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%[256] - The company expects to remain in compliance with its Credit Agreements, which require a consolidated fixed charge coverage ratio of not less than 1.10x to 1.00x[254] Operational Risks and Disruptions - The company's operations are exposed to risks from unexpected production disruptions, such as prolonged power outages, mechanical failures, and natural catastrophes, which could cause significant lost production and material adverse effects on results of operations[94] - The company's IT systems are critical to operations, and disruptions could harm manufacturing, sales, and financial performance[131] - Extreme weather events caused by climate change could damage facilities, disrupt supply chains, and increase costs[134] Environmental and Regulatory Compliance - The company is subject to significant environmental regulations, which could lead to increased compliance costs and operational restrictions[132] Pension and Tax Considerations - The company contributed approximately $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% in 2023, reaching $1,016.2 million compared to $932.3 million in 2022[219] - Adjusted EBITDA for the Consumer Products segment increased by 102.7% in 2023, reaching $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]

Financial Data and Key Metrics Changes - The company reported net sales of $520 million and adjusted EBITDA of $81 million for Q3 2023, which is $3 million higher than Q3 2022 [16] - Adjusted EBITDA margin rose to 15.5% in Q3 2023 compared to 14.3% in the previous year [26] - Net income for Q3 2023 was $36.6 million, with adjusted net income per diluted share of $2.19 [43] Business Line Data and Key Metrics Changes - The tissue business saw adjusted EBITDA more than double from $21 million in Q3 2022 to $46 million in Q3 2023, with an adjusted EBITDA margin of 18% [17][40] - The paperboard business delivered $52 million of adjusted EBITDA in Q3 2023 at a margin of 20%, despite soft demand [17][44] Market Data and Key Metrics Changes - Industry data indicated a 9.7% decrease in operating rates and a 15.7% decrease in shipments year-to-date 2023 compared to 2022 [20] - RISI forecasts a 10.5% decrease in total SBS production for 2023, followed by a 4.2% increase in 2024 and a 5.3% increase in 2025 [21] Company Strategy and Development Direction - The company emphasizes the need for consolidation in the tissue industry to achieve scale for long-term investments [5][32] - The strategy includes exploring additional paperboard products and potential acquisitions to enhance offerings for independent converters [71][72] Management's Comments on Operating Environment and Future Outlook - Management expects a gradual recovery in the paperboard market starting in 2024, driven by the end of destocking [2][56] - The company remains optimistic about long-term prospects for both tissue and paperboard despite current economic uncertainties [21][37] Other Important Information - The company reduced net debt by $69 million in Q3 2023, totaling a reduction of $416 million since 2020 [18][28] - Capital expenditures are projected to be between $70 million and $80 million, including significant projects in recovery boiler and precipitator replacements [30][50] Q&A Session Summary Question: Expectations for recovery in the paperboard business - Management indicated that recovery is expected to start in 2024, but the timing remains uncertain [56][77] Question: Timeline for investments in paperboard product development - The company aims to be a leader in the independent converter market and is exploring product development and acquisition opportunities [78][79] Question: Confidence in maintaining tissue margins amid pulp price fluctuations - Management expressed confidence in retaining most margin improvements despite expected headwinds from lower pulp costs [81][86] Question: Future growth of private branded products - The company believes there is potential for private branded products to gain market share, although growth may not be consistent [90][92]

ARSEN KITCH President, Chief Executive Officer and Director CLEARWATER PAPER CORPORATION FORWARD LOOKING STATEMENTS Non-GAAP Financial Measures Overall SHERRI BAKER Senior Vice President and Chief Financial Officer This presentation of supplemental information contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding order patterns; product demand and industry trend ...

2022 | --- | --- | --- | --- | --- | --- | |----------------------------------------------------------------------------------------|--------------------|-----------------------------------|----------------------------|-----------------------------------------------|---------------------------------| | Interest expense | Quarter \n2023 \n$ | Ended September \n \n(7.4) $ | 30, \n2022 \n(8.0) $ | Nine Months Ended \n2023 \n(22.6) $ | September 30, \n2022 \n(26.6) | | Amortization of deferred debt costs | | (0 ...

SECOND QUARTER EARNINGS RELEASE MATERIALS AUGUST 1, 2023 BECKY BARCKLEY Corporate Controller and Interim Chief Financial Officer Cautionary Statement Regarding Forward Looking Statements Non-GAAP Financial Measures © Clearwater Paper Corporation 2023 2 Overall • Net income $30 million • Adjusted EBITDA $71 million, up $8 million versus Q2 2022 • SBS prices increased from Q2 2022 Consumer Products CLEARWATER PAPER CORPORATION ARSEN S. KITCH President, Chief Executive Officer And Director FORWARD LOOKING STAT ...

Clearwater Paper Corporation (NYSE:CLW) Q2 2023 Earnings Conference Call August 1, 2023 5:00 PM ET Company Participants Sloan Bohlen – Investor Relations Arsen Kitch – President and Chief Executive Office Becky Barckley – Corporate Controller and Interim Chief Financial Officer Conference Call Participants Paul Quinn – RBC Capital Markets Operator Thank you for standing by. My name is Dina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clearwater Paper’s ...

Form 10-Q ITEM 5. Other Information 22 CLEARWATER PAPER CORPORATION Consolidated Statements of Comprehensive Income (Unaudited) | --- | --- | --- | --- | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------|-------------------|----------------|-------|------------------------------|-------------------|----------------------------------------|------------------------------| | (In millions, except share amounts which are in thousands) | Common \n ...

Financial Performance - Net sales increased by 8% to $525.4 million for the quarter ended March 31, 2023, compared to $488.2 million for the same quarter in 2022[44] - Net income for the quarter ended March 31, 2023, was $23.8 million, or $1.40 per diluted share, up from $16.6 million, or $0.97 per diluted share, in the prior year[44] - Adjusted EBITDA for the quarter ended March 31, 2023, was $65.7 million, compared to $58.9 million for the same quarter in 2022, reflecting an increase of 11.3%[52] Segment Performance - In the Pulp and Paperboard segment, sales increased by 4.7% to $278.8 million, with operating income rising by 13.6% to $57.1 million[55] - The Consumer Products segment saw sales rise by 11.4% to $248.3 million, with operating income increasing by 353.3% to $4.2 million[58] Expenses and Cash Flow - Corporate expenses for the quarter ended March 31, 2023, were $20.4 million, up from $17.8 million in the same period last year, primarily due to business process improvement projects[60] - Net cash flows used in operating activities for the quarter ended March 31, 2023, were $9.1 million, a decrease from $41.1 million in the same quarter of 2022[67] - Net cash flows used in investing activities for the quarter ended March 31, 2023, were $21.5 million, compared to $7.9 million in the prior year[68] - During the quarter ended March 31, 2023, net cash used for financing activities was $6.3 million, including $1.7 million for stock repurchases[69] Capital Expenditures - The company expects cash paid for capital expenditures in 2023 to be approximately $70 million to $80 million[68]

Part I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Clearwater Paper Corporation manufactures and supplies bleached paperboard and consumer tissue through its Pulp and Paperboard and Consumer Products segments, focusing on high-end SBS paperboard and private-branded tissue products Segment Sales | Segment | 2022 Sales (millions) | 2021 Sales (millions) | YoY Change | | :--- | :--- | :--- | :--- | | Pulp and Paperboard | $1,136.3 | $946.0 | 20.1% | | Consumer Products | $950.2 | $835.0 | 13.8% | | **Total** | **$2,080.1** | **$1,772.6** | **17.3%** | [Pulp and Paperboard Segment](index=6&type=section&id=Pulp%20and%20Paperboard%20Segment) This segment manufactures and markets Solid Bleached Sulfate (SBS) paperboard for the high-end packaging industry, focusing on applications like folding cartons, liquid packaging, and cups[369](index=369&type=chunk) A key competitive advantage is that the company does not produce converted paperboard end-products, positioning it as a supplier to, rather than a competitor of, its packaging converter customers[370](index=370&type=chunk) [Consumer Products Segment](index=8&type=section&id=Consumer%20Products%20Segment) The segment produces a full line of quality private branded at-home tissue products (bath, paper towels, facial, napkins) for large retail channels[401](index=401&type=chunk) The company estimates it accounted for **5%** of the overall U.S. at-home tissue market in 2022, including both branded and private branded products[401](index=401&type=chunk) [Input Costs and Operations](index=8&type=section&id=Input%20Costs%20and%20Operations) The principal raw material is wood fiber (chips, sawdust, logs), with the company also purchasing approximately **315,000 short tons** of pulp annually, primarily for the Consumer Products segment[371](index=371&type=chunk)[12](index=12&type=chunk) Significant operational costs include energy (electricity, natural gas), chemicals (caustic, polyethylene, starch), and freight for raw material and finished product transport[13](index=13&type=chunk)[372](index=372&type=chunk)[404](index=404&type=chunk) [Human Capital and Safety](index=12&type=section&id=Human%20Capital%20and%20Safety) The company employs approximately **3,000 people**, focusing on safety, competitive benefits, and a multi-year diversity, equity, and inclusion plan[19](index=19&type=chunk) As of December 31, 2022, approximately **1,250 employees** are covered under collective bargaining agreements[19](index=19&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces various operational, market, employee plan, and financial risks, including increased tissue supply, cyclical paperboard conditions, customer concentration, volatile input costs, underfunded pension plans, and substantial indebtedness [Risks Related to Business Operations and Markets](index=14&type=section&id=Risks%20Related%20to%20Business%20Operations%20and%20Markets) A substantial increase in North American tissue supply could depress product pricing and margins if demand does not grow commensurately[20](index=20&type=chunk) Significant customer concentration, with the top 10 customers accounting for **48% of sales** in 2022, makes the company vulnerable to the loss of any large customer[20](index=20&type=chunk) The Pulp and Paperboard business is subject to cyclical industry conditions affecting pricing, production levels, and cash flows[20](index=20&type=chunk) The business is exposed to significant fluctuations in the cost and availability of key inputs, including wood fiber, market pulp, chemicals, and energy[411](index=411&type=chunk)[382](index=382&type=chunk) [Risks Related to Employee Plans](index=19&type=section&id=Risks%20Related%20to%20Employee%20Plans) The company contributes to two multiemployer pension plans, PIUMPF and IAM NPF, which are in 'critical and declining' or 'critical' financial status[387](index=387&type=chunk)[28](index=28&type=chunk) A complete withdrawal from these plans could trigger significant liabilities, estimated at annual payments of **$5.7 million** for 20 years (present value of **~$72 million**) for PIUMPF and a single payment of approximately **$4.0 million** for IAM NPF as of December 31, 2022[28](index=28&type=chunk)[387](index=387&type=chunk) [Risks Related to Indebtedness and Tax Positions](index=21&type=section&id=Risks%20Related%20to%20Indebtedness%20and%20Tax%20Positions) The company has substantial debt, approximately **$569 million** face value outstanding as of December 31, 2022, which could limit operational flexibility and increase vulnerability to adverse economic conditions[29](index=29&type=chunk) The company expects a tax deduction for a worthless stock loss related to a subsidiary dissolution but has fully reserved for this uncertain tax position due to potential challenges by tax authorities[31](index=31&type=chunk) [Item 2. Properties](index=26&type=section&id=Item%202.%20Properties) The company operates principal executive offices in Spokane, Washington, and manufacturing facilities across the U.S., including major sites in Lewiston, Cypress Bend, and Shelby, producing tissue, pulp, paperboard, and sheeting services Annual Production Capacity | Product | Annual Capacity (short tons) | | :--- | :--- | | Tissue Parent Rolls | 390,000 | | Tissue Converting | 377,000 | | Pulp | 904,000 | | Paperboard | 840,000 | | Sheeted Paperboard | 191,000 | [Item 3. Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various claims and litigation, but management believes these proceedings will not materially adversely affect its financial condition, results of operations, or cash flows The company does not expect current legal proceedings to have a material adverse effect on its financial condition[67](index=67&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Clearwater Paper's common stock trades on the NYSE under "CLW", with no cash dividends paid, and the company repurchased **$5.0 million** of common stock in 2022, leaving **$24.9 million** available under authorization The company repurchased **149,860 shares** for approximately **$5.0 million** in 2022[428](index=428&type=chunk) As of December 31, 2022, **$24.9 million** remained under the stock repurchase authorization[428](index=428&type=chunk) The company has not paid any cash dividends, and future dividends are subject to Board of Directors' review and debt covenant restrictions[429](index=429&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, net sales increased **17.3%** to **$2.1 billion**, driven by price increases across segments, leading to a net income of **$46.0 million** and Adjusted EBITDA of **$226.9 million**, with cash from operations at **$150.2 million** and projected 2023 capital expenditures of **$70-80 million** Key Financial Metrics | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Sales | $2.1 billion | $1.77 billion | | Net Income (Loss) | $46.0 million | ($28.1 million) | | Diluted EPS | $2.68 | ($1.67) | | Adjusted EBITDA | $226.9 million | $174.6 million | [Results of Operations by Segment](index=34&type=section&id=Results%20of%20Operations%20by%20Segment) **Pulp and Paperboard:** Operating income and Adjusted EBITDA increased significantly in 2022 due to higher sales prices from previously announced increases, offsetting inflation and higher maintenance outage costs[77](index=77&type=chunk) **Consumer Products:** Operating income and Adjusted EBITDA increased in 2022 due to higher sales volumes from stabilized demand and new customer programs, along with price increases partially offsetting higher input costs, primarily for pulp and packaging[78](index=78&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Cash from operations increased to **$150.2 million** in 2022 from **$96.4 million** in 2021, driven by improved operating performance[112](index=112&type=chunk) Net cash used in financing activities was **$88.6 million**, primarily for the full prepayment of the term loan, open market purchases of 2014 Notes, and common stock repurchases[445](index=445&type=chunk) The company expects capital expenditures to be approximately **$70 million to $80 million** in 2023[339](index=339&type=chunk) As of December 31, 2022, the company had availability of approximately **$264.3 million** under its ABL Credit Agreement[29](index=29&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on its variable-rate ABL Credit Agreement, which had no outstanding borrowings as of December 31, 2022, and it faces minimal foreign currency exchange risk Market risk is limited to the ABL Credit Agreement, which had no outstanding borrowings at year-end 2022[113](index=113&type=chunk) The company has minimal foreign currency exchange risk[114](index=114&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes KPMG LLP's unqualified opinion on the consolidated financial statements and internal controls, presenting balance sheets, income statements, cash flow statements, and stockholders' equity for 2020-2022, along with detailed notes The independent auditor, KPMG LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of the company's internal control over financial reporting as of December 31, 2022[328](index=328&type=chunk)[289](index=289&type=chunk) A critical audit matter identified was the evaluation of the discount rate used in the measurement of the pension benefit obligation, due to the subjectivity and judgment involved[90](index=90&type=chunk) [Consolidated Financial Statements](index=41&type=section&id=Consolidated%20Financial%20Statements) Consolidated Financial Highlights | (In millions) | 2022 | 2021 | | :--- | :--- | :--- | | **Balance Sheet** | | | | Total Assets | $1,703.5 | $1,690.1 | | Total Liabilities | $1,131.5 | $1,178.3 | | Total Stockholders' Equity | $572.1 | $511.7 | | **Income Statement** | | | | Net Sales | $2,080.1 | $1,772.6 | | Income from Operations | $113.9 | $12.0 | | Net Income (Loss) | $46.0 | ($28.1) | | **Cash Flow** | | | | Net Cash from Operating Activities | $150.2 | $96.4 | [Notes to Consolidated Financial Statements](index=47&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, debt obligations, retirement and pension plans, and segment information, highlighting the company's **$569.2 million** debt and underfunded multiemployer pension plans **Debt (Note 7):** As of Dec 31, 2022, total debt was **$569.2 million**, primarily consisting of **$270 million** in 5.375% Senior Notes due 2025 and **$275 million** in 4.750% Senior Notes due 2028, with the company fully repaying its term loan in 2022[184](index=184&type=chunk)[202](index=202&type=chunk) **Retirement Plans (Note 10):** The company participates in multiemployer pension plans (PIUMPF and IAM NPF) in 'critical' (Red Zone) status, indicating significant underfunding, with an estimated withdrawal liability exceeding **$76 million** as of year-end 2022[225](index=225&type=chunk)[250](index=250&type=chunk) **Segment Information (Note 15):** In 2022, the Pulp and Paperboard segment generated operating income of **$183.5 million** on **$1.14 billion** in sales, while the Consumer Products segment had operating income of **$11.3 million** on **$950.2 million** in sales[264](index=264&type=chunk) [Item 9A. Controls and Procedures](index=72&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that both disclosure controls and internal control over financial reporting were effective as of December 31, 2022, a conclusion affirmed by KPMG LLP's unqualified opinion Management concluded that both disclosure controls and procedures, and internal control over financial reporting, were effective as of December 31, 2022[288](index=288&type=chunk) There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[288](index=288&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=75&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section lists executive officers as of February 1, 2023, with information on directors and corporate governance, including the Code of Business Conduct and Ethics, incorporated by reference from the 2023 Proxy Statement Arsen S. Kitch serves as President and Chief Executive Officer, and Michael J. Murphy serves as Senior Vice President, Chief Financial Officer[271](index=271&type=chunk) The company has adopted a Code of Business Conduct and Ethics applicable to all directors and employees, and a separate Code of Ethics for Senior Officers[271](index=271&type=chunk) [Items 11, 12, 13 & 14](index=76&type=section&id=Items%2011%2C%2012%2C%2013%20%26%2014) Information for these items, covering executive compensation, security ownership, related party transactions, director independence, and principal accounting fees, is incorporated by reference from the company's 2023 Proxy Statement Detailed information on executive compensation, security ownership, related party transactions, and auditor fees is not contained in this 10-K but is incorporated by reference from the 2023 Proxy Statement[272](index=272&type=chunk)[296](index=296&type=chunk)[273](index=273&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=77&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and provides a detailed index of all exhibits filed with the Form 10-K, including corporate governance documents, debt agreements, and compensatory plans Lists all financial statements, the report of the independent registered public accounting firm, and all exhibits filed as part of the annual report[275](index=275&type=chunk)[300](index=300&type=chunk)

Financial Data and Key Metrics Changes - The company reported net sales of $539 million for Q3 2022, a 20% increase compared to the prior year [4] - Adjusted net income was $31 million, and adjusted EBITDA was $77 million [4][13] - Net income for Q3 2022 was $20.6 million, with net income per diluted share at $1.21 and adjusted net income per diluted share at $1.83 [13][24] - The company reduced net debt by $6 million in the quarter and $106 million in the first nine months of the year [6][17] Business Line Data and Key Metrics Changes - The paperboard business experienced strong demand with higher pricing, reporting price increases totaling $500 per ton since early 2021, with $250 of that in 2022 [7][8] - The tissue business saw a shift towards private branded products, with private branded dollar share climbing to over 35% in September, an all-time high [10] - The company shipped 12.6 million cases of tissue in Q3, matching the previous quarter and slightly exceeding the same quarter last year [10] Market Data and Key Metrics Changes - The company noted inflation as a headwind across input costs, particularly in pulp, fiber, chemicals, and energy [5][12] - The overall industry demand for paperboard remains robust despite economic uncertainty, as indicated by stable backlogs and reported price increases [9] Company Strategy and Development Direction - The company aims to generate free cash flow, deleverage its balance sheet, and improve financial flexibility, with a capital allocation framework prioritizing sustaining its asset base and evaluating value-accretive investments [28][29][30] - The company plans to focus on medium-sized investments to improve throughput in the paperboard business and explore acquisition opportunities for growth [39][40] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about inflation outpacing price increases in the tissue segment and is working to recover margins through price increases and cost reduction efforts [11][24] - The fourth quarter is expected to see adjusted EBITDA of $38 million to $48 million, significantly lower than Q3 due to a planned major maintenance outage [20][21] - The company anticipates a full-year adjusted EBITDA of $237 million to $247 million, up from $175 million in 2021 [23] Other Important Information - The company updated its target capital expenditures to $60 million to $70 million per year, reflecting inflation impacts [19][26] - The effective tax rate for the full year is expected to be 34%, influenced by the reversal of net tax credits from previous years [27] Q&A Session Summary Question: What were the sources of upside relative to EBITDA guidance in Q3? - Management indicated that strong operational performance, pricing across the portfolio, lower natural gas prices, and deferred maintenance expenses contributed to the upside [35][36] Question: Can you elaborate on the production issues in October? - Management confirmed that production issues impacted both pulp and paperboard production, with an expected $5 million impact for the quarter [37] Question: How does the company plan to grow in the paperboard business without major capacity additions? - Management mentioned medium-sized investments to improve throughput and potential acquisition opportunities as growth strategies [39] Question: Are price increases expected to offset cost inflation in Q4? - Management clarified that price increases would be below the expected raw material cost inflation, leading to mild margin compression [42] Question: Is there any relief on freight costs? - Management noted some positive comparisons in freight costs heading into Q4 [43] Question: What is the outlook for major maintenance in 2023? - Management indicated that the timing of the next major maintenance outage would depend on the current outage's completion and the condition of equipment [46] Question: What is the company's stance on consolidation in the tissue market? - Management believes consolidation is still needed to improve scale and returns, and the company is well-positioned to participate in that process [53] Question: How does the company view investments in tissue versus packaging? - Management stated that investment decisions would be driven by value creation opportunities, remaining open to both segments [54]