ý
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
¨
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Delaware
|
|
20-3594554
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
601 West Riverside, Suite 1100
Spokane, Washington
|
|
99201
|
(Address of principal executive offices)
|
|
(Zip Code)
|
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
|
Large accelerated filer
|
¨
|
|
Accelerated filer
|
ý
|
Non-accelerated filer
|
¨
|
|
Smaller reporting company
|
¨
|
|
|
|
Emerging growth company
|
¨
|
•
|
impact of COVID-19 on our operations, our supplier's 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 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, and achieve the expected operational or financial results of those projects, including from the continuous digester at our Lewiston, Idaho facility;
|
•
|
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-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 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;
|
•
|
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.
|
|
|
|
|
|
Page
Number
|
|
|
|
PART I.
|
FINANCIAL INFORMATION
|
|
|
|
|
ITEM 1.
|
Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 2.
|
||
|
|
|
ITEM 3.
|
||
|
|
|
ITEM 4.
|
||
|
|
|
PART II.
|
OTHER INFORMATION
|
|
|
|
|
ITEM 1.
|
||
|
|
|
ITEM 1A.
|
||
|
|
|
ITEM 6.
|
||
|
|
|
ITEM 1.
|
Consolidated Financial Statements
|
(In millions, except share data)
|
March 31,
2020 |
|
December 31,
2019 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
60.8
|
|
|
$
|
20.0
|
|
Restricted cash
|
—
|
|
|
1.4
|
|
||
Receivables, net
|
207.1
|
|
|
159.4
|
|
||
Inventories
|
240.5
|
|
|
281.4
|
|
||
Other current assets
|
12.6
|
|
|
3.6
|
|
||
Total current assets
|
520.9
|
|
|
465.8
|
|
||
Property, plant and equipment, net
|
1,235.5
|
|
|
1,257.7
|
|
||
Operating lease right-of-use assets
|
70.4
|
|
|
73.1
|
|
||
Goodwill and intangible assets, net
|
51.2
|
|
|
52.0
|
|
||
Other assets, net
|
18.8
|
|
|
29.1
|
|
||
TOTAL ASSETS
|
$
|
1,896.8
|
|
|
$
|
1,877.7
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Short-term debt
|
$
|
58.1
|
|
|
$
|
17.9
|
|
Trade payables
|
146.8
|
|
|
158.2
|
|
||
Accrued compensation
|
34.1
|
|
|
45.0
|
|
||
Other accrued liabilities
|
51.4
|
|
|
59.3
|
|
||
Total current liabilities
|
290.4
|
|
|
280.4
|
|
||
Long-term debt
|
883.9
|
|
|
884.5
|
|
||
Long-term operating lease liabilities
|
62.7
|
|
|
65.6
|
|
||
Liability for pension and other postretirement employee benefits
|
75.3
|
|
|
76.6
|
|
||
Other long-term obligations
|
16.2
|
|
|
17.3
|
|
||
Deferred tax liabilities
|
123.6
|
|
|
121.3
|
|
||
TOTAL LIABILITIES
|
1,452.1
|
|
|
1,445.7
|
|
||
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,
16,569,442 and 16,515,813 shares issued
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
10.4
|
|
|
9.8
|
|
||
Retained earnings
|
492.1
|
|
|
481.7
|
|
||
Accumulated other comprehensive loss, net of tax
|
(57.7
|
)
|
|
(59.5
|
)
|
||
TOTAL STOCKHOLDERS' EQUITY
|
444.8
|
|
|
432.0
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
1,896.8
|
|
|
$
|
1,877.7
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions, except per-share data)
|
2020
|
|
2019
|
||||
Net sales
|
$
|
477.9
|
|
|
$
|
428.8
|
|
Costs and expenses:
|
|
|
|
||||
Cost of sales
|
423.0
|
|
|
384.3
|
|
||
Selling, general and administrative expenses
|
27.5
|
|
|
30.4
|
|
||
Other operating charges, net
|
8.6
|
|
|
(0.3
|
)
|
||
Total operating costs and expenses
|
459.1
|
|
|
414.4
|
|
||
Income from operations
|
18.8
|
|
|
14.4
|
|
||
Interest expense, net
|
(12.8
|
)
|
|
(8.6
|
)
|
||
Other non-operating expense
|
(1.9
|
)
|
|
(1.3
|
)
|
||
Total non-operating expense
|
(14.7
|
)
|
|
(9.9
|
)
|
||
Income before income taxes
|
4.1
|
|
|
4.5
|
|
||
Income tax provision (benefit)
|
(6.2
|
)
|
|
0.7
|
|
||
Net income
|
$
|
10.3
|
|
|
$
|
3.8
|
|
|
|
|
|
||||
Net income per common share:
|
|
|
|
||||
Basic
|
$
|
0.62
|
|
|
$
|
0.23
|
|
Diluted
|
0.62
|
|
|
0.23
|
|
||
|
|
|
|
||||
Average shares of common stock used to compute net income
per share: (in thousands) |
|
|
|
||||
Basic
|
16,555
|
|
|
16,516
|
|
||
Diluted
|
16,615
|
|
|
16,563
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
Net income
|
$
|
10.3
|
|
|
$
|
3.8
|
|
Other comprehensive income:
|
|
|
|
||||
Defined benefit pension and other postretirement employee benefits:
|
|
|
|
||||
Amortization of actuarial loss included in net periodic cost,
net of tax of $0.6 and $0.5
|
1.8
|
|
|
1.2
|
|
||
Other comprehensive income, net of tax
|
1.8
|
|
|
1.2
|
|
||
Comprehensive income
|
$
|
12.1
|
|
|
$
|
5.0
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
||||
Net income
|
$
|
10.3
|
|
|
$
|
3.8
|
|
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
28.0
|
|
|
25.8
|
|
||
Stock-based compensation expense
|
1.5
|
|
|
0.8
|
|
||
Deferred taxes
|
1.8
|
|
|
0.9
|
|
||
Pension and other post retirement employment benefits
|
0.8
|
|
|
—
|
|
||
Gain on divested assets
|
(1.4
|
)
|
|
—
|
|
||
Other non-cash activity, net
|
0.9
|
|
|
(0.6
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Increase in accounts receivable
|
(37.3
|
)
|
|
(23.1
|
)
|
||
(Increase) decrease in inventory
|
40.9
|
|
|
(21.6
|
)
|
||
Increase in other current assets
|
(9.0
|
)
|
|
(8.8
|
)
|
||
Increase (decrease) in trade payables
|
(13.0
|
)
|
|
(10.8
|
)
|
||
Decrease in accrued compensation
|
(10.9
|
)
|
|
(11.9
|
)
|
||
Decrease in other accrued liabilities
|
(0.1
|
)
|
|
13.5
|
|
||
Other, net
|
(0.5
|
)
|
|
2.6
|
|
||
Net cash flows provided by (used in) operating activities
|
12.1
|
|
|
(29.4
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Additions to property, plant and equipment
|
(10.5
|
)
|
|
(71.6
|
)
|
||
Net cash flows used in investing activities
|
(10.5
|
)
|
|
(71.6
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Borrowings of short-term debt
|
88.5
|
|
|
290.4
|
|
||
Repayments of short-term debt
|
(48.8
|
)
|
|
(199.0
|
)
|
||
Repayments of long-term debt
|
(1.1
|
)
|
|
—
|
|
||
Other, net
|
(0.8
|
)
|
|
(0.7
|
)
|
||
Net cash flows provided by financing activities
|
37.8
|
|
|
90.7
|
|
||
Increase (decrease) in cash, cash equivalents and restricted cash
|
39.4
|
|
|
(10.3
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
22.4
|
|
|
24.9
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
61.8
|
|
|
$
|
14.6
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
||||
Cash paid for interest, net of amounts capitalized
|
$
|
19.2
|
|
|
$
|
15.1
|
|
Cash received from refunds, net of amounts paid for income taxes
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
|
|
|
|
||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
|
|
|
||||
Cash and cash equivalents
|
$
|
60.8
|
|
|
$
|
12.2
|
|
Restricted cash
|
—
|
|
|
1.4
|
|
||
Restricted cash included in Other assets, net
|
1.0
|
|
|
1.0
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
61.8
|
|
|
$
|
14.6
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|||||||||||||
(In millions, except share amounts which are in thousands)
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance at December 31, 2018
|
16,482
|
|
|
$
|
—
|
|
|
$
|
6.4
|
|
|
$
|
487.3
|
|
|
$
|
(67.3
|
)
|
|
$
|
426.4
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
3.8
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|||||
Issuance of shares under stock plans
|
33
|
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|||||
Pension and other postretirement employee benefit plans,
net of tax of $0.5
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
1.2
|
|
|||||
Balance at March 31, 2019
|
16,515
|
|
|
$
|
—
|
|
|
$
|
7.2
|
|
|
$
|
491.1
|
|
|
$
|
(66.1
|
)
|
|
$
|
432.2
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|||||||||||||
(In millions, except share amounts which are in thousands)
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance at December 31, 2019
|
16,515
|
|
|
$
|
—
|
|
|
$
|
9.8
|
|
|
$
|
481.7
|
|
|
$
|
(59.5
|
)
|
|
$
|
432.0
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
10.3
|
|
|
—
|
|
|
10.3
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|||||
Issuance of shares under stock plans
|
54
|
|
|
—
|
|
|
(0.7
|
)
|
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|||||
Pension and other postretirement employee benefit plans,
net of tax of $0.6 |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
1.8
|
|
|||||
Balance at March 31, 2020
|
16,569
|
|
|
$
|
—
|
|
|
$
|
10.4
|
|
|
$
|
492.1
|
|
|
$
|
(57.7
|
)
|
|
$
|
444.8
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Trade accounts receivable
|
$
|
187.2
|
|
|
$
|
157.0
|
|
Allowance for current expected credit losses
|
(1.4
|
)
|
|
(1.5
|
)
|
||
Taxes receivable
|
19.2
|
|
|
0.3
|
|
||
Interest receivable
|
—
|
|
|
1.0
|
|
||
Other
|
2.0
|
|
|
2.6
|
|
||
|
$
|
207.1
|
|
|
$
|
159.4
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Logs, pulpwood, chips and sawdust
|
$
|
13.3
|
|
|
$
|
19.4
|
|
Materials and supplies
|
94.1
|
|
|
93.1
|
|
||
Pulp, paperboard and tissue products
|
133.1
|
|
|
168.9
|
|
||
|
$
|
240.5
|
|
|
$
|
281.4
|
|
Lease expense
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Operating lease costs
|
$
|
3.9
|
|
|
$
|
3.5
|
|
Finance lease costs:
|
|
|
|
||||
Amortization of right-of-use assets
|
0.4
|
|
|
0.4
|
|
||
Interest on lease liabilities
|
0.5
|
|
|
0.5
|
|
||
Total finance lease costs
|
0.9
|
|
|
0.9
|
|
||
Variable lease costs
|
0.4
|
|
|
0.2
|
|
||
Total lease costs
|
$
|
5.2
|
|
|
$
|
4.6
|
|
Supplemental cash flow information
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
||||
Operating cash flows from operating leases
|
$
|
4.4
|
|
|
$
|
4.1
|
|
Operating cash flows from finance leases
|
0.5
|
|
|
0.5
|
|
||
Financing cash flows from finance leases
|
0.3
|
|
|
0.3
|
|
||
|
|
|
|
||||
Non-cash amounts for lease liabilities arising from obtaining right-of-use assets:
|
|
|
|
||||
Operating leases
|
$
|
0.6
|
|
|
$
|
0.1
|
|
Finance leases
|
0.3
|
|
|
0.5
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Interest Rate at
March 31, 2020
|
|
Principal
|
|
Unamortized Debt Costs
|
|
Total
|
|
Principal
|
|
Unamortized Debt Costs
|
|
Total
|
||||||||||||
Term loan maturing 2026,
variable interest rate
|
4.3%
|
|
$
|
299.3
|
|
|
$
|
(5.0
|
)
|
|
$
|
294.3
|
|
|
$
|
300.0
|
|
|
$
|
(5.1
|
)
|
|
$
|
294.9
|
|
2013 Notes, maturing 2023,
fixed interest rate
|
4.5%
|
|
275.0
|
|
|
(1.4
|
)
|
|
273.6
|
|
|
275.0
|
|
|
(1.5
|
)
|
|
273.5
|
|
||||||
2014 Notes, maturing 2025,
fixed interest rate
|
5.4%
|
|
300.0
|
|
|
(1.4
|
)
|
|
298.6
|
|
|
300.0
|
|
|
(1.5
|
)
|
|
298.5
|
|
||||||
ABL Credit Agreement,
variable interest rate
|
2.8%
|
|
53.5
|
|
|
—
|
|
|
53.5
|
|
|
13.5
|
|
|
—
|
|
|
13.5
|
|
||||||
Finance leases
|
|
|
22.0
|
|
|
—
|
|
|
22.0
|
|
|
22.0
|
|
|
—
|
|
|
22.0
|
|
||||||
Total debt
|
|
|
949.7
|
|
|
(7.7
|
)
|
|
942.0
|
|
|
910.5
|
|
|
(8.1
|
)
|
|
902.4
|
|
||||||
Less: current portion
|
|
|
(58.1
|
)
|
|
—
|
|
|
(58.1
|
)
|
|
(17.9
|
)
|
|
—
|
|
|
(17.9
|
)
|
||||||
Net long-term portion
|
|
|
$
|
891.6
|
|
|
$
|
(7.7
|
)
|
|
$
|
883.9
|
|
|
$
|
892.6
|
|
|
$
|
(8.1
|
)
|
|
$
|
884.5
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Reorganization expenses
|
$
|
2.8
|
|
|
$
|
—
|
|
Union settlement
|
6.6
|
|
|
—
|
|
||
Gain on divested assets
|
(1.4
|
)
|
|
—
|
|
||
Directors' equity-based compensation expense (benefit)
|
0.2
|
|
|
(0.4
|
)
|
||
Other
|
0.4
|
|
|
0.1
|
|
||
|
$
|
8.6
|
|
|
$
|
(0.3
|
)
|
•
|
expenses of $2.8 million related to reorganization expenses (primarily related to corporate expenses),
|
•
|
expenses of $6.6 million associated with union settlement retroactive wage payments ($2.6 million associated with Consumer Products and $4.0 million associated with Pulp and Paperboard segments),
|
•
|
gain of $1.4 million associated with the Ladysmith Consumer Products facility sale escrow release and
|
•
|
expense of $0.2 million relating to directors' equity based compensation.
|
•
|
gain of $0.4 million relating to directors' equity based compensation.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Interest expense
|
$
|
(12.2
|
)
|
|
$
|
(11.9
|
)
|
Capitalized interest
|
—
|
|
|
3.4
|
|
||
Amortization of debt issuance costs
|
(0.6
|
)
|
|
(0.5
|
)
|
||
Interest income
|
—
|
|
|
0.4
|
|
||
Interest expense, net
|
$
|
(12.8
|
)
|
|
$
|
(8.6
|
)
|
|
|
|
|
||||
Non-operating pension and other postretirement employee
benefits income (expense)
|
(1.9
|
)
|
|
(1.3
|
)
|
||
Other non-operating expense
|
(1.9
|
)
|
|
$
|
(1.3
|
)
|
|
|
$
|
(14.7
|
)
|
|
$
|
(9.9
|
)
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
Pension Benefit Plans
|
|
Other Postretirement
Employee Benefit Plans
|
||||||||||||
Service cost
|
$
|
0.6
|
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
2.6
|
|
|
3.1
|
|
|
0.6
|
|
|
0.6
|
|
||||
Expected return on plan assets
|
(3.7
|
)
|
|
(4.1
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of actuarial loss (gain)
|
2.4
|
|
|
1.9
|
|
|
—
|
|
|
(0.2
|
)
|
||||
Net periodic cost
|
$
|
1.9
|
|
|
$
|
1.5
|
|
|
$
|
0.6
|
|
|
$
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Pension Plan Adjustments
|
Other Post Retirement Employee Benefit Plan Adjustments
|
Total
|
||||||
Balance at December 31, 2018
|
$
|
(83.0
|
)
|
$
|
15.7
|
|
$
|
(67.3
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
1.4
|
|
(0.2
|
)
|
1.2
|
|
|||
Other comprehensive income, net of tax
|
1.4
|
|
(0.2
|
)
|
1.2
|
|
|||
Balance at March 31, 2019
|
$
|
(81.6
|
)
|
$
|
15.5
|
|
$
|
(66.1
|
)
|
|
|
|
|
||||||
Balance at December 31, 2019
|
$
|
(67.8
|
)
|
$
|
8.3
|
|
$
|
(59.5
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
1.8
|
|
—
|
|
1.8
|
|
|||
Other comprehensive income, net of tax
|
1.8
|
|
—
|
|
1.8
|
|
|||
Balance at March 31, 2020
|
$
|
(66.0
|
)
|
$
|
8.3
|
|
$
|
(57.7
|
)
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Total stock-based compensation expense
(selling, general and administrative and other operating charges, net)
|
$
|
1.5
|
|
|
$
|
0.8
|
|
Income tax benefit related to stock-based compensation
|
$
|
0.4
|
|
|
$
|
0.2
|
|
Impact on cash flow due to taxes paid related to net share settlement of equity awards
|
$
|
0.7
|
|
|
$
|
0.4
|
|
|
Three Months Ended March 31,
|
||||
(In thousands)
|
2020
|
|
2019
|
||
Basic weighted-average common shares outstanding1
|
16,555
|
|
|
16,516
|
|
Incremental shares due to:
|
|
|
|
||
Stock-based awards
|
60
|
|
|
47
|
|
Diluted weighted-average common shares outstanding
|
16,615
|
|
|
16,563
|
|
1
|
Basic weighted-average common shares outstanding includes restricted stock unit awards that are fully vested, but are deferred for future issuance.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Segment net sales:
|
|
|
|
||||
Consumer Products
|
$
|
265.7
|
|
|
$
|
223.4
|
|
Pulp and Paperboard
|
212.2
|
|
|
205.4
|
|
||
Total segment net sales
|
$
|
477.9
|
|
|
$
|
428.8
|
|
|
|
|
|
||||
Operating income (loss):
|
|
|
|
||||
Consumer Products
|
$
|
14.3
|
|
|
$
|
1.3
|
|
Pulp and Paperboard
|
26.5
|
|
|
29.4
|
|
||
Corporate
|
(13.4
|
)
|
|
(16.6
|
)
|
||
Other operating charges, net
|
(8.6
|
)
|
|
$
|
0.3
|
|
|
Income from operations
|
$
|
18.8
|
|
|
$
|
14.4
|
|
ITEM 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
the ability of our suppliers to meet delivery requirements and commitments;
|
•
|
disruptions to our supply chains;
|
•
|
the ability of our employees to perform their work due to illness caused by the pandemic, the complete or partial closure of one or more of our manufacturing facilities, or local, state, or federal orders requiring employees to remain at home;
|
•
|
disruptions or delays in the delivery of our products to customers;
|
•
|
a decrease in demand for our products;
|
•
|
limitations on the ability of our customers to pay us on a timely basis; and
|
•
|
negative impact on some of our customers due to challenging economic conditions.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(In millions)
|
2020
|
|
2019
|
||||
Net income
|
$
|
10.3
|
|
|
$
|
3.8
|
|
Income tax provision (benefit)
|
(6.2
|
)
|
|
0.7
|
|
||
Interest expense, net
|
12.8
|
|
|
8.6
|
|
||
Depreciation and amortization expense
|
28.0
|
|
|
25.8
|
|
||
Other operating charges, net
|
8.6
|
|
|
(0.3
|
)
|
||
Other non-operating expense
|
1.9
|
|
|
1.3
|
|
||
Adjusted EBITDA
|
$
|
55.4
|
|
|
$
|
39.9
|
|
|
|
|
|
||||
Consumer Products segment income
|
$
|
14.3
|
|
|
$
|
1.3
|
|
Depreciation and amortization
|
17.3
|
|
|
14.7
|
|
||
Adjusted EBITDA Consumer Products segment
|
$
|
31.6
|
|
|
$
|
16.0
|
|
|
|
|
|
||||
Pulp and Paperboard segment income
|
$
|
26.5
|
|
|
$
|
29.4
|
|
Depreciation and amortization
|
9.3
|
|
|
9.5
|
|
||
Adjusted EBITDA Pulp and Paperboard segment
|
$
|
35.8
|
|
|
$
|
38.9
|
|
|
|
|
|
||||
Corporate and other expense
|
$
|
(13.4
|
)
|
|
$
|
(16.6
|
)
|
Depreciation and amortization
|
1.4
|
|
|
1.6
|
|
||
Adjusted EBITDA Corporate and other
|
$
|
(12.0
|
)
|
|
$
|
(15.0
|
)
|
|
|
|
|
||||
Consumer Products segment
|
$
|
31.6
|
|
|
$
|
16.0
|
|
Pulp and Paperboard segment
|
35.8
|
|
|
38.9
|
|
||
Corporate and other
|
(12.0
|
)
|
|
(15.0
|
)
|
||
Adjusted EBITDA
|
$
|
55.4
|
|
|
$
|
39.9
|
|
|
Three Months Ended
|
|
|
||||||
|
March 31,
|
|
Increase (decrease)
|
||||||
(Dollars in millions, except per unit)
|
2020
|
2019
|
|
|
|||||
Sales:
|
|
|
|
|
|
||||
Retail tissue
|
$
|
248.0
|
|
$
|
204.6
|
|
|
21.2
|
%
|
Non-retail tissue
|
13.9
|
|
18.5
|
|
|
(24.6
|
)%
|
||
Other
|
3.8
|
|
0.3
|
|
|
nm
|
|
||
|
$
|
265.7
|
|
$
|
223.4
|
|
|
18.9
|
%
|
|
|
|
|
|
|||||
Operating income
|
14.3
|
|
1.3
|
|
|
nm
|
|
||
Operating Margin
|
5.4
|
%
|
0.6
|
%
|
|
|
|||
|
|
|
|
|
|||||
Adjusted EBITDA
|
$
|
31.6
|
|
$
|
16.0
|
|
|
97.5
|
%
|
Adjusted EBITDA Margin
|
11.9
|
%
|
7.2
|
%
|
|
|
|||
|
|
|
|
|
|||||
Shipments (short tons)
|
|
|
|
|
|||||
Retail
|
90,791
|
|
73,356
|
|
|
23.8
|
%
|
||
Non-retail
|
9,002
|
|
10,266
|
|
|
(12.3
|
)%
|
||
|
|
|
|
|
|||||
Sales price (per short ton)
|
|
|
|
|
|||||
Retail
|
$
|
2,732
|
|
$
|
2,789
|
|
|
(2.0
|
)%
|
Non-retail
|
1,548
|
|
1,799
|
|
|
(14.0
|
)%
|
|
Three Months Ended
|
|
|
||||||
|
March 31,
|
|
Increase (decrease)
|
||||||
(Dollars in millions - except per ton amounts)
|
2020
|
2019
|
|
|
|||||
Sales:
|
|
|
|
|
|||||
Paperboard
|
$
|
211.0
|
|
$
|
203.0
|
|
|
3.9
|
%
|
Other
|
1.2
|
|
2.4
|
|
|
(50.9
|
)%
|
||
|
$
|
212.2
|
|
$
|
205.4
|
|
|
3.3
|
%
|
|
|
|
|
|
|||||
Operating income
|
26.5
|
|
29.4
|
|
|
(9.9
|
)%
|
||
Operating margin
|
12.5
|
%
|
14.3
|
%
|
|
|
|||
|
|
|
|
|
|||||
Adjusted EBITDA
|
$
|
35.8
|
|
$
|
38.9
|
|
|
(8.1
|
)%
|
Adjusted EBITDA Margin
|
16.9
|
%
|
18.9
|
%
|
|
|
|||
|
|
|
|
|
|||||
Shipments (short tons)
|
211,296
|
|
202,834
|
|
|
4.2
|
%
|
||
Sales price (per short tons)
|
$
|
999
|
|
$
|
1,001
|
|
|
(0.2
|
)%
|
ITEM 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
ITEM 4.
|
Controls and Procedures
|
ITEM 1.
|
Legal Proceedings
|
ITEM 1A.
|
Risk Factors
|
•
|
the complete or partial closure of one or more of our manufacturing facilities;
|
•
|
limitations on our ability to operate our business as a result of any federal, state or local regulations, including any changes to the designation of our business as “essential” by the US Department of Homeland Security;
|
•
|
disruptions to international trade, or further restrictions or prohibitions on international travel, on which we rely to make our products (for example, an interruption in eucalyptus pulp from Brazil or lack of availability for spare parts or technical support from European suppliers of our production and converting equipment);
|
•
|
a decrease in demand for our products as a result of a prolonged economic downturn or global recession (for example, during previous, extreme recessionary periods in the U.S., we experienced significant declines in demand for our paperboard used in folding carton, cup and liquid packaging applications);
|
•
|
the interruption of our distribution system or delays in the delivery of our products;
|
•
|
temporary or long-term disruption in our supply chains (for example, governmental restrictions on construction and the resulting decline in lumber production could result in a decline in the availability of wood residuals);
|
•
|
volatility related to pension plan assets (for example, we may need to make additional contributions to address an increase in obligations and/or a loss in plan assets as a result of the combination of declining market interest rates and/or past or future plan asset investment losses);
|
•
|
significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future;
|
•
|
a decline in our ability to collect on accounts receivable, which could materially affect our liquidity;
|
•
|
bankruptcy of customers that leads to a decrease in demand for our products;
|
•
|
the loss of our management team and employee base that possess unique technical skills for the execution of our business plan; and
|
•
|
an interruption in processing or an inability to process accounts payable by our third-party processor, which could result in our suppliers and vendors withholding supplies or services.
|
ITEM 2.
|
Unregistered Sale of Equity Securities
|
ITEM 3.
|
Defaults Upon Senior Securities
|
ITEM 4.
|
Mine Safety Disclosures
|
ITEM 5.
|
Other Information
|
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
31
|
|
|
|
|
|
32**
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase.
|
*
|
Incorporated by reference.
|
|
|
**
|
In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.
|
|
|
|
|
|
|
|
|
CLEARWATER PAPER CORPORATION
|
|
|
|
|
(Registrant)
|
|
|
|
|
||
|
|
|
|
|
May 5, 2020
|
|
|
By:
|
/s/ ARSEN S. KITCH
|
|
|
|
|
Arsen S. Kitch
|
|
|
|
|
President, Chief Executive Officer and Director (Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
May 5, 2020
|
|
|
By:
|
/s/ MICHAEL J. MURPHY
|
|
|
|
|
Michael J. Murphy
|
|
|
|
|
Senior Vice President, Finance and Chief Financial Officer (Principal Financial Officer)
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1.
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Inconsistency in Credit Agreement.
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2.
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Amendment to Credit Agreement.
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1.
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I have reviewed this report on Form 10-Q of Clearwater Paper Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 5, 2020
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/s/ Arsen S. Kitch
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Arsen S. Kitch
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President and Chief Executive Officer
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1.
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I have reviewed this report on Form 10-Q of Clearwater Paper Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 5, 2020
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/s/ MICHAEL J. MURPHY
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Michael J. Murphy
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Senior Vice President, Finance and Chief Financial Officer
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(1)
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the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
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(2)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ ARSEN S. KITCH
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Arsen S. Kitch
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President and Chief Executive Officer
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May 5, 2020
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(1)
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the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
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(2)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ MICHAEL J. MURPHY
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Michael J. Murphy
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Senior Vice President, Finance and Chief Financial Officer
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May 5, 2020
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