Clearwater Paper(CLW) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited consolidated financial statements and management's discussion and analysis for the first quarter of 2025 Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Q1 2025, reflecting the Augusta facility acquisition and the reclassification of tissue operations as discontinued Consolidated Balance Sheets As of March 31, 2025, total assets were $1,633.9 million, a decrease from $1,679.2 million at year-end 2024, primarily due to a reduction in cash and cash equivalents Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $44.0 | $79.6 | | Total current assets | $499.6 | $545.4 | | Property, plant and equipment, net | $1,029.9 | $1,023.1 | | Total assets | $1,633.9 | $1,679.2 | | Total current liabilities | $300.2 | $320.4 | | Long-term debt | $281.6 | $281.6 | | Total liabilities | $797.3 | $824.7 | | Total stockholders' equity | $836.6 | $854.6 | Consolidated Statements of Operations For the first quarter of 2025, the company reported a net loss of $6.3 million, compared to a net income of $17.2 million in the same period of 2024, with the prior year boosted by discontinued operations Quarterly Statement of Operations (in millions, except per-share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $378.2 | $258.8 | | Total operating costs and expenses | $382.2 | $259.6 | | Loss from continuing operations | $(5.9) | $(2.1) | | Income (loss) from discontinued operations, net of tax | $(0.4) | $19.3 | | Net income (loss) | $(6.3) | $17.2 | | Loss per share from continuing operations - basic and diluted | $(0.36) | $(0.12) | | Net income (loss) per share - basic and diluted | $(0.38) | $1.03 | Consolidated Statements of Cash Flows Net cash provided by operating activities was $1.5 million for Q1 2025, a significant decrease from $59.2 million in Q1 2024, primarily due to the divestiture of tissue operations Quarterly Cash Flow Summary (in millions) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $1.5 | $59.2 | | Net cash flows used in investing activities | $(32.7) | $(18.5) | | Net cash flows used in financing activities | $(4.4) | $(27.6) | | Increase (decrease) in cash and cash equivalents | $(35.6) | $13.2 | Notes to Consolidated Financial Statements The notes provide crucial context, detailing the sale of the tissue business, the acquisition of the Augusta paperboard facility, a new cost reduction plan, and the company's determination of having a single operating segment - The company completed the acquisition of a paperboard manufacturing facility in Augusta, Georgia on May 1, 2024, with a total purchase price of $708.2 million[22][23] - The company sold its tissue operations in November 2024. These results are now presented as discontinued operations. For Q1 2024, these operations generated $19.3 million in net income, compared to a loss of $0.4 million in Q1 2025 related to settlement costs[19][25][26] - In early 2025, a cost reduction plan was initiated to right-size operations after the tissue business sale, with expected employee severance costs of $5 to $7 million by the end of 2025. The company incurred $4.4 million in severance expense in Q1 2025[49] - The company has determined it has a single operating segment. Net sales are disaggregated by product line, with Food Service ($151.4 million) and Folding Carton ($148.4 million) being the largest contributors in Q1 2025[50][53] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q1 2025, highlighting a 46% increase in net sales driven by the Augusta acquisition, which offset market-driven price decreases. Adjusted EBITDA more than doubled to $29.8 million Q1 2025 vs Q1 2024 Performance | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net sales | $378.2 | $258.8 | 46% | | Loss from continuing operations | $(4.0) | $(0.8) | 410% | | Adjusted EBITDA from continuing operations | $29.8 | $14.2 | 110% | - The 46% increase in net sales was driven by higher sales volume from the acquired Augusta operations. This was partially offset by a 7.5% decrease in the average paperboard sales price per short ton[63][64] - Looking to Q2 2025, the company expects higher sales volumes, seasonally lower energy costs, and benefits from cost reduction efforts. These will be partially offset by increased planned maintenance expenses[73] - Cash flow from operations decreased significantly to $1.5 million in Q1 2025 from $59.2 million in Q1 2024, primarily due to the divestiture of the high cash-flow tissue business[77] - The company expects to spend approximately $80 million to $90 million on capital expenditures in 2025[78] Quantitative and Qualitative Disclosures About Market Risk The company reports that there have been no significant developments regarding its exposure to market risk during the first quarter of 2025 - There have been no significant changes to the company's market risk exposure for the quarter ended March 31, 2025[82] Controls and Procedures Based on an evaluation as of March 31, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures are effective - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[83] - No material changes to internal control over financial reporting occurred during the first quarter of 2025[84] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and other disclosures Legal Proceedings The company was named as a defendant in an environmental lawsuit filed on February 5, 2025, in Georgia, alleging PFAS presence related to its Augusta mill - On February 5, 2025, the company was named as a defendant in an environmental lawsuit related to its Augusta, Georgia mill[86] - The lawsuit seeks monetary damages and injunctive relief for the alleged presence of PFAS in the plaintiff's source water supply[87][88] Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported for the quarter[89] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 379,900 shares for approximately $10.9 million during Q1 2025 under its $100 million stock repurchase program - A $100 million stock repurchase program was authorized on October 31, 2024[89] Q1 2025 Stock Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 155,000 | $29.99 | | Feb 2025 | 154,900 | $28.87 | | Mar 2025 | 70,000 | $25.19 | | Total | 379,900 | $28.65 | Other Information During the first quarter of 2025, none of the company's officers or directors adopted or terminated a Rule 10b5-1 trading arrangement - No officers or directors adopted or terminated a Rule 10b5-1 arrangement during the quarter[94] Exhibits This section lists the exhibits filed as part of the Form 10-Q report, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO/CFO certifications (Exhibits 31 & 32) and an employment agreement with CEO Arsen S. Kitch[95]