Clearwater Paper(US:CLW)2022-02-14 16:00Sales Performance - Pulp and Paperboard segment sales increased by 7.8% to $946.0 million in 2021 from $877.1 million in 2020, while Consumer Products segment sales decreased by 18.0% to $835.0 million from $1,018.5 million[14]. - Total sales for the company decreased by 5.1% to $1,772.6 million in 2021 from $1,868.6 million in 2020[14]. - The Consumer Products segment held a 6% share of the overall U.S. at-home tissue market in 2021[21]. - Consumer Products segment sales decreased by 18.0% to $835.0 million in 2021 from $1,018.5 million in 2020, driven by lower consumer demand due to the lessening impact of COVID-19[109]. - The pulp and paperboard business saw higher sales prices in 2021, partially offset by major maintenance in operations[93]. Financial Performance - For the year ended 2021, the company reported net sales of $1.8 billion, down from $1.9 billion in 2020, with a net loss of $28.1 million or $1.67 per diluted share compared to a net income of $77.1 million or $4.61 per diluted share in 2020[93]. - Adjusted EBITDA for 2021 was $174.6 million, a decrease from $283.2 million in 2020, primarily due to reduced demand for retail tissue and higher costs for pulp, energy, and transportation[93]. - Operating income for the Consumer Products segment fell by 96.3% to $4.0 million in 2021 compared to $110.6 million in 2020, reflecting higher input costs and reduced sales volumes[109]. - The company reported a net loss of $28.1 million for the year 2021, compared to a net income of $77.1 million in 2020[140]. - The comprehensive loss for the year 2021 was $16.3 million, compared to a comprehensive income of $82.3 million in 2020[142]. Cost and Expenses - Total operating costs and expenses increased to $1,760.6 million in 2021 from $1,710.4 million in 2020, reflecting a rise of 2.9%[140]. - The company experienced increased price and promotion competition in its consumer products business, which decreased gross margins[40]. - Anticipated inflation in raw materials, freight, and energy costs is projected to be between $90 million and $100 million for the year ending December 31, 2022[22]. - The total production capacity for tissue converting is 377,000 tons, with the company producing 390,000 tons of tissue parent rolls across its facilities[78]. Debt and Financing - As of December 31, 2021, the company had approximately $644 million in outstanding debt, including $300 million in 2014 Notes and $275 million in 2020 Notes[62]. - The company has a substantial amount of indebtedness, which could negatively affect its financial condition and ability to secure future financing[61]. - The fixed charge coverage ratio was approximately 3.56x as of December 31, 2021, indicating strong cash flow relative to fixed charges[68]. - The company prepaid $79 million of principal under the Term Loan Credit Agreement in 2021, maintaining a first lien secured leverage ratio of 0.24x[121]. - The ABL Credit Agreement includes covenants that limit the company's operational flexibility, potentially hindering growth opportunities[66]. Operational Risks - The company relies on a limited number of third-party suppliers for raw materials, which could affect pricing and availability[40]. - The ongoing integration of new facilities in North Carolina involves risks that could adversely affect business operations[40]. - Transportation disruptions in 2021 led to difficulties in procuring sufficient transportation and significant increases in transportation costs[40]. - The pulp and paperboard business is subject to cyclical market conditions, which may lead to production downtime and lost revenue[50]. - Competitors with greater financial resources may negatively impact the company's market position and pricing strategies[45]. Employee and Labor Relations - Approximately 42% of the company's employees are covered under collective bargaining agreements as of December 31, 2021[36]. - Approximately 42% of full-time employees were represented by unions as of December 31, 2021, posing a risk of labor disruptions[50]. - The company faces challenges in attracting and retaining qualified personnel, which could negatively impact operations and financial performance[73]. Environmental and Regulatory Compliance - The company faces significant environmental compliance costs and potential liabilities due to evolving regulations, particularly related to greenhouse gas emissions and water quality standards[54]. - Increased regulatory activity regarding climate change could necessitate significant expenditures or operational changes for the company[54]. - Extreme weather events related to climate change have previously caused operational disruptions, such as the curtailment of natural gas supply to the Arkansas mill in 2021[55]. Pension and Retirement Obligations - The company contributed approximately $5.7 million to multiemployer pension plans in 2021, with potential future increases in contributions that could reduce cash available for business needs[58]. - As of December 31, 2021, the company’s salary pension plan was underfunded by $7.4 million, which may require future contributions, impacting cash flow[60]. - The pension benefit obligation was measured at $310.1 million as of December 31, 2021[132]. Market Conditions - The U.S. tissue market is segmented into at-home and away-from-home categories, with the at-home segment representing over 70% of market sales in 2021[97]. - The company anticipates that demand for tissue products will normalize and approach pre-COVID-19 levels as consumers return to away-from-home activities[97]. - The company experienced significant volatility in demand and pricing due to macroeconomic conditions and the impact of the COVID-19 pandemic on the paperboard industry[96].