Clearwater Paper Reports Updated Second Quarter Guidance

SPOKANE, Wash.--()--Clearwater Paper Corporation (NYSE: CLW), a premier supplier of quality tissue and bleached paperboard products, today announced a preliminary update to the company’s previous outlook for second quarter 2020 Adjusted EBITDA of $45 to $55 million.

Due to demand, production, and cost trends in April and May that were more favorable than previously anticipated, the company now expects Adjusted EBITDA for the second quarter of 2020 to be in the range of $71 to $77 million. A reconciliation of the updated Adjusted EBITDA outlook range to expected net income for the second quarter of 2020 is included in the table at the end of this press release.

In addition, in connection with its fourth quarter of 2019 earnings call, the company provided its outlook expectations for certain revenue and cost components for the full year of 2020. Due to anticipated performance in the second quarter of 2020, the company now believes that it will, in the aggregate, outperform the previous full-year expectations. The company will provide greater details regarding its performance and results for the second quarter of 2020 on its upcoming earnings call on August 4, 2020.

“We remain focused on two priorities — the health and safety of our employees and continuing to safely operate our facilities to meet the needs of our customers," said Arsen S. Kitch, president and chief executive officer. “Through April and May, we continued to see strong tissue demand with shipments up nearly 30% versus 2019 averages. While order pace is starting to normalize in June, we anticipate that our production in the second quarter will exceed expectations and match increased demand, which would drive an improvement in overall cost structure. In addition, our paperboard business is expected to remain stable in the second quarter, with strength in our core market segments offsetting recessionary impacts,” Kitch concluded.

The company is on track with ramping tissue production at its Shelby, North Carolina expansion, with the paper machine approaching its full run-rate targets. While the company expects to continue to explore the optimization of its pulp assets at the Lewiston, Idaho plant, it now believes that the pulp optimization project will not produce future incremental financial benefits as previously anticipated.

The company intends to continue using free cash flows to pay down debt, either through optional repayments or open market repurchases, including the company’s bank debt, senior notes maturing in 2023 and 2025, or both.

ABOUT CLEARWATER PAPER

Clearwater Paper is a premier supplier of private brand 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 second quarter of 2020 and 2019, including 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 table 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 second quarter 2020 outlook for Adjusted EBITDA, full year outlook expectations for certain revenue and cost components, full year 2020 financial and operational performance, trends in consumer demand, the company’s second quarter 2020 production including the impact of the Shelby expansion, the company’s pulp optimization project at Lewiston, and use of free cash flows. 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 the company’s 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. 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.

For additional information on Clearwater Paper, please visit our website at www.clearwaterpaper.com.

Clearwater Paper Corporation

Reconciliation of Non-GAAP Financial Measure

Adjusted EBITDA1

Unaudited (Dollars in Millions)

 
THREE MONTHS ENDING
JUNE 30, 2020
RANGE OF ESTIMATE
FROM TO
GAAP, Net income

$

21

$

26

Interest expense, net

 

12

 

12

Income tax provision

 

7

 

8

Depreciation and amortization expense

 

28

 

28

Non-operating pension and OPEB costs

 

2

 

2

Other

 

2

 

2

Adjusted EBITDA

$

71

$

77

Above table may not foot due to rounding

 
1Adjusted EBITDA is a non-GAAP measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is net income. Adjusted EBITDA is net earnings (losses) adjusted for net interest expense, income taxes, depreciation and amortization and excludes the impact of items that we do not believe are indicative of our core operating performance.

 

Contacts

Investors
Solebury Trout
Sloan Bohlen
Phone: 509-344-5906
investorinfo@clearwaterpaper.com

News media
Clearwater Paper Corporation
Shannon Myers, Sr. Director, Corporate Communications
Phone: 509-344-5967
shannon.myers@clearwaterpaper.com

Contacts

Investors
Solebury Trout
Sloan Bohlen
Phone: 509-344-5906
investorinfo@clearwaterpaper.com

News media
Clearwater Paper Corporation
Shannon Myers, Sr. Director, Corporate Communications
Phone: 509-344-5967
shannon.myers@clearwaterpaper.com