CLW-2015.06.30-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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ý | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2015
or
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¨ | 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)
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Delaware | | 20-3594554 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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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.
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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 July 31, 2015 was 19,056,095.
CLEARWATER PAPER CORPORATION
Index to Form 10-Q
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PART I. | | |
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ITEM 1. | | |
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ITEM 2. | | |
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ITEM 3. | | |
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ITEM 4. | | |
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PART II. | | |
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ITEM 1. | | |
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ITEM 1A. | | |
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ITEM 6. | | |
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Part I
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ITEM 1. | |
Consolidated Financial Statements |
Clearwater Paper Corporation
Consolidated Statements of Operations
Unaudited (Dollars in thousands - except per-share amounts)
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| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Net sales | $ | 444,558 |
| | $ | 498,759 |
| | $ | 878,584 |
| | $ | 983,679 |
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Costs and expenses: | | | | | | | |
Cost of sales | (384,347 | ) | | (434,111 | ) | | (774,179 | ) | | (860,740 | ) |
Selling, general and administrative expenses | (28,138 | ) | | (31,565 | ) | | (57,095 | ) | | (65,079 | ) |
Impairment of assets | — |
| | — |
| | — |
| | (4,259 | ) |
Total operating costs and expenses | (412,485 | ) | | (465,676 | ) | | (831,274 | ) | | (930,078 | ) |
Income from operations | 32,073 |
| | 33,083 |
| | 47,310 |
| | 53,601 |
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Interest expense, net | (7,774 | ) | | (10,688 | ) | | (15,556 | ) | | (21,422 | ) |
Earnings before income taxes | 24,299 |
| | 22,395 |
| | 31,754 |
| | 32,179 |
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Income tax provision | (8,702 | ) | | (9,942 | ) | | (10,400 | ) | | (13,500 | ) |
Net earnings | $ | 15,597 |
| | $ | 12,453 |
| | $ | 21,354 |
| | $ | 18,679 |
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Net earnings per common share: | | | | | | | |
Basic | $ | 0.82 |
| | $ | 0.61 |
| | $ | 1.11 |
| | $ | 0.91 |
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Diluted | 0.81 |
| | 0.61 |
| | 1.10 |
| | 0.90 |
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The accompanying condensed notes are an integral part of these consolidated financial statements.
Clearwater Paper Corporation
Consolidated Statements of Comprehensive Income
Unaudited (Dollars in thousands)
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| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Net earnings | $ | 15,597 |
| | $ | 12,453 |
| | $ | 21,354 |
| | $ | 18,679 |
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Other comprehensive income: | | | | | | | |
Defined benefit pension and other postretirement employee benefits: | | | | | | | |
Amortization of actuarial loss included in net periodic cost, net of tax of $1,261, $934, $2,467 and $1,899 | 1,965 |
| | 1,479 |
| | 3,842 |
| | 3,008 |
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Amortization of prior service credit included in net periodic cost, net of tax of $(204), $(353), $(411) and $(382) | (321 | ) | | (559 | ) | | (641 | ) | | (604 | ) |
Other comprehensive income, net of tax | 1,644 |
| | 920 |
| | 3,201 |
| | 2,404 |
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Comprehensive income | $ | 17,241 |
| | $ | 13,373 |
| | $ | 24,555 |
| | $ | 21,083 |
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The accompanying condensed notes are an integral part of these consolidated financial statements.
Clearwater Paper Corporation
Consolidated Balance Sheets
Unaudited (Dollars in thousands – except per-share amounts)
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| June 30, 2015 | | December 31, 2014 |
ASSETS | | | |
Current assets: | | | |
Cash | $ | 11,465 |
| | $ | 27,331 |
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Restricted cash | 2,270 |
| | 1,500 |
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Short-term investments | 60,000 |
| | 50,000 |
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Receivables, net | 141,090 |
| | 133,914 |
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Taxes receivable | — |
| | 1,255 |
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Inventories | 248,280 |
| | 286,626 |
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Deferred tax assets | 20,839 |
| | 21,760 |
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Prepaid expenses | 7,869 |
| | 4,191 |
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Total current assets | 491,813 |
| | 526,577 |
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Property, plant and equipment, net | 823,672 |
| | 810,987 |
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Goodwill | 209,087 |
| | 209,087 |
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Intangible assets, net | 22,473 |
| | 24,956 |
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Pension assets | 8,098 |
| | 4,738 |
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Other assets, net | 7,394 |
| | 9,583 |
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TOTAL ASSETS | $ | 1,562,537 |
| | $ | 1,585,928 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 214,701 |
| | $ | 215,826 |
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Current liability for pensions and other postretirement employee benefits | 7,915 |
| | 7,915 |
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Total current liabilities | 222,616 |
| | 223,741 |
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Long-term debt | 575,000 |
| | 575,000 |
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Liability for pensions and other postretirement employee benefits | 114,835 |
| | 118,464 |
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Other long-term obligations | 50,779 |
| | 56,856 |
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Accrued taxes | 1,717 |
| | 2,696 |
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Deferred tax liabilities | 110,289 |
| | 111,634 |
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Stockholders’ equity: | | | |
Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued | — |
| | — |
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Common stock, par value $0.0001 per share, 100,000,000 authorized shares-24,153,978 and 24,056,057 shares issued | 2 |
| | 2 |
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Additional paid-in capital | 336,431 |
| | 334,074 |
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Retained earnings | 485,678 |
| | 464,324 |
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Treasury stock, at cost, common shares-5,097,883 and 4,498,388 shares repurchased | (267,148 | ) | | (230,000 | ) |
Accumulated other comprehensive loss, net of tax | (67,662 | ) | | (70,863 | ) |
Total stockholders’ equity | 487,301 |
| | 497,537 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,562,537 |
| | $ | 1,585,928 |
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The accompanying condensed notes are an integral part of these consolidated financial statements.
Clearwater Paper Corporation
Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
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| Six Months Ended |
| June 30, |
| 2015 | | 2014 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net earnings | $ | 21,354 |
| | $ | 18,679 |
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Adjustments to reconcile net earnings to net cash flows from operating activities: | | | |
Depreciation and amortization | 41,640 |
| | 44,246 |
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Equity-based compensation expense | 2,019 |
| | 6,910 |
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Impairment of assets | — |
| | 4,259 |
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Deferred tax (benefit) provision | (2,480 | ) | | 9,857 |
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Employee benefit plans | 1,438 |
| | 979 |
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Deferred issuance costs and discounts on long-term debt | 446 |
| | 949 |
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Disposal of plant and equipment, net | 272 |
| | 422 |
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Non-cash adjustments to unrecognized taxes | (979 | ) | | — |
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Changes in working capital, net | 29,309 |
| | 14,818 |
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Changes in taxes receivable, net | 1,255 |
| | 3,663 |
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Excess tax benefits from equity-based payment arrangements | (1,459 | ) | | — |
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Funding of qualified pension plans | (3,179 | ) | | (8,889 | ) |
Other, net | (1,726 | ) | | (980 | ) |
Net cash flows from operating activities | 87,910 |
| | 94,913 |
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CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Changes in short-term investments, net | (10,000 | ) | | 11,000 |
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Additions to plant and equipment | (55,538 | ) | | (32,612 | ) |
Proceeds from sale of assets | 507 |
| | 619 |
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Net cash flows from investing activities | (65,031 | ) | | (20,993 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Purchase of treasury stock | (37,148 | ) | | (74,322 | ) |
Payment of tax withholdings on equity-based payment arrangements | (3,048 | ) | | (792 | ) |
Excess tax benefits from equity-based payment arrangements | 1,459 |
| | — |
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Other, net | (8 | ) | | — |
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Net cash flows from financing activities | (38,745 | ) | | (75,114 | ) |
Decrease in cash | (15,866 | ) | | (1,194 | ) |
Cash at beginning of period | 27,331 |
| | 23,675 |
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Cash at end of period | $ | 11,465 |
| | $ | 22,481 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | |
Cash paid for interest, net of amounts capitalized | $ | 14,280 |
| | $ | 19,547 |
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Cash paid for income taxes | 8,030 |
| | 4,211 |
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Cash received from income tax refunds | 2,029 |
| | 4,170 |
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SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES | | | |
Changes in accrued plant and equipment | $ | (5,187 | ) | | $ | (912 | ) |
The accompanying condensed notes are an integral part of these consolidated financial statements.
Clearwater Paper Corporation
Condensed Notes to Consolidated Financial Statements
Unaudited
NOTE 1 Nature of Operations and Basis of Presentation
GENERAL
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.
On December 30, 2014, we sold our specialty business and mills to a private buyer for $108 million in cash, net of sale related expenses and adjustments. The specialty business and mills' production consisted predominantly of machine-glazed tissue and also included parent rolls and other specialty tissue products such as absorbent materials and dark-hued napkins. The sale included five of our former subsidiaries with facilities located at East Hartford, Connecticut; Menominee, Michigan; Gouverneur, New York; St. Catharines, Ontario; and Wiggins, Mississippi. Included in the sale related expenses and adjustments was the impact of certain indemnity and working capital escrow clauses in the sales agreement. These escrowed amounts totaled $3.8 million of restricted cash on our December 31, 2014 Consolidated Balance Sheet. During the second quarter of 2015, the working capital escrow account established in connection with the sale of the specialty business and mills was settled, resulting in the release of $1.5 million from the restricted cash escrow account and the recognition of a corresponding gain recorded in "Selling, general and administrative expenses" within our Consolidated Statement of Operations.
On February 17, 2014, we announced the permanent and immediate closure of our Long Island, New York, tissue converting and distribution facility. As of June 30, 2015, we have incurred $20.1 million of costs associated with the closure, of which $0.7 million and $1.3 million, respectively, were incurred during the three and six month periods ended June 30, 2015.
FINANCIAL STATEMENT PREPARATION AND PRESENTATION
The accompanying Consolidated Balance Sheets at June 30, 2015 and December 31, 2014, the related Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2015 and 2014, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014, 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, 2014, as filed with the Securities and Exchange Commission, or SEC, on February 26, 2015.
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 periods. Significant areas requiring the use of estimates and measurement of uncertainty include determination of net realizable value for deferred tax assets, uncertain tax positions, assessment of impairment of long-lived assets, goodwill and intangibles, assessment of environmental matters, equity-based compensation and pension and postretirement obligation assumptions. Actual results could differ from those estimates and assumptions.
SHORT-TERM INVESTMENTS AND RESTRICTED CASH
Our short-term investments are invested primarily in demand deposits, which have very short maturity periods, and therefore earn an interest rate commensurate with low-risk instruments. We do not attempt to hedge our exposure to interest rate risk for our short-term investments. Our restricted cash in which the underlying instrument has a term of greater than twelve months from the balance sheet date is classified as non-current and is included in “Other assets, net” on our Consolidated Balance Sheet. As of June 30, 2015, we had $2.3 million classified as current on our Consolidated Balance Sheet. As of December 31, 2014, we had$1.5 million of restricted cash classified as current and $2.3 million of restricted cash classified as non-current and included in "Other assets, net" on our Consolidated Balance Sheets.
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 both June 30, 2015 and December 31, 2014, we had allowances for doubtful accounts of $1.4 million.
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 $1,485.3 million and $1,450.1 million at June 30, 2015 and December 31, 2014, respectively.
Consistent with authoritative guidance, we assess the carrying amount of long-lived assets with definite lives that are held-for-use and evaluate them for recoverability whenever events or changes in circumstances indicate that we may be unable to recover the carrying amount of the assets. During the first quarter of 2014, we permanently closed our Long Island tissue converting and distribution facility. As a result of this closure, we considered an outside third party's appraisal in assessing the recoverability of the facility's long-lived plant and equipment based on available market data for comparable assets sold through private party transactions. Based on this assessment, we determined the carrying amounts of certain long-lived plant and equipment related to the Long Island facility exceeded their fair value. As a result, we recorded a $3.0 million non-cash impairment charge to our accompanying Consolidated Statement of Operations for the six months ended June 30, 2014. There were no other such events or changes in circumstances that impacted our remaining long-lived assets.
STOCKHOLDERS’ EQUITY
On December 15, 2014, we announced that our Board of Directors had approved a new stock repurchase program authorizing the repurchase of up to $100 million of our common stock. The repurchase program authorizes purchases of our common stock from time to time through open market purchases, negotiated transactions or other means, including accelerated stock repurchases and 10b5-1 trading plans in accordance with applicable securities laws and other restrictions. We have no obligation to repurchase stock under this program and may suspend or terminate the program at any time. We have repurchased 599,495 shares of our outstanding common stock at an average price of $61.97 per share under this program. As of June 30, 2015, we had up to $62.9 million of authorization remaining pursuant to this stock repurchase program.
On February 5, 2014, we announced that our Board of Directors had approved a stock repurchase program authorizing the repurchase of up to $100 million of our common stock. We completed that program during the third quarter of 2014. In total, we repurchased 1,574,748 shares of our outstanding common stock at an average price of $63.50 per share under that program.
DERIVATIVES
We had no activity during the six months ended June 30, 2015 and 2014 that required hedge or derivative accounting treatment. However, to help 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 June 30, 2015, these contracts covered approximately 58% of our expected average monthly natural gas requirements for the remainder of 2015. Historically, these contracts have qualified for treatment as “normal purchases or normal sales” under authoritative guidance and thus required no mark-to-market adjustment.
EMPLOYEES
Unions represent hourly employees at six of our manufacturing sites. There are no collective bargaining agreements due to expire in 2015. The hourly union labor contracts that had expired as set forth on page 6 of our Annual Report on Form 10-K for the year ended December 31, 2014 were ratified during the first quarter of 2015.
NOTE 2 Recently Adopted and New Accounting Standards
In July 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, 2015-11, Simplifying the Measurement of Inventory. This standard is part of the FASB’s simplification initiative and applies to entities that measure inventory using a method other than last-in, first-out (LIFO) or the retail inventory method (e.g., first-in, first-out (FIFO), average cost). Under this ASU, entities that utilize FIFO and average cost must switch from the lower of cost or market to the lower of cost and net realizable value. This ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The core principle of the new standard is for companies to recognize revenue in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration, or payment, to which the company expects to be entitled in exchange for those goods or services. The standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively, such as service revenue and contract modifications, and clarify guidance for multiple-element arrangements. This standard was originally issued as effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption prohibited. However, in July 2015, the FASB approved deferring the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. In its approval, the FASB also permitted the early adoption of the standard, but not before the original effective date of fiscal years beginning after December 15, 2016. The standard may be applied under either a retrospective or cumulative effect adoption method. We plan on adopting the standard under the deferred effective date and are currently evaluating the impact this guidance will have on our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. This standard amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred asset. It is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. The adoption of this guidance is not expected to have a significant effect on our consolidated financial statements.
We reviewed all other new accounting pronouncements issued in the period and concluded that they are not applicable to our business.
NOTE 3 Inventories
Inventories at the balance sheet dates consist of:
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(In thousands) | June 30, 2015 | | December 31, 2014 |
Pulp, paperboard and tissue products | $ | 161,304 |
| | $ | 188,760 |
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Materials and supplies | 74,439 |
| | 74,916 |
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Logs, pulpwood, chips and sawdust | 12,537 |
| | 22,950 |
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| $ | 248,280 |
| | $ | 286,626 |
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NOTE 4 Intangible Assets
Intangible assets at the balance sheet dates are comprised of the following:
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| June 30, 2015 |
(Dollars in thousands, lives in years) | Useful Life | | Historical Cost | | Accumulated Amortization | | Net Balance |
Customer relationships | 9.0 | | $ | 41,001 |
| | $ | (20,500 | ) | | $ | 20,501 |
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Trade names and trademarks | 10.0 | | 3,286 |
| | (1,479 | ) | | 1,807 |
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Non-compete agreements | 5.0 | | 574 |
| | (409 | ) | | 165 |
|
| | | $ | 44,861 |
| | $ | (22,388 | ) | | $ | 22,473 |
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| | | | | | | |
| December 31, 2014 |
(Dollars in thousands, lives in years) | Useful Life | | Historical Cost | | Accumulated Amortization | | Net Balance |
Customer relationships | 9.0 | | $ | 41,001 |
| | $ | (18,223 | ) | | $ | 22,778 |
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Trade names and trademarks | 10.0 | | 3,286 |
| | (1,314 | ) | | 1,972 |
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Non-compete agreements | 5.0 | | 1,189 |
| | (983 | ) | | 206 |
|
| | | $ | 45,476 |
| | $ | (20,520 | ) | | $ | 24,956 |
|
As a result of the closure of our Long Island tissue converting and distribution facility, we performed an assessment of the recoverability of our intangible assets by utilizing the income approach, which discounts projected future cash flows based on management’s expectations of the current and future operating environment. It was determined that the carrying amounts of certain trade names and trademarks related to the Long Island facility were exceeding their fair value. As a result, in the first quarter of 2014 we recorded a $1.3 million non-cash impairment charge in our accompanying Consolidated Statement of Operations. There were no other such events or changes in circumstances that impacted our remaining definite-lived intangible assets.
NOTE 5 Income Taxes
Consistent with authoritative guidance, our estimated annual effective tax rate is used to allocate our expected annual income tax provision to interim periods. The rate is the ratio of our estimated annual income tax provision 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 provision 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.
For the three and six months ended June 30, 2015 and 2014, the effective tax rates attributable to continuing operations were as follows:
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Statutory federal income tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % | | 35.0 | % |
State taxes, net of credits | 2.2 |
| | 0.9 |
| | 2.2 |
| | 0.9 |
|
Change in valuation allowances | 0.9 |
| | 1.6 |
| | 0.9 |
| | 2.5 |
|
Federal manufacturing deduction | (3.1 | ) | | (1.7 | ) | | (3.1 | ) | | (1.7 | ) |
Change in uncertain tax positions | — |
| | — |
| | (3.1 | ) | | — |
|
Interest accrued on uncertain tax positions | — |
| | 0.1 |
| | 0.1 |
| | 0.1 |
|
Federal credits and audit adjustments | (0.4 | ) | | (0.1 | ) | | (0.4 | ) | | (1.4 | ) |
State rate adjustments | — |
| | 4.6 |
| | — |
| | 3.2 |
|
Return to provision adjustments | — |
| | 4.1 |
| | (0.1 | ) | | 3.1 |
|
Other | 1.2 |
| | (0.1 | ) | | 1.3 |
| | 0.3 |
|
Effective tax rate | 35.8 | % | | 44.4 | % | | 32.8 | % | | 42.0 | % |
Our estimated annual effective tax rate for the second quarter of 2015 and 2014 is approximately 35%.
During the quarter ended June 30, 2014, we recognized the effects of enacted New York state law changes. As part of the analysis, we identified that, in prior years, we had not applied the proper apportionment factor when certain New York state net operating loss carryforwards were generated, which resulted in a $2.9 million overstatement that was corrected in the period and is included as a discrete item within state rate adjustments due to immateriality. Additionally, return to provision adjustments, including amended returns, generated expense of 7.4%, which was offset by other state return to provision adjustments benefit of 3.3%.
NOTE 6 Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at the balance sheet dates consist of:
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| | | | | | | |
(In thousands) | June 30, 2015 | | December 31, 2014 |
Trade accounts payable | $ | 122,918 |
| | $ | 122,856 |
|
Accrued wages, salaries and employee benefits | 37,842 |
| | 41,880 |
|
Accrued interest | 11,932 |
| | 12,173 |
|
Accrued discounts and allowances | 11,510 |
| | 10,026 |
|
Accrued utilities | 6,417 |
| | 6,959 |
|
Accrued taxes other than income taxes payable | 5,950 |
| | 5,622 |
|
Other | 18,132 |
| | 16,310 |
|
| $ | 214,701 |
| | $ | 215,826 |
|
NOTE 7 Debt
SENIOR NOTES
On July 29, 2014, we issued $300 million aggregate principal amount of senior notes, which we refer to as the 2014 Notes. The 2014 Notes mature on February 1, 2025, have an interest rate of 5.375% and were issued at their face value.
The 2014 Notes are guaranteed by all of our direct and indirect subsidiaries. The 2014 Notes will also be guaranteed by each of our future direct and indirect subsidiaries that do not constitute an immaterial subsidiary under the indenture governing the 2014 Notes. The 2014 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 2014 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 2014 Notes limit our ability and the ability of any restricted subsidiaries to incur certain liens, engage in sale and leaseback transactions and consolidate, merge with, or convey, transfer or lease substantially all of our or their assets to another person.
On January 23, 2013, we issued $275 million aggregate principal amount of senior notes, which we refer to as the 2013 Notes. The 2013 Notes mature on February 1, 2023, have an interest rate of 4.5% and were issued at their face value.
The 2013 Notes are guaranteed by all of our direct and indirect subsidiaries, and will also be guaranteed by each of our future direct and indirect subsidiaries that we do not designate as an unrestricted subsidiary under the indenture governing these notes. The 2013 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. In addition, they 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 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 or their assets.
REVOLVING CREDIT FACILITY
On November 26, 2008, we entered into a $125 million senior secured revolving credit facility with certain financial institutions. 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. The revolving credit facility has been subsequently amended and expires on September 30, 2016.
As of June 30, 2015, there were no borrowings outstanding under the credit facility, but $6.2 million of the credit facility was being used to support outstanding standby letters of credit. Loans under the credit facility bear interest (i) for LIBOR loans, LIBOR plus between 1.75% and 2.25% and (ii) for base rate loans, a per annum rate equal to the greater of (a) the prime rate for such day; (b) the federal funds effective rate for such day, plus 0.50%; or (c) LIBOR for a 30-day interest period as determined on such day, plus between 1.25% and 1.75%. The percentage margin on all loans is based on our fixed charge coverage ratio for the most recent four quarters. As of June 30, 2015, we would have been permitted to draw an additional $118.8 million under the credit facility at LIBOR plus 1.75%, or base rate plus 1.25%.
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 June 30, 2015, the fixed charge coverage ratio for the most recent four quarters was 1.1-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 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; enter into certain affiliate transactions; enter into certain hedging arrangements; and consolidate with or merge with another entity. The revolving credit facility contains usual and customary affirmative and negative covenants and usual and customary events of default.
NOTE 8 Other Long-Term Obligations
Other long-term obligations at the balance sheet dates consist of:
|
| | | | | | | |
(In thousands) | June 30, 2015 | | December 31, 2014 |
Long-term lease obligations, net of current portion | $ | 24,437 |
| | $ | 24,805 |
|
Deferred compensation | 12,888 |
| | 14,609 |
|
Deferred proceeds | 10,883 |
| | 12,360 |
|
Other | 2,571 |
| | 5,082 |
|
| $ | 50,779 |
| | $ | 56,856 |
|
NOTE 9 Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax, is comprised of the following:
|
| | | | | | | | | | | |
(In thousands) | Foreign Currency Translation Adjustments1 | | Pension and Other Post Retirement Employee Benefit Plan Adjustments | | Total |
Balance at December 31, 2014 | $ | — |
| | $ | (70,863 | ) | | $ | (70,863 | ) |
Other comprehensive income, net of tax2 | — |
| | 3,201 |
| | 3,201 |
|
Balance at June 30, 2015 | $ | — |
| | $ | (67,662 | ) | | $ | (67,662 | ) |
| | | | | |
(In thousands) | Foreign Currency Translation Adjustments1 | | Pension and Other Post Retirement Employee Benefit Plan Adjustments | | Total |
Balance at December 31, 2013 | $ | (874 | ) | | $ | (57,219 | ) | | $ | (58,093 | ) |
Other comprehensive income, net of tax2 | — |
| | 2,404 |
| | 2,404 |
|
Balance at June 30, 2014 | $ | (874 | ) | | $ | (54,815 | ) | | $ | (55,689 | ) |
| |
1 | This balance consists of unrealized foreign currency translation adjustments related to the operations of our Canadian subsidiary before its functional currency was changed from Canadian dollars to U.S. dollars in 2012. As a result of the divestiture of the specialty business and mills, this balance was written off in the fourth quarter of 2014. |
| |
2 | For the six months ended June 30, 2015 and 2014, net periodic costs associated with our pension and other postretirement employee benefit, or OPEB, plans included in other comprehensive income and reclassified from accumulated other comprehensive loss included $6.3 million and $4.9 million, respectively, of actuarial loss amortization, as well as $1.1 million and $1.0 million, respectively, of prior service credit amortization, all net of tax totaling $2.1 million and $1.5 million, respectively. These accumulated other comprehensive loss components are included in the computation of net periodic pension and OPEB costs in Note 10, “Pension and Other Postretirement Employee Benefit Plans.” |
NOTE 10 Pension and Other Postretirement Employee Benefit Plans
The following table details the components of net periodic cost of our company-sponsored pension and OPEB plans for the periods presented:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
(In thousands) | 2015 | | 2014 | | 2015 | | 2014 |
| Pension Benefit Plans | | Other Postretirement Employee Benefit Plans |
Service cost | $ | 307 |
| | $ | 340 |
| | $ | 33 |
| | $ | 109 |
|
Interest cost | 3,475 |
| | 3,724 |
| | 892 |
| | 980 |
|
Expected return on plan assets | (5,074 | ) | | (5,083 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | 18 |
| | 51 |
| | (543 | ) | | (963 | ) |
Amortization of actuarial loss (gain) | 3,226 |
| | 2,555 |
| | — |
| | (142 | ) |
Net periodic cost (benefit) | $ | 1,952 |
| | $ | 1,587 |
| | $ | 382 |
| | $ | (16 | ) |
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
(In thousands) | 2015 | | 2014 | | 2015 | | 2014 |
| Pension Benefit Plans | | Other Postretirement Employee Benefit Plans |
Service cost | $ | 623 |
| | $ | 695 |
| | $ | 181 |
| | $ | 226 |
|
Interest cost | 6,965 |
| | 7,412 |
| | 1,940 |
| | 2,282 |
|
Expected return on plan assets | (10,058 | ) | | (10,098 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | 36 |
| | 103 |
| | (1,088 | ) | | (1,089 | ) |
Amortization of actuarial loss (gain) | 6,309 |
| | 5,049 |
| | — |
| | (142 | ) |
Net periodic cost | $ | 3,875 |
| | $ | 3,161 |
| | $ | 1,033 |
| | $ | 1,277 |
|
During the six months ended June 30, 2015, we contributed $3.2 million to our qualified pension plans. We do not expect to make additional contributions in 2015.
During the six months ended June 30, 2015, we made contributions of $0.2 million to our company-sponsored non-qualified pension plan, and we estimate contributions will total $0.4 million in 2015. We do not anticipate funding our OPEB plans in 2015 except to pay benefit costs as incurred during the year by plan participants.
During the three and six months ended June 30, 2015, $1.6 million and $3.4 million, respectively, of net periodic pension and OPEB costs were charged to "Cost of sales," and $0.7 million and $1.5 million, respectively, were charged to "Selling, general and administrative expenses" in the accompanying Consolidated Statements of Operations. During the three and six months ended June 30, 2014, $1.0 million and $3.3 million, respectively, of net periodic pension and OPEB costs were charged to "Cost of sales," and $0.6 million and $1.1 million, respectively, were charged to "Selling, general and administrative expenses" in the accompanying Consolidated Statements of Operations.
NOTE 11 Earnings per Common Share
Basic earnings per share are based on the weighted average number of shares of common stock outstanding. Diluted earnings per share are based upon the weighted average number of shares of common stock outstanding plus all potentially dilutive securities that were assumed to be converted into common shares at the beginning of the period under the treasury stock method.
The following table reconciles the number of common shares used in calculating the basic and diluted net earnings per share:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Basic average common shares outstanding1 | 19,081,848 |
| | 20,256,137 |
| | 19,205,254 |
| | 20,614,305 |
|
Incremental shares due to: | | | | | | | |
Restricted stock units | 93,459 |
| | 78,508 |
| | 74,324 |
| | 73,692 |
|
Performance shares | 118,868 |
| | 182,026 |
| | 104,330 |
| | 181,612 |
|
Stock options | 79 |
| | — |
| | 459 |
| | — |
|
Diluted average common shares outstanding | 19,294,254 |
| | 20,516,671 |
| | 19,384,367 |
| | 20,869,609 |
|
| | | | | | | |
Basic net earnings per common share | $ | 0.82 |
| | $ | 0.61 |
| | $ | 1.11 |
| | $ | 0.91 |
|
Diluted net earnings per common share | 0.81 |
| | 0.61 |
| | 1.10 |
| | 0.90 |
|
| | | | | | | |
Anti-dilutive shares excluded from calculation | 265,149 |
| | 210,771 |
| | 326,085 |
| | 248,429 |
|
| |
1 | Basic average common shares outstanding include restricted stock awards that are fully vested, but are deferred for future issuance. |
NOTE 12 Equity-Based Compensation
We recognize equity-based compensation expense for all equity-based payment awards made to employees and directors, including restricted stock units, or RSUs, performance shares and stock options, based on estimated fair values.
EMPLOYEE AWARDS
Employee equity-based compensation expense was recognized as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | 2015 | | 2014 | | 2015 | | 2014 |
Restricted stock units | $ | 552 |
| | $ | 587 |
| | $ | 963 |
| | $ | 1,032 |
|
Performance shares | 1,164 |
| | 1,474 |
| | 2,043 |
| | 2,555 |
|
Stock options | 592 |
| | 407 |
| | 941 |
| | 543 |
|
Total employee equity-based compensation | $ | 2,308 |
| | $ | 2,468 |
| | $ | 3,947 |
| | $ | 4,130 |
|
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 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, 2014, the service and performance period for 137,775 outstanding performance shares granted in 2012 ended. Those performance shares were settled and distributed in the first quarter of 2015. The number of shares actually settled, as a percentage of the outstanding amount, was 106.9%. After adjusting for the related minimum tax withholdings, a net 97,921 shares were issued in the first quarter of 2015. The related minimum tax withholdings payment made in the first quarter of 2015 in connection with issued shares was $3.0 million. No restricted stock units vested and settled during the first half of 2015.
The following table summarizes the number of share-based awards granted under the Clearwater Paper Corporation 2008 Stock Incentive Plan during the six months ended June 30, 2015 and the grant-date fair value of the awards:
|
| | | | | | |
| Six Months Ended |
| June 30, 2015 |
| Number of Shares Subject to Award | | Average Fair Value of Award Per Share |
Restricted stock units | 23,148 |
| | $ | 62.02 |
|
Performance shares | 47,513 |
| | 62.05 |
|
Stock options | 142,542 |
| | 20.82 |
|
DIRECTOR AWARDS
Annually, each outside member of our Board of Directors receives deferred equity-based awards that are measured in units of our common stock and ultimately settled in cash at the time of payment. Accordingly, the compensation expense associated with these awards is subject to fluctuations each quarter 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 benefits from director equity-based compensation of $1.5 million and less than $0.1 million for the three months ended June 30, 2015 and 2014, respectively. For the six months ended June 30, 2015, we recorded a benefit relating to our director equity-based compensation of $1.9 million, compared to compensation expense of $2.8 million for the same period in 2014.
As of June 30, 2015, the liability amount associated with director equity-based compensation included in "Other long-term obligations" on the accompanying Consolidated Balance Sheet was $11.6 million. At December 31, 2014, liability amounts associated with director equity-based compensation included in "Other long-term obligations" and "Accounts payable and accrued liabilities" totaled $13.5 million and $1.4 million, respectively.
NOTE 13 Fair Value Measurements
The estimated fair values of our financial instruments at the dates presented below are as follows:
|
| | | | | | | | | | | | | | | |
| June 30, | | December 31, |
| 2015 | | 2014 |
| Carrying | | Fair | | Carrying | | Fair |
(In thousands) | Amount | | Value | | Amount | | Value |
Cash, restricted cash and short-term investments (Level 1) | $ | 73,735 |
| | $ | 73,735 |
| | $ | 81,101 |
| | $ | 81,101 |
|
Long-term debt (Level 1) | 575,000 |
| | 558,875 |
| | 575,000 |
| | 558,000 |
|
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 14 Segment Information
The table below presents information about our reportable segments:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | 2015 | | 2014 | | 2015 | | 2014 |
Segment net sales: | | | | | | | |
Consumer Products | $ | 239,391 |
| | $ | 299,130 |
| | $ | 474,567 |
| | $ | 585,638 |
|
Pulp and Paperboard | 205,167 |
| | 199,629 |
| | 404,017 |
| | 398,041 |
|
Total segment net sales | $ | 444,558 |
| | $ | 498,759 |
| | $ | 878,584 |
| | $ | 983,679 |
|
| | | | | | | |
Operating income (loss): | | | | | | | |
Consumer Products | $ | 17,032 |
| | $ | 12,705 |
| | $ | 29,427 |
| | $ | 12,182 |
|
Pulp and Paperboard | 27,754 |
| | 33,635 |
| | 43,948 |
| | 70,411 |
|
| 44,786 |
| | 46,340 |
| | 73,375 |
| | 82,593 |
|
Corporate | (12,713 | ) | | (13,257 | ) | | (26,065 | ) | | (28,992 | ) |
Income from operations | $ | 32,073 |
| | $ | 33,083 |
| | $ | 47,310 |
| | $ | 53,601 |
|
| | | | | | | |
Depreciation and amortization: | | | | | | | |
Consumer Products | $ | 13,438 |
| | $ | 15,071 |
| | $ | 26,415 |
| | $ | 30,561 |
|
Pulp and Paperboard | 6,737 |
| | 6,019 |
| | 14,048 |
| | 12,289 |
|
Corporate | 457 |
| | 925 |
| | 1,177 |
| | 1,396 |
|
Total depreciation and amortization | $ | 20,632 |
| | $ | 22,015 |
| | $ | 41,640 |
| | $ | 44,246 |
|
NOTE 15 Supplemental Guarantor Financial Information
All of our direct and indirect subsidiaries guarantee the 2014 Notes and the 2013 Notes on a joint and several basis. There are no significant restrictions on the ability of the guarantor subsidiaries to make distributions to Clearwater Paper, the issuer of the 2014 Notes and 2013 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
Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended June 30, 2015
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiary | | Eliminations | | Total |
Net sales | $ | 401,444 |
| | $ | 70,271 |
| | $ | — |
| | $ | (27,157 | ) | | $ | 444,558 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (342,714 | ) | | (68,790 | ) | | — |
| | 27,157 |
| | (384,347 | ) |
Selling, general and administrative expenses | (25,431 | ) | | (2,707 | ) | | — |
| | — |
| | (28,138 | ) |
Total operating costs and expenses | (368,145 | ) | | (71,497 | ) | | — |
| | 27,157 |
| | (412,485 | ) |
Income (loss) from operations | 33,299 |
| | (1,226 | ) | | — |
| | — |
| | 32,073 |
|
Interest expense, net | (7,715 | ) | | (59 | ) | | — |
| | — |
| | (7,774 | ) |
Earnings (loss) before income taxes | 25,584 |
| | (1,285 | ) | | — |
| | — |
| | 24,299 |
|
Income tax provision | (9,681 | ) | | (841 | ) | | — |
| | 1,820 |
| | (8,702 | ) |
Equity in loss of subsidiary | (2,126 | ) | | — |
| | — |
| | 2,126 |
| | — |
|
Net earnings (loss) | $ | 13,777 |
| | $ | (2,126 | ) | | $ | — |
| | $ | 3,946 |
| | $ | 15,597 |
|
Other comprehensive income, net of tax | 1,644 |
| | — |
| | — |
| | — |
| | 1,644 |
|
Comprehensive income (loss) | $ | 15,421 |
| | $ | (2,126 | ) | | $ | — |
| | $ | 3,946 |
| | $ | 17,241 |
|
Clearwater Paper Corporation
Consolidating Statement of Operations and Comprehensive Income (Loss)
Six Months Ended June 30, 2015
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiaries | | Eliminations | | Total |
Net sales | $ | 796,831 |
| | $ | 143,599 |
| | $ | — |
| | $ | (61,846 | ) | | $ | 878,584 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (693,760 | ) | | (142,265 | ) | | — |
| | 61,846 |
| | (774,179 | ) |
Selling, general and administrative expenses | (50,219 | ) | | (6,876 | ) | | — |
| | — |
| | (57,095 | ) |
Total operating costs and expenses | (743,979 | ) | | (149,141 | ) | | — |
| | 61,846 |
| | (831,274 | ) |
Income (loss) from operations | 52,852 |
| | (5,542 | ) | | — |
| | — |
| | 47,310 |
|
Interest expense, net | (15,482 | ) | | (74 | ) | | — |
| | — |
| | (15,556 | ) |
Earnings (loss) before income taxes | 37,370 |
| | (5,616 | ) | | — |
| | — |
| | 31,754 |
|
Income tax provision | (12,909 | ) | | (1,183 | ) | | — |
| | 3,692 |
| | (10,400 | ) |
Equity in loss of subsidiary | (6,799 | ) | | — |
| | — |
| | 6,799 |
| | — |
|
Net earnings (loss) | $ | 17,662 |
| | $ | (6,799 | ) | | $ | — |
| | $ | 10,491 |
| | $ | 21,354 |
|
Other comprehensive income, net of tax | 3,201 |
| | — |
| | — |
| | — |
| | 3,201 |
|
Comprehensive income (loss) | $ | 20,863 |
| | $ | (6,799 | ) | | $ | — |
| | $ | 10,491 |
| | $ | 24,555 |
|
Clearwater Paper Corporation
Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended June 30, 2014
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiary | | Eliminations | | Total |
Net sales | $ | 401,866 |
| | $ | 133,972 |
| | $ | 14,180 |
| | $ | (51,259 | ) | | $ | 498,759 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (341,902 | ) | | (131,114 | ) | | (12,354 | ) | | 51,259 |
| | (434,111 | ) |
Selling, general and administrative expenses | (25,907 | ) | | (5,320 | ) | | (338 | ) | | — |
| | (31,565 | ) |
Total operating costs and expenses | (367,809 | ) | | (136,434 | ) | | (12,692 | ) | | 51,259 |
| | (465,676 | ) |
Income (loss) from operations | 34,057 |
| | (2,462 | ) | | 1,488 |
| | — |
| | 33,083 |
|
Interest expense, net | (10,681 | ) | | (7 | ) | | — |
| | — |
| | (10,688 | ) |
Earnings (loss) before income taxes | 23,376 |
| | (2,469 | ) | | 1,488 |
| | — |
| | 22,395 |
|
Income tax provision | (7,272 | ) | | (5,675 | ) | | (390 | ) | | 3,395 |
| | (9,942 | ) |
Equity in (loss) income of subsidiary | (7,046 | ) | | 1,098 |
| | — |
| | 5,948 |
| | — |
|
Net earnings (loss) | $ | 9,058 |
| | $ | (7,046 | ) | | $ | 1,098 |
| | $ | 9,343 |
| | $ | 12,453 |
|
Other comprehensive income, net of tax | 920 |
| | — |
| | — |
| | — |
| | 920 |
|
Comprehensive income (loss) | $ | 9,978 |
| | $ | (7,046 | ) | | $ | 1,098 |
| | $ | 9,343 |
| | $ | 13,373 |
|
Clearwater Paper Corporation
Consolidating Statement of Operations and Comprehensive Income (Loss)
Six Months Ended June 30, 2014
|
| | | | | | | | | | | | | | | | | | | |
| | | Guarantor | | Non-Guarantor | | | | |
(In thousands) | Issuer | | Subsidiaries | | Subsidiaries | | Eliminations | | Total |
Net sales | $ | 786,487 |
| | $ | 272,645 |
| | $ | 27,064 |
| | $ | (102,517 | ) | | $ | 983,679 |
|
Cost and expenses: | | | | | | | | | |
Cost of sales | (660,294 | ) | | (277,203 | ) | | (25,760 | ) | | 102,517 |
| | (860,740 | ) |
Selling, general and administrative expenses | (53,566 | ) | | (10,837 | ) | | (676 | ) | | — |
| | (65,079 | ) |
Impairment of assets | — |
| | (4,259 | ) | | — |
| | — |
| | (4,259 | ) |
Total operating costs and expenses | (713,860 | ) | | (292,299 | ) | | (26,436 | ) | | 102,517 |
| | (930,078 | ) |
Income (loss) from operations | 72,627 |
| | (19,654 | ) | | 628 |
| | — |
| | 53,601 |
|
Interest expense, net | (21,404 | ) | | (18 | ) | | — |
| | — |
| | (21,422 | ) |
Earnings (loss) before income taxes | 51,223 |
| | (19,672 | ) | | 628 |
| | — |
| | 32,179 |
|
Income tax (provision) benefit | (20,749 | ) | | 3,697 |
| | (184 | ) | | 3,736 |
| | (13,500 | ) |
Equity in (loss) earnings of subsidiary | (15,531 | ) | | 444 |
| | — |
| | 15,087 |
| | — |
|
Net earnings (loss) | $ | 14,943 |
| | $ | (15,531 | ) | | $ | 444 |
| | $ | 18,823 |
| | $ | 18,679 |
|
Other comprehensive income, net of tax | 2,404 |
| | — |
| | — |
| | — |
| | 2,404 |
|
Comprehensive income (loss) | $ | 17,347 |
| | $ | (15,531 | ) | | $ | 444 |
| | $ | 18,823 |
| | $ | 21,083 |
|
Clearwater Paper Corporation
Consolidating Balance Sheet
At June 30, 2015
|
| | | | | | | | | | | | | | | | | | | |
(In thousands) | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiary | | Eliminations | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash | $ | 11,465 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 11,465 |
|
Restricted cash | 2,270 |
| | — |
| | — |
| | — |
| | 2,270 |
|
Short-term investments | 60,000 |
| | — |
| | — |
| | — |
| | 60,000 |
|
Receivables, net | 124,051 |
| | 17,444 |
| | — |
| | (405 | ) | | 141,090 |
|
Inventories | 212,773 |
| | 35,507 |
| | — |
| | — |
| | 248,280 |
|
Deferred tax assets | 18,273 |
| | 2,720 |
| | — |
| | (154 | ) | | 20,839 |
|
Prepaid expenses | 7,397 |
| | 472 |
| | — |
| | — |
| | 7,869 |
|
Total current assets | 436,229 |
| | 56,143 |
| | — |
| | (559 | ) | | 491,813 |
|
Property, plant and equipment, net | 675,758 |
| | 147,914 |
| | — |
| | — |
| | 823,672 |
|
Goodwill | 209,087 |
| | — |
| | — |
| | — |
| | 209,087 |
|
Intangible assets, net | 4,702 |
| | 17,771 |
| | — |
| | — |
| | 22,473 |
|
Intercompany receivable (payable) | 31,877 |
| | (32,031 | ) | | — |
| | 154 |
| | — |
|
Investment in subsidiary | 130,483 |
| | — |
| | — |
| | (130,483 | ) | | — |
|
Pension assets | 8,098 |
| | — |
| | — |
| | — |
| | 8,098 |
|
Other assets, net | 6,352 |
| | 1,042 |
| | — |
| | — |
| | 7,394 |
|
TOTAL ASSETS | $ | 1,502,586 |
| | $ | 190,839 |
| | $ | — |
| | $ | (130,888 | ) | | $ | 1,562,537 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | $ | 191,723 |
| | $ | 23,383 |
| | $ | — |
| | $ | (405 | ) | | $ | 214,701 |
|
Current liability for pensions and other postretirement employee benefits | 7,915 |
| | — |
| | — |
| | — |
| | 7,915 |
|
Total current liabilities | 199,638 |
| | 23,383 |
| | — |
| | (405 | ) | | 222,616 |
|
Long-term debt | 575,000 |
| | — |
| | — |
| | — |
| | 575,000 |
|
Liability for pensions and other postretirement employee benefits | 114,835 |
| | — |
| | — |
| | — |
| | 114,835 |
|
Other long-term obligations | 50,078 |
| | 701 |
| | — |
| | — |
| | 50,779 |
|
Accrued taxes | 925 |
| | 792 |
| | — |
| | — |
| | 1,717 |
|
Deferred tax liabilities | 74,809 |
| | 35,480 |
| | — |
| | — |
| | 110,289 |
|
Accumulated other comprehensive loss, net of tax | (67,662 | ) | | — |
| | — |
| | — |
| | (67,662 | ) |
Stockholders’ equity excluding accumulated other comprehensive loss | 554,963 |
| | 130,483 |
| | — |
| | (130,483 | ) | | 554,963 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,502,586 |
| | $ | 190,839 |
| | $ | — |
| | $ | (130,888 | ) | | $ | 1,562,537 |
|
Clearwater Paper Corporation
Consolidating Balance Sheet
At December 31, 2014
|
| | | | | | | | | | | | | | | | | | | |
(In thousands) | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiary | | Eliminations | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash | $ | 27,331 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 27,331 |
|
Restricted cash | 1,500 |
| | — |
| | — |
| | — |
| | 1,500 |
|
Short-term investments | 50,000 |
| | — |
| | — |
| | — |
| | 50,000 |
|
Receivables, net | 117,970 |
| | 16,557 |
| | — |
| | (613 | ) | | 133,914 |
|
Taxes receivable | 6,760 |
| | (15,758 | ) | | — |
| | 10,253 |
| | 1,255 |
|
Inventories | 246,210 |
| | 40,416 |
| | — |
| | — |
| | 286,626 |
|
Deferred tax assets | 14,733 |
| | 5,206 |
| | — |
| | 1,821 |
| | 21,760 |
|
Prepaid expenses | 3,734 |
| | 457 |
| | — |
| | — |
| | 4,191 |
|
Total current assets | 468,238 |
| | 46,878 |
| | — |
| | 11,461 |
| | 526,577 |
|
Property, plant and equipment, net | 657,369 |
| | 153,618 |
| | — |
| | — |
| | 810,987 |
|
Goodwill | 209,087 |
| | — |
| | — |
| | — |
| | 209,087 |
|
Intangible assets, net | 5,224 |
| | 19,732 |
| | — |
| | — |
| | 24,956 |
|
Intercompany receivable (payable) | 33,703 |
| | (21,629 | ) | | — |
| | (12,074 | ) | | — |
|
Investment in subsidiary | 137,282 |
| | — |
| | — |
| | (137,282 | ) | | — |
|
Pension assets | 4,738 |
| | — |
| | — |
| | — |
| | 4,738 |
|
Other assets, net | 8,496 |
| | 1,087 |
| | — |
| | — |
| | 9,583 |
|
TOTAL ASSETS | $ | 1,524,137 |
| | $ | 199,686 |
| | $ | — |
| | $ | (137,895 | ) | | $ | 1,585,928 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | $ | 193,326 |
| | $ | 23,113 |
| | $ | — |
| | $ | (613 | ) | | $ | 215,826 |
|
Current liability for pensions and other postretirement employee benefits | 7,915 |
| | — |
| | — |
| | — |
| | 7,915 |
|
Total current liabilities | 201,241 |
| | 23,113 |
| | — |
| | (613 | ) | | 223,741 |
|
Long-term debt | 575,000 |
| | — |
| | — |
| | — |
| | 575,000 |
|
Liability for pensions and other postretirement employee benefits | 118,464 |
| | — |
| | — |
| | — |
| | 118,464 |
|
Other long-term obligations | 56,029 |
| | 827 |
| | — |
| | — |
| | 56,856 |
|
Accrued taxes | 1,902 |
| | 794 |
| | — |
| | — |
| | 2,696 |
|
Deferred tax liabilities | 73,964 |
| | 37,670 |
| | — |
| | — |
| | 111,634 |
|
Accumulated other comprehensive loss, net of tax | (70,863 | ) | | — |
| | — |
| | — |
| | (70,863 | ) |
Stockholders’ equity excluding accumulated other comprehensive loss | 568,400 |
| | 137,282 |
| | — |
| | (137,282 | ) | | 568,400 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,524,137 |
| | $ | 199,686 |
| | $ | — |
| | $ | (137,895 | ) | | $ | 1,585,928 |
|
Clearwater Paper Corporation
Consolidating Statement of Cash Flows
Six Months Ended June 30, 2015
|
| | | | | | | | | | | | | | | | | | | |
(In thousands) | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiary | | Eliminations | | Total |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | |