Clearwater Paper Reports Second Quarter 2021 Results

SECOND QUARTER HIGHLIGHTS
- Net loss of $52 million, or $3.10 per diluted share
- Adjusted EBITDA of $15 million
- Successfully completed planned major maintenance at the Lewiston, Idaho facility ($22 million Adjusted EBITDA impact)
- Announced closure of Neenah, Wisconsin tissue facility
- Continued to reduce net debt

“We performed better than our initial expectations for the quarter. In paperboard, we continue to experience strong demand and robust backlogs. Tissue demand bottomed out in April as consumers de-stocked pantries and retailers adjusted inventories. Our tissue orders have started to build back to more normal levels since then,” said Arsen Kitch, president and chief executive officer. “Our team executed well in the quarter, performed our largest maintenance outage at Lewiston, serviced strong SBS demand, closed our high-cost Neenah tissue facility and took tissue production downtime to reduce inventory levels and mitigate pulp price inflation.”

OVERALL RESULTS
For the second quarter of 2021, Clearwater Paper reported net sales of $406 million, a 15% decrease compared to net sales of $481 million for the second quarter of 2020. Net loss for the second quarter of 2021 was $52 million, or $3.10 per diluted share, compared to net income for the second quarter of 2020 of $23 million, or $1.36 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net loss in the second quarter of 2021 of $18 million, or $1.07 per diluted share, compared to second quarter 2020 adjusted net income of $28 million, or $1.67 per diluted share. Adjusted EBITDA for the quarter was $15 million, compared to the second quarter of 2020 Adjusted EBITDA of $79 million. Additionally, Clearwater Paper incurred impairment and other closure costs associated with the recently announced closure of its Neenah, Wisconsin facility of $41.7 million.

For the first six months of 2021, Clearwater Paper reported net sales of $832 million, a 13% decrease compared to net sales of $958 million for the first six months of 2020. Net loss for the first six months of 2021 was $40 million, or $2.37 per diluted share, compared to net income for the first six months of 2020 of $33 million, or $1.99 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net loss in the first six months of 2021 of $6 million, or $0.37 per diluted share, compared to first six months of 2020 adjusted net income of $37 million, or $2.24 per diluted share. Adjusted EBITDA for the first six months was $69 million, compared to the first six months of 2020 Adjusted EBITDA of $134 million.

Pulp and Paperboard Products Segment
Net sales in the Pulp and Paperboard Products segment were $227 million for the second quarter of 2021, up 5% compared to second quarter 2020 net sales of $216 million. Segment operating income for the second quarter of 2021 was $13 million compared to $32 million for the second quarter of 2020. Adjusted EBITDA for the segment was $22 million in the second quarter of 2021, compared to $41 million in the second quarter of 2020. The decrease in operating income and Adjusted EBITDA was driven by higher maintenance costs due to the major planned maintenance outage at the Lewiston, Idaho location and higher input costs due to inflation which were partially offset by higher sales prices.

Net sales in the Pulp and Paperboard Products segment were $447 million for the first six months of 2021, up 2% compared to first six months of 2020 net sales of $440 million. Segment operating income for the first six months of 2021 was $38 million compared to $58 million for the first six months of 2020. Adjusted EBITDA for the segment was $56 million in the first six months of 2021, compared to $77 million in the first six months of 2020. The decrease in operating income and Adjusted EBITDA was driven by higher maintenance outage costs due to the at the Lewiston location which were partially offset with higher sales prices.

Paperboard Sales Volumes and Prices:
- Paperboard sales volumes were 200,551 tons in the second quarter of 2021, a decrease of 1% compared to 201,728 tons in the second quarter of 2020. Paperboard sales volumes were 407,263 tons in the first six months of 2021, a decrease of 1% compared to 409,644 tons in the first six months of 2020
- Paperboard average net selling price increased 5% to $1,058 per ton for the second quarter of 2021, compared to $1,009 per ton in the second quarter of 2020. Paperboard average net selling price increased 3% to $1,043 per ton for the first six months of 2021, compared to $1,011 per ton in the first six months of 2020.

Consumer Products Segment
Net sales in the Consumer Products segment were $181 million for the second quarter of 2021, down 33% compared to the second quarter 2020 net sales of $271 million. In the second quarter of 2021, converted case shipments totaled 10.2 million cases, a decrease of 36% compared to 16.0 million cases shipped in the second quarter of 2020. Segment operating loss for the second quarter of 2021 was $10 million compared to operating income of $37 million in the second quarter of 2020. Adjusted EBITDA for the segment was $7 million in the second quarter of 2021, down from $54 million in the second quarter of 2020. The decrease in operating income and Adjusted EBITDA was driven by higher input costs due to inflation and lower sales volume as customers and consumers continued to reduce their tissue inventory which led to lower orders.

Net sales in the Consumer Products segment were $389 million for the first six months of 2021, down 27% compared to the first six months of 2020 net sales of $534 million. In the first six months of 2021, converted case shipments totaled 21.8 million cases, a decrease of 30% compared to 31.2 cases shipped in the first six months of 2020. Segment operating income for the first six months of 2021 was $8 million compared to operating income of $51 million in the first six months of 2020. Adjusted EBITDA for the segment was $41 million in the first six months of 2021, down from $86 million in the first six months of 2020. The decrease in operating income and Adjusted EBITDA was driven by the same factors affecting the second quarter of 2021.

Retail Tissue Sales Volumes and Prices:
- Retail tissue volumes sold were 61,497 tons in the second quarter of 2021, a decrease of 36% compared to 95,432 tons in the second quarter of 2020. Retail volumes represented 89% of total volumes sold in the second quarter of 2021, a decrease from 94% in the second quarter of 2020. Retail tissue volumes sold were 132,259 tons in the first six months of 2021, a decrease of 29% compared to 186,223 tons in the first six months of 2020. Retail volumes represented 89% of total volumes sold in the first six months of 2021, a decrease from 93% in the first six months of 2020.
- Retail tissue selling prices increased 1% to $2,755 per ton in the second quarter of 2021, compared to $2,729 per ton in the second quarter of 2020. Retail tissue selling prices increased 1% to $2,757 per ton in the first six months of 2021, compared to $2,730 per ton in the first six months of 2020.

COMPANY OUTLOOK
“We executed well in the second quarter and are well positioned to realize strong cash flows and further reduce net debt in the latter half of 2021. Our paperboard business continues to perform well with favorable market dynamics, and our tissue demand is continuing to recover after a retailer and consumer drawdown of inventory. We are working to offset inflation across our business, including closing our high cost Neenah tissue facility and a continued focus on operational execution,” Kitch concluded.