Clearwater Paper Corporation (NYSE:CLW) Q2 2022 Earnings Conference Call August 2, 2022 5:00 PM ET Company Participants Sloan Bohlen - Investor Relations Arsen Kitch - President and Chief Executive Officer Mike Murphy - Chief Financial Officer Conference Call Participants Adam Josephson - KeyBanc Capital Markets Mark Wilde - BMO Capital Markets Paul Quinn - RBC Capital Markets Operator Good day, and thank you for standing by. Welcome to the Clearwater Paper 2Q '22 Earnings Call. [Operator Instructions] I wi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2022 or ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 001-34146 CLEARWATER PAPER CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-3594554 (State or other ju ...

Clearwater Paper Corporation (NYSE:CLW) Q1 2022 Earnings Conference Call April 28, 2022 5:00 PM ET Company Participants Sloan Bohlen - Investor Relations Arsen Kitch - President and Chief Executive Officer Mike Murphy - Chief Financial Officer Conference Call Participants Adam Josephson - KeyBanc Capital Markets Mark Wilde - BMO Capital Markets Paul Quinn - RBC Capital Markets Operator Good day. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to t ...

[Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) Forward-looking statements in this report are subject to risks and uncertainties that may cause actual results to differ materially - Forward-looking statements cover areas including **COVID-19 impact**, **strategic projects**, **cash flows**, **capital expenditures**, **operating costs**, and **debt repayment**[2](index=2&type=chunk) - Key factors that could cause results to differ include **COVID-19 impacts**, **competitive pricing pressures**, **customer demand**, **costs and availability of raw materials and transportation**, **cyber-security risks**, **manufacturing disruptions**, and **debt covenants**[3](index=3&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited consolidated financial statements for Q1 2022 show increased net sales and net income, with a slight decrease in total assets and liabilities, leading to higher stockholders' equity [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets slightly decreased to $1,683.1 million due to reduced property, plant, and equipment, while total liabilities decreased to $1,153.2 million, leading to increased stockholders' equity Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $507.5 | $487.2 | | **Property, plant and equipment, net** | $1,059.9 | $1,081.8 | | **Total assets** | **$1,683.1** | **$1,690.1** | | **Total current liabilities** | $256.1 | $254.1 | | **Long-term debt** | $617.7 | $637.6 | | **Total liabilities** | **$1,153.2** | **$1,178.3** | | **Total stockholders' equity** | **$530.0** | **$511.7** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) In Q1 2022, net sales increased by 14.6% to $488.2 million, driving net income up to $16.6 million, or $0.97 per diluted share, compared to the prior year Q1 Operating Results (in millions, except per-share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Net sales** | $488.2 | $425.9 | | **Income from operations** | $32.9 | $27.1 | | **Net income** | $16.6 | $12.1 | | **Diluted EPS** | $0.97 | $0.71 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to $41.1 million in Q1 2022, while cash used in investing decreased and cash used in financing significantly increased due to debt repayments Q1 Cash Flow Summary (in millions) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Net cash from operating activities** | $41.1 | $33.8 | | **Net cash used in investing activities** | ($7.9) | ($11.1) | | **Net cash used in financing activities** | ($21.9) | ($1.4) | | **Increase in cash** | $11.2 | $21.2 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the prospective adoption of a new accounting standard, a reduction in debt fair value, an increased effective tax rate, and varied segment performance, with strong results in Pulp and Paperboard but weaker in Consumer Products - The company adopted **ASU 2021-10** for government assistance disclosures on January 1, 2022, with **no material impact**[22](index=22&type=chunk) - The effective tax rate for Q1 2022 was **26.6%**, higher than the **21%** U.S. federal statutory rate, primarily due to state taxes and nondeductible compensation[28](index=28&type=chunk) Segment Net Sales and Operating Income (in millions) | Segment | Q1 2022 Net Sales | Q1 2021 Net Sales | Q1 2022 Operating Income | Q1 2021 Operating Income | | :--- | :--- | :--- | :--- | :--- | | **Pulp and Paperboard** | $266.2 | $219.7 | $50.3 | $25.0 | | **Consumer Products** | $223.0 | $208.4 | $0.9 | $17.9 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a 15% increase in Q1 2022 net sales, leading to higher net income and Adjusted EBITDA, driven by strong Pulp and Paperboard performance, while Consumer Products faced significant cost inflation despite price increases [Executive Summary](index=15&type=section&id=Executive%20Summary) In Q1 2022, net sales increased by 15% to $488.2 million, with net income rising to $16.6 million and Adjusted EBITDA increasing to $58.9 million Q1 2022 Key Financial Metrics (vs. Q1 2021) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | **Net Sales** | $488.2M | $425.9M | | **Net Income** | $16.6M | $12.1M | | **Adjusted EBITDA** | $58.9M | $54.3M | [Our Operating Results](index=17&type=section&id=Our%20Operating%20Results) Operating results varied by segment, with Pulp and Paperboard's operating income doubling due to higher pricing, while Consumer Products' operating income plummeted due to significant cost inflation despite price increases - **Pulp and Paperboard** operating income increased **100.8%** to **$50.3 million**, and Adjusted EBITDA rose **75.0%** to **$59.5 million**, driven by higher sales prices[56](index=56&type=chunk) - **Consumer Products** operating income decreased **94.8%** to **$0.9 million**, and Adjusted EBITDA fell **53.2%** to **$16.2 million**, primarily due to higher input costs[58](index=58&type=chunk)[59](index=59&type=chunk) - Corporate expenses increased to **$17.8 million** from **$15.5 million** year-over-year, mainly due to higher incentive compensation[60](index=60&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily from operations and its ABL credit facility, with Q1 2022 generating $41.1 million in operating cash and making $20.4 million in voluntary debt repayments - Net cash from operating activities was **$41.1 million** for Q1 2022, up from **$33.8 million** in Q1 2021[67](index=67&type=chunk) - The company made voluntary debt repayments of **$20.4 million** in Q1 2022[69](index=69&type=chunk) - Expected capital expenditures for 2022 are approximately **$60 million to $70 million**[68](index=68&type=chunk) - The ABL Credit Agreement provides a **$250 million** revolving loan commitment, with **no borrowings outstanding** as of March 31, 2022, and **$3.7 million** used for letters of credit[70](index=70&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is exposure to interest rate fluctuations on its **$30.0 million** variable-rate debt, including the Term Loan and ABL Credit Agreement - A one percentage point change in interest rates would result in an approximate **$0.3 million** annual effect on interest expense, based on **$30.0 million** of variable-rate debt outstanding[72](index=72&type=chunk) [Controls and Procedures](index=22&type=section&id=ITEM%204.%20Controls%20and%20Procedures) As of March 31, 2022, the CEO and CFO concluded that disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures are effective in providing reasonable assurance of timely and accurate material information reporting[74](index=74&type=chunk) - No material changes occurred during the quarter affecting the company's internal control over financial reporting[75](index=75&type=chunk) [PART II. OTHER INFORMATION](index=23&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=23&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in various claims and litigation, but management does not expect their outcomes to have a material adverse effect on financial condition - The company does not expect legal proceedings, in aggregate, to materially adversely affect its financial condition[77](index=77&type=chunk) [Risk Factors](index=23&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K - No material changes from the risk factors disclosed in the **2021 Form 10-K** are reported[78](index=78&type=chunk) [Exhibits](index=23&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files - Exhibits filed include **Sarbanes-Oxley Section 302 and 1350 certifications**, along with **XBRL instance documents** and related files[78](index=78&type=chunk)

Financial Data and Key Metrics Changes - For Q4 2021, the company reported net sales of $490 million, adjusted net income of $9 million, and adjusted EBITDA of $56 million, which was at the high end of expectations [5][6] - For the full year 2021, net sales were nearly $1.8 billion, adjusted net income was $17 million, and adjusted EBITDA was $175 million [5][6] - The company maintained liquidity of $265 million at the end of the quarter and reduced net debt by $37 million during the quarter, totaling a $69 million reduction for the year [8][30] Business Line Data and Key Metrics Changes - The paperboard business experienced strong demand, leading to implemented price increases across the SBS portfolio [6][12] - Tissue business demand stabilized, with Q4 volume similar to Q3, shipping 12.4 million cases in Q4, slightly higher than 12.3 million cases in Q3 [22][23] - Adjusted EBITDA for the paperboard division reached a record $61.9 million in Q4, benefiting from price increases and favorable mix improvements despite inflationary pressures [25][26] Market Data and Key Metrics Changes - The U.S. tissue market was approximately 10.6 million tons in 2020, with the at-home market accounting for about 7.6 million tons [20] - The private-branded tissue market has grown more quickly than the branded market, with private brands now representing over 30% of total tissue share in the U.S. [47][48] - The company noted that the top five retailers now account for nearly 70% of all private-branded tissue demand, indicating significant industry consolidation [21] Company Strategy and Development Direction - The company is focused on operating efficiencies and price increases to offset cost inflation, particularly in the tissue segment [7][40] - The paperboard division is positioned to benefit from favorable market dynamics, with a commitment to sustainability and product innovation [16][19] - The company is evaluating its tissue asset footprint to ensure competitiveness and is open to consolidation opportunities in the industry [61][93] Management's Comments on Operating Environment and Future Outlook - Management expects inflation and supply chain disruptions to continue impacting operations in 2022, with a projected adjusted EBITDA range of $48 million to $56 million for Q1 2022 [32][34] - The company anticipates annual pricing benefits of $120 million to $140 million in 2022, but expects cost inflation to be a significant headwind [35][36] - Management remains optimistic about the long-term outlook for both the paperboard and tissue businesses, citing strong demand and sustainability trends [42][48] Other Important Information - The company has updated its investor handout with refreshed information on Clearwater Paper and the industries in which it competes [11] - Major maintenance outages are expected to impact adjusted EBITDA in 2023, with significant capital expenditures anticipated for recovery boiler work [38][39] Q&A Session Summary Question: Impact of 2022 shift mix in the bleached board business - Management noted strength in the food service category from a pricing standpoint, expecting a less pronounced negative impact compared to previous years [51] Question: Strategy to counter European boxboard producer - Management emphasized the complexity and risk of conversions, maintaining a positive outlook on the paperboard business due to demand outstripping supply [53][54] Question: Activity levels in January and February - Strong demand in paperboard continues, while tissue sales in January were in line with Q4, indicating normalization [56][57] Question: Supply-demand challenges in the tissue market - Management acknowledged the need for industry consolidation to improve scale and cost positions, expressing willingness to participate in such opportunities [60][61] Question: Major contract renewals in tissue - Approximately 50% of the business is up for renewal this year, which is higher than the typical 25% [76] Question: Major maintenance in 2023 - A significant project is planned for the recovery boiler at the Lewiston mill, addressing the end of useful life of certain components [77] Question: Challenges in implementing price increases in tissue - Pricing is driven by supply and demand dynamics, with negotiations being critical as customers have alternative suppliers [80] Question: Cash flow expectations for 2022 - The company expects to be a cash taxpayer this year, with some offsetting liabilities related to payroll tax repayments [89]

Sales 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].

Clearwater Paper Corporation (NYSE:CLW) Q3 2021 Earnings Conference Call November 2, 2021 5:00 PM ET Company Participants Sloan Bohlen - Investor Relations Arsen Kitch - President and Chief Executive Officer Mike Murphy - Chief Financial Officer Conference Call Participants Adam Josephson - KeyBanc Mark Wilde - BMO Capital Markets Paul Quinn - RBC Capital Markets Adam Josephson - KeyBanc Operator Ladies and gentlemen, thank you for standing by and welcome to the Clearwater Paper Third Quarter 2021 Earnings ...

Financial Data and Key Metrics Changes - The company reported net sales of $406 million for Q2 2021 and adjusted EBITDA of $15 million, which was better than expectations [5][20] - The net loss for Q2 2021 was $52 million, with a diluted net loss per share of $3.10 and an adjusted loss per share of $1.07 [20][21] - Liquidity at the end of the quarter was $297 million, and net debt was reduced by $4 million [8][26] Business Line Data and Key Metrics Changes - The paperboard business experienced strong demand, leading to implemented price increases across the SBS portfolio [6][10] - The tissue business saw a decline in shipments, with 10.2 million cases shipped in Q2, down approximately 36% year-over-year and 13% sequentially [16][24] - The major maintenance outage in the paperboard business impacted adjusted EBITDA by $22 million [12][22] Market Data and Key Metrics Changes - The U.S. tissue market is traditionally split into 2/3 at-home and 1/3 away-from-home, with total demand around 10 million tons per year [13] - Retailer shipments of finished goods bottomed out in April, indicating a recovery period beginning in May [15][16] - The company expects tissue shipments to grow by 10% to 15% in Q3 relative to Q2 [30] Company Strategy and Development Direction - The company is focused on reducing costs and improving cash flow, particularly in the tissue business, while also maximizing production in the paperboard segment [39][44] - The closure of the Neenah tissue mill is part of a strategy to exit the away-from-home market and reduce overall costs [18][35] - The company is planning to shift some capital projects to 2022 to accommodate strong paperboard demand [33][77] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains challenging due to inflation and competitive pressures, but they are optimistic about long-term growth in both business segments [40][43] - The company anticipates continued recovery in tissue demand and expects to manage production levels to align with market needs [30][39] - Management highlighted the importance of monitoring consumer and channel trends, especially in light of the Delta variant [81] Other Important Information - The company expects input cost inflation to be between $60 million and $70 million for 2021, primarily driven by pulp prices [34] - The anticipated financial impact from raw material inflation is expected to increase in the coming quarters [24][29] Q&A Session Summary Question: What are the inflation expectations for the year? - Management indicated that inflation expectations have slightly improved due to offsetting factors in pulp and freight costs [46] Question: Can we expect further price increases in SBS? - Management confirmed that sequential improvements in SBS pricing are expected from Q3 to Q4 [47] Question: How does the company view the tissue market post-COVID? - Management believes that the current year reflects a more normal baseline for tissue demand compared to the COVID-impacted year [49] Question: What is the outlook for tissue shipment volumes? - Management expects tissue shipment volumes to grow by 10% to 15% in Q3 compared to Q2 [30][67] Question: How is the company managing inventory levels? - Management stated that inventory levels are still higher than desired, but they are actively working to reduce them [62] Question: What is the status of the Neenah site closure? - The closure is expected to improve the overall cost structure and avoid losses associated with the site [35][18] Question: What are the expectations for capital expenditures? - Management indicated that capital expenditures have been reduced this year, with a focus on scrutinizing spending [76][77]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2021 or ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 001-34146 CLEARWATER PAPER CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-3594554 (State or other ju ...

Financial Data and Key Metrics Changes - The company reported net sales of $426 million and adjusted EBITDA of $54 million for Q1 2021, indicating strong financial performance despite challenges [5][18] - Net income for the first quarter was $12 million, with diluted net income per share at $0.71 and adjusted income at $0.69 per share [18] Business Line Data and Key Metrics Changes - The paperboard business experienced strong demand, particularly in the folding carton segment, leading to announced price increases across the SBS product portfolio [5][10] - The tissue business faced lower orders and shipments, with a nearly 20% decline in overall tissue dollar sales compared to Q4 2020, attributed to consumer de-stocking and elevated inventory levels [6][15] Market Data and Key Metrics Changes - The U.S. tissue market is traditionally split into 2/3 at-home and 1/3 away-from-home consumption, with total demand around 10 million tons per year [13] - The company estimates an excess inventory of over a month between consumers and retailers, impacting tissue demand and shipments [14][15] Company Strategy and Development Direction - The company is focused on implementing price increases in the paperboard business and managing costs in the tissue segment to address inflation and lower demand [30][32] - A transformation effort has been launched to improve core operations, supported by a consulting firm, aimed at achieving the company's full potential over the next several years [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant cost inflation and a temporary decrease in tissue demand, with expectations of a mid double-digit decline in tissue volume year-over-year for 2021 [27][28] - The company remains optimistic about long-term consumption growth in the tissue market, projecting a growth rate of 1% to 2% per year [15][28] Other Important Information - The company reduced net debt by $21 million using free cash flows generated during Q1 2021, maintaining a strong balance sheet with liquidity of $282.7 million [7][23] - The planned maintenance outage at the Lewiston mill is expected to impact earnings by $21 to $24 million, consistent with prior expectations [25] Q&A Session Summary Question: What is the expected timeline for the SBS pricing increase to take effect? - Management indicated it would take about two quarters to fully implement the price increase [36][37] Question: How will lower sales and production cuts impact the second quarter? - Management provided a breakdown of expected costs, indicating a significant impact from production cuts and lower sales [40] Question: What strategies are being implemented to mitigate rising costs in tissue? - The company is working with customers on pricing adjustments and product changes to address rising costs [41][42] Question: How is the company positioned regarding the recent acquisition of a large independent carton producer? - Management stated that their exposure to the acquired producer is limited and emphasized strong relationships with independent converters [44] Question: Is the downtime in Q2 sufficient to clear the inventory overhang? - Management noted uncertainty regarding the exact amount of overhang but indicated that the downtime is aimed at matching demand and reducing inventory [46][47] Question: What is the company's philosophy regarding quarterly guidance? - Management explained that due to significant changes in business conditions, they are providing expectations rather than specific guidance [54][56] Question: What is the current focus on capital allocation? - The company is prioritizing debt reduction, targeting a leverage ratio of 2.5x, with no expectation to achieve that this year [60][61]