Clearwater Paper's Q3 earnings slip 30% year-over-year, to US$13.3M, due to US$17.5M of planned major maintenance costs in quarter; sales up 1.6% to US$487.8M
October 23, 2013
– The company reported net sales of $487.8 million for the third quarter of 2013, compared to net sales of $480.2 million for the third quarter of 2012. Net earnings prepared in conformity with generally accepted accounting principles, or GAAP, for the third quarter of 2013 were $13.3 million, or $0.60 per diluted share, impacted significantly by $17.5 million of planned major maintenance costs in the quarter, compared to net earnings of $19.1 million, or $0.80 per diluted share, for the third quarter of 2012. The 2013 third quarter GAAP net earnings included a $6.9 million non-core operating net benefit comprised of $0.2 million of after-tax expense associated with the mark-to-market impact of directors’ equity-based compensation, $1.1 million of after-tax expense associated with the announced closing of the company’s Thomaston, Ga., converting and distribution facility, a $4.7 million benefit from the release of reserves for uncertain tax positions relating to state tax credits and a $3.5 million benefit resulting from additional Cellulosic Biofuel Producer Credits, or CBPC, claimed and agreed upon as part of our ongoing IRS audit. Excluding those items, third quarter 2013 adjusted net earnings were $6.4 million, or $0.29 per diluted share, compared to third quarter 2012 adjusted net earnings of $21.1 million, or $0.89 per diluted share.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, was $41.0 million for the third quarter of 2013. Adjusted EBITDA of $43.1 million was down 29.1% compared to third quarter 2012 Adjusted EBITDA of $60.8 million. The decrease in EBITDA and Adjusted EBITDA was due primarily to $17.5 million of planned major maintenance costs.
"Our pulp and paperboard segment continues to report excellent results with strong pricing and its second biggest shipment quarter ever, while our consumer products business experienced increased price competition from both brands and private label during the quarter," said president and chief executive officer Linda Massman. "Despite the heightened competition, our TAD sales are progressing and we believe we will achieve our TAD expansion goals."
During the third quarter, the company completed its $50 million accelerated stock buyback program (“ASB Program”), which was part of the company’s previously announced $100 million share buyback program. Under the ASB Program, 212,896 incremental shares were delivered to the company in the third quarter of 2013, for a total of approximately 1.04 million shares at an average cost of $48.10 per share. The company also separately repurchased an additional 327,315 shares of common stock in the third quarter through open market transactions at a total cost of $15.8 million, or $48.27 per share. Since announcing the $100 million buyback program in January 2013, the company has repurchased approximately 1.6 million shares for $75.8 million through September 30, 2013, and expects to use the remaining $24.2 million balance of the program by the end of October 2013.
THIRD QUARTER 2013 SEGMENT PERFORMANCE
Net sales in the Consumer Products segment were $292.9 million for the third quarter of 2013, consistent with third quarter 2012 net sales of $293.0 million. GAAP operating income decreased to $13.4 million from $18.5 million in the prior year period, driven by transition costs of $2.2 million associated with the company’s TAD expansion and $1.7 million of expenses related to the announced closure of the company’s Thomaston facility, as well as higher energy and packaging costs and increased depreciation year over year.
Total tissue sales volumes of 133,649 tons in the third quarter of 2013 were down 3.7% compared to the third quarter of 2012. Converted product cases shipped increased 1.7% compared to the third quarter of 2012.
Average net selling prices increased 3.9% to $2,192 per ton in the third quarter of 2013, compared to the third quarter of 2012, due to increased TAD sales, improved mix and parent roll price increases.
Pulp and Paperboard
Net sales in the Pulp and Paperboard segment were $194.9 million for the third quarter of 2013, up 4.1% compared to third quarter 2012 net sales of $187.3 million. The increase was primarily due to higher paperboard volumes driven by strong market backlogs and higher pricing in the third quarter of 2013 compared to the third quarter of 2012. GAAP operating income for the quarter decreased $18.1 million to $16.3 million, compared to $34.4 million for the third quarter of 2012, primarily due to $17.5 million of costs related to the company’s planned major maintenance at its Lewiston paperboard facility, as well as higher energy and operating expenses.
Paperboard sales volumes increased 2.2% to 199,408 tons in the third quarter of 2013, compared to 195,097 tons in the third quarter of 2012.
Paperboard net selling prices increased 2.6% to $973 per ton compared to the third quarter of 2012 as a result of announced price increases.
The company’s GAAP tax rate for the third quarter was a benefit of 63.7% compared to an expense of 40.2% in the third quarter of 2012. Adjusting for the CBPC tax credit conversion and the released reserves, the third quarter 2013 tax rate was approximately 37%. The company expects its annual GAAP and adjusted tax rates to be approximately 1% and 39%, respectively, for 2013.
Note Regarding Use of Non-GAAP Financial Measures
In this press release, the company presents its results for the third quarters of 2013 and 2012, including EBITDA, Adjusted EBITDA, adjusted net earnings and adjusted net earnings per diluted share excluding special items. These amounts are not in accordance with GAAP, and accordingly reconciliations to net earnings and net earnings per diluted share as determined in accordance with GAAP are included at the end of this press release. The company presents these 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.
CONFERENCE CALL INFORMATION
A live audio webcast and conference call will be held today, Wednesday, October 23, 2013 at 2 p.m. Pacific time (5 p.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 1:05 p.m. Pacific time (4:05 p.m. Eastern time). The webcast will be audio only. The company recommends that investors 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 at 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 and pulp 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. This includes grocery, drug, mass merchants and discount stores. The company also produces bleached paperboard used by quality-conscious printers and packaging converters. Clearwater Paper's employees build shareholder value by developing strong customer relationships through quality and service.
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