Clearwater Paper Corporation (NYSE:CLW) today reported financial
results for the second quarter of 2011.
The company reported net earnings of $13.9 million, or $1.17 per
diluted share, for the second quarter of 2011, compared to net
earnings of $20.6 million, or $1.75 per diluted share, for the
second quarter of 2010. The second quarter 2011 earnings before
interest, taxes, depreciation and amortization, or EBITDA, was
$52.4 million, compared to $49.2 million in the second quarter of
2010. EBITDA in the second quarter of 2011 includes $9.1 million of
Cellu Tissue integration-related expenses and tissue expansion
costs related to Shelby.
Clearwater Paper acquired Cellu Tissue Holdings, Inc. on
December 27, 2010. The second quarter of 2011 includes Cellu
Tissue’s results, which is the primary reason for many of the
variances on a year-over-year basis.
“Second quarter results were solid after considering the
significant cost pressures for many of our inputs,” said Gordon
Jones, chairman, president and chief executive officer. “We
continue to make good progress on integrating Cellu Tissue and on
increasing the value we expect this acquisition to bring to
Clearwater Paper. As a result, we are pleased to increase our
estimated net annual synergies from $15-$20 million to $35-$40
million, expected to be achieved by the end of 2012.
“Additionally, we recently celebrated the grand opening of our
converting and distribution facility at Shelby, North Carolina,
with the start-up of the first two converting lines,” added
Jones.
The company also separately announced today a 2-for-1 stock
split in the form of a stock dividend and the Board of Director’s
approval of a $30 million stock repurchase program.
SECOND QUARTER 2011 SEGMENT PERFORMANCE
Consumer Products
Net sales in the Consumer Products segment were $269.1 million
for the second quarter of 2011, as compared to second quarter 2010
net sales of $145.4 million. The increase in net sales was
primarily attributable to the inclusion of Cellu Tissue's operating
results for the full quarter. Operating income for the second
quarter of 2011 was $6.9 million, compared with operating income of
$25.6 million for the second quarter of 2010. The decrease in
operating income was primarily the result of increased operating
costs, including $9.1 million of integration-related expenses and
Shelby expansion costs, as well as $1.1 million in depreciation and
amortization expense associated with acquisition accounting.
- Tissue volume increased to 128,762 tons
in the second quarter of 2011, as compared to 55,486 tons in the
second quarter of 2010, with the increase primarily attributable to
the addition of Cellu Tissue volumes. Including Cellu Tissue in our
second quarter 2010 results would have resulted in pro forma volume
of 138,065 tons. The decrease in pro forma tons sold by the
combined company was primarily due to converting more parent rolls
into finished cases, which results in a yield loss associated with
the process of manufacturing finished cases.
- Net selling prices decreased to $2,088
per ton in the second quarter of 2011 versus $2,620 in the second
quarter of 2010, due primarily to the inclusion of Cellu Tissue
products in the total product mix for the 2011 period. Cellu
Tissue’s operations had a broader range of products and tissue
grades than the legacy Clearwater Paper facilities. On a pro forma
basis, net selling prices were $2,026 in the second quarter of
2010.
- Operating costs were comparatively
higher in all categories as a result of the inclusion of Cellu
Tissue’s operations in our results. Cost increases that had the
biggest impact on the decline in operating income were salaries and
wages associated with our Shelby expansion, relocation and
severance costs associated with the acquisition of Cellu Tissue and
retroactive pay related to labor contracts. In addition, we saw
higher costs in packaging supplies, transportation due to higher
oil prices, pulp, depreciation and amortization due to acquisition
accounting and additional repair and maintenance expense associated
with the Cellu Tissue facilities.
Pulp and Paperboard
Net sales of $225.5 million for the second quarter of 2011 were
up 13.6%, compared to second quarter 2010 net sales of $198.5
million. Operating income for the quarter rose to $34.5 million,
compared to $22.7 million for the second quarter of 2010.
- Higher net sales for the quarter were
driven by a 10.4% increase in paperboard pricing and a 7.3%
increase in paperboard volumes to 201,991 tons, compared to the
second quarter of 2010.
- The increase in net sales was partially
offset by an 8.4% decline in external pulp pricing to $718 per ton
and a 16.3% decline in external pulp volumes to 11,140 tons,
largely due to increased internal consumption of pulp.
- No major maintenance expense was
included in either second quarter 2011 or 2010.
Taxes
The actual income tax rate for the second quarter of 2011 was
38.3%, compared to an actual rate of 38.0% for the second quarter
of 2010. The estimated annual effective tax rate for 2011, without
discrete items, is expected to be approximately 35.2%.
Note Regarding Use of Non-GAAP Financial
Measure
In this press release, the company presents its results for the
second quarter of 2011 and 2010, including EBITDA. The EBITDA
amounts are not in accordance with generally accepted accounting
principles (GAAP) and accordingly a reconciliation of EBITDA to net
earnings determined in accordance with GAAP is included at the end
of this press release.
CONFERENCE CALL INFORMATION
A live audio webcast and conference call will be held today,
Thursday, July 28, 2011 at 8 a.m. Pacific time (11 a.m. Eastern
time). Investors may access the conference call by dialing
877-303-9241 (for U.S./Canada investors) or 760-666-3575 (for
international investors). The audio webcast may be accessed on the
company's website at http://ir.clearwaterpaper.com/events.cfm. An
accompanying presentation including supplemental information will
be available for downloading at the same site at 7 a.m. Pacific
time (10:00 a.m. Eastern time). The webcast will be audio only.
Investors are recommended to download the accompanying presentation
prior to the call.
For those unable to participate in the call, an archived
recording will be available through the Clearwater Paper
Corporation website www.clearwaterpaper.com under "Investor
Relations" following the conference call.
ABOUT CLEARWATER PAPER
Clearwater Paper manufactures quality consumer tissue,
away-from-home tissue, parent roll tissue, machine glazed
tissue, bleached paperboard, pulp and wood products at 15
manufacturing locations in the U.S. and Canada. The company is a
premier supplier of private label tissue to major retailers and
wholesale distributors, which include grocery, drug, mass merchants
and discount stores. The company also produces bleached paperboard
used by quality-conscious printers and packaging converters.
Clearwater Paper's more than 4,000 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 the integration
of Cellu Tissue, our estimated net annual synergies relating to the
acquisition of Cellu Tissue, the stock split, the stock repurchase
program, expected results and the company’s estimated tax rate.
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, fluctuations and
volatility in the company’s stock price; risks and uncertainties
arising from difficulties with the integration process or the
realization of the benefits expected from the acquisition of Cellu
Tissue; the company's ability to complete its new facilities;
customers' product preferences; market acceptance of product price
increases and competitive pricing pressure for the company's
products; changes in the United States and international economies;
changes in raw material and energy costs; cyclical industry
conditions; loss of a large customer; changes in the Alternative
Fuel Mixture Tax Credit or Cellulosic Biofuel Producer Credit
regulations and the company's eligibility for such tax credits;
changes in transportation costs and disruptions in transportation
services; unanticipated manufacturing disruptions; changes in
general and industry-specific laws and regulations; unforeseen
environmental liabilities or expenditures; labor disruptions; and
other risks and uncertainties described from time to time in the
company's public filings with the Securities and Exchange
Commission. 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.
Clearwater Paper Corporation Condensed Consolidated
Statements of Operations Unaudited (Dollars in thousands - except
per-share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2011
2010 2011
2010
Net sales $ 494,627 100%
$ 343,860 100% $
960,457 100% $
674,481 100% Costs and expenses: Cost of sales
(433,358) 88% (286,415) 83% (848,278) 88% (588,379) 87% Selling,
general and administrative expenses
(27,476) 6%
(20,145) 6% (54,840) 6%
(38,238) 6%
Total operating costs and expenses
(460,834) 93%
(306,560) 89% (903,118)
94% (626,617)
93% Income from operations 33,793 7% 37,300 11%
57,339 6% 47,864 7% Interest expense, net (10,992) 2% (4,132) 1%
(22,325) 2% (8,417) 1% Other, net
(229)
- (705)
-
Earnings before income taxes 22,572 5% 33,168 10% 34,309 4%
39,447 6% Income tax provision
(8,649) 2%
(12,600) 4% (14,782) 2%
(18,421) 3% Net
earnings $ 13,923 3%
$ 20,568 6% $
19,527 2% $ 21,026
3% Net earnings per common share: Basic $ 1.21 $ 1.79
$ 1.70 $ 1.83 Diluted 1.17 1.75 1.65 1.78 Average shares
outstanding (in thousands): Basic 11,519 11,478 11,516 11,468
Diluted 11,854
11,777
11,855
11,786
Clearwater Paper Corporation Condensed Consolidated Balance
Sheets Unaudited (Dollars in thousands)
June 30, December 31,
2011
2010 ASSETS Current
assets: Cash $ 34,476 $ 18,928 Restricted cash 1,656 3,637
Short-term investments 92,000 126,095 Receivables, net 182,002
153,335 Taxes receivable 12,157 10,354 Inventories 223,604 228,321
Deferred tax assets 40,915 37,374 Prepaid expenses
9,177
11,415 Total current assets 595,987 589,459
Property, plant and equipment, net 696,836 654,456 Goodwill
229,533 229,533 Intangible assets, net 53,000 56,400 Other assets
13,505
15,488
$ 1,588,861
$ 1,545,336 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable and accrued liabilities $
183,226 $ 184,604 Current liability for pensions and other
postretirement employee benefits 9,749 9,749 Current portion of
long-term debt 15,215
760 Total current
liabilities 208,190 195,113 Long-term debt, net of current
portion 523,583 538,314 Liability for pensions and other
postretirement employee benefits 180,405 187,116 Other long-term
obligations 35,133 23,369 Accrued taxes 73,373 72,011 Deferred tax
liabilities 75,454 61,064 Accumulated other comprehensive loss, net
of tax (94,806 ) (98,352 ) Stockholders' equity, excluding
accumulated other comprehensive loss, net of tax
587,529
566,701 $
1,588,861 $ 1,545,336
Clearwater Paper Corporation Segment
Information Unaudited (Dollars in thousands)
Three Months Ended
Six Months Ended June 30, June 30,
2011
2010 (1)
2011
2010 (1)
Segment net sales: Consumer Products $ 269,118
54 % $ 145,373 42 % $ 538,370 56 % $ 283,196 42 % Pulp and
Paperboard 225,509
46 %
198,487 58 % 422,087
44 % 391,285
58 % Total segment net sales
$ 494,627 100 %
$ 343,860 100 % $
960,457 100 %
$ 674,481 100 % Operating income
(loss): Consumer Products $ 6,868 20 % $ 25,643 69 % $ 20,683 36 %
$ 51,630 108 % Pulp and Paperboard
34,456 102 %
22,660 61 %
50,104 87 %
14,743 31 % 41,324 48,303 70,787 66,373
Corporate and eliminations
(7,531 ) -22 %
(11,003 ) -29 % (13,448 )
-23 % (18,509 )
-39 % Income from operations
$ 33,793 100 %
$ 37,300 100 % $
57,339 100 %
$ 47,864 100 %
(1) Prior period net sales and segment
operating income have been adjusted to reflect our change in
accounting for intersegment pulp transfers. Commencing January 1,
2011, rather than recording the intersegment transfer of pulp
through net sales, the costs of pulp are transferred from the Pulp
and Paperboard segment to the Consumer Products segment.
Clearwater Paper Corporation Reconciliation of Consolidated
Net Earnings to EBITDA Unaudited (Dollars in thousands)
Three Months Ended Six Months Ended June 30, June 30,
2011
2010 2011
2010 Net earnings $ 13,923 $ 20,568 $
19,527 $ 21,026 Add back: Interest expense, net 10,992 4,132 22,325
8,417 Income tax provision 8,649 12,600 14,782 18,421 Depreciation
and amortization
18,870 11,861
37,539 23,727 EBITDA
$ 52,434
$ 49,161 $ 94,173
$ 71,591
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