Clearwater Paper Corporation — Q1 2022 Form 10-Q
Reporting period: Quarter ended March 31, 2022. Clearwater Paper manufactures paperboard and tissue products, reported in its Pulp and Paperboard and Consumer Products segments. Amounts below are in millions of dollars unless stated otherwise.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net sales | $488.2 | $425.9 |
| Income from operations | $32.9 | $27.1 |
| Net income | $16.6 | $12.1 |
| Diluted EPS | $0.97 | $0.71 |
| Adjusted EBITDA (non-GAAP) | $58.9 | $54.3 |
| Operating cash flow | $41.1 | $33.8 |
| Capital expenditures, net | $7.9 | $11.1 |
- Sales increased 15%; operating income rose about 21% and net income about 37% year over year. Higher sales prices contributed to improved results.
- Segment results diverged: Pulp and Paperboard operating income doubled to $50.3, with an 18.9% operating margin versus 11.4%. Consumer Products operating income fell to $0.9 from $17.9; operating margin declined to 0.4% from 8.6%.
- At March 31, cash and cash equivalents were $36.4, compared with $25.2 at year-end 2021. Current assets were $507.5 and current liabilities $256.1. Total debt, including current maturities, was $619.3, down from $639.2 at year-end.
- Operating cash flow increased, reflecting higher net income and working-capital changes. The company used $20.4 for long-term debt repayments, including $20.0 of voluntary term-loan prepayments. Cash, cash equivalents and restricted cash totaled $37.5 at quarter-end.
Drivers and material changes
- Pulp and Paperboard: Sales rose 21.2%, largely on a 22.9% increase in paperboard selling price; paperboard shipments fell 2.6%, partly due to a planned Lewiston maintenance outage. Improved pricing and the absence of the prior-year southern winter storm’s $6.5 cost impact supported earnings, partly offset by inflation in chemicals, freight and energy.
- Consumer Products: Sales rose 7.0%, but operating income declined sharply as higher pulp and transportation costs outweighed pricing increases. Retail tissue shipments increased 6.6%. Away-from-home sales ceased following the 2021 closure of the Neenah facility.
- Corporate expenses increased to $17.8 from $15.5, mainly reflecting higher incentive compensation. Net interest expense declined by $0.7, primarily due to lower debt.
Outlook, risks and contingencies
- The company expected 2022 cash capital expenditures of approximately $60–$70. No specific earnings or revenue guidance is provided in the filing text.
- Management cited inflation and potential changes in costs or availability of fiber, pulp, transportation, energy, chemicals and maintenance as risks, alongside customer demand and pricing, competition, operational disruptions, labor, cyber risks, and substantial indebtedness and covenant restrictions.
- The $250 million ABL revolving facility had no borrowings and $3.7 million of letters of credit outstanding at quarter-end. Availability was supported up to $250 million; its 1.10-to-1.00 fixed-charge coverage covenant applies if unused availability falls below $25 million. The reported fixed-charge coverage ratio was approximately 3.93x.
- A 1 percentage-point interest-rate change on $30.0 million of credit-agreement borrowings was estimated to affect annual interest expense by approximately $0.3. Management said pending legal matters were not expected, in aggregate, to materially adversely affect financial condition; it reported no material risk-factor changes from the 2021 Form 10-K.
Key facts for investors to verify
- Whether price increases can continue to offset input-cost inflation, particularly in Consumer Products.
- Whether the Lewiston outage and expanded Shelby tissue operations affect production, quality, demand or margins.
- Progress against the $60–$70 million 2022 capital-spending outlook and continued voluntary debt reduction.
- Liquidity, ABL availability and covenant headroom if operating conditions or borrowing-base availability weaken.
- Adjusted EBITDA is a non-GAAP measure; review the filing’s reconciliation and limitations when comparing performance.