Clearwater Paper Reports Fourth Quarter and Full Year 2017 Results
Clearwater Paper Corporation (NYSE:CLW) reported financial results for the fourth quarter and full year of 2017.
The company reported net sales of $436.7 million for the fourth quarter of 2017, up 2.6% compared to net sales of $425.6 million for the fourth quarter of 2016. Net earnings determined in accordance with generally accepted accounting principles, or GAAP, for the fourth quarter of 2017 were $80.9 million, or $4.88 per diluted share, compared to net earnings for the fourth quarter of 2016 of $9.3 million, or $0.56 per diluted share. The increase in net earnings primarily consisted of a benefit related to recent tax law changes. Excluding this tax benefit and certain other non-core items identified in the attached Reconciliation of Non-GAAP Financial Measures, fourth quarter 2017 adjusted net earnings were $14.4 million, or $0.87 per diluted share, compared to fourth quarter 2016 adjusted net earnings of $13.8 million, or $0.82 per diluted share.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, were $52.2 million for the fourth quarter of 2017 compared to $49.3 million for the fourth quarter of 2016. Adjusted EBITDA for the quarter was $57.5 million, up 6.3% compared to fourth quarter 2016 Adjusted EBITDA of $54.1 million. The $3.4 million increase in Adjusted EBITDA in the fourth quarter of 2017 was primarily a result of higher paperboard pricing and volumes, improved consumer product mix, and lower general maintenance costs. Additional factors for the increase included lower wage and benefits expense resulting from warehouse automation projects at several of the company's facilities, the shutdown of two higher cost tissue machines at the company's Neenah, Wisconsin mill at the end of 2016 and the closure of the company's Oklahoma City converting facility in March 2017. These factors were partially offset by lower non-retail tissue shipment volumes and higher input costs for pulp, transportation and energy.
"We had a strong finish to 2017 due to improved operating efficiencies resulting from the completion of our three-year strategic capital projects, including warehouse automation and the continuous pulp digester at our Lewiston, Idaho mill,” said Linda K. Massman, president and chief executive officer. "We also had increased paperboard sales and shipments and ultra-quality tissue sales, partially offset by very competitive market conditions in the retail industry and higher transportation costs.
"Throughout 2018, we will remain focused on efforts to increase our margins and ultimately cash flow to build a solid foundation for our long-term success and create shareholder value," said Massman. "Our efforts include the vital work of realigning portions of our company in both tissue and paperboard, and investing in our business to meet customer needs as reflected in the ongoing investment in our Shelby, North Carolina facility."
FOURTH QUARTER2017SEGMENT PERFORMANCE
Net sales in the Consumer Products segment were $234.7 million for the fourth quarter of 2017, down 3.1% compared to fourth quarter 2016 net sales of $242.1 million. This decrease was due primarily to lower parent roll sales resulting from the shutdown of the two higher cost paper machines at the Neenah, Wisconsin mill at the end of 2016 and a 3.3% decrease in retail tons sold in the fourth quarter of 2017.
Operating income and margin for the fourth quarter of 2017 decreased to $7.5 million and 3.2%, compared to $13.8 million and 5.7%, respectively, in the fourth quarter of 2016. After adjusting for certain non-core items identified in the attached Reconciliation of Non-GAAP Financial Measures, adjusted operating income and margin of $11.4 million and 4.9% for the fourth quarter of 2017 were down from $17.0 million and 7.0% for the same period in 2016. Adjusted EBITDA for the segment decreased from $32.0 million in the fourth quarter of 2016 to $25.8 million in the fourth quarter of 2017. These decreases were due to higher input costs for external pulp, transportation and packaging supplies with partial offsets from lower maintenance costs as well as lower labor costs due to the implementation of warehouse automation and the previously mentioned paper machine shutdowns at the Neenah mill and facility closure in Oklahoma City.
Tissue Sales Volumes and Prices:
-Total tissue sales volumes of 87,313 tons in the fourth quarter of 2017 decreased by 9.9% and converted product cases shipped were 12.7 million, down 1.7%, each compared to the fourth quarter of 2016.
-Average tissue net selling prices increased 6.2% or $155 per ton in the fourth quarter of 2017, compared to the fourth quarter of 2016, due to improved product mix.
Pulp and Paperboard
Net sales in the Pulp and Paperboard segment were $202.1 million for the fourth quarter of 2017, up 10.2% compared to fourth quarter 2016 net sales of $183.4 million. The increase was primarily due to higher paperboard prices and shipment volume, including sales from the operations of Manchester Industries acquired in December 2016.
Operating income for the fourth quarter of 2017 increased $7.0 million to $34.6 million, compared to operating income of $27.6 million for the fourth quarter of 2016. Pulp and paperboard's operating margin increased to 17.1% in the fourth quarter of 2017 from 15.0% in the fourth quarter of 2016. Adjusted EBITDA for the segment was $44.5 million in the fourth quarter of 2017, compared to $35.0 million in the fourth quarter of 2016. These increases were primarily due to lower costs for wood fiber, lower maintenance costs at Arkansas, lower wage and benefits expense and lower operating supply costs. These items were partially offset by higher priced purchased pulp, higher electricity usage due to a turbine generator outage and higher chemical and transportation costs.
Paperboard Sales Volumes and Prices:
-Paperboard sales volumes increased 5.4% to 210,098 tons in the fourth quarter of 2017, compared to 199,415 tons in the fourth quarter of 2016.
-Paperboard net selling prices increased 4.6% to $962 per ton compared to the fourth quarter of 2016.
The company's consolidated GAAP tax rate and adjusted tax rate for the fourth quarter of 2017 were a benefit of 333.2% and a provision of 39.9%, respectively, compared to provisions of 41.7% and 37.8%, respectively, in the fourth quarter of 2016. On a GAAP basis, the benefit for the fourth quarter of 2017 was primarily driven by a $70 million tax benefit resulting from the remeasurement of the company's net deferred tax liabilities following passage of the Tax Cuts and Jobs Act ("Act") signed into law on December 22, 2017. The company expects its GAAP and adjusted tax rate for 2018 to be approximately 26%, due to the reduced federal corporate income tax rate of 21% under the Act.
Given the significant changes resulting from and complexities associated with the Act, the impact on the company's 2018 estimated effective and adjusted tax rates is subject to further analysis, interpretation and clarification of the Act, which could result in changes to these estimates during 2018.
(Clearwater Paper Corporation)