Clearwater Paper Corporation (CLW) has recently authorized a $100 million share repurchase program to purchase its common stock over a period of time through open market or negotiated transactions. The company intends to complete the share repurchase program in 2013, following which it intends to return approximately 50% of discretionary free cash flow to shareholders in 2014 and 2015. The current share repurchase program replaces the company's erstwhile $30 million share repurchase authorization initiated in Jul 2011.
Clearwater Paper expects to fund the share repurchases through available cash. In order to increase its liquidity, the company has announced a debt offering of $275 million senior notes due 2023. Clearwater Paper expects to utilize approximately $100 million of the net proceeds from the debt offering for its share repurchase program.
Furthermore, the company anticipates to generate significant cash flow to fuel its share repurchases with the successful start-up of the TAD (through air drying) paper machine at its Shelby, North Carolina facility. In 2010, Clearwater Paper began construction of new tissue manufacturing and converting facilities at its Shelby factory to expand its wings in the Consumer Products segment in the Eastern U.S.
The advanced TAD machine that was subsequently launched at this production facility and became fully operational in fourth quarter 2012 is capable of producing ultra grades of private label tissue products. This is likely to enable Clearwater Paper to supply a full range of TAD products to customers across the U.S., and consequently establish itself as the only private label tissue products company offering a full line of tissue products to its customers.
Clearwater Paper manufactures and sells pulp-based products such as consumer tissue, away-from-home tissue, parent roll tissue, machine glazed tissue, and bleached paperboard across the globe. The company faces stiff competition from other leading players in the industry like International Paper Company (IP), Orchids Paper Products Company (TIS), and Domtar Corporation (UFS), due to which it has to continually invest in value drivers that act as a hedge against competition. We currently have a Zacks Rank #2 (Buy) for Clearwater Paper.