CLW - Earnings call transcript Q2 2019 | Clearwater Paper Corporation

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Operator

Welcome to Clearwater Paper Corporation's Second Quarter 2019 Earnings Conference Call.

As a reminder, this call is being recorded today, July 31, 2019. I would now like to turn the conference over to Ms. Robin Yim, Vice President, Investor Relations of Clearwater Paper. Please go ahead.

Robin Yim

afternoon, XXXX you earnings good Paper's joining operator, quarter second conference you, and for thank Clearwater Thank call.

Financial and Joining are me released Hrivnak, shortly Officer; market quarter Linda today results Chief Bob Massman, President after the on and Chief were the second Officer. Financial call close. for today's Executive

XXXX a range supplemental the of our information, find XXXX, website expectations at and certain of Relations current third Investor company's EBITDA and estimates an the updated page will quarter on posted shipment, other You the pricing, including presentation of for adjusted for of the impact of providing production outlook expected factors costs, slide, the quarter and third clearwaterpaper.com. to

forward-looking Reform the Securities from and forward-looking on limited XXXX. would may estimates, the the Private statements of of Act to change, statements QX based results within are subject including I remind adjusted presentation to like but statements. materially Litigation meaning These differ to are actual as you assumptions that XXXX amended that for not forward-looking and projections expectations, EBITDA contains current this

to only statements assumes any that made the as in our company earnings the Factors actual differ as time to are update to include well of release and the XXXX information. Form forward-looking our risks December XX, XX, Form for ended supplemental Any March obligation cause year XX-Q forward-looking ended quarter this no and and statements. Commission, from the described filings results as those with including date Exchange Securities uncertainties for and materially our could time XX-K and XXXX

in the the information provided on be GAAP is to non-GAAP reconciliation discussion. in our in will A afternoon's providing material this Additionally, included supplemental website. certain or comparable information non-GAAP release the press information we of

and remarks followed Then of begin open with call second will conclude the results quarter, by third Hrivnak. prepared Bob Linda our the update highlights Linda of on outlook environment, the XXXX. of second question-and-answer for business session. Massman will strategic for from with the we'll call an our an the the projects, financial Then overview our today's quarter our quarter

Now to I'll turn the Linda. over call

Linda Massman

thanks Thank for us everyone and today. Hello you, joining Robin.

the quarter, good some happy performance. with For for metrics or outlook share in to quarter. line our I'm second above you were All the

was of performed the Our second the is Both quarter. adjusted million we one of top-line we the end $XX growth delivered Products Consumer high better and well EBITDA, in and results generated which than outlook on businesses our solid and expected range. Paperboard

highlight revenues achieved Pulp to First, strong shipments quarter. Paperboard I'd and record a and financial the in like and contribution was the

Consumer to with our Products business of compared higher converted the first shipped retail improvement quarter show of Second, tissue XXXX. continued volumes to

to sourcing continue In paper contribute in and our the savings, from where transportation offsetting related addition, Shelby, benefits expected regional the implementation Carolina. model this of the startup machine new North costs cost partially costs to

this reach opportunity rate take team pleased great results the delivering Products We making progress Consumer producing past run XXXX. progress are Paperboard to are quality we and the paper thank full for still of this are the for production want I late on quarter. to track in and with and team the and Pulp to excellent

generating balance to debt. a us sheet, out cost down to paying give flow the also We flexibility took opportunity our cash our term to strengthen on debt reduce and and interest execute

by and million respectively. revolving completed Term million seven-year of our rated the like S&P Billion that BB+ $XXX with BaX was $XXX credit Moody's and refinancing a We Loan facility covenants

provide cost at assets. also based underlying the establishing effectively a short-term working liquidity strength utilize asset We borrowing by lower the quality to of our an on the balance based sheet of revolver capital

environment sheets. rate ahead balance liquidity we needed took one now. and provide we approximately with revolver, flexibility new year These operational on flow credit as refinancing these from focused are de-lever to While favorable the the facilities interest of our expected go bank we to were generating a to cash facilities advantage free

more outlook on later and for our a quarter projects remarks. and XXXX update third detailed provide the prepared strategic in I'll my

Now, turn Bob. the I will to call over

Bob Hrivnak

paper QX board under the EPS, in came outlook strength Thank exception of you, had for and range. adjusted top and was stated, expectations pulp our summary, end came Linda. due above quarter. second as a margin, we to operating The our on in low which our line an in business. income line our Linda the results were and In basis just strong with in EBITDA, The and the

I Throughout benefits the the and of exclude that indicative GAAP results. and posted slides earnings my operating performance. reconciliation not are we The The to on in supplemental core provided adjusted our or non-GAAP of our and results GAAP adjusted remarks, certain believe from release charges between rest results will distinguishing be website. is the adjusted

the pretax of quarter netted of and due XXXX benefit to pension which mainly second non-operating million $X.X expense, of was $X.X post retirement million cost. to EBITDA items the adjusted other For

discuss is XX quarter. adjusted non-GAAP results and with on consolidated A are shown shown slide deck. our results of of for supplemental Slide Slide that, the let's our on summary So GAAP XX results

the volumes was which in X.X%. production was levels shipment SBS due came of range This up second paperboard which the than to Our largely million and quarter led outlook quarter, revenues. excellent to $XXX better over record sales first at our in to X.X% net X.X% quarter,

outlook mills, which XXX and our was the decrease adjusted and North a at million and for $XX our previously Carolina came Idaho, first quarter due or This outlook. costs with the point margin, million line in Arkansas from Second a X.X% profit quarter. repair $X in at included mainly gross maintenance items was basis QX to

$X.X energy $X addition, start-up In partially in Shelby came were improvement These offset with forecast million. costs a of a at in cost million million cost. versus $X.X

QX or due lower expense million quarter and net X.X% primarily from professional Adjusted $X to is sales, XX.X% $XX was down fees SG&A or second of other expenses. which million

were or range sales outlook net million of in of X.X% our with X% line income of X%. to Operating $XX

up Adjusted our of outlook or which the sales, and high million $XX X.X% million end X.X% EBITDA of from QX. was came or was $XX in on net in

$XX interest completed to higher and up to of $X capitalized we the was lower QX Net interest due million as machine. levels overall startup operation borrowing the expense initiated million construction paper compared and Shelby of

our of Turning greater tax QX $X.X in basis of million rate items XXXX a effective second percentage to impact quarter the to pretax have XXX%. million taxes, our book quarter XXXX. Tax effected income on was compared of first a the $X.X on in

rate highly sensitive last of annual be earnings to our our tax federal in call, effective in and estimates outlook state changes stated we As earnings tax adjustments pretax credits. including for other the could and

share $X.XX GAAP Second loss end of the million adjusted share. to per compares outlook and a an net quarter. share $X.XX $XXX,XXX first of $XXX,XXX the or loss $X.XX That $X.XX per on diluted $X.XX or quarter diluted of XXXX diluted adjusted the in per or range share, which earnings basis loss $X.X to was low was earnings below per net

retiree our which Non-cash the over expenses medical quarter in first million of of pension and up $XX completion amortization, total the million $X the with second depreciation expansion, expense. and Shelby of is quarter million $X included and

supplemental shipment be million to that first points retail Now the we I million mix XX I’ll were X.X% materials. $X be the basis in improved primarily X top X.X% sales tons second results. in increase a compared up converted Products to will quarter found second in shipments. due segment as line for higher retail can The a $XXX Consumer increase results discuss quarter. had Net referring the to case shipments the results of XXXX, of of quarter Slide and on The were or the XX and

million million operating quarter. was income second in the quarter Consumer $X.X in Products of operating versus loss the XXXX $X.X first

previously new and with startup I expected was due mainly higher depreciation As to Shelby costs this paper expense. the machine mentioned, of the associated in

of Consumer million margin result, QX. was down to QX X.X% in $XX As from a in million XXXX. EBITDA adjusted $XX.X EBITDA compared X.X% The was Products

the XX Pulp supplemental in be Paperboard Slide Now and results the can on be materials. will division. X turning The found and referring to to I

shipment Linda $XX shipment $XXX million, or were highlighted million opening of net volumes the sales team quarter, her XX%. level in first record As quarter, Compared and the revenues up in increase an were volumes. second the XX.X% in remarks, achieved to

average resulted The disruption in and improvement in per Paperboard’s of and ton Pulp primarily the costs ticked margin fixed was improved income in XX.X% operating the production QX. of the operating net to basis gas Pacific volumes versus ton over addition, per XX.X% Northwest absorption once from energy natural cost higher expected of first improvement the pipeline resolved. up quarter In price $X,XXX quarter. XXXX XX compared sales net second $XX points million or for or to million sales $XX was

and This quarter margin of second was compared or quarter. maintenance and offset $X to by increase XX.X% Paperboard’s EBITDA an were million the $XX respectively. QX. XX.X% second partially million in This represents adjusted

to quarter turning $XX sheet. Cash, $XXX the XXXX capital balance Now second million of were in year-to-date. expenditures million the and

times. borrowings. months which purposes covenant debt at fixed $XXX We peak June versus Our a million end. adjusted of leverage million X.XX to We for million. outstanding XX unchanged in $XXX quarter includes $XXX unchanged expect XX net The times debt XXXX EBITDA expected Long-term rate at million revolver under remained secured remains outstanding X.X approximately revolver QX. $XXX CapEx total last of at borrowings cash of to three-year for had was $XXX short-term ratio still total the covenant million, at

to $XX the second cash, available had our With and unrestricted of million liquidity, ended we million revolver. regard $XX with the under quarter we

opening and remarks, underlying of based means revolving utilize new a facilities to credit credit are As $XXX the we short-term covenant revolver million which asset Term like, refinancing of Linda completed covenants. there no seven-year maintenance B recently Loan her in quality are $XXX credit mentioned our with the million The a assets. our

provide operational facilities to as credit the are delevering balance both on our flexibility sheet. we liquidity expected and focused Now additional

expansion $XX of in completion and $XX was quarter, drain a in is to QX which The working payables. from primarily focus managing approximately trade near During mainly million by cash of an improvement by net the improvement provided a second on change and generated Working source certain in of the terms. $XX compared capital the impacted operations. due receivable QX, we million a negatively Shelby to million the capital driven

call the I concludes back turn now over my will And Massman. remarks. Linda to That

Linda Massman

Bob. Thanks,

our bring early paper our a our line conclude machine now up-to-date We in this specs started outlook up with stage, me third expectations. second provide environment, with At market are producing quarter. early Let quality the brief we quarter. our paper for strategic the the on update you on products Shelby and in new with projects,

machine paper As I to coming in typical the be still ramp up $X the start-up volume is higher line in despite and mentioned in last committed quarter curve, expected fully production million approximately outlook. are versus quarter, the with in cost XXXX second total a our

cases in for final at previous work of thank continued was end the near want our converting second this earnings the and the on with team line The take line plan focus. to started facility I for the to I and producing discussed call. the customers opportunity hard quarter installed their

$XX will XXXX. cost the pulp remaining in run calibrated and process, in benefit saving Regarding the well, digester savings. for producing and The is we catalyst the new estimated This the of is end to project to Once installed continues achieve work pulp Idaho. digester to the on energy the continuous of catalyst track XXXX. Lewiston, for making delivery expected remains optimize timeline the million

view businesses brands. tissue market. for of positive panel with each private market North dollar estimated our data American the to in momentum IRI the environment Turning reflects starting The our the of and terms for

tissue the market First, year-over-year. grew approximately total X.X%

the X.X% for over grew brands X.X% versus Second, brands same national private timeframe.

growing year Third, to continues brands brand second data category. private the products, in strong XX% XX% share market preference the quarter to to acceptance the with and consumer ultra-quality ago. a especially And private ended for compared point

with for which averages forecast net market XX,XXX from annum. new XXX,XXX line to long-term, tissue per to has approximately through tons, over out in tons RISI’s year, the XXX,XXX per growth American XXXX and for been demand X.X% tissue XXXX X% capacity the by to North tons lowered

in as comes net unchanged using ratio capacity be XX%. demand in plus online is for estimates to to XXXX the scheduled, and approximately that capacity forecasted RISI North demand North and all America, Assuming imports, American

capacity if we new online to of been there that capacity earliest estimate While were any recent is additions, that XXXX. announcement the occur, early could come have

the of flow at North to and Turning commensurate XXXX balance of on the outlook RISI’s and capacity. based pricing Paperboard. American is adjustments. for market tightening are associated They capacity supply industry changes forecasting ebb with remains periods

outages back both half second XX.X% was operating The to ago. stock the rate for period. year in steady and planned increases as price remain a rate reported attributable According Industry five-week XXXX. includes continue the the the is by largely AF&PA, of in at folding the of XX.X% still industry backlogs to cup forecast lower RISI’s offering carton RISI to compared range. quarter, during industry to

to compared Now second quarter to XXXX the our of third outlook quarter XXXX.

We flat several sequentially. X.X% the adjusted in expect including, be to to Consolidated in consolidated key mill to to our Lewiston variables of margin $XX operating be minus the million $XX million. expected due first, outage X.X%, range plus down sales net range X% to to major at cost from is maintenance to

we expect primarily transportation pulp to from our lower savings, million And be XX%. tax net to Second, cost $X $X annual rate expect between in we last, million in costs. approximately

$XX and in in of in range the net the adjusted of adjusted $XX $X.XX share to million diluted fully million result this to We expect $X.XX. range for loss EBITDA

the to with the million like estimated million. ranging the is outage costs scheduled maintenance $X that quarter remaining from plan fourth Arkansas for major add mill to I’d an for $X

very conclude, that To are I’m the strategic capital of completed. investments our majority pleased

a delivery cash to the end quality Our focused that as running have products. pulp The flexibility catalyst the year on required, new our structure for liquidity and flow is provide the paper digester balance for with of up and is remain and operating machine de-lever can schedule sheet. the and us on generating we producing we capital

that, take And with will your we now questions.

Operator

is our KeyBanc. Josephson from And Instructions] with [Operator you. question Thank first Adam

open. is Your line

Adam Josephson

Linda and afternoon. good Bob,

Linda Massman

Adam. Hi,

Adam Josephson

Hi, Linda.

get questions queue. of in and the I’ll back couple a Just

changes you can terms respect me to that of so may this up, help and cetera, fees, are and missed late, debt I maintenance have leverage I new revolver, said just know cetera on your and et In to just what you will of the base some Bob, with mentioned covenant know light they situation your they and no loan any interest had interest to issuance? ratio term and but and covenants, agreement covenant occurred secured I debt credit with with asset pay, to loosen with contrast the this have respect got I rates, used previously what fees there rates, covenant debt, the what your considerably you be covenant are you you are had now X:sX but what et be compare opposed and

Bob Hrivnak

Adam. Thank you, Okay. All right.

compliance at to So start the end with covenants off, QX. in we our of were

favorable. for the take we driver to the refinancing, rate key environment advantage of the interest So wanted current which is very

We mature would also fact in they previous credit have about to our the thought we XXXX, need that in refinance facilities, XXXX.

So given refinancing on the forward favorable thought, market let's the move environment, we now.

about So term the ABL and I'll B revolver. then loan talk

benefit set B, in loan terms loan market. to light covenant to flexibility optimize and term the with we down So a financial for the term us And debt manner. a B up the conditions the added gives of pay structure

six to prepayment lenders the of benefit larger our a as the is and seven So opportunity well extended with work months for of banks. an group with after mainly this flexibility loan term rather has than maturity years B commercial big a

cost to manage our our manner. to to pay day-to-day to of will quality respect receivables lower our the operations. the revolver our With light also the working facility revolver, covenant it strength as utilize short-term of a balance is us help high And our execute allows we our sheet, And in inventory plan and strong it debt. down our capital borrowing

we we're this project happy us the very was overall a positive, So thought for with very outcome. and

Adam Josephson

few the word Bob, that elaborate specific? light” on a you more to be a can little times you just “covenant Just mentioned

Bob Hrivnak

Okay.

quality. term is assets, fixed B, which loan basically our high primarily the are with the collateral So

facility the coverage maintenance bank So ratio have interest and covenants, the the leverage typically ratio. with basically

had fact term light. our if capability. we the that covenant bank So that then play the into loan And borrowing would have We than we less come security revolver, the left with the arranged covenants the don't on with B capacity XX% the is is differently, ABL had only covenants its maintenance facility.

inventory. we're debt, quality high our receivables again, collateralizing the and So utilizing our

Adam Josephson

spreads Okay. being just can I'll elaborate on this, that back price terms went queue. I'll And that'll me ask And you mix the already is Linda Thanks on forgive if just million down sequentially $X $X million in over in guidance for get tissue that a you to and in that? couple or a Bob. the of SBS,

Linda Massman

It's of into move issued was February a $XX little business. realization price received renegotiated mix are of of decline into account Adam in bit back price for across it's takes that And also further the here the both as parts of up we QX. contracts that then, that that some a

Adam Josephson

you're thing that this talking year? mix seasonal a is is to the about And specific that or

Linda Massman

It's across a this of really across specific shift the year. to It's business. sides just both

Adam Josephson

one relatively plummeting sequentially, that And on other bridge, did versus Okay. is to just $X in to $X costs these million you cost extent pulp of million how XQ? benefits much pulp the of from benefit the and other, what

Linda Massman

Yes, transportation. to I'd pulp. the say three probably is to maybe I I of both million split, $X it's pulp and $X guess evenly say million the bulk would related somewhat

Adam Josephson

get Got in queue. it. you. I'll Thanks. back the Then Thank

Linda Massman

Thank you.

Operator

Thank you.

question Paul with next Capital Our comes Markets. from RBC Quinn

open. line is Your

Paul Quinn

much. thanks Good Yes, very afternoon.

Linda Massman

Hi Paul.

Paul Quinn

actual I expecting were couple next early QX, between Shelby a the your the you what startup million $X startup what difference to in and questions amount million, X cost, costs a million[ph] forecast little QX the over just was your year? X, then the Hey, if said forehead on bit cost. X and is QX see And the are

Linda Massman

Yes.

anything significant you're startup lot you paper as this equipment, startup over then, that course, well, up but you're so are you of state more have so typically as machine, we're costs the not associated of phone off I'm slightly moving you a issue. is do we a would the not And costs say expecting – that's into it. we I'll what it. call production produce about on it hear others sellable. absorption QX. off just not may thought we the sure, you grade some just would it tons I have but that And And as So of And the since know, the of million that's that. quarter, starting running $X.X We're paper all fixed costs timing with have

start as So that QX. move out balancing into should we

Paul Quinn

Okay.

but QX, break-even be be to So II we to cost not Are the are a expecting or? that's still you range. $X.X in going suggesting going Shelby on it's million in

Linda Massman

be enough still which it There is No. costs, some break not material to out.

Paul Quinn

Less $X million? than

Linda Massman

Yes.

Paul Quinn

I Okay. you guess Clearwater's then the order RISI backlogs And backlogs? What weeks. to flipping mentioned paperboard side, over the are around has five

Linda Massman

you say about I'd with hear with we're what RISI. consistent

it delivering out. business a us. a And and good team our nice customer turned to the for So great good quarter results. a feel had huge such really paperboard for so great real base you has quarter, was We how about have thank a

Paul Quinn

just negotiation? Okay. on facility Then the contract with we itself, the where Lewiston

Linda Massman

Yes.

So what is to long-term progress. with we I'd to reaching consistent still union Lewiston viability parties say included. that with agreement. mill Both contract. and today supports two are committed so before. that are meeting with what agreement employees, work an days, committed over the our continuing we're you've we making the operations of course a ratifying before. are towards stated But the consistent heard We've to we've last been This of reaching

Paul Quinn

all Good Okay. luck. very Thanks much. That's had. I

Linda Massman

Paul. Thanks

Operator

from our Chercover next comes And Davidson. Steve D.A. you. with Thank question

Your line is open.

Steve Chercover

afternoon everyone. Good Thanks.

Linda Massman

Steve. Hi

Steve Chercover

given capacity more the under you at also you timing. questions months. I'll it two So of of sounds new today expected call the be April that my would the said machine be like With XXXX. XX And end QX startup, I you the full the months. would on XX guise within to that guess Shelby, said respect lump And first

is So what's slower? changed? Why it

Linda Massman

Yes.

months to I said months to months XX think for months production. XX for XX – we XX full

hit rate think would happen before on production hitting to we're need course, production track through progress We mean, run we XXXX, say shipment going – the commensurate to after can rate, course with originally over full will say we're of continue thought of what I'd we during So And sometime that with that. run make to regard the course which but I I XXXX. full really rate then, that full Shelby.

Steve Chercover

Okay, catalyst was Lewiston to a impression and to digester? this maintenance now looks it only XXXX was the $X it's free the have do that thanks. basically something to down question. and case. and no we'll is I million, And be like maintenance that's under the The million longer primarily. timing at call Does year, $X a that also the supposed with

Linda Massman

We're then, Historically, right planning be plan, now. months of XX schedule that of on course, months. maintenance every we Arkansas Lewiston said XX would a every and conservatively maintenance

So that be would off cycle.

implemented that done So placeholder, need seeing right on best of as continue and now to going to our getting to year move what the through and we get balance year. we're that that's assess next and this we work really catalyst

Steve Chercover

going Okay. wrong, a I used was to very be light to Well, being that next wrong I'm so was year? year maintenance

Linda Massman

No. the yes. maintenance followed have would year, been XX If schedule, next we there month not

Steve Chercover

item Okay. pulp your an bridges. in instead an kind as sorry, in item to Thank specifically with a EBITDA real it of have you. you or, transportation broke expected be it now since discrete? as And we in how of in keeping EBITDA you come that And tailwind, lumped – then presentations, previous out

Linda Massman

and a this confusing, material, before becomes benefit stated of say had last pulp relatively I'd But bit number cost a we those, it it think slightly out. but year-over-year, the start that a quite benefit year, But then break this through were cycle, we we'll we once year be seeing of to through getting we this And the will get reduction. of better. should pulp. cycle I it's that, contracts it definitely once we Yes, we've as is favorable flat

Steve Chercover

for please. Okay. more two And then me,

and tissue to which businesses? most be bucket sequential expect, of cost the drop you both lower and the Will mix between the that into? going price that is SG&A within the or So business guys it across

Linda Massman

the about Steve? quarter third talking you outlook, Are

Steve Chercover

to take you want You offer. going and can then I'll talk forward, the QX info all about

Linda Massman

Okay.

Also that bit price mix that into some of but price talked there'd RISI that little attributed also business, both So to a be mix, of headwind. And across going of decline a forward parts we we we the QX, some our that's some pulp have driver, big for major of that's we the related now. to have tailwinds QX, just in Lewiston catching and planned then contracts up and maintenance transportation with a

big year, in to of continuing the have us, course out the going that's QX remaining benefit the QX working next benefits getting we that that catalyst forward on drivers and So digester will Lewiston of working. well a Shelby, once as the benefit as of is in place

Steve Chercover

you And and then, segment Okay. cycle EBITDA do on still by consolidated have a targets basis? cross

Linda Massman

have removals in think are I the those longer we no and supplementals, yes.

Steve Chercover

Are constant before? they what anticipated Right. from you had

Linda Massman

of on think tissue be time macroeconomic seen – revisited, all we from both given good continues all you supplying doesn't when we've in grow, conditions very it the that to the the positive, works know, the tissue mean, the are said so sides of I the about private to But through business label trends we really really still very as of over the system. confident business. what situation, I stabilize those end with side, feel business. our XXXX, need side that until the capacity

we more it’ll create those meaningful. lot be a targets, cross be once that I to again, think get through state, cycle So that’ll easier

from quite above well a perspective, cycle as market on as On well our the of you the know, years paperboard margins cross well continue quite to side own well business those conditions. do for few that and we’re as as side

Steve Chercover

terrific It's business.

and I the back get question queue. in won't last Okay,

benefits million from just wondering, read to structures cost X, $XX to of the you I'm past, know told might us those benefits can capital they through you But from cost expect I'm $XX million those is just Lewis $XX to in pass kind you've terms Slide of regardless or, costs the time. in in point I get referring to XXXX tethered and encroach to happened the Shelby, have what EBITDA? any investments, and that And Just are that too. from tethered million benefits $XX to a million are

Linda Massman

the out timed at been of have decisions would when the those timing made. So were

go we yes. question think timing, if is ask I those you on about we answer were the that's still So confident a that closest do deliver savings to basis? The can feel cost but forward

Steve Chercover

equal, all XXXX. by $XX you. EBITDA million being So of All things end right, have thank to the million we incremental should $XXX what,

Operator

Thank you.

Our Vertical comes Research. next Dillon question from Chip with

line open. is Your

Chip Dillon

Good Bob. Linda afternoon, Yes. and

have First question, we just to this absolutely right. make sure

were less $X that – the and third. until to get be X.X full X plan, should should there’ll in than stay to were per you your the So production? barring cost start-up in I should unusual? second And up below any I two quarter sorry the million say, according points mean it

Linda Massman

of see immaterial costs Well, really as they I would that out things line the start say is a that the it better start-up But for bulk this saw start-up you about. in over quarter just to and us. should somewhat timeframe the talked we

it cycle. get but and the easier the of time, we further should start-up get course over takes as that puts that there are happen So into

Chip Dillon

payables know you third quarter give doing I million $XXX of debt the you're I might more Bob, is million about net already net all But But so mean, that at now, or for of if $XXX up. $XX whole low, a looks take expense. going you Bob. half the I this And back have wrong for for very year. within the you're it – was already like was And to Okay. the I CapEx, that. surprised the maintenance a working working million, had look it if or normalized capital more capital when looking looks little of which little project. I the be obviously about lot

how more the So much should third we quarter? see go debt in up net

Bob Hrivnak

Yes.

on million, recap capital to of about the drain we began $XX working kind to on just QX had yes, situation, basically, a payable So in the of side, we normalize. but QX

from we source cash And you're million. of $XX in of had we working of So million. capital net right operations had from cash QX, a $XX

we the to graph on operations, have look this normalized for goes cash more back a supplementals, from you in history. it at there, based If XXXX, like quarter be a would

net mind, let's that talk background with about So debt. in

due to going QX in our with And is million. the at was closely going which the So Where line debt peak net to we where our though levels, leverage net in we to debt be see QX, should of with ratio. were line in volatility be – timing of expect end of bit you’re payments. little levels however, the $XXX to some

the the year, second we major half have outages. of maintenance in the So

rise. in to EBITDA to the have Lewiston, for debt decline last to we going to cause So our months’ the and EBITDA QX is one XX it's to ratio going which cost net

coming it's important should that down So, note QX. in though debt start the levels net

to the peak a in QX And down. be in leverage But coming QX peaking XX due maintenance caused and bit last rise, and months’ to ratio level, little going the to by then our is QX the QX. EBITDA. lower expected we're to major it’s is this outages So begin going above QX QX,

Chip Dillon

I'm And yes does. just looking by It the way, the at absolute level.

still make $XXX million. in little before should I down? you’re high the million QX you was level, as saying come it it will Are to I as – starts quarter mean above $XXX QX, coming a So a we third expect

Bob Hrivnak

higher. in QX. would roughly And anticipate we that slightly I say it then level maybe down coming

Chip Dillon

I somewhere imagine you're at expense around – the looking Okay. slide. got XX think I XX, And just guiding off the would I that to then to and interest

very or should that into debt. fourth higher XX? third much the smidge capitalizing with approaching be kind because the peak higher quarter that it still you a quarter, – of a the sort what is you're But represent going For are or little quarterly might of maybe

Bob Hrivnak

Yes.

up because and Shelby no longer the metrics. on we're running, So project, we're capitalizing

Chip Dillon

– to if benefit, we we cuts? there weight any there today, any the further a if is rate And rate – cut if you are – you. are sensitive had Got of

Bob Hrivnak

to be if there us. to tied would our cuts, is are are credit future whatever so impact on a so it LIBOR, benefit facilities LIBOR, rate Yes,

Chip Dillon

question XX you. see Got is, And then not of for put specific, too – to in sort good last I of be you to one I is slides, CapEx number think a the you. ongoing but year

down. XX worked to just So as I clear closer XX, kind year CapEx should there'd I'm was XX but saying just debt you be like see it we thought as so well, of – that next perhaps and that now you're

Bob Hrivnak

that’s our plan. Yes, Exactly.

Chip Dillon

one. you. right, one All And got last

early EBITDA You Lewiston, have the slide gave will to project on over immediate one I that Is a at believe. or and phase fairly number, starts in year the that benefits the next while? it of

Linda Massman

Yes.

should up somewhat to assuming is circumstances little slower. that full be of be pretty If it year. bit unforeseen the everything a we we that hard But are well, say, should mostly to starts then there expect well, that might it be be would much, any immediate, course today, So it's contemplated

Chip Dillon

you. Okay, great. Thank

Operator

we And with Adam KeyBanc. a follow-up you. Thank from Josephson have

is Your open. line

Adam Josephson

for and so follow-up. taking Linda Bob, thanks my much

on I question have couple then up Just Linda, one just a pulp and others. cleaning

pulp asked last will So of quantify a your just next forget higher much you us, get help nature can How the was pulp. even I expecting about what's else a how just of think I drag possible, And you you someone on to year? extent indicated you contract. benefit more you're already happened, of benefits that this year? much year Can from the based you

to me pulp impact help the next had extent and just year? could it that this can year, possible with So you as have last year the

Linda Massman

with about contract own get regard in could includes seeing really decline, around to This based there it’s Adam, really do year touch in there prior just some there I of key next peaked commodity some obviously some you is need should because year will what year-over-year, on now our and year. might go started the And year. given last your quite for was depending outlook pretty on headwind have flattish us you this year with So much slide going the it pulp. back an it impact some items. expect flat incremental and that a we to a in how benefit pulp when and And then pulp declining versus going pulp of supplementals where it's to be you make is. think sensitivities have on assumptions your We to our see of about to

is, that slide. So pretty I think helpful a

Adam Josephson

Right.

with be that lag contracts. – be of obviously on the impact your would sort some of based nature And would Okay. with the

Linda Massman

Yes.

Adam Josephson

Right.

multiemployer industry in all you paper talk K. why pension if peers Okay. many from of your fund haven't your your as not just fund on a the Can have? And couple – withdrawn on PACE that just you that's about,

Linda Massman

Yes.

question. the for thanks So

and continue believe range imagine, whole that covers plans a to at PACE, we plan we will a not so at and this to and for that look and of that At obviously, fund, facility is have We made Lewiston looked over to or in monitor First of point, course you withdrawn best the we of out time action all, multiemployer options to PIUMPF, our carefully, this pension those have USW related it’s of pretty remain in we any plan. it PIUMPF or PACE us can carefully members considered the we and withdraw. options. our call participate

to phone, as bargaining know decision for And already, it participate in just to our plan the we case part agreement. the collective but is of anybody you or negotiated may to else needs whether the not be in continue this highlighted as on

us, with doesn't So the okay. decision rest solely

In replacement result negotiate believe addition, in which a we withdraw, plan would to do if did we it require costs. increased

withdraw point, move and We're incremental choosing So plan. just incur in costs. going not at to the and this we're stay out

Adam Josephson

– go just Linda. ahead, I'm yes, And sorry,

Linda Massman

Adam. No, go ahead

Adam Josephson

to you'd also beyond in mentioned, Is a costs correctly? replacement which just $XX that that of I Yes, that to but understanding value result the K were future as you be additional estimated, you part $XX in I I it and plan at have million, it a withdraw think if your you present million. to would am above be payments, would think –

Linda Massman

Yes.

withdrawal were some that So then some liability benefits replace to to would like of if pay replacement amounts to. we And plan negotiate addition, would withdraw, a you in have – plan. that we have to we to referred

high incremental negotiate we a cost watermark, an cost. if plan use as the a of just example million you you what $X.X if have currently So to like-to-like an up of that's annual replacement at

Adam Josephson

Got it.

Okay. Thank you, Linda.

Operator

Thank remarks. you. Ladies At our or to the closing will Ms. over that for any question-and-answer this time, does Massman I And call additional turn and conclude gentlemen, session.

Linda Massman

Great. and in Paper, interest and you. Clearwater thank us your continued you Thank Thank day. a to for great just joining want �� say I I hope has everybody

Operator

conference ladies the Paper And participation. concludes call. your second does appreciate XXXX Clearwater gentlemen, that We quarter do and earnings

Clearwater Paper (CLW) 1 Aug 192019 Q2 Earnings call transcript