9.3 million, or $0.56 per diluted share, compared to $11.6 million, or $0.65 per diluted share, for the fourth quarter of 2015. The decrease in net earnings was due primarily to lower paperboard pricing and shipment volumes and higher costs related to the impact of a fire at the company's Las Vegas facility. These items were partially offset by lower input costs for pulp and transportation. Excluding certain non-core items identified in the attached Reconciliation of non-GAAP financial measures, fourth quarter 2016 adjusted net earnings were $13.8 million, or $0.82 per diluted share, compared to fourth quarter 2015 adjusted net earnings of $13.3 million, or $0.75 per diluted share.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, was $49.3 million for the fourth quarter of 2016 compared to $58.2 million for the fourth quarter of 2015. Adjusted EBITDA for the quarter was $54.1 million, down 8.1% compared to fourth quarter 2015 Adjusted EBITDA of $58.9 million. The $4.8 million decrease in Adjusted EBITDA was a result of the same factors affecting GAAP net earnings in the fourth quarter of 2016.
“We achieved fourth quarter and full year 2016 results at the high end of our outlook thanks to our team's relentless focus on managing costs while producing and delivering high-quality products to our valued customers,” said Linda K. Massman, president and chief executive officer. “Our priorities for 2017 are to complete what remains of our previously announced strategic projects, integrate our Manchester Industries acquisition and begin work on the newly announced paper machine in Shelby, North Carolina.”
FOURTH QUARTER 2016 SEGMENT PERFORMANCE
Consumer Products
Net sales in the Consumer Products segment were $242.1 million for the fourth quarter of 2016, up 1.6% compared to fourth quarter 2015 net sales of $238.3 million. This increase was due to market share gains, which resulted in growth of total tissue volume and a richer product mix that included a 6.4% increase in retail tons sold.
Consumer Products had operating income of $13.8 million in the fourth quarter of 2016, compared to operating income of $10.8 million in the fourth quarter of 2015. Adjusted operating income of $17.0 million for the fourth quarter of 2016 was up from $11.5 million in the same period in 2015, after adjusting for certain non-core items identified in the attached Reconciliation of non-GAAP financial measures. Consumer Products operating margin increased to 5.7% in the fourth quarter of 2016 from 4.5% in the 2015 period. The adjusted operating margin increased from 4.8% in the fourth quarter of 2015 to 7.0% in the most recent period due to a higher margin product mix and lower transportation costs which were partially offset by higher costs related to a fire at the company's Las Vegas facility.
Pulp and Paperboard
Net sales in the Pulp and Paperboard segment were $183.4 million for the fourth quarter of 2016, down 5.1% compared to fourth quarter 2015 net sales of $193.3 million. The decrease was primarily due to lower paperboard pricing and shipment volume. Operating income for the quarter decreased $11.9 million to $27.6 million, compared to $39.5 million for the fourth quarter of 2015, primarily due to lower paperboard prices and increased wood fiber prices in the Idaho region.
Taxes
The company's consolidated GAAP tax rate for the fourth quarter of 2016 was a provision of 41.7%, compared to 59.5% in the fourth quarter of 2015 due to a number of discrete items in 2015, including a decrease in the value of foreign tax credits due to logistical changes in foreign shipments, a decrease in the value of state tax credits, a reduction in the benefit from the manufacturing deduction due to the passage of the tax extenders law in December 2015, and state tax provision related to tax return adjustments filed or amended in the fourth quarter of 2015. On an adjusted basis, the fourth quarter 2016 tax rate was 37.8%. The company expects its annual GAAP and adjusted tax rate to be approximately 36% plus or minus two percentage points for 2017.
Note Regarding Use of Non-GAAP Financial Measures
In this press release, the company presents certain non-GAAP financial information for the fourth quarters of 2016 and 2015, including EBITDA, Adjusted EBITDA, adjusted net earnings, adjusted net earnings per diluted share, adjusted operating income, adjusted operating margin and adjusted tax rate. Because these amounts are not in accordance with GAAP, reconciliations to net earnings, net earnings per diluted share, operating income and tax rate as determined in accordance with GAAP are included either in the body or 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.
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 completion of strategic projects, integration of Manchester Industries, the company's plans for a new paper machine in Shelby, North Carolina and the company's expected tax rate for 2017. 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 company's ability to execute on its growth and expansion strategies; unanticipated construction delays involving the company's planned new tissue manufacturing operations in Shelby, NC; 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; 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 at the company's newly announced Shelby facility when it becomes operational; changes in the U.S. and international economies and in general economic conditions in the regions and industries in which the company operates; the loss of or changes in prices in regards to a significant customer; the company's ability to successfully implement its operational efficiencies and cost savings strategies; changes in customer product preferences and competitors' product offerings; manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunction and damage to the company's manufacturing facilities; changes in transportation costs and disruptions in transportation services; changes in the cost and availability of wood fiber and wood pulp; labor disruptions; cyclical industry conditions; changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs; environmental liabilities or expenditures; the company’s ability to realize the expected benefits of its Manchester Industries acquisition; changes in expenses and required contributions associated with the company's pension plans; 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, 2015. 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.
Clearwater Paper Corporation | ||||||||||||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||||||||||||
Unaudited (Dollars in thousands - except per-share amounts) | ||||||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||||
Net sales | $ | 425,568 | 100 | % | $ | 431,595 | 100 | % | $ | 1,734,763 | 100 | % | $ | 1,752,401 | 100 | % | ||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||
Cost of sales | (368,524 | ) | 87 | % | (364,778 | ) | 85 | % | (1,495,627 | ) | 86 | % | (1,512,849 | ) | 86 | % | ||||||||||||||
Selling, general and administrative expenses | (32,934 | ) | 8 | % | (30,308 | ) | 7 | % | (129,574 | ) | 7 | % | (117,149 | ) | 7 | % | ||||||||||||||
(Loss) gain on divested assets, net | — | — | % | (195 | ) | — | % | 1,755 | — | % | 1,267 | — | % | |||||||||||||||||
Total operating costs and expenses | (401,458 | ) | 94 | % | (395,281 | ) | 92 | % | (1,623,446 | ) | 94 | % | (1,628,731 | ) | 93 | % | ||||||||||||||
Income from operations | 24,110 | 6 | % | 36,314 | 8 | % | 111,317 | 6 | % | 123,670 | 7 | % | ||||||||||||||||||
Interest expense, net | (7,741 | ) | 2 | % | (7,744 | ) | 2 | % | (30,300 | ) | 2 | % | (31,182 | ) | 2 | % | ||||||||||||||
Debt retirement costs | (351 | ) | — | % | — | — | % | (351 | ) | — | % | — | — | % | ||||||||||||||||
Earnings before income taxes | 16,018 | 4 | % | 28,570 | 7 | % | 80,666 | 5 | % | 92,488 | 5 | % | ||||||||||||||||||
Income tax provision | (6,675 | ) | 2 | % | (17,005 | ) | 4 | % | (31,112 | ) | 2 | % | (36,505 | ) | 2 | % | ||||||||||||||
Net earnings | $ | 9,343 | 2 | % | $ | 11,565 | 3 | % | $ | 49,554 | 3 | % | $ | 55,983 | 3 | % | ||||||||||||||
Net earnings per common share: | ||||||||||||||||||||||||||||||
Basic | $ | 0.56 | $ | 0.65 | $ | 2.91 | $ | 2.98 | ||||||||||||||||||||||
Diluted | 0.56 | 0.65 | 2.90 | 2.97 | ||||||||||||||||||||||||||
Average shares outstanding (in thousands): | ||||||||||||||||||||||||||||||
Basic | 16,578 | 17,800 | 17,001 | 18,762 | ||||||||||||||||||||||||||
Diluted | 16,781 | 17,891 | 17,106 | 18,820 |
Clearwater Paper Corporation | |||||||||||||
Condensed Consolidated Balance Sheets | |||||||||||||
Unaudited (Dollars in thousands) | |||||||||||||
December 31, | December 31, | ||||||||||||
2016 | 2015 | ||||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 23,001 | $ | 5,610 | |||||||||
Short-term investments | — | 250 | |||||||||||
Restricted cash | — | 2,270 | |||||||||||
Receivables, net | 147,074 | 139,052 | |||||||||||
Taxes receivable | 9,709 | 14,851 | |||||||||||
Inventories | 258,029 | 255,573 | |||||||||||
Other current assets | 8,682 | 9,331 | |||||||||||
Total current assets | 446,495 | 426,937 | |||||||||||
Property, plant and equipment, net | 945,328 | 866,538 | |||||||||||
Goodwill | 244,283 | 209,087 | |||||||||||
Intangible assets, net | 40,485 | 19,990 | |||||||||||
Other assets, net | 7,751 | 4,817 | |||||||||||
TOTAL ASSETS | $ | 1,684,342 | $ | 1,527,369 | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Borrowings under revolving credit facilities |
$ | 135,000 | $ | — | |||||||||
Accounts payable and accrued liabilities | 223,699 | 220,368 | |||||||||||
Current liability for pensions and other postretirement employee benefits | 7,821 | 7,559 | |||||||||||
Total current liabilities | 366,520 | 227,927 | |||||||||||
Long-term debt | 569,755 | 568,987 | |||||||||||
Liability for pensions and other postretirement employee benefits | 81,812 | 89,057 | |||||||||||
Other long-term obligations | 41,776 | 46,738 | |||||||||||
Accrued taxes | 2,434 | 1,676 | |||||||||||
Deferred tax liabilities | 152,172 | 118,118 | |||||||||||
TOTAL LIABILITIES | 1,214,469 | 1,052,503 | |||||||||||
Stockholders' equity, excluding accumulated other comprehensive loss, net of tax | 521,626 | 530,414 | |||||||||||
Accumulated other comprehensive loss, net of tax | (51,753 | ) | (55,548 | ) | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,684,342 | $ | 1,527,369 |
Clearwater Paper Corporation | |||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||
Unaudited (Dollars in thousands) | |||||||||||||
Twelve Months Ended
December 31, |
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2016 | 2015 | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||
Net earnings | $ | 49,554 | $ | 55,983 | |||||||||
Adjustments to reconcile net earnings to net cash flows from operating activities: | |||||||||||||
Depreciation and amortization | 91,090 | 84,732 | |||||||||||
Equity-based compensation expense | 12,385 | 4,557 | |||||||||||
Deferred tax provision | 18,327 | 16,081 | |||||||||||
Employee benefit plans | (1,979 | ) | 3,011 | ||||||||||
Deferred issuance costs on debt | 1,242 | 928 | |||||||||||
Disposal of plant and equipment, net | 1,381 | 1,492 | |||||||||||
Non-cash adjustments to unrecognized taxes | 758 | (1,020 | ) | ||||||||||
Changes in working capital, net of acquisition | (3,462 | ) | 14,841 | ||||||||||
Changes in taxes receivable, net | 5,142 | (13,596 | ) | ||||||||||
Excess tax benefits from equity-based payment arrangements | (312 | ) | (1,433 | ) | |||||||||
Funding of qualified pension plans | — | (3,179 | ) | ||||||||||
Other, net | (1,375 | ) | (2,722 | ) | |||||||||
Net cash flows from operating activities | 172,751 | 159,675 | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||
Changes in short-term investments, net | 250 | 49,750 | |||||||||||
Additions to plant and equipment | (155,349 | ) | (128,902 | ) | |||||||||
Acquisition of Manchester Industries, net of cash acquired | (67,443 | ) | — | ||||||||||
Proceeds from sale of assets | 36 | 604 | |||||||||||
Net cash flows from investing activities | (222,506 | ) | (78,548 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||
Purchase of treasury stock | (65,327 | ) | (99,990 | ) | |||||||||
Borrowings on revolving credit facilities |
1,273,959 | — | |||||||||||
Repayments of revolving credit facilities' borrowings |
(1,138,959 | ) | — | ||||||||||
Payments for debt issuance costs | (1,906 | ) | — | ||||||||||
Payment of tax withholdings on equity-based payment arrangements | (933 | ) | (4,152 | ) | |||||||||
Excess tax benefits from equity-based payment arrangements | 312 | 1,433 | |||||||||||
Other, net | — | (139 | ) | ||||||||||
Net cash flows from financing activities | 67,146 | (102,848 | ) | ||||||||||
Increase (decrease) in cash and cash equivalents | 17,391 | (21,721 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 5,610 | 27,331 | |||||||||||
Cash and cash equivalents at end of period | $ | 23,001 | $ | 5,610 |
Clearwater Paper Corporation | ||||||||||||||||||||||||||||||
Segment Information | ||||||||||||||||||||||||||||||
Unaudited (Dollars in thousands) | ||||||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||||
Segment net sales: | ||||||||||||||||||||||||||||||
Consumer Products | $ | 242,131 | 57 | % | $ | 238,288 | 55 | % | $ | 988,380 | 57 | % | $ | 959,894 | 55 | % | ||||||||||||||
Pulp and Paperboard | 183,437 | 43 | % | 193,307 | 45 | % | 746,383 | 43 | % | 792,507 | 45 | % | ||||||||||||||||||
Total segment net sales | $ | 425,568 | 100 | % | $ | 431,595 | 100 | % | $ | 1,734,763 | 100 | % | $ | 1,752,401 | 100 | % | ||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||||
Consumer Products | $ | 13,781 | 57 | % | $ | 10,951 | 30 | % | $ | 66,161 | 59 | % | $ | 54,437 | 44 | % | ||||||||||||||
(Loss) gain on divested assets, net | — | — | % | (195 | ) | 1 | % | 1,755 | 2 | % | 1,267 | 1 | % | |||||||||||||||||
Pulp and Paperboard | 27,581 | 114 | % | 39,467 | 109 | % | 112,732 | 101 | % | 120,861 | 98 | % | ||||||||||||||||||
41,362 | 50,223 | 180,648 | 176,565 | |||||||||||||||||||||||||||
Corporate1 | (17,252 | ) | 72 | % | (13,909 | ) | 38 | % | (69,331 | ) | 62 | % | (52,895 | ) | 43 | % | ||||||||||||||
Income from operations | $ | 24,110 | 100 | % | $ | 36,314 | 100 | % | $ | 111,317 | 100 | % | $ | 123,670 | 100 | % |
1 |
Corporate expenses for the three and twelve months ended December 31, 2016 include $2.7 million of expenses associated with the acquisition of Manchester Industries. Operating results subsequent to the acquisition of Manchester Industries are included in the Pulp and Paperboard segment. Corporate expenses for the twelve months ended December 31, 2016 also include a $3.5 million settlement accounting charge associated with a pension lump sum buyout for term-vested participants. |
Clearwater Paper Corporation | |||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||
EBITDA and Adjusted EBITDA | |||||||||||||||||
Unaudited (Dollars in thousands) | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
Net earnings | $ | 9,343 | $ | 11,565 | $ | 49,554 | $ | 55,983 | |||||||||
Add back: | |||||||||||||||||
Interest expense, net3 | 8,092 | 7,744 | 30,651 | 31,182 | |||||||||||||
Income tax provision | 6,675 | 17,005 | 31,112 | 36,505 | |||||||||||||
Depreciation and amortization expense4 | 25,169 | 21,888 | 91,090 | 84,732 | |||||||||||||
EBITDA1 | $ | 49,279 | $ | 58,202 | $ | 202,407 | $ | 208,402 | |||||||||
Directors' equity-based compensation expense (benefit) | $ | 354 | $ | (232 | ) | $ | 4,779 | $ | (4,073 | ) | |||||||
Manchester Industries acquisition related expenses | 2,665 | — | 2,665 | — | |||||||||||||
Costs associated with Neenah paper machines shutdown | 1,049 | — | 1,049 | — | |||||||||||||
Costs associated with announced Oklahoma City facility closure | 318 | — | 318 | — | |||||||||||||
Pension settlement expense | — | — | 3,482 | — | |||||||||||||
Legal expenses and settlement costs | — | — | — | 1,972 | |||||||||||||
Reorganization related expenses | — | 285 | — | 1,470 | |||||||||||||
Costs associated with Long Island facility closure | 460 | 446 | 1,891 | 2,463 | |||||||||||||
Loss (gain) associated with the sale of the specialty mills, net | — | 195 | (1,755 | ) | (1,267 | ) | |||||||||||
Costs associated with labor agreement | — | — | — | 1,730 | |||||||||||||
Adjusted EBITDA2 | $ | 54,125 | $ | 58,896 | $ | 214,836 | $ | 210,697 |
1 | 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 (including debt retirement costs), income taxes, and depreciation and amortization. It should not be considered as an alternative to net earnings computed under GAAP. | |||
2 | Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance. | |||
3 | Interest expense, net for the three and twelve months ended December 31, 2016 includes debt retirement costs of $0.4 million. | |||
4 | Depreciation and amortization expense for the three and twelve months ended December 31, 2016 includes $1.3 million of accelerated depreciation associated with the announced March 31, 2017 Oklahoma City facility closure. |
Clearwater Paper Corporation | |||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||||
Adjusted Net Earnings and Adjusted Net Earnings Per Diluted Common Share | |||||||||||||||||||
Unaudited (Dollars in thousands, except per-share amounts) | |||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
GAAP net earnings | $ | 9,343 | $ | 11,565 | $ | 49,554 | $ | 55,983 | |||||||||||
Special items, after-tax1: | |||||||||||||||||||
Directors' equity-based compensation expense (benefit) | 229 | (155 | ) | 3,086 | (2,785 | ) | |||||||||||||
Pension settlement expense | — | — | 2,240 | — | |||||||||||||||
Manchester Industries acquisition related expenses | 2,200 | — | 2,200 | — | |||||||||||||||
Costs associated with Neenah paper machines shutdown | 678 | — | 678 | — | |||||||||||||||
Costs associated with announced Oklahoma City facility closure | 1,073 | — | 1,073 | — | |||||||||||||||
Costs associated with Long Island facility closure | 297 | 299 | 1,219 | 1,683 | |||||||||||||||
Loss (gain) associated with the sale of the specialty mills, net | — | 131 | (1,129 | ) | (872 | ) | |||||||||||||
Discrete tax items related to foreign tax credits | — | 1,309 | — | 1,309 | |||||||||||||||
Legal expenses and settlement costs | — | — | — | 1,346 | |||||||||||||||
Reorganization related expenses | — | 191 | — | 1,000 | |||||||||||||||
Costs associated with labor agreement | — | — | — | 1,197 | |||||||||||||||
Adjusted net earnings2 | $ | 13,820 | $ | 13,340 | $ | 58,921 | $ | 58,861 | |||||||||||
GAAP net earnings per diluted share | $ | 0.56 | $ | 0.65 | $ | 2.90 | $ | 2.97 | |||||||||||
Special items, after-tax1: | |||||||||||||||||||
Directors' equity-based compensation expense (benefit) | 0.01 | (0.01 | ) | 0.18 | (0.15 | ) | |||||||||||||
Pension settlement expense | — | — | 0.13 | — | |||||||||||||||
Manchester Industries acquisition related expenses | 0.13 | — | 0.13 | — | |||||||||||||||
Costs associated with Neenah paper machines shutdown | 0.04 | — | 0.04 | — | |||||||||||||||
Costs associated with announced Oklahoma City facility closure | 0.06 | — | 0.06 | — | |||||||||||||||
Costs associated with Long Island facility closure | 0.02 | 0.02 | 0.07 | 0.09 | |||||||||||||||
Loss (gain) associated with the sale of the specialty mills, net | — | 0.01 | (0.07 | ) | (0.05 | ) | |||||||||||||
Discrete tax items related to foreign tax credits | — | 0.07 | — | 0.07 | |||||||||||||||
Legal expenses and settlement costs | — | — | — | 0.07 | |||||||||||||||
Reorganization related expenses | — | 0.01 | — | 0.05 | |||||||||||||||
Costs associated with labor agreement | — | — | — | 0.06 | |||||||||||||||
Adjusted net earnings per diluted share2 | $ | 0.82 | $ | 0.75 | $ | 3.44 | $ | 3.13 |
1 |
Tax effect was calculated using the estimated annual effective tax rate for the period presented. | |||
2 | Adjusted net earnings and Adjusted net earnings per diluted share exclude the impact of the items listed that we do not believe are indicative of our core operating performance. |
Clearwater Paper Corporation | |||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||||
Segment EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin | |||||||||||||||||||
Unaudited (Dollars in thousands) | |||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Consumer Products: | |||||||||||||||||||
Net sales | $ | 242,131 | $ | 238,288 | $ | 988,380 | $ | 959,894 | |||||||||||
Operating income | 13,781 | 10,756 | 67,916 | 55,704 | |||||||||||||||
Depreciation and amortization expense5 | 16,391 | 14,132 | 59,375 | 54,595 | |||||||||||||||
Consumer Products EBITDA1 | $ | 30,172 | $ | 24,888 | $ | 127,291 | $ | 110,299 | |||||||||||
Costs associated with Neenah paper machines shutdown | 1,049 | — | 1,049 | — | |||||||||||||||
Costs associated with announced Oklahoma City facility closure | 318 | — | 318 | — | |||||||||||||||
Costs associated with Long Island facility closure | 460 | 446 | 1,891 | 2,463 | |||||||||||||||
Loss (gain) associated with the sale of the specialty mills, net | — | 195 | (1,755 | ) | (1,267 | ) | |||||||||||||
Costs associated with labor agreement | — | — | — | 814 | |||||||||||||||
Reorganization related expenses | — | 62 | — | 556 | |||||||||||||||
Consumer Products Adjusted EBITDA2 | $ | 31,999 | $ | 25,591 | $ | 128,794 | $ | 112,865 | |||||||||||
Consumer Products EBITDA margin3 | 12.5 | % | 10.4 | % | 12.9 | % | 11.5 | % | |||||||||||
Consumer Products Adjusted EBITDA margin4 | 13.2 | % | 10.7 | % | 13.0 | % | 11.8 | % | |||||||||||
Pulp and Paperboard6: | |||||||||||||||||||
Net sales | $ | 183,437 | $ | 193,307 | $ | 746,383 | $ | 792,507 | |||||||||||
Operating income | 27,581 | 39,467 | 112,732 | 120,861 | |||||||||||||||
Depreciation and amortization expense | 7,395 | 6,621 | 26,741 | 27,204 | |||||||||||||||
Pulp and Paperboard EBITDA1 | $ | 34,976 | $ | 46,088 | $ | 139,473 | $ | 148,065 | |||||||||||
Costs associated with labor agreement | — | — | — | 916 | |||||||||||||||
Reorganization related expenses | — | 180 | — | 419 | |||||||||||||||
Pulp and Paperboard Adjusted EBITDA2 | $ | 34,976 | $ | 46,268 | $ | 139,473 | $ | 149,400 | |||||||||||
Pulp and Paperboard EBITDA margin3 | 19.1 | % | 23.8 | % | 18.7 | % | 18.7 | % | |||||||||||
Pulp and Paperboard Adjusted EBITDA margin4 | 19.1 | % | 23.9 | % | 18.7 | % | 18.9 | % |
1 | Segment EBITDA is segment operating income adjusted for depreciation and amortization. | |||
2 | Segment Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance. | |||
3 | Segment EBITDA margin is defined as Segment EBITDA divided by Segment Net sales. | |||
4 | Segment Adjusted EBITDA margin is defined as Segment Adjusted EBITDA divided by Segment Net sales. | |||
5 | Consumer Products depreciation and amortization expense for the three and twelve months ended December 31, 2016 includes $1.3 million of accelerated depreciation associated with the announced March 31, 2017 Oklahoma City facility closure. | |||
6 | Results for Manchester Industries subsequent to the December 16, 2016 acquisition are included in the Pulp and Paperboard segment. |
Clearwater Paper Corporation | ||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||
Segment Adjusted Operating Income and Operating Margin | ||||||||||||||||||
Unaudited (Dollars in thousands) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Consumer Products: | ||||||||||||||||||
Net sales | $ | 242,131 | $ | 238,288 | $ | 988,380 | $ | 959,894 | ||||||||||
Operating income | 13,781 | 10,756 | 67,916 | 55,704 | ||||||||||||||
Costs associated with Neenah paper machines shutdown | 1,049 | — | 1,049 | — | ||||||||||||||
Costs associated with announced Oklahoma City facility closure3 | 1,662 | — | 1,662 | — | ||||||||||||||
Costs associated with Long Island facility closure | 460 | 446 | 1,891 | 2,463 | ||||||||||||||
Loss (gain) associated with the sale of the specialty mills, net | — | 195 | (1,755 | ) | (1,267 | ) | ||||||||||||
Costs associated with labor agreement | — | — | — | 814 | ||||||||||||||
Reorganization related expenses | — | 62 | — | 556 | ||||||||||||||
Consumer Products Adjusted operating income1 | $ | 16,952 | $ | 11,459 | $ | 70,763 | $ | 58,270 | ||||||||||
Consumer Products operating margin | 5.7 | % | 4.5 | % | 6.9 | % | 5.8 | % | ||||||||||
Consumer Products Adjusted operating margin2 | 7.0 | % | 4.8 | % | 7.2 | % | 6.1 | % | ||||||||||
Pulp and Paperboard4: | ||||||||||||||||||
Net sales | $ | 183,437 | $ | 193,307 | $ | 746,383 | $ | 792,507 | ||||||||||
Operating income | 27,581 | 39,467 | 112,732 | 120,861 | ||||||||||||||
Costs associated with labor agreement | — | — | — | 916 | ||||||||||||||
Reorganization related expenses | — | 180 | — | 419 | ||||||||||||||
Pulp and Paperboard Adjusted operating income1 | $ | 27,581 | $ | 39,647 | $ | 112,732 | $ | 122,196 | ||||||||||
Pulp and Paperboard operating margin | 15.0 | % | 20.4 | % | 15.1 | % | 15.3 | % | ||||||||||
Pulp and Paperboard Adjusted operating margin2 | 15.0 | % | 20.5 | % | 15.1 | % | 15.4 | % |
1 | Segment Adjusted operating income excludes the impact of the items listed that we do not believe are indicative of our core operating performance. | |||
2 | Segment Adjusted operating margin is defined as Segment Adjusted operating income divided by Segment Net sales. | |||
3 | Costs associated with the announced Oklahoma City facility closure for the three and twelve months ended December 31, 2016 include $1.3 million in accelerated depreciation associated with the announced March 31, 2017 Oklahoma City facility closure. | |||
4 |
Results for Manchester Industries subsequent to the December 16, 2016 acquisition are included in the Pulp and Paperboard segment. |
Clearwater Paper Corporation | ||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||
Adjusted Income Tax Provision | ||||||||||||||||||
Unaudited (Dollars in thousands) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
GAAP income tax provision | $ | (6,675 | ) | $ | (17,005 | ) | $ | (31,112 | ) | $ | (36,505 | ) | ||||||
Special items, after-tax: | ||||||||||||||||||
Directors' equity-based compensation (expense) benefit | (125 | ) | 77 | (1,693 | ) | 1,288 | ||||||||||||
Pension settlement expense | — | — | (1,242 | ) | — | |||||||||||||
Manchester Industries acquisition related expenses | (465 | ) | — | (465 | ) | — | ||||||||||||
Costs associated with Neenah paper machines shutdown | (371 | ) | — | (371 | ) | — | ||||||||||||
Costs associated with announced Oklahoma City facility closure | (589 | ) | — | (589 | ) | — | ||||||||||||
Costs associated with Long Island facility closure | (163 | ) | (147 | ) | (672 | ) | (780 | ) | ||||||||||
Loss (gain) associated with the sale of the specialty mills, net | — | (64 | ) | 626 | 395 | |||||||||||||
Discrete tax items related to foreign tax credits | — | 1,309 | — | 1,309 | ||||||||||||||
Legal expenses and settlement costs | — | — | — | (626 | ) | |||||||||||||
Reorganization related expenses | — | (94 | ) | — | (470 | ) | ||||||||||||
Costs associated with labor agreement | — | — | — | (533 | ) | |||||||||||||
Adjusted income tax provision1 | $ | (8,388 | ) | $ | (15,924 | ) | $ | (35,518 | ) | $ | (35,922 | ) | ||||||
Adjusted income tax provision rate1,2 | 37.8 | % | 54.4 | % | 37.6 | % | 37.9 | % | ||||||||||
1 | Adjusted income tax provision and Adjusted income tax provision rate exclude the impact of the items listed that we do not believe are indicative of our core operating performance. | |||
2 | The Adjusted income tax provision rate is defined as [Adjusted income tax provision / (Adjusted income tax provision + Adjusted net earnings)]. |
CONTACT:
Clearwater Paper Corporation
News media:
Matt Van
Vleet, 509-344-5912
or
Investors:
Robin S. Yim, 509-344-5906
Exhibit 99.2
Clearwater Paper Corporationfourth quarter 2016 and full year 2016Supplemental Information Linda Massman President, Chief Executive Officer and DirectorJohn HertzSenior Vice President Finance and Chief Financial Officer 02/08/17
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 financial models; the costs, timing and benefits associated with strategic capital investments and operational improvements; outlook for Q1 and fiscal year 2017; cost sensitivities; Manchester acquisition related benefits; revenue; product volumes shipped; product pricing and sales mix; pulp and wood fiber costs; cost and timing of major maintenance and repairs; cost of wages and benefits; financial benefits from productivity and operational efficiency projects; cost inflation; estimated Q1 and fiscal year 2017 net earnings, EBITDA, adjusted EBITDA, operating income, adjusted operating income, adjusted net earnings, net earnings per diluted common share, adjusted net earnings per diluted common share, net sales and adjusted operating margin; and cost sensitivities. 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, as well as the following: our ability to execute on our growth and expansion strategies; unanticipated construction delays involving our planned new tissue manufacturing operations in Shelby, NC; competitive pricing pressures for our products, including as a result of increased capacity as additional manufacturing facilities are operated by our competitors; 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 at our newly announced Shelby, NC facility when it becomes operational; changes in the U.S. and international economies and in general economic conditions in the regions and industries in which we operate; the loss of or changes in prices in regards to a significant customer; our ability to successfully implement our operational efficiencies and cost savings strategies; changes in customer product preferences and competitors' product offerings;manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunction and damage to our manufacturing facilities; changes in transportation costs and disruptions in transportation services; changes in the cost and availability of wood fiber and wood pulp; labor disruptions; cyclical industry conditions; changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs; environmental liabilities or expenditures; our ability to realize the expected benefits of our Manchester Industries acquisition;changes in expenses and required contributions associated with our pension plans; cyber-security risks;reliance on a limited number of third-party suppliers for raw materials; our inability to service our debt obligations;restrictions on our business from debt covenants and terms; andchanges 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, whether as a result of new information, future events or otherwise. 1
2016 full year highlights $1,735 million net sales, $111 million gaap operating income, down 10% vs. 2015, $215 million adjusted EBitda1, up 2% VS. 2015Diluted gaap eps of $2.90, adjusted diluted eps of $3.441entered into a new revolving credit facility totaling $300 million, Retired $125 million asset backed line of creditAcquired Manchester industries, a paperboard sheeting solution business, at a purchase price of $68 millionAnnounced permanent closure of the Oklahoma city tissue converting facility and shutdown of two tissue machines at the Neenah facilityReturned $65 million to shareholders in 2016 as part of $100 million share buyback program at average price of $48.18 per shareA $40 million contribution to operating income and a $42 million contribution to adjusted ebitda1 from strategic capital and operational efficiency initiatives in 2016 2 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure.
Fourth Quarter financial highlights $426 million net sales, down 2% VS. Q3’16 $24 million gaap operating income$54 million adjusted EBitda1, at higher end of outlook range of $49 to $55 millionDiluted gaap eps of $0.56, adjusted diluted eps of $0.821A $12 million contribution to operating income and A $13 million contribution to adjusted ebitda1 from strategic capital and operational efficiency initiatives in q4’16 3 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure.
Financial Summary (GAAP basis)(Unaudited) 4 1 The Q1’15, Q2’15, and Q3’16 selling, general, and administrative results exclude gains (losses) associated with the 2014 divesture of the specialty tissue business previously included.
Financial Summary (adjusted basis)(Unaudited) 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure.2 Adjusted gross profit margin is defined as Adjusted gross profit divided by Net sales.3 Adjusted operating margin is defined as Adjusted operating income divided by Net sales.4 Adjusted EBITDA margin is defined as Adjusted EBITDA divided by Net sales.5 This information is based upon management’s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.6 Non-GAAP measure – See page 18 for the reconciliation to the most comparable GAAP measure... 5
2016 vs. 2015Consolidated Adjusted EBITDA1 Bridge 6 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. Price/Mix Lower paperboard pricing, partly offset by a higher mix of ultra tissue sales, full year benefit of 2015 price increase in tissue Volume Higher ultra tissue case shipments Pulp/wood fiber Lower negotiated pulp prices, improved utilization due to operational improvement initiatives Transportation Improved line haul rates, network optimization initiatives Chemicals Lower negotiated polyethylene prices and lower usage due to strategic capital projects Energy Lower natural gas prices, lower usage due to strategic capital projects Op. & pkg. supplies Lower negotiated packaging prices maintenance Higher CPD maintenance investment to drive productivity Wages & Benefits Wage inflation, mostly offset by savings from strategic capital investments and operational improvement initiatives
Q4’16 vs. Q3’16Consolidated Adjusted EBITDA1 Bridge 7 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. Price/mix Slightly lower paperboard pricing, higher mix of commodity grade paperboard sales, higher mix of tissue parent roll sales volume Lower seasonal retail shipments partly offset by higher tissue parent roll shipments Pulp Lower purchased pulp usage due to no major outage TRANSPORTATION Network optimization initiatives, offset by increased internal inventory shipments due to a Las Vegas outage caused by a paper machine fire energy Lower electrical usage and lower Las Vegas seasonal electrical rates maintenance Idaho major maintenance outage completed in Q3, lower CPD planned maintenance Wages & benefits Higher overtime associated with Las Vegas outage, mostly offset by savings from strategic capital investments and operational improvement initiatives
Q4’16 vs. Q4’15Consolidated Adjusted EBITDA1 Bridge 8 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. Price/Mix Lower paperboard pricing partly offset by a higher mix of ultra tissue sales Volume Lower paperboard shipments Pulp/wood fiber Lower negotiated pulp prices, partly offset by higher wood prices in Idaho due to decreased regional supply transportation Improved line haul rates, network optimization initiatives CHEMICALS Higher usage to improve product quality, mostly offset by lower negotiated prices, savings from strategic capital investments Maintenance Higher maintenance due to Las Vegas outage WAGES & BENEFITS Wage inflation and higher overtime due to Las Vegas outage, mostly offset by savings from strategic capital investments and operational improvement initiatives
Strategic investment and operational improvement scorecard as of Q4’16 9 Strategic plan announced in Q1’15, expected capex of $237-$249 millionExpected to yield a $97-$127 million operating income increase by 20182Expected to yield a $115-$145 million Adjusted EBITDA1 increase by 20182Would yield a $285-$335 2018 Adjusted EBITDA1 run rate assuming $10-$15 million of annual margin pressure2 Continuous Digester3 Warehouse Automation4 Other Projects5 Operational Improvements TOTAL STRATEGIC CAPEX $148-$158 $40-$42 $49 $0 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure2 Based on Q1’15 prices, input costs, and market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.3 The Continuous Digester is expected to be completed in Q4’17. 2016 Adjusted EBITDA contribution is $0.3M.4 2015 and 2016 Adjusted EBITDA contributions were $0.6M and $4.8M, respectively.5 2015 and 2016 Adjusted EBITDA contributions were $0.4M and $2.8M, respectively.. 1 1 FULL RUN-RATE EXPECTED IMPACT (MILLIONS $)2 ADJUSTED EBITDA1 $23-$28 OPERATING INCOME $21-$26 $44.3
Key Segment Results – Consumer Products (Unaudited) 10 1 Includes away-from-home (AFH), contract and parent roll tissue products. 2 Includes retail, AFH, and contract tissue case products. 3 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. 4 Non-GAAP measure – Segment Adjusted EBITDA margin is defined as Segment Adjusted EBITDA divided by Segment net sales. Q1'15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Consumer Products Cross-Cycle Financial Model Shipments Non-Retail (short tons)1 21,107 24,744 21,250 23,077 24,358 20,028 18,384 19,182 Retail (short tons) 71,102 71,476 76,856 73,004 75,027 79,095 82,216 77,704 Total Tissue Tons 92,209 96,220 98,106 96,081 99,385 99,123 100,600 96,886 Converted Products (cases in thousands)2 13,025 13,125 13,375 12,624 12,990 13,229 13,770 12,886 Sales Price Non-Retail ($/short ton)1 $1,475 $1,430 $1,530 $1,448 $1,477 $1,496 $1,506 $1,442 Retail ($/short ton) $2,864 $2,846 $2,787 $2,805 $2,784 $2,747 $2,742 $2,757 Total Tissue ($/short ton) $2,546 $2,482 $2,515 $2,479 $2,464 $2,494 $2,516 $2,496 Segment net sales ($ in thousands) $235,176 $239,391 $247,039 $238,288 $245,018 $247,912 $253,319 $242,131 Segment GAAP operating income ($ in thousands) $12,395 $17,032 $15,521 $10,756 $18,390 $18,544 $17,201 $13,781 Segment GAAP operating margin 5.3% 7.1% 6.3% 4.5% 7.5% 7.5% 6.8% 5.7% Segment Adjusted EBITDA3 ($ in thousands) $26,609 $29,874 $30,791 $25,591 $32,581 $33,280 $30,934 $31,999 Segment Adjusted EBITDA margin4 11.3% 12.5% 12.5% 10.7% 13.3% 13.4% 12.2% 13.2% 17.0%
Clearwater Paper Tissue Shipmentsand U.S. Retail Tissue Market 11 U.S. Retail Tissue Market ($) (MultiOutlet)1 Category Private Label BRANDS Total Total RetailTissue Share ($) 25% 75% 100% % ChangeQ4’16 vs. Q3’16 0.4% (0.4)% -% 1 Data Source: IRI Worldwide data through January 1, 2017.
Price/Mix Shipment volumes External Pulp Chemical costs Op. & Pkg. Supplies Transportation costs Energy costs Maintenance SG&A Q4’16 OutlookVersus Q3’16 Lower Lower Cost / shipped ton: stable Cost / shipped ton: stable Cost / shipped ton: slightly lower Cost / shipped ton: lower Cost / shipped ton: slightly lower Lower Stable Q4’16 ActualVersus Q3’16 Lower Lower Cost / shipped ton: stable Cost / shipped ton: stable Cost / shipped ton: stable Cost / shipped ton: slightly higher Cost / shipped ton: lower Lower Stable Price/mix Higher mix of parent roll sales volume Lower retail sales volume partly offset by higher parent roll volume Transportation Increased internal inventory shipments due to Las Vegas outage, partly offset by network optimization initiatives Energy Lower electrical usage and lower Las Vegas electrical rates maintenance Higher maintenance in Las Vegas due to impact of outage, offset by lower planned maintenance Wages & benefits Higher overtime associated with Las Vegas outage, mostly offset by savings from strategic capital investments and operational improvement initiatives Q4’16 vs. Q3’16Consumer Products Adjusted EBITDA1 Bridge 12 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. Previous Outlook vs. Segment Actual 1
Key Segment Results – Pulp and Paperboard(Unaudited) 13 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure.2 Non-GAAP measure – Segment Adjusted EBITDA margin is defined as Segment Adjusted EBITDA divided by Segment net sales. Pulp and PaperboardCross-Cycle Financial Model Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Shipments Paperboard (short tons) 191,635 204,983 198,535 201,580 201,340 199,132 196,271 199,415 Sales Price Paperboard ($/short ton) $1,031 $997 $979 $956 $952 $948 $927 $920 Segment net sales ($ in thousands) $198,850 $205,167 $195,183 $193,307 $192,186 $188,759 $182,001 $183,437 Segment GAAP operating income ($ in thousands) $16,194 $27,754 $37,446 $39,467 $35,163 $40,032 $9,956 $27,581 Segment GAAP operating margin 8.1% 13.5% 19.2% 20.4% 18.3% 21.2% 5.5% 15.0% Segment Adjusted EBITDA1 ($ in thousands) $24,421 $34,491 $44,220 $46,268 $41,530 $46,481 $16,486 $34,976 Segment Adjusted EBITDA margin2 12.3% 16.8% 22.7% 23.9% 21.6% 24.6% 9.1% 19.1% 19.0%
Clearwater Paper Paperboard Shipments and U.S. Paperboard Market 14 U.S. Paperboard Production3 Category Clearwater Paper Other Total Domestic SBS1 Market Share 14% 86% Folding 19% 81% Food Service2 15% 85% Liquid Packaging 4% 96% 1 Solid Bleached Sulfate.2 Food Service includes cup, plate, dish and tray products.3 Data Source: American Forest and Paper Association Solid Bleached Domestic Production – December YTD 2016.
Price/Mix Shipment volumes Wood Fiber Chemical costs Op. & Pkg. Supplies Transportation costs Energy costs Maintenance SG&A Q4’16 OutlookVersus Q3’16 Lower Lower Cost / shipped ton: higher Cost / shipped ton: higher Cost / shipped ton: stable Cost / shipped ton: stable Cost / shipped ton: higher Lower Stable Q4’16 ActualVersus Q3’16 Lower Higher Cost / shipped ton: lower Cost / shipped ton: stable Cost / shipped ton: stable Cost / shipped ton: stable Cost / shipped ton: stable Lower Stable Price/mix Slightly lower paperboard pricing, higher mix of commodity grade paperboard sales volume Higher paperboard shipments Wood fiber Lower purchased pulp usage due to no major outage Maintenance Idaho major maintenance outage completed in Q3 Q4’16 vs. Q3’16 Pulp and Paperboard Adjusted EBITDA1 Bridge 15 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure. Previous Outlook vs. Segment Actual 1 1
Clearwater Paper Cross-Cycle Financial Model 16 1 Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure.
Adjusted Return on Invested Capital1(Unaudited) 17 1 Adjusted Return on Invested Capital (Adjusted ROIC) is defined as [Net Earnings + Interest Expense] / [Tangible Stockholders’ Equity6 + Debt – Excess (Deficit) Cash6] adjusted for non-recurring discrete items. Non-GAAP measure – See Appendix for the definition and reconciliation to the most comparable GAAP measure.2 2013 Adjusted ROIC Net Earnings was adjusted to remove a benefit of $67.5 million from discrete tax items relating to release of uncertain tax positions.2013 Adjusted ROIC Interest Expense includes debt retirement costs of $17.1 million.3 2014 Adjusted ROIC Net Earnings was adjusted to remove a loss associated with the optimization and sale of the specialty mills totaling $37.0 million after-tax.2014 Adjusted ROIC Interest Expense includes debt retirement costs of $24.4 million. 4 2015 Adjusted ROIC Net Earnings was adjusted to remove a gain associated with the sale of the specialty mills totaling $0.9 million after-tax.5 2016 Adjusted ROIC Net Earnings was adjusted to remove a gain associated with the sale of the specialty mills totaling $1.1 million after-tax, pension settlement costs totaling $2.2 million after-tax, and non-cash costs associated with the announced Oklahoma City facility closure totaling $0.9 million after-tax. 2016 Adjusted ROIC Interest Expense includes debt retirement costs of $.4 million. 6 Rolling Adjusted ROIC Average is the average percentage of each annual and prior years’ Adjusted ROIC values.
Q1’17 Outlook1Reconciliation of Non-GAAP Financial Measures (Unaudited) 18 1 This information is based upon management’s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.2 EBITDA is a non-GAAP measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is net earnings (loss). EBITDA is net earnings adjusted for net interest expense (including debt retirement costs), income taxes, and depreciation and amortization. It should not be considered as an alternative to net earnings computed under GAAP.3 Depreciation and amortization outlook for the three months ended March 31, 2017 includes $4.0 million in accelerated depreciation associated with the announced March 31, 2017 Oklahoma City facility closure.4 Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance.
Q1’17 Outlook1Reconciliation of Non-GAAP Financial Measures (Unaudited) 19 1 This information is based upon management’s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.2 Adjusted operating income, Adjusted net earnings and Adjusted net earnings per diluted common share exclude the impact of the items listed that we do not believe are indicative of our core operating performance.3 All non-tax items are tax effected at a 36% annual rate.4 GAAP net earnings per diluted common share and Adjusted net earnings per diluted common share are calculated utilizing fourth quarter 2016 diluted average common shares outstanding of 16,781 (in thousands).
Q1’17 OUTLOOK1 20 1 This information is based upon management’s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.2 Non-GAAP measure – See prior slides for the reconciliation to the most comparable GAAP measure.3 Adjusted operating margin is defined as net sales divided by adjusted operating income.4 Adjusted net earnings per diluted common share is calculated utilizing fourth quarter 2016 diluted average common shares outstanding of 16,781 (in thousands). Net sales 1%-3% higher Adjusted operating margin2,3 6%-7.5% Adjusted ebitda2 $48M - $56M Adjusted net earnings per diluted common share2,4 $0.62 - $0.90
2017 Outlook1Reconciliation of Non-GAAP Financial Measures (Unaudited) 21 1 This information is based upon certain assumptions and management’s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.2 EBITDA is a non-GAAP measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is net earnings (loss). EBITDA is net earnings adjusted for net interest expense (including debt retirement costs), income taxes, and depreciation and amortization. It should not be considered as an alternative to net earnings computed under GAAP.3 Depreciation and amortization outlook for the twelve months ended December 31, 2017 includes $4.0 million in accelerated depreciation associated with the announced March 31, 2017 Oklahoma City facility closure. 4 Adjusted EBITDA and Adjusted operating income exclude the impact of the items listed that we do not believe are indicative of our core operating performance.
2017 OUTLOOK1,2 (assumes January input cost structure and paperboard and tissue pricing) 22 Net sales 0%-2% higher Adjusted operating margin2,3 6.5%-7.5% Adjusted ebitda2 $205M - $225M 1 This information is based upon certain assumptions and management’s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.2 Non-GAAP measure – See prior slides for the reconciliation to the most comparable GAAP measure.3 Adjusted operating margin is defined as net sales divided by adjusted operating income.
Price and Cost Sensitivities 23
Appendix 24
Adjusted Gross Profit& Adjusted SG&AReconciliation of Non-GAAP Financial Measures (Unaudited) 25 1 Gross profit is defined as net sales minus cost of sales.2 Adjusted gross profit and Adjusted selling, general and administrative expenses exclude the impact of the items listed that we do not believe are indicative of our core operating performance.3 The Q1’15, Q2’15, and Q3’16 selling, general, and administrative results exclude gains (losses) associated with the 2014 divesture of the specialty tissue business previously included.
Segment Adjusted Operating Income (Loss)Reconciliation of Non-GAAP Financial Measures (Unaudited) 26 1 Adjusted operating income (loss) excludes the impact of the items listed that we do not believe are indicative of our core operating performance.
Adjusted Net Earnings & Adjusted Net Earnings per Diluted common shareReconciliation of Non-GAAP Financial Measures (Unaudited) 27 1 All non-tax items are tax effected at the expected annual rate for that period.2 Adjusted net earnings and Adjusted net earnings per diluted common share exclude the impact of the items listed that we do not believe are indicative of our core operating performance.
Adjusted Income Tax ProvisionReconciliation of Non-GAAP Financial Measure (Unaudited) 28 1 Adjusted income tax provision excludes the impact of the items listed that we do not believe are indicative of our core operating performance.
EBITDA & Adjusted EBITDA Reconciliation of Non-GAAP Financial Measures (Unaudited) 29 1 EBITDA is a non-GAAP measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is net earnings (loss). EBITDA is net earnings (loss) adjusted for net interest expense (including debt retirement costs), income taxes, and depreciation and amortization. It should not be considered as an alternative to net earnings (loss) computed under GAAP.2 Interest expense, net for the third quarter of 2014 includes debt retirement costs of $24.4 million.3 Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance.
EBITDA & Adjusted EBITDA Reconciliation of Non-GAAP Financial Measures (Unaudited) 30 1 EBITDA is a non-GAAP measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is net earnings (loss). EBITDA is net earnings (loss) adjusted for net interest expense (including debt retirement costs), income taxes, and depreciation and amortization. It should not be considered as an alternative to net earnings (loss) computed under GAAP.2 Interest expense, net for the fourth quarter of 2016 includes debt retirement costs of $0.4 million.3 Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance.
Segment EBITDA & Adjusted EBITDA Reconciliation of Non-GAAPFinancial Measures (Unaudited) 31 1 Segment EBITDA is a non-GAAP measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is segment operating income (loss). Segment EBITDA is segment operating income (loss) adjusted for depreciation and amortization. It should not be considered as an alternative to segment operating income (loss) computed under GAAP. 2 Segment Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance.
Return on Invested Capital, Tangible Stockholders’ Equity & Excess Cash Reconciliation of Non-GAAP Financial Measures (Unaudited) 32 1 Non-GAAP measure.2 Tangible stockholders' equity is defined as stockholders’ equity less Goodwill and Intangible assets, net.3 Excess cash is defined as the sum of Cash and Short-term investments less Operating cash1,4.4 Operating cash is defined as a minimum amount of available cash deemed by management to be sufficient to avoid operating disruptions due to a mismatch of cash inflows and outflows during an accounting period.Note: Balance sheet items are as of the end of each period presented.
Reconciliation of GAAP to Non-GAAP: Strategic investments1 (Unaudited) 33 1 Based on Q1’15 prices, input costs, and market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.2 Non-GAAP measure – See Appendix for the definition.
Reconciliation of GAAP to Non-GAAP: Strategic investments1 (Unaudited) 34 1 Based on Q1’15 prices, input costs, and market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See “Forward-Looking Statements” on page 1.2 Non-GAAP measure – See Appendix for the definition.
Discretionary free cash flowReconciliation of Non-GAAP Financial Measure (Unaudited) 35 1 Discretionary free cash flow is defined as net cash provided by operating activities less payments for maintenance capital expenditures. Management uses free cash flow to help assess the cash generation ability of the company and funds available for investing activities, such as acquisitions, investing in the business to drive growth, and financing activities, including debt payments and share repurchases. Free cash flow does not represent cash available only for discretionary expenditures, since the Company has mandatory debt service requirements and other contractual and non-discretionary expenditures. In addition, free cash flow may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded. 2 Maintenance capital expenditures consists of non-discretionary capital expenditures for purposes of replacing or maintaining current assets or that are essential in nature for health, safety or environmental purposes.
For more information:www.clearwaterpaper.com 36
Exhibit 99.3
Clearwater Paper Announces Second Tissue Machine and Converting Facility in Shelby, North Carolina
SPOKANE, Wash.--(BUSINESS WIRE)--February 8, 2017--Clearwater Paper Corporation (NYSE:CLW) today announced plans to build a new tissue machine and related converting equipment for producing premium and ultra-premium grades of private label tissue products at a site adjacent to the company’s existing facility in Shelby, North Carolina.
“Clearwater Paper’s customers are requiring more premium and ultra-premium products, which we are addressing with the new capacity. These high growth segments have increased 3.5 times faster than the overall tissue market, and we are committed to growing with our strategic customers and positioning ourselves to add new customers,” said Linda K. Massman, president and CEO. “We believe this new capacity will reinforce our leadership in the private label tissue business and will be a significant driver of operating earnings growth while strengthening the quality of our manufacturing assets.”
After an extensive analysis of the anticipated market growth, costs and financial returns of a new paper machine, the company will install a 200-inch Valmet NTT tissue machine and related converting equipment. The new tissue machine will produce a variety of high-quality private label premium and ultra-premium bath, paper towel and napkin products. At full production capacity, the new tissue machine is expected to produce approximately 70,000 tons of tissue products annually.
The estimated cost for the project includes approximately $283 million for the tissue machine, converting equipment and buildings, and approximately $57 million for the purchase and expansion of an existing warehouse that will consolidate all southeastern warehousing in Shelby. Clearwater Paper projects that the construction of the new facility will be completed in early 2019 and fully operational in 2020. Assuming the paper machine is fully sold out, it is expected to contribute an incremental $55 to $65 million of EBITDA based on $38 to $48 million of estimated operating income and approximately $17 million of estimated depreciation. The expected internal rate of return (IRR) for this project is 11 percent.
“Companies like Clearwater Paper know that North Carolina is a wonderful place to do business thanks to our skilled workforce, strong infrastructure and prime location,” said North Carolina Governor Roy Cooper. “We want companies looking to expand to come to North Carolina because there’s no better place to invest and grow.”
“We expect the new tissue facility will be built on time and within budget, consistent with our first Shelby facility that was announced in June 2010 and commenced operations in late 2012. Our experience in Shelby, North Carolina, has been exceptional and we continue to enjoy the region’s outstanding transportation infrastructure, business-friendly community, and overall quality of life,” said Pat Burke, group president. “For those same reasons and a competitive incentive program from the City of Shelby, Cleveland County and the State of North Carolina, we are pleased to announce the company’s newest state-of-the-art tissue machine will be built in Shelby.”
The company expects to fund the project with cash flow from operations and its revolving line of credit. It is expected that capital will be deployed over the next 30 months with approximately one-third deployed in 2017, approximately two thirds in 2018 and any remaining amount in 2019.
Clearwater Paper intends to start construction during the second quarter of this year. Converting and warehouse operations are expected to be completed during the second half of 2018, and the tissue machine is expected to be completed during the first quarter of 2019.
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 STATEMENT
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 initiation and completion of the newly announced tissue manufacturing, converting and warehousing facilities in Shelby, North Carolina, the company's growth strategy and expansion plans, market share, product offerings, production capacity, product demand, customer base, capital costs, incremental EBITDA, operating income, return on the investment, incentives, revenue and operational growth, operating margins, quality of assets and sources and allocation of the capital costs. 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 company's ability to execute on its growth and expansion strategies; unanticipated construction delays involving the company’s planned new tissue manufacturing, converting and warehousing facilities in Shelby, North Carolina; 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; 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 at the company’s newly announced Shelby facility when it becomes operational; changes in the U.S. and international economies and in general economic conditions in the regions and industries in which the company operates; the loss of or changes in prices in regards to a significant customer; the company's ability to successfully implement its operational efficiencies and cost savings strategies; changes in customer product preferences and competitors' product offerings; manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunction and damage to the company's manufacturing facilities; changes in transportation costs and disruptions in transportation services; changes in the cost and availability of wood fiber and wood pulp; labor disruptions; cyclical industry conditions; changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs; environmental liabilities or expenditures; changes in expenses and required contributions associated with the company's pension plans; 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, 2015.
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.
VENDORS AND SUPPLIERS
Commercial inquiries should be directed to: Shelby2@clearwaterpaper.com
CONTACT:
Clearwater Paper Corporation
News media:
Matt Van
Vleet, 509-344-5912
Vice President, Public Affairs
or
Investors:
Robin
S. Yim, 509-344-5906
Vice President, Investor Relations
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