Clearwater Paper : Earnings Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

• Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

or

• Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from

to

Commission File Number: 001-34146

CLEARWATER PAPER CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	20-3594554
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
601 West Riverside, Suite 1100
Spokane, WA	99201
(Address of principal executive offices)	(Zip Code)

[phone]

(Registrant's telephone number, including area code)

__________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	CLW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this

chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No

¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of shares of common stock of the registrant outstanding as of August 2, 2021 was 16,687,328.

FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this report 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 capital expenditures; product demand and volume; the impact of COVID-19 on our operations; inventory levels; input costs and inflation; major maintenance costs and timing; accounting standards; liquidity; capital expenditures; cash flow; borrowing and credit facilities; credit agreement compliance; disclosure controls, our operations and expectations, timing and costs related to maintenance, and legal proceedings. Words such as "anticipate," "expect," "intend," "plan," "target," "project," "believe," "schedule," "estimate," "may," and similar expressions are intended to identify such forward-looking statements. 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 report. Important factors that could cause or contribute to such differences in operating results include those risks discussed in Item 1A "Risk Factors" in our 2020 Form 10-K, as well as the following:

• impact of the COVID-19 pandemic on our operations, our suppliers' operations and our customer demand;
• competitive pricing pressures for our products, including as a result of increased capacity as additional manufacturing facilities are operated by our competitors and the impact of foreign currency fluctuations on the pricing of products globally;
• 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, financial and other advantages;
• 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 by our expanded Shelby, North Carolina operations;
• consolidation and vertical integration of converting operations in the paperboard industry;
• our ability to successfully implement our operational efficiencies and cost savings strategies, along with related capital projects;
• changes in the U.S. and international economies and in general economic conditions in the regions and industries in which we operate;
• manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunctions and damage to our manufacturing facilities;
• cyber-securityrisks;
• 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 our pension plans;
• environmental liabilities or expenditures;
• reliance on a limited number of third-party suppliers for raw materials;
• our ability to attract, motivate, train and retain qualified and key personnel;
• our substantial indebtedness and ability to service our debt obligations and restrictions on our business from debt covenants and terms;
• negative changes in our credit agency ratings; and
• changes in laws, regulations or industry standards affecting our business.

Forward-looking statements contained in this report present management's views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of management's views to reflect events or circumstances occurring after the date of this report. You are advised, however, to consult any further disclosures we make on related subjects in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the Securities and Exchange Commission, or SEC.

	CLEARWATER PAPER CORPORATION
	Index to Form 10-Q
		Page
		Number
PART I.	FINANCIAL INFORMATION
ITEM 1.	Consolidated Financial Statements
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income (Loss)	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Stockholders' Equity	6
	Notes to Consolidated Financial Statements	8
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	21
ITEM 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	23
ITEM 1A.	Risk Factors	23
ITEM 6.	Exhibits	24
SIGNATURES		25

Part I: Financial Information

ITEM 1. Consolidated Financial Statements

CLEARWATER PAPER CORPORATION

Consolidated Balance Sheets (Unaudited)

(In millions, except share data)

ASSETS

Current assets:

Cash and cash equivalents

Receivables, net of allowance for current expected credit losses of $1.5 and $1.6 at June 30, 2021 and December 31, 2020

Inventories

Other current assets

Total current assets

Property, plant and equipment, net

Operating lease right-of-use assets

Goodwill and intangible assets, net

Other assets, net

TOTAL ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

Accounts payable and accrued liabilities

Total current liabilities

Long-term debt

Liability for pension and other postretirement employee benefits

Deferred tax liabilities and other long-term obligations

TOTAL LIABILITIES

Stockholders' equity:

Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued

Common stock, par value $0.0001 per share, 100,000,000 authorized shares, 16,685,836 and 16,573,246 shares issued

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss, net of tax

TOTAL STOCKHOLDERS' EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

	June 30, 2021		December 31, 2020
$	60.9	$	35.9
	144.0		160.6
	282.9		263.3
	10.8		15.2
	498.6		474.9
	1,124.5		1,191.5
	58.1		63.5
	47.3		48.8
	22.4		21.7
$	1,750.9	$	1,800.4

$	1.7		$	1.7
	254.1			243.1
	255.9			244.8
	716.2			716.4
	78.5			80.5
	212.3			237.6
	1,262.9			1,279.3
	-			-
	-			-
	19.3			16.6
	519.2			558.8
	(50.5)			(54.3)
	488.1			521.1
$	1,750.9		$	1,800.4

See accompanying Notes to the Consolidated Financial Statements.

2

CLEARWATER PAPER CORPORATION

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,
(In millions, except per-share data)	2021	2020

Six Months Ended June 30,

20212020

Net sales

Costs and expenses:

Cost of sales

Selling, general and administrative expenses Other operating charges, net

Total operating costs and expenses

Income (loss) from operations

Interest expense, net

Other non-operating expense

Debt retirement costs

Total non-operating expense

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Net income (loss) per common share: Basic

Diluted

$	406.4	$	480.6	$
	392.2		396.7
	26.3		32.6
	44.5		3.0
	463.0		432.4
	(56.6)		48.2
	(9.3)		(12.0)
	(2.5)		(2.0)
	-		(1.0)
	(11.8)		(14.9)
	(68.4)		33.2
	(16.7)		10.4
$	(51.6)	$	22.8	$
$	(3.10)	$	1.37	$
	(3.10)		1.36

832.3			$	958.5
762.8
			819.7
54.1				60.1
44.9				11.6
861.8				891.4
(29.5)				67.0
(18.6)				(24.9)
(5.0)				(3.8)
-				(1.0)
(23.6)				(29.6)
(53.1)				37.3
(13.5)				4.2
(39.6)			$	33.1
(2.37)			$	2.00
(2.37)				1.99

Average shares of common stock used to compute net income per share:

(in thousands)
Basic	16,685		16,594
Diluted	16,685		16,686

See accompanying Notes to the Consolidated Financial Statements.

3

16,678	16,575
16,678	16,644