CLW-2012.09.30-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
|
| |
ý | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2012
or
|
| |
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number: 001-34146
CLEARWATER PAPER CORPORATION
(Exact name of registrant as specified in its charter)
|
| | |
| | |
Delaware | | 20-3594554 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| |
601 West Riverside, Suite 1100 Spokane, Washington | | 99201 |
(Address of principal executive offices) | | (Zip Code) |
(509) 344-5900
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
| | | | | | |
Large accelerated filer | | ý | | Accelerated filer | | ¨ |
Non-accelerated filer | | ¨ (Do not check if a smaller reporting company) | | Smaller reporting company | | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
The number of shares of common stock of the registrant outstanding as of October 24, 2012 was 23,203,668.
CLEARWATER PAPER CORPORATION
Index to Form 10-Q
|
| | |
| | |
| | Page Number |
| | |
PART I. | | |
| | |
ITEM 1. | | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | |
ITEM 2. | | |
| | |
ITEM 3. | | |
| | |
ITEM 4. | | |
| | |
PART II. | | |
| | |
ITEM 1. | | |
| | |
ITEM 1A. | | |
| | |
ITEM 2. | | |
| | |
ITEM 6. | | |
| |
| |
| |
| |
Part I
|
| |
ITEM 1. | |
Condensed Consolidated Financial Statements |
Clearwater Paper Corporation
Condensed Consolidated Statements of Operations
Unaudited (Dollars in thousands - except per-share amounts)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2012 | | 2011 | | 2012 | | 2011 |
Net sales | $ | 480,233 |
| | $ | 501,125 |
| | $ | 1,411,603 |
| | $ | 1,461,582 |
|
Costs and expenses: | | | | | | | |
Cost of sales | (409,822 | ) | | (448,927 | ) | | (1,211,444 | ) | | (1,297,205 | ) |
Selling, general and administrative expenses | (30,649 | ) | | (26,815 | ) | | (90,252 | ) | | (81,655 | ) |
Total operating costs and expenses | (440,471 | ) | | (475,742 | ) | | (1,301,696 | ) | | (1,378,860 | ) |
Income from operations | 39,762 |
| | 25,383 |
| | 109,907 |
| | 82,722 |
|
Interest expense, net | (7,900 | ) | | (12,100 | ) | | (26,775 | ) | | (34,425 | ) |
Other, net | — |
| | 1,290 |
| | — |
| | 585 |
|
Earnings before income taxes | 31,862 |
| | 14,573 |
| | 83,132 |
| | 48,882 |
|
Income tax provision | (12,798 | ) | | (5,928 | ) | | (38,853 | ) | | (20,710 | ) |
Net earnings | $ | 19,064 |
| | $ | 8,645 |
| | $ | 44,279 |
| | $ | 28,172 |
|
Net earnings per common share: | | | | | | | |
Basic | $ | 0.82 |
| | $ | 0.38 |
| | $ | 1.90 |
| | $ | 1.23 |
|
Diluted | 0.80 |
| | 0.37 |
| | 1.87 |
| | 1.19 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Clearwater Paper Corporation
Condensed Consolidated Statements of Comprehensive Income
Unaudited (Dollars in thousands)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2012 | | 2011 | | 2012 | | 2011 |
Net earnings | $ | 19,064 |
| | $ | 8,645 |
| | $ | 44,279 |
| | $ | 28,172 |
|
Other comprehensive income: | | | | | | | |
Defined benefit pension and other postretirement employee benefits: | | | | | | | |
Amortization of actuarial loss included in net periodic cost, net of tax expense of $1,190, $818, $3,571 and $2,452 | 1,831 |
| | 1,278 |
| | 5,493 |
| | 3,834 |
|
Amortization of prior service credit included in net periodic cost, net of tax benefit of $202, $59, $605 and $176 | (310 | ) | | (91 | ) | | (930 | ) | | (275 | ) |
Foreign currency translation adjustment | — |
| | (3,666 | ) | | — |
| | (2,377 | ) |
Amortization of deferred taxes related to actuarial gain on other postretirement employee benefit obligations | — |
| | (58 | ) | | — |
| | (173 | ) |
Other comprehensive income (loss), net of tax | 1,521 |
| | (2,537 | ) | | 4,563 |
| | 1,009 |
|
Comprehensive income | $ | 20,585 |
| | $ | 6,108 |
| | $ | 48,842 |
| | $ | 29,181 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Clearwater Paper Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands – except per-share amounts)
|
| | | | | | | |
| September 30, 2012 | | December 31, 2011 |
ASSETS | | | |
Current assets: | | | |
Cash | $ | 19,564 |
| | $ | 8,439 |
|
Restricted cash | — |
| | 769 |
|
Short-term investments | 37,000 |
| | 55,001 |
|
Receivables, net | 175,587 |
| | 176,189 |
|
Taxes receivable | 11,918 |
| | 10,000 |
|
Inventories | 224,435 |
| | 244,071 |
|
Deferred tax assets | 24,857 |
| | 39,466 |
|
Prepaid expenses | 8,570 |
| | 11,396 |
|
Total current assets | 501,931 |
| | 545,331 |
|
Property, plant and equipment, net | 840,981 |
| | 735,566 |
|
Goodwill | 229,533 |
| | 229,533 |
|
Intangible assets, net | 44,854 |
| | 49,748 |
|
Other assets, net | 9,603 |
| | 11,140 |
|
TOTAL ASSETS | $ | 1,626,902 |
| | $ | 1,571,318 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 171,195 |
| | $ | 144,631 |
|
Current liability for pensions and other postretirement employee benefits | 9,861 |
| | 9,861 |
|
Total current liabilities | 181,056 |
| | 154,492 |
|
Long-term debt | 523,872 |
| | 523,694 |
|
Liability for pensions and other postretirement employee benefits | 197,222 |
| | 215,932 |
|
Other long-term obligations | 48,560 |
| | 48,474 |
|
Accrued taxes | 78,625 |
| | 74,464 |
|
Deferred tax liabilities | 70,972 |
| | 69,358 |
|
Stockholders’ equity: | | | |
Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued | — |
| | — |
|
Common stock, par value $0.0001 per share, 100,000,000 authorized shares, 23,825,750 and 23,101,710 shares issued | 2 |
| | 2 |
|
Additional paid-in capital | 318,168 |
| | 315,964 |
|
Retained earnings | 339,832 |
| | 295,553 |
|
Treasury stock, at cost, common shares-622,082 and 333,300 shares repurchased | (20,705 | ) | | (11,350 | ) |
Accumulated other comprehensive loss, net of tax | (110,702 | ) | | (115,265 | ) |
Total stockholders’ equity | 526,595 |
| | 484,904 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,626,902 |
| | $ | 1,571,318 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Clearwater Paper Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
|
| | | | | | | |
| Nine Months Ended |
| September 30, |
| 2012 | | 2011 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net earnings | $ | 44,279 |
| | $ | 28,172 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
Depreciation and amortization | 58,477 |
| | 57,108 |
|
Deferred tax expense | 13,257 |
| | 12,311 |
|
Equity-based compensation expense | 7,681 |
| | 5,117 |
|
Employee benefit plans | 6,697 |
| | 6,252 |
|
Changes in working capital, net | 51,434 |
| | (32,621 | ) |
Change in taxes receivable, net | (1,918 | ) | | (2,028 | ) |
Excess tax benefits from equity-based payment arrangements | (9,193 | ) | | — |
|
Change in non-current accrued taxes | 4,161 |
| | 1,873 |
|
Funding of qualified pension plans | (17,625 | ) | | (9,800 | ) |
Change in restricted cash, net | 769 |
| | 4,429 |
|
Other, net | 2,564 |
| | 1,490 |
|
Net cash provided by operating activities | 160,583 |
| | 72,303 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Change in short-term investments, net | 18,001 |
| | 41,094 |
|
Additions to plant and equipment | (155,365 | ) | | (87,251 | ) |
Proceeds from sale of assets | 1,035 |
| | — |
|
Net cash used for investing activities | (136,329 | ) | | (46,157 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Repayment of Cellu Tissue debt | — |
| | (15,595 | ) |
Purchase of treasury stock | (9,355 | ) | | (10,003 | ) |
Excess tax benefits from equity-based payment arrangements | 9,193 |
| | — |
|
Payment of tax withholdings on equity-based payment arrangements | (12,965 | ) | | (1,498 | ) |
Other, net | (2 | ) | | 2,940 |
|
Net cash used for financing activities | (13,129 | ) | | (24,156 | ) |
Effect of exchange rate changes | — |
| | 153 |
|
Increase in cash | 11,125 |
| | 2,143 |
|
Cash at beginning of period | 8,439 |
| | 18,928 |
|
Cash at end of period | $ | 19,564 |
| | $ | 21,071 |
|
| | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | |
Cash paid for interest, net of amounts capitalized | $ | 12,366 |
| | $ | 22,303 |
|
Cash paid for income taxes | 17,740 |
| | 40,045 |
|
Cash received from income tax refunds | 1,607 |
| | 29,282 |
|
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES: | | | |
Increase in accrued plant and equipment | $ | 3,258 |
| | $ | 5,087 |
|
Property acquired under capital lease | — |
| | 12,687 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Clearwater Paper Corporation
Notes to Condensed Consolidated Financial Statements
Unaudited
NOTE 1 Nature of Operations and Basis of Presentation
GENERAL
We manufacture and sell pulp-based products. We currently manufacture quality consumer tissue, away-from-home tissue, parent roll tissue, machine-glazed tissue, bleached paperboard and pulp at 15 manufacturing locations in the U.S. and Canada. Our private label tissue products, such as facial and bath tissue, paper towels and napkins, are used primarily at home and are principally sold to major retailers and wholesale distributors, which include grocery, drug, mass merchant and discount stores. Our paperboard is sold primarily in the high-end segment of the packaging industry and is ultimately used by our customers to make packaging for products ranging from liquids to pharmaceuticals to consumer goods packaging, all of which demand high quality construction and print surfaces for graphics. Our products primarily utilize pulp made from wood fiber. In addition to wood fiber, other major cost categories include chemicals, transportation, energy, packaging, and costs associated with our manufacturing facilities.
On December 27, 2010, we acquired Cellu Tissue Holdings, Inc., or Cellu Tissue, and consolidated the acquisition in our financial statements as of that date. The financial position and results of Cellu Tissue’s operations and cash flows are fully reflected in these condensed consolidated financial statements.
On November 28, 2011, we sold our Lewiston, Idaho sawmill to Idaho Forest Group of Coeur d’Alene, Idaho. The transaction included the sale of our sawmill, planer mill, dry kilns and related assets along with log and finished goods inventories and timber under contract, in the aggregate amount of approximately $30 million. This sawmill was our only wood products facility.
FINANCIAL STATEMENT PREPARATION AND PRESENTATION
The accompanying Condensed Consolidated Balance Sheets at September 30, 2012 and December 31, 2011, the related Condensed Consolidated Statements of Operations and Comprehensive Income for the three months and nine months ended September 30, 2012 and 2011, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011, have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. We believe that all adjustments necessary for a fair statement of the results of the interim periods presented have been included. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.
This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission, or SEC, on February 24, 2012.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Significant areas requiring the use of estimates and measurement of uncertainty include determination of net realizable value for deferred tax assets, assessment of impairment of long-lived assets and goodwill, assessment of environmental matters, equity-based compensation and pension and postretirement obligation assumptions. Actual results could differ from those estimates and assumptions.
RESTRICTED CASH AND SHORT-TERM INVESTMENTS
At September 30, 2012, we had no restricted cash balance. At December 31, 2011, all restricted cash was classified as current and included in “Restricted cash” on our Condensed Consolidated Balance Sheet. Our short-term investments are invested largely in demand deposits, which have very short maturity periods, and they therefore earn an interest rate commensurate with low-risk instruments.
TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are stated at the amount we expect to collect. Trade accounts receivable do not bear interest. The allowance for doubtful accounts is our best estimate of the losses we expect will result from the inability of our customers to make required payments. We generally determine the allowance based on a combination of actual historical write-off experience and an analysis of specific customer accounts. As of September 30, 2012 and December 31, 2011, we had an allowance for doubtful accounts of $1.8 million and $1.7 million, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, including any interest costs capitalized, less accumulated depreciation. Depreciation of buildings, equipment and other depreciable assets is determined using the straight-line method. Assets we acquire through business combinations have estimated lives that are typically shorter than the assets we construct or buy new. Accumulated depreciation totaled $1,395.4 million and $1,342.7 million at September 30, 2012 and December 31, 2011, respectively.
For the three months and nine months ended September 30, 2012, we capitalized $4.1 million and $9.0 million, respectively, of interest expense associated with the construction of our new tissue manufacturing and converting facilities in Shelby, North Carolina, and improvements to our tissue manufacturing facility in Las Vegas, Nevada, compared to $0.8 million and $2.3 million for the same periods in 2011, respectively.
STOCKHOLDERS’ EQUITY
On July 28, 2011, our Board of Directors authorized the repurchase of up to $30.0 million of our common stock. Under our stock repurchase program, we may repurchase shares in the open market or as otherwise may be determined by management, subject to market conditions, business opportunities and other factors. During the three and nine months ended September 30, 2012, we repurchased 50,300 and 288,782 shares, respectively, of our outstanding common stock. As of September 30, 2012, we had $9.3 million of authorization remaining pursuant to our share repurchase program. We account for share repurchases under the program as treasury stock and record the amounts paid to repurchase shares at cost as a component of stockholders’ equity. We have not retired any treasury shares and may choose to reissue shares held in treasury stock in a future period.
DERIVATIVES
We had no activity during the three months and nine months ended September 30, 2012 and 2011 that required hedge or derivative accounting treatment. However, to partially mitigate our exposure to market risk for changes in utility commodity pricing, we use firm price contracts to supply a portion of the natural gas requirements for our manufacturing facilities. As of September 30, 2012, these contracts covered approximately 18% of our expected average monthly natural gas requirements for the remainder of 2012, plus lesser amounts for 2013.
We also have agreements with suppliers to purchase pulp and chemicals at market-based prices covering approximately 33% and 42%, respectively, of our current expected remaining 2012 pulp and chemical needs. These contracts for natural gas, pulp and chemicals qualify for treatment as “normal purchases or normal sales” under authoritative guidance and thus require no mark-to-market adjustment.
NOTE 2 Recently Adopted and New Accounting Standards
There were no new accounting standards adopted during the three months ended September 30, 2012. We reviewed all new accounting pronouncements issued in the period and concluded that there are none that we believe will have a significant or material impact to our current or future financial statements or disclosures.
NOTE 3 Inventories
Inventories at the balance sheet dates consist of:
|
| | | | | | | |
(In thousands) | September 30, 2012 | | December 31, 2011 |
Pulp, paperboard and tissue products | $ | 142,631 |
| | $ | 162,426 |
|
Materials and supplies | 64,181 |
| | 62,376 |
|
Logs, pulpwood, chips and sawdust | 17,623 |
| | 17,713 |
|
Lumber | — |
| | 1,556 |
|
| $ | 224,435 |
| | $ | 244,071 |
|
Inventories are stated at the lower of market or cost using the average cost method. The last-in, first-out, or LIFO, method was previously used to determine cost of logs, wood fiber and the majority of lumber until the sale of our sawmill in November 2011. During the three months ended March 31, 2012, the remaining lumber inventory from the sawmill was sold. The sale of this inventory, which was valued at costs prevailing in prior years under the LIFO method, had the effect of increasing earnings in the period ended March 31, 2012 by an immaterial amount.
NOTE 4 Intangible Assets
Intangible assets at the balance sheet dates are comprised of the following:
|
| | | | | | | | | | | | | |
| September 30, 2012 |
(Dollars in thousands, lives in years) | Useful Life | | Historical Cost | | Accumulated Amortization | | Net Balance |
Customer relationships | 9.0 | | $ | 50,000 |
| | $ | (9,849 | ) | | $ | 40,151 |
|
Trade names and trademarks | 10.0 | | 5,300 |
| | (927 | ) | | 4,373 |
|
Non-compete agreements | 2.5 | | 1,100 |
| | (770 | ) | | 330 |
|
Total intangible assets | | | $ | 56,400 |
| | $ | (11,546 | ) | | $ | 44,854 |
|
| | | | | | | |
| December 31, 2011 |
(Dollars in thousands, lives in years) | Useful Life | | Historical Cost | | Accumulated Amortization | | Net Balance |
Customer relationships | 9.0 | | $ | 50,000 |
| | $ | (5,682 | ) | | $ | 44,318 |
|
Trade names and trademarks | 10.0 | | 5,300 |
| | (530 | ) | | 4,770 |
|
Non-compete agreements | 2.5 | | 1,100 |
| | (440 | ) | | 660 |
|
Total intangible assets | | | $ | 56,400 |
| | $ | (6,652 | ) | | $ | 49,748 |
|
NOTE 5 Taxes
Consistent with authoritative guidance, our estimated annual effective tax rate is used to allocate expected annual income tax expense to interim periods. The rate is the ratio of estimated annual income tax expense to estimated pre-tax ordinary income, and excludes “discrete items”, which are significant, unusual or infrequent items reported separately net of their related tax effect. The estimated annual effective tax rate is applied to the current interim period’s ordinary income to determine the income tax expense allocated to the interim period. The income tax effects of discrete items are then determined separately and recognized in the interim period in which the income or expense items arise.
We recorded income tax expense of $12.8 million and $38.9 million in the three and nine months ended September 30, 2012 compared to $5.9 million and $20.7 million in the three and nine months ended September 30, 2011. The effective rates for the three months and nine months ended September 30, 2012 were 40.2% and 46.7%, respectively, compared to rates of 40.7% and 42.4% for the same periods of 2011. As discussed below, the rates for the nine month periods included the net impact of reporting discrete items in each reporting period totaling net expense of $9.7 million and $4.0 million, respectively.
The net increase to our tax expense and effective tax rate for the nine months ended September 30, 2012 was primarily the result of $6.5 million in tax expense related to our decision to convert certain gallons of alternative fuel originally claimed in 2009 under the Alternative Fuel Mixture Tax Credit, or AFMTC, which had been converted by us in 2010 to the Cellulosic Biofuel Producer Credit, or CBPC, back to gallons under the AFMTC. The tax expense attributable to the AFMTC conversion was comprised of $3.4 million relating to the conversion back to the AFMTC and a resulting additional $3.1 million increase in our liabilities for uncertain tax positions. The remaining discrete expense of $3.2 million recorded in the nine months ended September 30, 2012 was primarily interest accrued on uncertain tax positions.
The net increase to our tax expense and effective tax rate in the nine months ended September 30, 2011 was primarily the result of discrete expenses for interest accrued on uncertain tax positions and the impact of reevaluating our state tax structure as Cellu Tissue was being integrated into our operations, partially offset by a benefit associated with certain transaction costs relating to the Cellu Tissue acquisition that were determined to be deductible under the Internal Revenue Code, or IRC.
We have tax benefits relating to excess equity-based compensation that are being utilized to reduce our U.S. taxable income. Our Condensed Consolidated Balance Sheets reflect deferred tax assets comprised of net operating losses and tax credit carryforwards excluding amounts impacted by excess equity-based compensation. We have historically elected to follow the “with-and-without” or “incremental” method for ordering tax benefits derived from employee equity-based compensation awards. As a result of this method, net operating loss carryforwards and tax credit carryforwards not generated from equity-based compensation are utilized before the current period’s equity-based tax deduction (excess tax benefits from equity-based compensation awards are recognized last). Excess tax benefits from equity-based compensation awards that are determined to reduce U.S. taxable income following this method are recognized when realized as increases to additional paid-in capital as a component of stockholders’ equity. During the nine months ended September 30, 2012, we generated additional excess tax benefits of $13.9 million relating to the release of vested performance share and restricted stock unit awards to employees. For the nine months ended September 30, 2012, $9.2 million of excess tax benefits have been allocated to additional paid-in capital and reduced income taxes payable based on the incremental method. As of September 30, 2012, we had a total amount of excess tax benefits that are not recognized on our condensed consolidated balance sheet of $8.0 million.
Subsequent to September 30, 2012, the Internal Revenue Service has undertaken an audit of the company for the 2009 through 2011 tax years. Other audits opened during the third quarter of 2012 include a Canada Revenue Agency audit of our Canadian subsidiary, which we acquired in the Cellu Tissue acquisition, for the fiscal year ended February 2010 and calendar years 2010 and 2011.
NOTE 6 Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at the balance sheet dates consist of:
|
| | | | | | | |
(In thousands) | September 30, 2012 | | December 31, 2011 |
Trade accounts payable | $ | 78,704 |
| | $ | 65,040 |
|
Accrued wages, salaries and employee benefits | 40,805 |
| | 37,430 |
|
Accrued interest | 15,879 |
| | 5,245 |
|
Accrued taxes other than income taxes payable | 9,158 |
| | 11,257 |
|
Accrued discounts and allowances | 7,564 |
| | 5,588 |
|
Accrued utilities | 7,225 |
| | 7,265 |
|
Accrued transportation | 4,380 |
| | 3,801 |
|
Other | 7,480 |
| | 9,005 |
|
| $ | 171,195 |
| | $ | 144,631 |
|
NOTE 7 Debt
$375 MILLION SENIOR NOTES DUE 2018
On October 22, 2010, we sold $375.0 million aggregate principal amount of senior notes, which we refer to as the 2010 Notes. The 2010 Notes mature on November 1, 2018, have an interest rate of 7.125% and were issued at their face value.
The 2010 Notes are guaranteed by certain of our existing and future direct and indirect domestic subsidiaries. The 2010 Notes are equal in right of payment with all other existing and future unsecured senior indebtedness and are senior in right of payment to any future subordinated indebtedness. The 2010 Notes are effectively subordinated to all of our existing and future secured indebtedness, including borrowings under our secured revolving credit facility, which is secured by certain of our accounts receivable, inventory and cash. The terms of the 2010 Notes limit our ability and the ability of any restricted subsidiaries to borrow money; pay dividends; redeem or repurchase capital stock; make investments; sell assets; create restrictions on the payment of dividends or other amounts to us from any restricted subsidiaries; enter into transactions with affiliates; enter into sale and lease back transactions; create liens; and consolidate, merge or sell all or substantially all of our assets.
Prior to November 1, 2013, we may redeem up to 35% of the 2010 Notes at a redemption price equal to 107.125% of the principal amount plus accrued and unpaid interest with the proceeds from one or more qualified equity offerings. We have the option to redeem all or a portion of the 2010 Notes at any time before November 1, 2014 at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest and a “make whole” premium. On or after November 1, 2014, we may redeem all or a portion of the 2010 Notes at specified redemption prices plus accrued and unpaid interest. In addition, we may be required to make an offer to purchase the 2010 Notes upon the sale of certain assets and upon a change of control.
$150 MILLION SENIOR NOTES DUE 2016
In June 2009, we issued senior unsecured notes, which we refer to as the 2009 Notes, in the aggregate principal amount of $150.0 million. The 2009 Notes are due on June 15, 2016 and have an interest rate of 10.625%. The 2009 Notes were issued at a price equal to 98.792% of their face value.
The 2009 Notes are guaranteed by each of our existing and future direct and indirect domestic subsidiaries. The 2009 Notes are general unsecured obligations and are therefore not secured by our assets and are effectively subordinated to all of our existing and future secured indebtedness, including borrowings under our secured revolving credit facility, which is secured by certain of our accounts receivable, inventory and cash. The terms of the 2009 Notes limit our ability and the ability of any restricted subsidiaries to borrow money; pay dividends; redeem or repurchase capital stock; make investments; sell assets; create restrictions on the payment of dividends or other amounts to us from any restricted subsidiaries; enter into transactions with affiliates; enter into sale and lease back transactions; create liens; and consolidate, merge or sell all or substantially all of our assets.
We have the option to redeem all or a portion of the 2009 Notes at any time prior to June 15, 2013 at a redemption price equal to 100% of the principal amount thereof plus a “make whole” premium and accrued and unpaid interest. On or after June 15, 2013, we may redeem all or a portion of the 2009 Notes at specified redemption prices plus accrued and unpaid interest. In addition, we may be required to make an offer to purchase the 2009 Notes upon the sale of certain assets and upon a change of control.
REVOLVING CREDIT FACILITY
On November 26, 2008, we entered into a $125 million revolving credit facility with certain financial institutions. On September 28, 2011, we amended our revolving credit facility, among other things, (i) to extend the term of the revolving loan to the earlier of September 30, 2016 or 90 days prior to the maturity date of the 2009 Notes; (ii) to increase permitted capital expenditures limits; and (iii) to change the interest rate margins applicable to base rate loans and LIBOR loans in circumstances based on our fixed charge coverage ratio from time to time, and to reduce the fees paid by us on undrawn amounts. The amount available to us under the revolving credit facility is based on the lesser of 85% of our eligible accounts receivable plus approximately 65% of our eligible inventory, or $125 million.
As of September 30, 2012, there were no borrowings outstanding under the credit facility, but approximately $5.9 million of the credit facility was being used to support outstanding standby letters of credit. Loans under the credit facility bear interest at LIBOR plus between 1.75% and 2.25% for LIBOR loans, and a base rate effectively equal to the agent bank’s prime rate plus between 0.25% and 0.75% for other loans. The percentage margin on all loans is based on our fixed charge coverage ratio for the last twelve months, which is recalculated on a quarterly basis. As of September 30, 2012, we would have been permitted to draw approximately $119.1 million under the credit facility at LIBOR plus 1.75%.
A minimum fixed charge coverage ratio is the only financial covenant requirement under our credit facility and is triggered when there are any commitments or obligations outstanding and availability falls below 12.5% or an event of default exists, at which time the minimum fixed charge coverage ratio must be at least 1.0-to-1.0. As of September 30, 2012, the fixed charge coverage ratio for the last twelve months was 3.4-to-1.0.
Our obligations under the revolving credit facility are secured by certain of our accounts receivable, inventory and cash. The terms of the credit facility agreement contain various provisions that limit our discretion in the operations of our business by restricting our ability to, among other things pay dividends; redeem or repurchase capital stock; create, incur or guarantee certain debt; incur liens on certain properties; make capital expenditures in amounts in excess of those permitted under the revolving credit agreement; enter into certain affiliate transactions; enter into certain hedging arrangements; and consolidate with or merge with another entity.
NOTE 8 Other Long-Term Obligations
Other long-term obligations at the balance sheet dates consist of:
|
| | | | | | | |
(In thousands) | September 30, 2012 | | December 31, 2011 |
Long-term lease obligations, net of current portion | $ | 25,336 |
| | $ | 25,546 |
|
Deferred proceeds | 11,411 |
| | 13,040 |
|
Deferred compensation | 10,254 |
| | 8,100 |
|
Other | 1,559 |
| | 1,788 |
|
| $ | 48,560 |
| | $ | 48,474 |
|
NOTE 9 Pension and Other Postretirement Employee Benefit Plans
The following table details the components of net periodic cost of our pension and other postretirement employee benefit, or OPEB, plans for the periods presented:
|
| | | | | | | | | | | | | | | |
| Three months ended September 30: |
| | | | | Other Postretirement |
| Pension Benefit Plans | | Employee Benefit Plans |
(In thousands) | 2012 | | 2011 | | 2012 | | 2011 |
Service cost | $ | 622 |
| | $ | 1,931 |
| | $ | 173 |
| | $ | 175 |
|
Interest cost | 3,673 |
| | 3,773 |
| | 1,454 |
| | 1,714 |
|
Expected return on plan assets | (4,921 | ) | | (4,883 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | 158 |
| | 299 |
| | (670 | ) | | (449 | ) |
Amortization of actuarial loss | 3,021 |
| | 2,096 |
| | — |
| | — |
|
Net periodic cost | $ | 2,553 |
| | $ | 3,216 |
| | $ | 957 |
| | $ | 1,440 |
|
|
| | | | | | | | | | | | | | | |
| Nine months ended September 30: |
| Pension Benefit Plans | | Other Postretirement Employee Benefit Plans |
(In thousands) | 2012 | | 2011 | | 2012 | | 2011 |
Service cost | $ | 1,864 |
| | $ | 5,794 |
| | $ | 520 |
| | $ | 526 |
|
Interest cost | 11,020 |
| | 11,319 |
| | 4,361 |
| | 5,143 |
|
Expected return on plan assets | (14,764 | ) | | (14,649 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | 475 |
| | 895 |
| | (2,010 | ) | | (1,346 | ) |
Amortization of actuarial loss | 9,064 |
| | 6,286 |
| | — |
| | — |
|
Net periodic cost | $ | 7,659 |
| | $ | 9,645 |
| | $ | 2,871 |
| | $ | 4,323 |
|
As discussed in the notes to our consolidated financial statements in our 2011 Form 10-K, our company-sponsored pension plans were underfunded by $89.1 million at December 31, 2011. The underfunded status as of December 31, 2011 increased by $33.7 million over the underfunded status as of December 31, 2010, primarily due to lower discount rates and low returns on pension asset investments. As a result of being underfunded, we are required to make contributions to our qualified pension plans. During the nine months ended September 30, 2012, we contributed $17.6 million to these pension plans. In October 2012, we contributed an additional $3.0 million, which was the remaining contribution we were required to make in 2012.
During the nine months ended September 30, 2012, we made contributions of approximately $0.2 million to our non-qualified pension plan, which substantially fulfills our estimated 2012 annual contributions to our non-qualified pension plan. We do not anticipate funding our OPEB plans in 2012 except to pay benefit costs as incurred during the year by plan participants.
NOTE 10 Earnings per Common Share
Earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding in accordance with accounting guidance related to earnings per share. The following table reconciles the number of common shares used in calculating basic and diluted net earnings per share:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2012 | | 2011 | | 2012 | | 2011 |
Basic average common shares outstanding1 | 23,360,967 |
| | 22,865,233 |
| | 23,337,323 |
| | 22,975,847 |
|
Incremental shares due to: | | | | | | | |
Restricted stock units | 51,230 |
| | 281,782 |
| | 43,580 |
| | 273,821 |
|
Performance shares | 287,491 |
| | 444,161 |
| | 264,021 |
| | 442,124 |
|
Diluted average common shares outstanding | 23,699,688 |
| | 23,591,176 |
| | 23,644,924 |
| | 23,691,792 |
|
| | | | | | | |
Basic net earnings per common share | $ | 0.82 |
| | $ | 0.38 |
| | $ | 1.90 |
| | $ | 1.23 |
|
Diluted net earnings per common share | 0.80 |
| | 0.37 |
| | 1.87 |
| | 1.19 |
|
| | | | | | | |
Anti-dilutive shares excluded from calculation | 29,382 |
| | 88,674 |
| | 132,273 |
| | 104,212 |
|
| |
1 | Basic average common shares outstanding include restricted stock awards that are fully vested, but are deferred for future issuance. See Note 11 "Equity-Based Compensation" for further discussion. |
NOTE 11 Equity-Based Compensation
We recognize equity-based compensation expense for all equity-based payment awards made to employees and directors, including restricted stock units and performance shares, based on estimated fair values.
Employee equity-based compensation expense was recognized as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands) | 2012 | | 2011 | | 2012 | | 2011 |
Restricted stock units | $ | 297 |
| | $ | 321 |
| | $ | 693 |
| | $ | 888 |
|
Performance shares | 1,953 |
| | 1,359 |
| | 5,284 |
| | 3,594 |
|
Total employee equity-based compensation | $ | 2,250 |
| | $ | 1,680 |
| | $ | 5,977 |
| | $ | 4,482 |
|
As provided for in the Clearwater Paper Corporation 2008 Stock Incentive Plan, the performance measure used to determine the number of performance shares ultimately issued is a comparison of the percentile ranking of our total stockholder return compared to the total stockholder return performance of a selected peer group. The number of shares actually issued, as a percentage of the amount subject to the performance share award, could range from 0%-200%.
On December 31, 2011, the service and performance period for 499,680 outstanding performance shares granted in 2009 ended. Those performance shares were settled and distributed in the first quarter of 2012. The number of shares actually settled, as a percentage of the outstanding amount, was 200%. An additional 257,112 shares of restricted stock units vested in the first quarter of 2012, of which 90,856 shares were settled and distributed during the period and 166,256 shares that would have resulted in certain executive compensation being above the IRC section 162(m) threshold were deferred to preserve tax deductibility for the company. After adjusting for the related minimum tax withholdings, and excluding the deferred restricted stock units, a net 724,040 shares were issued in the first quarter of 2012. The related minimum tax withholdings payment made in the first quarter of 2012 in connection with issued shares was $13.0 million. Subsequent to the first quarter of 2012, no performance shares or restricted stock units have vested, and no related minimum tax withholding payments have been made.
The following table summarizes the number of share-based awards granted under our 2008 Stock Incentive Plan during the nine months ended September 30, 2012 and the grant-date fair value of the awards:
|
| | | | | | |
| Nine Months Ended September 30, 2012 |
| Number of awards | | Average fair value of award per share |
Restricted stock units | 52,294 |
| | $ | 34.59 |
|
Performance shares | 150,865 |
| | 40.24 |
|
DIRECTOR AWARDS
Each year our directors receive equity-based awards that are deferred, measured in units of our common stock and ultimately converted to cash at the time of payment. Accordingly, this compensation is subject to fluctuations based on mark-to-market adjustments at each reporting period in line with changes in the market price of our common stock. As a result of the mark-to-market adjustment, we recorded director equity-based compensation expense of $1.8 million and $1.7 million for the three and nine months ended September 30, 2012, compared to compensation expense of $0.5 million and $0.6 million for the same periods ended September 30, 2011.
NOTE 12 Fair Value Measurements
The estimated fair values of our financial instruments at the dates presented below are as follows:
|
| | | | | | | | | | | | | | | |
| September 30, 2012 | | December 31, 2011 |
| Carrying | | Fair | | Carrying | | Fair |
(In thousands) | Amount | | Value | | Amount | | Value |
Cash, restricted cash, and short-term investments (Level 1) | $ | 56,564 |
| | $ | 56,564 |
| | $ | 64,209 |
| | $ | 64,209 |
|
Long-term debt (Level 1) | 523,872 |
| | 573,563 |
| | 523,694 |
| | 556,313 |
|
Accounting guidance establishes a framework for measuring the fair value of financial instruments, providing a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities, or “Level 1” measurements, followed by quoted prices of similar assets or observable market data, or “Level 2” measurements, and the lowest priority to unobservable inputs, or “Level 3” measurements.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should seek to maximize the use of observable inputs and minimize the use of unobservable inputs.
NOTE 13 Segment Information
The table below presents information about our reportable segments:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands) | 2012 | | 2011 | | 2012 | | 2011 |
Segment net sales: | | | | | | | |
Consumer Products | $ | 292,959 |
| | $ | 285,237 |
| | $ | 853,911 |
| | $ | 823,607 |
|
Pulp and Paperboard1 | 187,274 |
| | 215,888 |
| | 557,692 |
| | 637,975 |
|
Total segment net sales | $ | 480,233 |
| | $ | 501,125 |
| | $ | 1,411,603 |
| | $ | 1,461,582 |
|
| | | | | | | |
Operating income: | | | | | | | |
Consumer Products | $ | 18,453 |
| | $ | 7,075 |
| | $ | 70,420 |
| | $ | 27,758 |
|
Pulp and Paperboard1 | 34,449 |
| | 26,266 |
| | 78,108 |
| | 76,370 |
|
| 52,902 |
| | 33,341 |
| | 148,528 |
| | 104,128 |
|
Corporate and eliminations | (13,140 | ) | | (7,958 | ) | | (38,621 | ) | | (21,406 | ) |
Income from operations | $ | 39,762 |
| | $ | 25,383 |
| | $ | 109,907 |
| | $ | 82,722 |
|
| | | | | | | |
Depreciation and amortization: | | | | | | | |
Consumer Products | $ | 13,275 |
| | $ | 12,920 |
| | $ | 39,692 |
| | $ | 37,115 |
|
Pulp and Paperboard | 5,525 |
| | 6,536 |
| | 17,547 |
| | 19,646 |
|
Corporate | 399 |
| | 113 |
| | 1,238 |
| | 347 |
|
Total depreciation and amortization | $ | 19,199 |
| | $ | 19,569 |
| | $ | 58,477 |
| | $ | 57,108 |
|
| |
1 | Results for Pulp and Paperboard for the nine months ended September 30, 2012 include income and expenses associated with the November 2011 sale of the Lewiston, Idaho sawmill, the effects of which were immaterial in the aggregate. |
NOTE 14 Supplemental Guarantor Financial Information
On October 22, 2010 we issued the 2010 Notes. Certain of our 100% owned, domestic subsidiaries guarantee the 2010 Notes on a joint and several basis. The 2010 Notes are not guaranteed by Interlake Acquisition Corporation Limited or Cellu Tissue-CityForest, LLC. There are no significant restrictions on the ability of the guarantor subsidiaries to make distributions to Clearwater Paper, the issuer of the 2010 Notes. The following tables present the results of operations, financial position and cash flows of Clearwater Paper and its subsidiaries, the guarantor and non-guarantor entities, and the eliminations necessary to arrive at the information for Clearwater Paper on a consolidated basis.
Clearwater Paper Corporation
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2012
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiaries | | Eliminations | | Total |
Net sales | $ | 351,309 |
| | $ | 118,592 |
| | $ | 16,388 |
| | $ | (6,056 | ) | | $ | 480,233 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (287,715 | ) | | (116,033 | ) | | (12,130 | ) | | 6,056 |
| | (409,822 | ) |
Selling, general and administrative expenses | (9,143 | ) | | (16,638 | ) | | (4,868 | ) | | — |
| | (30,649 | ) |
Total operating costs and expenses | (296,858 | ) | | (132,671 | ) | | (16,998 | ) | | 6,056 |
| | (440,471 | ) |
Income (loss) from operations | 54,451 |
| | (14,079 | ) | | (610 | ) | | — |
| | 39,762 |
|
Interest expense, net | (7,900 | ) | | — |
| | — |
| | — |
| | (7,900 | ) |
Earnings (loss) before income taxes | 46,551 |
| | (14,079 | ) | | (610 | ) | | — |
| | 31,862 |
|
Income tax provision | (20,364 | ) | | 4,980 |
| | (1,523 | ) | | 4,109 |
| | (12,798 | ) |
Equity in (loss) income of subsidiary | (11,232 | ) | | (2,133 | ) | | — |
| | 13,365 |
| | — |
|
Net earnings (loss) | $ | 14,955 |
| | $ | (11,232 | ) | | $ | (2,133 | ) | | $ | 17,474 |
| | $ | 19,064 |
|
Other comprehensive income, net of tax | 1,521 |
| | — |
| | — |
| | — |
| | 1,521 |
|
Comprehensive income (loss) | $ | 16,476 |
| | $ | (11,232 | ) | | $ | (2,133 | ) | | $ | 17,474 |
| | $ | 20,585 |
|
Clearwater Paper Corporation
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2012
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiaries | | Eliminations | | Total |
Net sales | $ | 1,035,596 |
| | $ | 346,397 |
| | $ | 48,762 |
| | $ | (19,152 | ) | | $ | 1,411,603 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (866,127 | ) | | (329,125 | ) | | (35,344 | ) | | 19,152 |
| | (1,211,444 | ) |
Selling, general and administrative expenses | (65,483 | ) | | (19,463 | ) | | (5,306 | ) | | — |
| | (90,252 | ) |
Total operating costs and expenses | (931,610 | ) | | (348,588 | ) | | (40,650 | ) | | 19,152 |
| | (1,301,696 | ) |
Income (loss) from operations | 103,986 |
| | (2,191 | ) | | 8,112 |
| | — |
| | 109,907 |
|
Interest expense, net | (26,775 | ) | | — |
| | — |
| | — |
| | (26,775 | ) |
Earnings before income (loss) taxes | 77,211 |
| | (2,191 | ) | | 8,112 |
| | — |
| | 83,132 |
|
Income tax provision | (37,002 | ) | | 1,478 |
| | (3,545 | ) | | 216 |
| | (38,853 | ) |
Equity in income (loss) of subsidiary | 3,854 |
| | 4,567 |
| | — |
| | (8,421 | ) | | — |
|
Net earnings (loss) | $ | 44,063 |
| | $ | 3,854 |
| | $ | 4,567 |
| | $ | (8,205 | ) | | $ | 44,279 |
|
Other comprehensive income, net of tax | 4,563 |
| | — |
| | — |
| | — |
| | 4,563 |
|
Comprehensive income (loss) | $ | 48,626 |
| | $ | 3,854 |
| | $ | 4,567 |
| | $ | (8,205 | ) | | $ | 48,842 |
|
Clearwater Paper Corporation
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2011
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiaries | | Eliminations | | Total |
Net sales | $ | 362,347 |
| | $ | 123,524 |
| | $ | 15,254 |
| | $ | — |
| | $ | 501,125 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (313,942 | ) | | (119,820 | ) | | (15,165 | ) | | — |
| | (448,927 | ) |
Selling, general and administrative expenses | (22,147 | ) | | (3,933 | ) | | (735 | ) | | — |
| | (26,815 | ) |
Total operating costs and expenses | (336,089 | ) | | (123,753 | ) | | (15,900 | ) | | — |
| | (475,742 | ) |
Income (loss) from operations | 26,258 |
| | (229 | ) | | (646 | ) | | — |
| | 25,383 |
|
Interest expense, net | (11,927 | ) | | (24 | ) | | (149 | ) | | — |
| | (12,100 | ) |
Other, net | — |
| | — |
| | 1,290 |
| | — |
| | 1,290 |
|
Earnings (loss) before income taxes | 14,331 |
| | (253 | ) | | 495 |
| | — |
| | 14,573 |
|
Income tax provision | (11,116 | ) | | 3,381 |
| | (341 | ) | | 2,148 |
| | (5,928 | ) |
Equity in income (loss) of subsidiary | 3,282 |
| | 154 |
| | — |
| | (3,436 | ) | | — |
|
Net earnings (loss) | $ | 6,497 |
| | $ | 3,282 |
| | $ | 154 |
| | $ | (1,288 | ) | | $ | 8,645 |
|
Other comprehensive loss, net of tax | (2,537 | ) | | — |
| | — |
| | — |
| | (2,537 | ) |
Comprehensive income (loss) | $ | 3,960 |
| | $ | 3,282 |
| | $ | 154 |
| | $ | (1,288 | ) | | $ | 6,108 |
|
Clearwater Paper Corporation
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2011
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiaries | | Eliminations | | Total |
Net sales | $ | 1,063,657 |
| | $ | 348,559 |
| | $ | 49,366 |
| | $ | — |
| | $ | 1,461,582 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (915,786 | ) | | (335,018 | ) | | (46,401 | ) | | — |
| | (1,297,205 | ) |
Selling, general and administrative expenses | (64,699 | ) | | (14,459 | ) | | (2,497 | ) | | — |
| | (81,655 | ) |
Total operating costs and expenses | (980,485 | ) | | (349,477 | ) | | (48,898 | ) | | — |
| | (1,378,860 | ) |
Income (loss) from operations | 83,172 |
| | (918 | ) | | 468 |
| | — |
| | 82,722 |
|
Interest expense, net | (33,805 | ) | | (90 | ) | | (530 | ) | | — |
| | (34,425 | ) |
Other, net | — |
| | — |
| | 585 |
| | — |
| | 585 |
|
Earnings (loss) before income taxes | 49,367 |
| | (1,008 | ) | | 523 |
| | — |
| | 48,882 |
|
Income tax provision | (24,136 | ) | | 2,734 |
| | (1,456 | ) | | 2,148 |
| | (20,710 | ) |
Equity in income (loss) of subsidiary | 793 |
| | (933 | ) | | — |
| | 140 |
| | — |
|
Net earnings (loss) | $ | 26,024 |
| | $ | 793 |
| | $ | (933 | ) | | $ | 2,288 |
| | $ | 28,172 |
|
Other comprehensive income, net of tax | 1,009 |
| | — |
| | — |
| | — |
| | 1,009 |
|
Comprehensive income (loss) | $ | 27,033 |
| | $ | 793 |
| | $ | (933 | ) | | $ | 2,288 |
| | $ | 29,181 |
|
Clearwater Paper Corporation
Condensed Consolidating Balance Sheet
At September 30, 2012
|
| | | | | | | | | | | | | | | | | | | |
(In thousands) | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash | $ | 12,720 |
| | $ | 407 |
| | $ | 6,437 |
| | $ | — |
| | $ | 19,564 |
|
Restricted cash | — |
| | — |
| | — |
| | — |
| | — |
|
Short-term investments | 37,000 |
| | — |
| | — |
| | — |
| | 37,000 |
|
Receivables, net | 125,117 |
| | 42,902 |
| | 9,414 |
| | (1,846 | ) | | 175,587 |
|
Taxes receivable | 12,078 |
| | 3,043 |
| | (3,636 | ) | | 433 |
| | 11,918 |
|
Inventories | 162,567 |
| | 55,035 |
| | 6,833 |
| | — |
| | 224,435 |
|
Deferred tax assets | 28,505 |
| | 4,627 |
| | 438 |
| | (8,713 | ) | | 24,857 |
|
Prepaid expenses | 7,555 |
| | 843 |
| | 172 |
| | — |
| | 8,570 |
|
Total current assets | 385,542 |
| | 106,857 |
| | 19,658 |
| | (10,126 | ) | | 501,931 |
|
Property, plant and equipment, net | 586,344 |
| | 207,179 |
| | 47,458 |
| | — |
| | 840,981 |
|
Goodwill | 229,533 |
| | — |
| | — |
| | — |
| | 229,533 |
|
Intangible assets, net | — |
| | 38,635 |
| | 6,219 |
| | — |
| | 44,854 |
|
Intercompany receivable (payable) | 39,164 |
| | (106,958 | ) | | 45,265 |
| | 22,529 |
| | — |
|
Investment in subsidiary | 257,563 |
| | 94,285 |
| | — |
| | (351,848 | ) | | — |
|
Other assets, net | 9,225 |
| | 378 |
| | — |
| | — |
| | 9,603 |
|
TOTAL ASSETS | $ | 1,507,371 |
| | $ | 340,376 |
| | $ | 118,600 |
| | $ | (339,445 | ) | | $ | 1,626,902 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | $ | 132,911 |
| | $ | 32,741 |
| | $ | 7,389 |
| | $ | (1,846 | ) | | $ | 171,195 |
|
Current liability for pensions and other postretirement employee benefits | 9,861 |
| | — |
| | — |
| | — |
| | 9,861 |
|
Total current liabilities | 142,772 |
| | 32,741 |
| | 7,389 |
| | (1,846 | ) | | 181,056 |
|
Long-term debt | 523,872 |
| | — |
| | — |
| | — |
| | 523,872 |
|
Liability for pensions and other postretirement employee benefits | 197,222 |
| | — |
| | — |
| | — |
| | 197,222 |
|
Other long-term obligations | 48,199 |
| | 361 |
| | — |
| | — |
| | 48,560 |
|
Accrued taxes | 78,225 |
| | 59 |
| | 341 |
| | — |
| | 78,625 |
|
Deferred tax liabilities (assets) | (9,514 | ) | | 49,652 |
| | 16,585 |
| | 14,249 |
| | 70,972 |
|
Accumulated other comprehensive loss, net of tax | (110,702 | ) | | — |
| | — |
| | — |
| | (110,702 | ) |
Stockholders’ equity excluding accumulated other comprehensive loss | 637,297 |
| | 257,563 |
| | 94,285 |
| | (351,848 | ) | | 637,297 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,507,371 |
| | $ | 340,376 |
| | $ | 118,600 |
| | $ | (339,445 | ) | | $ | 1,626,902 |
|
Clearwater Paper Corporation
Condensed Consolidating Balance Sheet
At December 31, 2011
|
| | | | | | | | | | | | | | | | | | | |
(In thousands) | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash | $ | 2,146 |
| | $ | 901 |
| | $ | 5,392 |
| | $ | — |
| | $ | 8,439 |
|
Restricted cash | 769 |
| | — |
| | — |
| | — |
| | 769 |
|
Short-term investments | 55,001 |
| | — |
| | — |
| | — |
| | 55,001 |
|
Receivables, net | 100,600 |
| | 66,580 |
| | 9,009 |
| | — |
| | 176,189 |
|
Taxes receivable | 8,957 |
| | 709 |
| | 334 |
| | — |
| | 10,000 |
|
Inventories | 175,446 |
| | 62,234 |
| | 6,391 |
| | — |
| | 244,071 |
|
Deferred tax assets | 27,801 |
| | 2,950 |
| | 194 |
| | 8,521 |
| | 39,466 |
|
Prepaid expenses | 9,756 |
| | 1,437 |
| | 203 |
| | — |
| | 11,396 |
|
Total current assets | 380,476 |
| | 134,811 |
| | 21,523 |
| | 8,521 |
| | 545,331 |
|
Property, plant and equipment, net | 468,372 |
| | 217,235 |
| | 49,959 |
| | — |
| | 735,566 |
|
Goodwill | 229,533 |
| | — |
| | — |
| | — |
| | 229,533 |
|
Intangible assets, net | — |
| | 42,873 |
| | 6,875 |
| | — |
| | 49,748 |
|
Intercompany receivable (payable) | 120,061 |
| | (155,395 | ) | | 35,334 |
| | — |
| | — |
|
Investment in subsidiary | 249,142 |
| | 89,718 |
| | — |
| | (338,860 | ) | | — |
|
Other assets, net | 10,815 |
| | 325 |
| | — |
| | — |
| | 11,140 |
|
TOTAL ASSETS | $ | 1,458,399 |
| | $ | 329,567 |
| | $ | 113,691 |
| | $ | (330,339 | ) | | $ | 1,571,318 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | $ | 109,549 |
| | $ | 28,838 |
| | $ | 6,244 |
| | $ | — |
| | $ | 144,631 |
|
Current liability for pensions and other postretirement employee benefits | 9,861 |
| | — |
| | — |
| | — |
| | 9,861 |
|
Total current liabilities | 119,410 |
| | 28,838 |
| | 6,244 |
| | — |
| | 154,492 |
|
Long-term debt | 523,694 |
| | — |
| | — |
| | — |
| | 523,694 |
|
Liability for pensions and other postretirement employee benefits | 215,932 |
| | — |
| | — |
| | — |
| | 215,932 |
|
Other long-term obligations | 48,009 |
| | 465 |
| | — |
| | — |
| | 48,474 |
|
Accrued taxes | 73,594 |
| | — |
| | 870 |
| | — |
| | 74,464 |
|
Deferred tax liabilities (assets) | (7,144 | ) | | 51,122 |
| | 16,859 |
| | 8,521 |
| | 69,358 |
|
Accumulated other comprehensive loss, net of tax | (115,265 | ) | | — |
| | — |
| | — |
| | (115,265 | ) |
Stockholders’ equity excluding accumulated other comprehensive loss | 600,169 |
| | 249,142 |
| | 89,718 |
| | (338,860 | ) | | 600,169 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,458,399 |
| | $ | 329,567 |
| | $ | 113,691 |
| | $ | (330,339 | ) | | $ | 1,571,318 |
|
Clearwater Paper Corporation
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2012
|
| | | | | | | | | | | | | | | | | | | |
(In thousands) | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Total |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | |
Net earnings (loss) | $ | 44,063 |
| | $ | 3,854 |
| | $ | 4,567 |
| | $ | (8,205 | ) | | $ | 44,279 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | |
Depreciation and amortization | 35,244 |
| | 19,076 |
| | 4,157 |
| | — |
| | 58,477 |
|
Deferred tax expense (benefit) | (6,040 | ) | | (3,147 | ) | | (518 | ) | | 22,962 |
| | 13,257 |
|
Equity-based compensation expense | 7,681 |
| | — |
| | — |
| | — |
| | 7,681 |
|
Employee benefit plans | 6,697 |
| | — |
| | — |
| | — |
| | 6,697 |
|
Changes in working capital, net | 16,641 |
| | 34,698 |
| | 95 |
| | — |
| | 51,434 |
|
Change in taxes receivable, net | (3,121 | ) | | (2,334 | ) | | 3,970 |
| | (433 | ) | | (1,918 | ) |
Excess tax benefits from equity-based payment arrangements | (9,193 | ) | | — |
| | — |
| | — |
| | (9,193 | ) |
Change in non-current accrued taxes | 4,631 |
| | 59 |
| | (529 | ) | | — |
| | 4,161 |
|
Funding of qualified pension plans | (17,625 | ) | | — |
| | — |
| | — |
| | (17,625 | ) |
Change in restricted cash, net | 769 |
| | — |
| | — |
| | — |
| | 769 |
|
Other, net | 1,757 |
| | 807 |
| | — |
| | — |
| | 2,564 |
|
Net cash provided by operating activities | 81,504 |
| | 53,013 |
| | 11,742 |
| | 14,324 |
| | 160,583 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | |