Clearwater Paper Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the text does not provide a clear standalone fourth-quarter income statement or full set of quarterly financial results.
Business context
Clearwater Paper manufactures bleached paperboard and consumer tissue, primarily private-label at-home tissue. It reports two segments: Pulp and Paperboard, and Consumer Products. The company operates mainly in the United States.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $2,080.1 million | $1,772.6 million |
| Income (loss) from operations | $113.9 million | $12.0 million |
| Net income (loss) | $46.0 million | $(28.1) million |
| Diluted EPS | $2.68 | $(1.67) |
| Adjusted EBITDA | $226.9 million | $174.6 million |
| Cash from operations | $150.2 million | $96.4 million |
| Capital expenditures | $33.5 million | $38.4 million |
Sales rose 17.3%. Pulp and Paperboard sales increased 20.1% to $1,136.3 million; segment operating income was $183.5 million and operating margin was 16.1%, versus $125.7 million and 13.3% in 2021. Consumer Products sales increased 13.8% to $950.2 million; operating income was $11.3 million and operating margin was 1.2%, versus $4.0 million and 0.5%. Consumer Products Adjusted EBITDA margin declined to 7.8% from 8.3%.
At year-end, cash and cash equivalents were $53.7 million, current assets were $586.3 million, and current liabilities were $312.0 million. Total debt was approximately $569 million, including finance leases; balance-sheet debt carrying value was $565.8 million. The company had no ABL borrowings and reported $264.3 million of availability, with $3.5 million used for letters of credit. It repaid its $50 million term loan and purchased $30 million of its 2014 Notes during 2022.
Changes and notable items
- Profitability improved substantially year over year. The 2021 comparison included $50 million in charges associated with the Neenah tissue facility closure; the 2022 filing reports $9.7 million of other operating charges, including a $6.1 million fixed-asset impairment.
- Paperboard prices increased 24.6% year over year, while shipments declined 0.9%. Management attributed improved segment results primarily to higher prices, partly offset by inflation and outage costs.
- Retail tissue volume rose 7.6% and selling price per ton rose 8.6%. Higher volume and pricing were partly offset by higher pulp and packaging costs.
- Costs increased significantly, particularly for pulp, chemicals, freight, and other inputs. Management said the higher-cost environment was expected to continue in 2023.
- Operating cash flow increased to $150.2 million, partly reflecting improved operating performance; higher cash taxes and working-capital changes were offsets. Inventory increased to $324.0 million from $277.7 million.
Outlook, risks, and contingencies
- Management said cash, operating cash flow, and available borrowing capacity should be adequate for operating needs, debt service, working capital, and capital expenditures over the next 12 months. It forecast approximately $70–$80 million of cash capital expenditures in 2023; this is not earnings guidance.
- Fourth-quarter operating disruptions included extended maintenance at the Idaho facility and a mechanical paper-machine failure at the Arkansas facility, reducing production and sales and increasing costs.
- Major risks include cyclical demand and pricing, increased industry capacity, customer concentration (the top 10 customers represented 48% of 2022 sales), and volatility or availability of pulp, wood fiber, energy, chemicals, and freight. The company also cites manufacturing, labor, cyber, environmental, climate, and interest-rate risks.
- Potential multiemployer pension withdrawal liability was estimated at more than $76 million pretax in aggregate if the company had completely withdrawn in 2022. Clearwater reported no plan to withdraw and recognized no withdrawal liability. A disputed additional PIUMPF exit fee could create further exposure if legally enforceable and applicable.
- The company recorded a $68.4 million reserve for an uncertain tax position tied to a worthless-stock deduction. It requested an IRS ruling and said a favorable determination could reduce unrecognized tax benefits; the outcome was uncertain.
- Clearwater has 2030 targets to reduce Scope 1 and 2 greenhouse-gas emissions by 30% and Scope 3 emissions by 25%; achieving targets may increase costs. It reported no material expected impact from the Inflation Reduction Act based on its current analysis.
Investor facts to verify
- Whether 2023 price increases can continue to offset input-cost inflation, particularly in tissue.
- Whether production and maintenance performance recover after the 2022 Idaho and Arkansas disruptions.
- Debt maturity and refinancing plans for $270 million of 2014 Notes due in 2025, alongside debt-service costs and ABL covenant headroom.
- The IRS ruling and related accounting treatment for the $68.4 million uncertain tax position.
- Developments in PIUMPF’s financial condition, potential withdrawal exposure, and the disputed exit-fee issue.
- Execution and funding of the planned $70–$80 million 2023 capital program amid elevated costs and working-capital needs.
The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. The audit identified measurement of the pension benefit obligation, including its discount-rate assumption, as a critical audit matter.