SPOKANE, Wash.-Apr 21,2017 --- Clearwater Paper Corporation (NYSE:CLW) today reported financial results for the first quarter of 2017.The company reported net sales of $437.5 million for the first quarter of 2017, essentially flat with net sales of $437.2 million for the first quarter of 2016. Net earnings determined in accordance with generally accepted accounting principles, or GAAP, for the first quarter of 2017 were $7.5 million, or $0.45 per diluted share, compared to net earnings of $18.4 million, or $1.05 per diluted share, for the first quarter of 2016. The decrease in net earnings was due primarily to higher input costs for natural gas, transportation and maintenance, and costs related to the closure of the company's Oklahoma City converting facility, partially offset by lower wage and benefit costs due to the implementation of warehouse automation and the shutdown of two paper machines in the Neenah, Wisconsin mill. Unplanned outages at the Las Vegas, Nevada facility in the fourth quarter of 2016 and at the Shelby, North Carolina facility in the first quarter of 2017 contributed to the higher transportation costs in the first quarter of 2017 due to the positioning of inventory. In addition, planned production curtailments at the end of the fourth quarter of 2016 drove higher inventory costs that flowed through results for the first quarter of 2017. Excluding certain non-core items identified in the attached Reconciliation of non-GAAP financial measures, first quarter 2017 adjusted net earnings were $10.7 million, or $0.64 per diluted share, compared to first quarter 2016 adjusted net earnings of $19.2 million, or $1.09 per diluted share.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, was $48.1 million for the first quarter of 2017 compared to $58.9 million for the first quarter of 2016. Adjusted EBITDA for the quarter was $49.3 million, down 17.9% compared to first quarter 2016 Adjusted EBITDA of $60.1 million. The $10.8 million decrease in Adjusted EBITDA was primarily a result of the same higher input costs affecting GAAP net earnings in the first quarter of 2017.
"We achieved solid results in the first quarter of 2017 due to strong demand for both consumer products and paperboard, positive contributions from the Manchester Industries acquisition, and our team's continued smart work and focus," said Linda K. Massman, president and chief executive officer. "This is a significant year for Clearwater Paper as we look forward to completing the final year of our current strategic plan, which includes warehouse automation, the continuous pulp digester in Lewiston, Idaho, and the operational efficiencies that are vital to improving our cost structure. The exciting work on the Shelby, North Carolina plant and warehousing expansion is also underway."
FIRST QUARTER 2017 SEGMENT PERFORMANCE
Net sales in the Consumer Products segment were $242.4 million for the first quarter of 2017, down 1.1% compared to first quarter 2016 net sales of $245.0 million. This decrease was due to lower non-retail sales resulting from the shutdown of two higher cost paper machines at the Neenah, Wisconsin mill, partially offset by a richer product mix that included a 4.9% increase in retail tons sold.
Consumer Products had operating income of $6.2 million in the first quarter of 2017, compared to operating income of $18.4 million in the first quarter of 2016. Adjusted operating income of $12.4 million for the first quarter of 2017 was down from $18.8 million in the same period in 2016, after adjusting for certain non-core items identified in the attached Reconciliation of non-GAAP financial measures. Consumer Products operating margin decreased to 2.6% in the first quarter of 2017 from 7.5% in the 2016 period. The adjusted operating margin decreased from 7.7% in the first quarter of 2016 to 5.1% in the most recent period due to higher input costs for transportation, natural gas and maintenance, partially offset by lower negotiated pulp prices and lower wage and benefit costs resulting from the implementation of warehouse automation, and the previously mentioned shutdown at the Neenah mill. The unplanned outages at the Las Vegas and Shelby facilities and the planned production curtailments at the end of the fourth quarter 2016, both discussed above, unfavorably affected Consumer Products' results for the first quarter of 2017.
Total tissue sales volumes of 95,364 tons in the first quarter of 2017 decreased by 4.0% and converted product cases shipped were 13.1 million, up 1.0%, each compared to the first quarter of 2016.
Average tissue net selling prices increased 3.0% to $2,539 per ton in the first quarter of 2017, compared to the first quarter of 2016.
Pulp and Paperboard
Net sales in the Pulp and Paperboard segment were $195.1 million for the first quarter of 2017, up 1.5% compared to first quarter 2016 net sales of $192.2 million. The increase was primarily due to higher paperboard shipment volume, which includes a full quarter of operations from the Manchester Industries acquisition. Operating income for the quarter decreased $7.9 million to $27.2 million, compared to operating income of $35.2 million for the first quarter of 2016, primarily due to lower paperboard prices and increased costs for energy and supplies, as well as higher depreciation expense.
Paperboard sales volumes increased 4.5% to 210,382 tons in the first quarter of 2017, compared to 201,340 tons in the first quarter of 2016.
Paperboard net selling prices decreased 2.6% to $927 per ton, compared to the first quarter of 2016.
The company's consolidated GAAP tax rate for the first quarter of 2017 was a provision of 40.0%, compared to 38.8% in the first quarter of 2016. The provision for the first quarter of 2017 included the impact of a new accounting standard pertaining to stock-based compensation, which now requires differences between book and tax measures of stock compensation that previously flowed through equity to flow through the income tax provision. On an adjusted basis, the first quarter 2017 tax rate was 38.3%. The company expects its GAAP and adjusted tax rate for 2017 to be approximately 36% plus or minus two percentage points.
Note Regarding Use of Non-GAAP Financial Measures
In this press release, the company presents certain non-GAAP financial information for the first quarters of 2017 and 2016, including EBITDA, Adjusted EBITDA, adjusted net earnings, adjusted net earnings per diluted share, adjusted operating income, adjusted operating margin and adjusted tax rate. Because these amounts are not in accordance with GAAP, reconciliations to net earnings, net earnings per diluted share, operating income and tax rate 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.
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 http://ir.clearwaterpaper.com. A replay of today's conference call will be available on the website at http://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 partnerships through quality and service.
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