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]

[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%28Unaudited%29) Presents unaudited consolidated financial statements for Clearwater Paper Corporation as of September 30, 2022, highlighting improved financial performance [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased slightly to $1,703.6 million, while total liabilities decreased to $1,134.4 million, boosting stockholders' equity to $569.2 million Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $570.2 | $487.2 | | Property, plant and equipment, net | $1,023.1 | $1,081.8 | | **Total assets** | **$1,703.6** | **$1,690.1** | | **Liabilities & Equity** | | | | Total current liabilities | $295.1 | $254.1 | | Long-term debt | $564.9 | $637.6 | | **Total liabilities** | **$1,134.4** | **$1,178.3** | | **Total stockholders' equity** | **$569.2** | **$511.7** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q3 2022 net sales increased 19.6% to $538.8 million, with net income surging to $20.6 million, and nine-month net income reaching $51.9 million Q3 and Nine Months Operating Results (in millions, except per-share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $538.8 | $450.5 | $1,553.3 | $1,282.8 | | Income (loss) from operations | $48.9 | $13.8 | $113.3 | $(15.6) | | Net income (loss) | $20.6 | $1.9 | $51.9 | $(37.6) | | Diluted EPS | $1.21 | $0.11 | $3.04 | $(2.25) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities more than doubled to $132.8 million for the nine months, while financing activities used $87.6 million Nine Months Cash Flow Summary (in millions) | Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $132.8 | $64.4 | | Net cash used in investing activities | $(19.9) | $(29.9) | | Net cash used in financing activities | $(87.6) | $(42.5) | | **Increase (decrease) in cash** | **$25.3** | **$(8.1)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes cover segment performance, income tax calculations, and account breakdowns, highlighting strong growth in Pulp and Paperboard Segment Net Sales (in millions) | Segment | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Pulp and Paperboard | $300.8 | $237.5 | $862.8 | $684.6 | | Consumer Products | $241.0 | $214.2 | $696.1 | $603.2 | Segment Operating Income (Loss) (in millions) | Segment | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Pulp and Paperboard | $63.7 | $34.6 | $165.9 | $72.6 | | Consumer Products | $5.2 | $3.7 | $9.6 | $11.5 | | Corporate and eliminations | $(17.8) | $(14.3) | $(53.8) | $(44.8) | | Other operating charges, net | $(2.2) | $(10.2) | $(8.5) | $(55.1) | - The effective tax rate for the nine months ended September 30, 2022 was **36.1%**, compared to 26.8% for the same period in 2021. The variance from the 21% federal statutory rate is primarily due to state taxes, adjustments related to a tax audit, and nondeductible compensation[28](index=28&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=17&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights a 20% increase in Q3 net sales driven by pricing, with Adjusted EBITDA rising to $77.3 million and operating cash flow doubling Reconciliation of Net Income to Adjusted EBITDA (in millions) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $20.6 | $1.9 | $51.9 | $(37.6) | | **Adjusted EBITDA** | **$77.3** | **$49.9** | **$199.2** | **$119.0** | - Pulp and Paperboard segment sales prices increased **27.5%** per short ton in Q3 2022 vs Q3 2021, driving a **67.9%** increase in the segment's Adjusted EBITDA[56](index=56&type=chunk)[57](index=57&type=chunk) - Consumer Products segment's retail sales prices increased **12.8%** per short ton in Q3 2022 vs Q3 2021. However, for the nine-month period, the segment's Adjusted EBITDA decreased by **7.2%** due to higher input costs, primarily pulp and freight, which offset the price increases[59](index=59&type=chunk) - Net cash from operating activities for the first nine months of 2022 was **$132.8 million**, a significant increase from $64.4 million in the same period of 2021, driven by improved operating performance[68](index=68&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk exposure to interest rates is minimal as of September 30, 2022, due to full repayment of the Term Loan and no ABL borrowings - As of September 30, 2022, the Term Loan Credit Agreement was fully repaid and no borrowings were outstanding under the ABL Credit Agreement, minimizing interest rate risk[73](index=73&type=chunk) [Controls and Procedures](index=25&type=section&id=ITEM%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022[75](index=75&type=chunk) - No changes occurred during the quarter that materially affected, or are likely to materially affect, the company's internal control over financial reporting[76](index=76&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=26&type=section&id=ITEM%201.%20Legal%20Proceedings) Management believes ongoing legal proceedings will not materially adversely affect the company's financial condition - The company does not expect legal proceedings to have a material adverse effect on its financial condition[78](index=78&type=chunk) [Risk Factors](index=26&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes were reported to the risk factors previously disclosed in the 2021 Form 10-K - No material changes from the risk factors disclosed in the 2021 Form 10-K were reported[79](index=79&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Uses%20of%20Proceeds) The company's stock repurchase program had $24.9 million remaining authorization, with 30,532 shares repurchased in Q3 2022 - As of September 30, 2022, **$24.9 million** remained available for repurchase under the company's stock repurchase program[79](index=79&type=chunk) Share Repurchases in Q3 2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2022 | 30,052 | $33.93 | | August 2022 | 480 | $35.02 | | September 2022 | — | — | | **Total Q3** | **30,532** | **$33.95** | [Exhibits](index=27&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files - Exhibits filed include Section 302 and Section 1350 certifications, as well as XBRL interactive data files[82](index=82&type=chunk)

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 ...