Clearwater Paper(CLW) - 2023 Q4 - Annual Report

Market Demand and Pricing - The company's Pulp and Paperboard segment experienced a surge in demand during and following the COVID-19 pandemic, but demand and prices declined in 2023 due to customers deploying their inventories[92] - The company's top 10 customers accounted for 54% of sales in 2023, and increased price competition and a significant drop in demand adversely affected its paperboard revenue and gross margins[120] - The company's ability to sustain pricing and production levels during periods of weak demand is uncertain, and prolonged market weakness could materially adversely affect its results of operations and cash flows[101] - Pulp and paperboard sales decreased by 6.4% in 2023 compared to 2022, with sales dropping from $1,136.3 million to$1,063.7 million[216] - Paperboard shipments decreased by 7.7% in 2023, with 751,520 short tons shipped compared to 814,556 short tons in 2022[216] - The U.S. tissue industry saw a 7-8% increase in parent roll sales prices industry-wide in 2023 compared to the prior year[208] Competition and Market Position - The company's Pulp and Paperboard business competes with larger competitors such as WestRock, Georgia-Pacific, and Graphic Packaging, and any increase in manufacturing capacity by these or other producers could result in overcapacity and downward pressure on pricing[99] - The company's Consumer Products segment faces increased competition from private label tissue products, with several new tissue paper machines and converting assets completed or announced, leading to a substantial increase in tissue supply in the North American market[100] - The company's ability to compete is influenced by factors such as manufacturing capacity, general economic conditions, and the availability and demand for paperboard substitutes, including non-paper-based packaging and other grades of paperboard[99] - The company faces intense competition from larger competitors with greater financial resources, lower costs, and better access to raw materials[125] Supply Chain and Raw Materials - In 2023, the company sourced 70% of its Consumer Product segment pulp requirements (or 30% overall) from external suppliers, exposing it to significant price fluctuations[94] - The company's wood fiber supply is subject to regional market influences, and the price of wood fiber in the Pacific Northwest is expected to remain volatile, potentially increasing costs and harming operations and financial results[94] - The company relies on a limited number of third-party suppliers, which poses risks related to pricing, availability, quality, and delivery schedules[123] - Chemical and energy costs significantly impact the company's operations and cash flows, with prices for petroleum-based chemicals expected to remain volatile[123] Financial Performance and Debt - The company had approximately $468 million face value of debt outstanding as of December 31, 2023, with availability of$120 million under its PCA Credit Agreement and $235.3 million under its ABL Credit Agreement[111] - Net income for 2023 was$107.7 million, a significant increase from $46.0 million in 2022 and a loss of$28.1 million in 2021[241] - Net cash flows from operating activities in 2023 were $190.7 million, up from$150.2 million in 2022 and $96.4 million in 2021[241] - Capital expenditures for property, plant, and equipment in 2023 were$73.7 million, compared to $33.5 million in 2022 and$38.4 million in 2021[241] - Total cash, cash equivalents, and restricted cash at the end of 2023 were $42.0 million, down from$54.4 million in 2022 and $26.2 million in 2021[241][246] - The company repurchased$17.9 million of common stock in 2023 under its stock repurchase program[252] - The company completed an initial draw of $150 million under the PCA Credit Agreement in Q4 2023, with a total revolving term loan commitment of$270 million[254] - Long-term fixed-rate debt maturing in 2028 is $425.0 million, with an average interest rate of 6.94$5.8 million to multiemployer pension plans in 2023, with potential for increased future contributions[137] - The company received a $26 million tax refund in 2022 but has fully reserved for the benefit due to uncertainty over its tax position[145] Consumer Products Segment Performance - Retail tissue sales increased by 9.0$1,016.2 million compared to $932.3 million in 2022[219] - Adjusted EBITDA for the Consumer Products segment increased by 102.7$150.5 million compared to $74.2 million in 2022[219] Capital Expenditures and Commitments - The company expects cash paid for capital expenditures in 2024 to be approximately$90 million to $100 million[224] - The company has$48.2 million in purchase commitments associated with capital expenditures, all payable within 12 months[226] Corporate Expenses and Wages - Corporate expenses increased to $78.3 million in 2023, up from$71.1 million in 2022, primarily due to business improvement projects and higher wages[220] Interest Rate and Debt Service Risks - The company is exposed to risks from rising interest rates, which could increase debt service obligations and borrowing costs[145] Pulp Shipments and Production - Pulp shipments increased by 32.9% in 2023, with 34,084 short tons shipped compared to 25,647 short tons in 2022[216]