SPOKANE, Wash.--(BUSINESS WIRE)--Clearwater Paper Corporation (NYSE:CLW) today reported financial results for the second quarter of 2019.

The company reported net sales of $452.0 million for the second quarter of 2019, which were $19.9 million or 4.6% higher than net sales of $432.1 million for the second quarter of 2018. The increase was due to record quarterly paperboard shipments and sales, higher retail tissue shipments and higher paperboard and tissue pricing from previously announced price increases. These items were partially offset by lower non-retail tissue shipments primarily resulting from the sale of the company's mill in Ladysmith, Wisconsin in August 2018.

Net loss determined in accordance with generally accepted accounting principles, or GAAP, for the second quarter of 2019 was $0.4 million, or $0.03 per diluted share, compared to net earnings for the second quarter of 2018 of $7.0 million, or $0.42 per diluted share. The decrease in net earnings was due to maintenance costs at the company's Shelby, North Carolina, Cypress Bend, Arkansas and Lewiston, Idaho mills, costs associated with the start-up of the company's new paper machine and converting lines at its North Carolina mill and higher depreciation and interest expense, partially offset by the favorable impact of higher shipment volumes and pricing. Excluding certain non-core items identified in the attached Reconciliation of Non-GAAP Financial Measures, second quarter 2019 adjusted net loss was $0.4 million, or $0.02 per diluted share, compared to second quarter 2018 adjusted net earnings of $7.1 million, or $0.43 per diluted share.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, were $42.3 million for the second quarter of 2019, compared to $42.4 million for the second quarter of 2018. Adjusted EBITDA for the quarter was $43.9 million, compared to second quarter 2018 Adjusted EBITDA of $43.8 million despite the sale of the Ladysmith mill.

“We delivered a solid second quarter with record paperboard shipments and sales, and higher shipments of converted retail tissue, compared to the first quarter of 2019," said Linda K. Massman, president and chief executive officer. "Partially offsetting those results were the start-up costs related to our new paper machine in Shelby, North Carolina, which is progressing well and is expected to reach its full production run rate in late 2020. In addition, we recently completed the refinancing of our secured revolving credit facility with a seven-year Term Loan B and an asset based revolving credit facility, which will provide us the operational flexibility and liquidity needed as we focus on generating free cash flow to de-lever our balance sheet.”

SECOND QUARTER 2019 SEGMENT PERFORMANCE

Consumer Products

Net sales in the Consumer Products segment were $224.3 million for the second quarter of 2019, up 1.2% compared to second quarter 2018 net sales of $221.6 million. This increase was due to higher retail tissue volumes sold, higher average prices for both retail and non-retail tissue products and a favorable mix shift to a higher percentage of retail and ultra-quality products, partially offset by the impact from the divestiture of the Ladysmith, Wisconsin mill in August 2018.

Segment operating loss for the second quarter of 2019 was $5.1 million, compared to an operating loss of $3.6 million in the second quarter of 2018. Adjusted operating loss was $5.1 million for the second quarter of 2019, compared to an adjusted operating loss of $2.6 million for the same period in 2018. The increased operating loss was primarily due to Shelby start-up costs, higher depreciation expense resulting from the completion of the Shelby mill expansion and higher pulp costs, which were partially offset by lower transportation costs. Adjusted EBITDA for the segment was $12.3 million in the second quarter of 2019, up from $11.6 million in the second quarter of 2018. The increase was primarily due to improved retail shipment volumes, pricing and mix, partially offset by the start-up costs for the new paper machine and converting lines at the Shelby mill, planned maintenance at the Shelby mill and the divestiture of the Ladysmith mill.

Tissue Sales Volumes and Prices:

• Total tissue volumes sold were 82,798 tons in the second quarter of 2019, a decrease of 7,588 tons or 8.4% compared to 90,386 tons in the second quarter of 2018. The percentage of retail volumes rose to 92% of total volumes sold in the second quarter of 2019, up from 81% in the second quarter of 2018. Converted product cases shipped increased to 12.5 million in the second quarter of 2019, a 3.8% increase compared to the 12.0 million cases shipped in the second quarter of 2018.
• Average tissue net selling prices increased 9.8% to $2,691 per ton in the second quarter of 2019, due to a significant reduction in parent roll sales resulting from the divestiture of the Ladysmith mill, previously announced price increases and a higher mix of ultra-quality tissue products. This compares to $2,451 per ton in the second quarter of 2018.

Pulp and Paperboard

Net sales in the Pulp and Paperboard segment reached a record high of $227.7 million for the second quarter of 2019, up 8.1% compared to second quarter 2018 net sales of $210.5 million. The increase was due to record shipment volumes resulting from strong demand and the benefit of higher prices from previously announced increases.

Segment operating income and margin for the second quarter of 2019 were $33.6 million and 14.8%, compared to $34.2 million and 16.2%, respectively, for the second quarter of 2018. Adjusted EBITDA for the segment was $43.1 million in the second quarter of 2019, compared to $43.6 million in the second quarter of 2018. The decrease was primarily due to planned maintenance at the Arkansas mill and unplanned maintenance at the Idaho mill, partially offset by higher shipment volumes and prices.

Paperboard Sales Volumes and Prices:

• Paperboard sales volumes were a record 225,188 tons in the second quarter of 2019, an increase of 4.0% compared to 216,582 tons in the second quarter of 2018.
• Paperboard average net selling price increased 3.3% to $1,004 per ton for the second quarter of 2019, compared to $972 per ton in the second quarter of 2018.

Taxes

The company's consolidated GAAP tax rate for the second quarter of 2019 was a provision of 114.6%, compared to a provision of 26.5% in the second quarter of 2018. Tax effected items reflecting the cumulative impact of the annual effective tax rate in the second quarter of 2019 have a greater impact on a percentage basis of the $2.9 million of earnings before taxes compared to $9.5 million of pre-tax earnings in the second quarter of 2018.

Note Regarding Use of Non-GAAP Financial Measures

In this press release, the company presents certain non-GAAP financial information for the second quarters of 2019 and 2018, including adjusted net earnings, adjusted net earnings per diluted share, EBITDA, adjusted EBITDA, adjusted operating income and adjusted operating margin. Because these amounts are not in accordance with GAAP, reconciliations to net earnings, net earnings per diluted share and operating income as determined in accordance with GAAP are included in the tables at the end of this press release. The company presents these non-GAAP 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. In addition, the company uses EBITDA and Adjusted EBITDA: (i) as factors in evaluating management’s performance when determining incentive compensation, (ii) to evaluate the effectiveness of the company's business strategies, and (iii) because the company's credit agreement and the indentures governing the company's outstanding notes use metrics similar to EBITDA to measure the company's compliance with certain covenants.

WEBCAST INFORMATION

Clearwater Paper Corporation will discuss these results during an earnings conference call that begins at 2:00 p.m. Pacific Time today. A live webcast and accompanying supplemental information will be available on the company's website at https://ir.clearwaterpaper.com. A replay of today's conference call will be available on the website at https://ir.clearwaterpaper.com/results.cfm beginning at 5:00 p.m. Pacific Time today.

ABOUT CLEARWATER PAPER

Clearwater Paper manufactures quality consumer tissue, away-from-home tissue, parent roll tissue, bleached paperboard and pulp at manufacturing facilities across the nation. The company is a premier supplier of private label tissue to major retailers and wholesale distributors, including grocery, drug, mass merchants and discount stores. In addition, the company produces bleached paperboard used by quality-conscious printers and packaging converters, and offers services that include custom sheeting, slitting and cutting. Clearwater Paper's employees build shareholder value by developing strong customer relationships 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 production at the company's Shelby, North Carolina facility, benefits of credit facilities, operational flexibility, liquidity, cash flow, financial leverage, and the company's balance sheet. 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: competitive pricing pressures for products, including as a result of increased capacity as additional manufacturing facilities are operated by the company’s competitors; the loss of, changes in prices in regard to, or reduction in, orders from a significant customer; changes in customer product preferences and competitors' product offerings; the company’s ability to achieve full production at its new tissue manufacturing operations in Shelby, North Carolina on time and within current cost expectations; customer acceptance and timing and quantity of purchases of the company’s tissue products, including the existence of sufficient demand for and the quality of tissue manufactured at its expanded Shelby, North Carolina operations upon full production; consolidation and vertical integration of converting operations in the paperboard industry; the company’s ability to successfully implement its 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 pulp digester at its Lewiston, Idaho facility; changes in the cost and availability of wood fiber and wood pulp; changes in transportation costs and disruptions in transportation services; labor disruptions; changes in the U.S. and international economies and in general economic conditions in the regions and industries in which the company operates; manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunctions and damage to the company’s manufacturing facilities; changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs; larger competitors having operational and other advantages; cyclical industry conditions; changes in expenses, required contributions and potential withdrawal costs associated with the company’s pension plans; environmental liabilities or expenditures; cyber-security risks; reliance on a limited number of third-party suppliers for raw materials; the company’s ability to attract, motivate, train and retain qualified and key personnel; material weaknesses in the company internal controls over financial reporting; the company’s substantial indebtedness and ability to service its debt obligations; restrictions on the company’s business from debt covenants and terms; and changes in laws, regulations or industry standards affecting the company’s business; and other risks and uncertainties described from time to time in the company's public filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2018. 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 based on new developments or changes in the company's expectations after the date of this press release.