Clearwater Paper Corporation (NYSE:CLW) Q4 2014 Earnings Conference Call - Final Transcript

Feb 04, 2015 • 05:00 pm ET


Clearwater Paper Corporation (NYSE:CLW) Q4 2014 Earnings Conference Call - Final Transcript


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announced another $100 million stock repurchase authorization which should enable us to return at least 50% of discretionary free cash flow to shareholders in 2015.

Operationally we took actions on three fronts to address the market place pressures and to improve the cost structure of our tissue business. First, we accelerated approximately $10 million of capital expenditures into 2014 in order to standardize the back end of our converting mines and covert our warehouses from slip sheets to pallets. Those investments are expected to significantly improve production planning flexibility and decrease transportation and warehousing cost.

Second, on December 30th we announced the sale of our specialty products mills for approximately $140 million. The estimated net proceeds of $107 million will be reinvested into capital projects for the benefit of the consumer products division which Linda will discuss in more detail and are expected to significantly improve CPD EBITDA margins. And finally, we are taking actions to reduce the number of product SKUs particularly at the low volume low

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margin end of the spectrum.

In 2014 we reduced the number of tissue product SKUs by 13% and will continue those efforts in 2015 and beyond. We believe that the combination of those three actions will yield 400 to 600 basis points improvement in CPD EBITDA margins over the next two to three years and provides a roadmap to achieving the consumer product division 17% cross cycle EBITDA margin model.

Before I get into our fiscal year and fourth quarter 2014 results I'd like to preface my comments by stating that throughout the rest of my remarks I will be distinguishing between GAAP and non-GAAP or adjusted results. The adjusted results exclude certain charges and benefits that we believe are not indicative of our core operating performance. The reconciliation from GAAP to adjusted results is provided in the supplemental slides posted on our website.

For the full year, those charges totaled $93 million and includes $41 million of goodwill and intangible write-off and other non recurring deal specific charges related to the sale of our specialty products mills. $20 million due to the closure of both the Long Island, New York and Thomaston, Georgia converting facilities, $24 million in early retirement charges to refinance high interest rate bonds, a write off of $3 million ascribed to Clearwater Fiber, customer relationship, and $5 million from mark-to-market impact associated with Director's cash settled stock units.

For the fourth quarter of 2014 there was a charge of $49 million which includes $40 million related to the sale of our specialty product mills, $4 million of cost associated with the closure of our Long Island converting facility, $3 million Clearwater Fiber related write-off, and lastly $2 million from the mark-to-mark impact associated with Director's cash settled stock units.

Starting with full year 2015 results, excuse me, 2014 results. As I previously mentioned we achieved record net sales, adjusted EBITDA, and adjusted EPS for the year. The $239 million in adjusted EBITDA is a 19% increase over