Clearwater Paper(CLW) - 2025 Q2 - Quarterly Report

Forward-Looking Statements This section outlines forward-looking statements and potential risk factors that may cause actual results to differ materially from projections - The report contains forward-looking statements regarding future outlook, cost reduction efforts, asset dispositions, operations, borrowing, cash flows, capital expenditures, working capital, compliance, operating costs, SG&A, liquidity, and legal proceedings[6] - Actual results may differ materially due to factors such as the inability to realize benefits from the Augusta acquisition, purchase price adjustments from the consumer products division sale, competitive pricing, loss of significant customers, changes in preferences, industry consolidation, economic changes, increased regulation, manufacturing disruptions, changes in input costs, larger competitors, labor disruptions, reliance on third-party suppliers, cybersecurity risks, environmental liabilities (including PFAS), and ability to execute growth strategies[6][8] Part I. Financial Information This part presents the company's unaudited consolidated financial statements and management's discussion and analysis Item 1. Consolidated Financial Statements (Unaudited) This section presents Clearwater Paper Corporation's unaudited consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Total Assets | $1,640.7 | $1,679.2 | | Total Liabilities | $804.0 | $824.7 | | Total Stockholders' Equity | $836.7 | $854.6 | | Cash and Cash Equivalents | $46.7 | $79.6 | | Inventories, net | $283.9 | $258.0 | | Long-term debt | $328.5 | $281.6 | Consolidated Statements of Operations This section presents the company's revenues, expenses, and net income or loss over specific reporting periods | Metric (in millions, except per-share data) | Q2 2025 | Q2 2024 | | :---------------------------------------- | :------ | :------ | | Net sales | $391.8 | $344.4 | | Cost of sales | $348.8 | $346.4 | | Income (loss) from continuing operations | $9.8 | $(46.9) | | Net income (loss) | $2.7 | $(25.8) | | Net income (loss) per share - basic | $0.17 | $(1.55) | | Metric (in millions, except per-share data) | H1 2025 | H1 2024 | | :---------------------------------------- | :------ | :------ | | Net sales | $770.0 | $603.2 | | Cost of sales | $690.3 | $571.9 | | Income (loss) from continuing operations | $(2.3) | $(43.7) | | Net income (loss) | $(3.6) | $(8.6) | | Net income (loss) per share - basic | $(0.22) | $(0.52) | Consolidated Statements of Comprehensive Income (Loss) This section details the company's net income or loss and other comprehensive income or loss components | Metric (in millions) | Q2 2025 | Q2 2024 | | :------------------- | :------ | :------ | | Net income (loss) | $2.7 | $(25.8) | | Comprehensive income (loss) | $2.7 | $(25.8) | | Metric (in millions) | H1 2025 | H1 2024 | | :------------------- | :------ | :------ | | Net income (loss) | $(3.6) | $(8.6) | | Comprehensive income (loss) | $(3.5) | $(8.7) | Consolidated Statements of Cash Flows This section reports the cash generated and used by operating, investing, and financing activities | Metric (in millions) | H1 2025 | H1 2024 | | :------------------- | :------ | :------ | | Net cash flows provided by (used in) operating activities | $(26.7) | $80.3 | | Net cash flows used in investing activities | $(55.6) | $(744.8) | | Net cash flows provided by financing activities | $49.3 | $662.1 | | Decrease in cash and cash equivalents | $(33.0) | $(2.4) | | Cash and cash equivalents at end of period | $46.7 | $39.6 | Consolidated Statements of Stockholders' Equity This section details changes in the company's equity accounts, including retained earnings and treasury stock | Metric (in millions) | Dec 31, 2024 | June 30, 2025 | | :------------------- | :----------- | :------------ | | Total Stockholders' Equity | $854.6 | $836.7 | | Retained Earnings | $880.8 | $877.3 | | Treasury Stock (amount) | $(3.3) | $(12.7) | | Common Stock (shares in thousands) | 16,568 | 16,568 | - The company repurchased 148,100 shares of common stock for $4.2 million during the quarter ended June 30, 2025, and 380,000 shares for $10.9 million during the six months ended March 31, 2025[16][111] Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements Note 1. Description of Business and Basis of Presentation This note describes Clearwater Paper Corporation's business and the basis for its financial statement presentation - Clearwater Paper Corporation is a premier manufacturer and supplier of bleached paperboard, primarily serving independent converters in North America, and offers custom sheeting, slitting, and cutting services[18] - The company sold its tissue (consumer products) operations during 2024, and their results are now presented as discontinued operations in the Consolidated Statements of Operations[19] Note 2. Recently Issued Accounting Standards This note outlines recently issued accounting standards and their anticipated impact on the company's disclosures - ASU 2024-03 (Disaggregation of Income Statement Expenses) is effective for fiscal years beginning after December 15, 2026, requiring disaggregated disclosure of certain expenses[20] - ASU No. 2023-09 (Income Taxes—Improvements to Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, requiring enhanced disclosures for rate reconciliation and disaggregation of income taxes paid[21] Note 3. Business Acquisition This note details the acquisition of the Augusta paperboard manufacturing facility, including its purchase price allocation - On May 1, 2024, Clearwater Paper completed the acquisition of a paperboard manufacturing facility in Augusta, Georgia, for a final purchase price of $708.2 million[22][23] | Item (in millions) | Final Purchase Price Allocation | | :----------------- | :------------------------------ | | Purchase price | $708.2 | | Total assets acquired | $725.9 | | Total liabilities assumed | $(30.5) | | Net assets acquired | $695.3 | | Goodwill | $12.9 | | Metric (in millions) | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :------------------- | :-------------------------- | :----------------------------- | | Net sales | $650.1 | $1,271.4 | | Net loss | $(23.2) | $(21.9) | Note 4. Discontinued Operations This note provides financial details on the company's tissue operations, now classified as discontinued operations - In November 2024, the company sold its tissue operations, which are now classified as discontinued operations[25][26] | Metric (in millions) | Q2 2025 | Q2 2024 | | :------------------- | :------ | :------ | | Net sales | $— | $252.8 | | Income (loss) from discontinued operations, net of tax | $(0.9) | $15.7 | | Metric (in millions) | H1 2025 | H1 2024 | | :------------------- | :------ | :------ | | Net cash provided by (used in) operating activities | $(2.0) | $103.1 | | Net cash used in investing activities | $— | $(5.9) | Note 5. Fair Value Measurements This note explains the fair value measurements for financial instruments, including debt and short-term assets - Carrying amounts for cash, receivables, and payables approximate fair value due to their short-term maturity[28] | Debt Type (in millions) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | 2020 Notes, maturing 2028 | $260.7 | $258.9 | | ABL Credit Agreement | $47.0 | $— | | Total | $307.7 | $258.9 | Note 6. Receivables This note provides a breakdown of the company's various receivable types, including trade accounts and unbilled amounts | Receivable Type (in millions) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Trade accounts receivable | $148.2 | $167.5 | | Allowance for current expected credit losses | $(1.8) | $(1.6) | | Unbilled receivables | $4.2 | $5.3 | | Taxes receivable | $8.4 | $2.6 | | Other | $6.9 | $15.0 | | Total | $165.9 | $188.7 | Note 7. Inventories This note details the composition of the company's inventories, including raw materials, pulp, and finished products | Inventory Type (in millions) | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :---------------- | | Logs, chips and sawdust | $22.3 | $25.1 | | Pulp | $9.4 | $6.9 | | Paperboard products | $141.6 | $123.4 | | Materials and supplies | $110.6 | $102.5 | | Total | $283.9 | $258.0 | Note 8. Property, Plant and Equipment This note presents the company's property, plant, and equipment, net of accumulated depreciation and amortization | Asset Type (in millions) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Land and land improvements | $65.8 | $65.8 | | Buildings and improvements | $232.4 | $232.4 | | Machinery and equipment | $2,028.7 | $1,942.6 | | Construction in progress | $42.9 | $87.6 | | Total gross PPE | $2,369.8 | $2,328.4 | | Less accumulated depreciation and amortization | $(1,342.7) | $(1,305.4) | | Property, plant and equipment, net | $1,027.1 | $1,023.1 | Note 9. Accounts Payable and Accrued Liabilities This note details the company's accounts payable and accrued liabilities, including trade payables and compensation | Liability Type (in millions) | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :---------------- | | Trade payables | $162.9 | $164.6 | | Accrued compensation | $24.3 | $38.2 | | Operating lease liabilities | $11.8 | $11.1 | | Taxes payable | $— | $50.8 | | Other | $59.6 | $55.0 | | Total | $258.5 | $319.7 | - Included in accounts payable and accrued liabilities are $15.5 million and $25.8 million related to unpaid capital expenditures as of June 30, 2025, and December 31, 2024, respectively[32] Note 10. Income Taxes This note explains the company's income tax provision or benefit and the factors affecting its effective tax rate - For the six months ended June 30, 2025, the company recognized an income tax provision of $0.1 million on loss from continuing operations, compared to a benefit of $14.1 million in the same period of 2024[35] - The effective tax rate for H1 2025 varied from the U.S. federal statutory tax rate of 21.0% primarily due to state taxes, nondeductible compensation, and a change in the state valuation allowance[35] Note 11. Debt This note provides details on the company's debt instruments, including interest rates, principal amounts, and maturities | Debt Type (in millions) | Interest Rate (June 30, 2025) | Principal (June 30, 2025) | Total (June 30, 2025) | Principal (Dec 31, 2024) | Total (Dec 31, 2024) | | :---------------------- | :---------------------------- | :------------------------ | :-------------------- | :----------------------- | :------------------- | | 2020 Notes, maturing 2028 | 4.75% | $275.0 | $273.4 | $275.0 | $273.2 | | ABL Credit Agreement | 5.7% | $47.0 | $47.0 | $— | $— | | Finance leases | N/A | $8.7 | $8.7 | $9.1 | $9.1 | | Total debt | | $330.7 | $329.1 | $284.1 | $282.2 | - The PCA Credit Agreement (term revolver commitment of $264.6 million) matures on May 1, 2029, with no outstanding balance as of June 30, 2025[37] - The ABL Credit Agreement has a $375.0 million revolving loan commitment, maturing on November 7, 2027[39] Note 12. Other Operating Charges This note details various other operating charges, including acquisition-related costs, integration, and cost reduction plans | Charge Type (in millions) | Q2 2025 | Q2 2024 | | :------------------------ | :------ | :------ | | Acquisition related costs | $— | $10.1 | | Integration costs | $0.9 | $1.9 | | Cost reduction plan | $0.8 | $— | | Loss on sale or impairment associated with assets | $3.1 | $0.7 | | Directors' equity-based compensation expense | $0.9 | $2.0 | | Other | $1.5 | $— | | Total | $7.1 | $14.6 | - Total other operating charges, net, decreased from $14.6 million in Q2 2024 to $7.1 million in Q2 2025, primarily due to lower acquisition-related costs and a decrease in directors' equity-based compensation expense, partially offset by new cost reduction plan expenses and higher asset impairment losses[42][44] Note 13. Non-Operating Expense This note outlines non-operating expenses, primarily focusing on net interest expense and pension-related costs | Expense Type (in millions) | Q2 2025 | Q2 2024 | | :------------------------- | :------ | :------ | | Interest expense | $(3.9) | $(9.9) | | Amortization of debt issuance costs | $(0.6) | $(0.5) | | Interest income | $0.5 | $0.8 | | Interest expense, net | $(3.9) | $(9.6) | | Non-operating pension and other postretirement employee benefits | $(0.3) | $0.3 | | Total non-operating expense | $(4.2) | $(9.3) | - Total non-operating expense decreased from $(9.3) million in Q2 2024 to $(4.2) million in Q2 2025, primarily driven by a reduction in net interest expense[45] Note 14. Retirement Plans and Postretirement Benefits This note details the net periodic costs associated with the company's retirement plans and postretirement benefits | Component (in millions) | Q2 2025 | Q2 2024 | | :---------------------- | :------ | :------ | | Service cost | $0.8 | $0.6 | | Interest cost | $3.0 | $3.0 | | Expected return on plan assets | $(3.3) | $(3.9) | | Amortization of actuarial loss | $0.2 | $— | | Net periodic cost | $0.6 | $(0.3) | | Component (in millions) | Q2 2025 | Q2 2024 | | :---------------------- | :------ | :------ | | Service cost | $— | $0.1 | | Interest cost | $0.6 | $0.7 | | Amortization of actuarial gain | $(0.1) | $(0.1) | | Net periodic cost | $0.5 | $0.6 | Note 15. Accumulated Other Comprehensive Loss This note presents the components of accumulated other comprehensive loss, including pension and postretirement adjustments | Component (in millions) | Dec 31, 2024 | June 30, 2025 | | :---------------------- | :----------- | :------------ | | Pension Plan Adjustments | $(47.8) | $(47.5) | | Other Post Retirement Employee Benefit Plan Adjustments | $13.4 | $13.2 | | Total | $(34.5) | $(34.4) | Note 16. Stockholders' Equity This note details changes in stockholders' equity, including stock-based compensation and restricted stock unit awards | Metric (in millions) | Q2 2025 | Q2 2024 | | :------------------- | :------ | :------ | | Total stock-based compensation expense | $2.5 | $4.7 | | Income tax provision related to stock-based compensation | $0.5 | $1.0 | - As of June 30, 2025, there was $12.3 million of total unrecognized compensation costs related to outstanding restricted stock unit awards[49] - During the six months ended June 30, 2025, the company granted 196,128 time-vesting restricted stock units at an average fair value of $28.35 per share and 190,914 performance-vesting restricted stock units at an average fair value of $31.02 per share[50] Note 17. Earnings (Loss) per Share This note provides the calculation of basic and diluted earnings per share, including weighted-average shares outstanding | Metric (in thousands) | Q2 2025 | Q2 2024 | | :-------------------- | :------ | :------ | | Basic weighted-average common shares outstanding | 16,220 | 16,661 | | Diluted weighted-average common shares outstanding | 16,241 | 16,661 | - Shares excluded from diluted EPS computation were 0.3 million and 0.4 million for Q2 and H1 2025, respectively, and 0.4 million for Q2 and H1 2024, due to being antidilutive or not meeting performance conditions[53] Note 18. Cost Reduction Plan This note outlines the company's cost reduction plan, including expected severance costs and incurred expenses - In early 2025, the company announced a cost reduction plan following the sale of its tissue operations, expecting $5 million to $7 million in employee severance costs by the end of 2025[54] - During Q2 and H1 2025, severance expenses of $1 million and $5.1 million, respectively, were incurred under this plan[54] | Item (in millions) | Amount | | :----------------- | :----- | | Balance at December 31, 2024 | $— | | Employee severance charges | $5.1 | | Cost paid or otherwise settled | $(4.5) | | Balance at June 30, 2025 | $0.5 | Note 19. Segment Disclosure This note clarifies the company's single operating segment structure and provides net sales by product line - The company operates as a single operating segment, with the Chief Operating Decision Maker (CODM) evaluating performance and allocating resources on a consolidated basis[56] | Product Line (in millions) | Q2 2025 | Q2 2024 | | :------------------------- | :------ | :------ | | Food service | $166.1 | $134.7 | | Folding carton | $147.6 | $147.6 | | Sheeting and distribution | $39.9 | $41.2 | | Pulp and other | $38.2 | $20.9 | | Total net sales | $391.8 | $344.4 | | Expense Type (in millions) | Q2 2025 | Q2 2024 | | :------------------------- | :------ | :------ | | Input cost | $174.5 | $145.9 | | Labor and overhead | $128.0 | $134.7 | | Supply chain costs | $39.0 | $35.7 | | Selling, general and administrative expenses | $24.4 | $29.2 | | Depreciation and amortization | $23.5 | $17.2 | | Interest expense, net | $3.9 | $9.6 | | Non-significant expenses | $(7.0) | $28.5 | | Income tax provision (benefit) | $1.9 | $(14.6) | | Income (loss) from continuing operations | $3.6 | $(41.6) | Note 20. Insurance Recovery This note details insurance proceeds received for a natural gas disruption at the Lewiston facility in Q1 2024 - During Q1 2024, the Lewiston, Idaho facility experienced a natural gas disruption[60] - Of the proceeds, $0.9 million was allocated to discontinued operations and $9.3 million to continuing operations, recorded within 'Cost of sales'[60] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, critical accounting policies, non-GAAP measures, operating results, outlook, and liquidity Critical Accounting Policies and Estimates This section confirms no material changes to critical accounting policies and estimates from the prior annual report - The preparation of financial statements requires management to make subjective judgments and estimates[62][63] Non-GAAP Measures This section defines and reconciles non-GAAP financial measures, specifically Adjusted EBITDA from continuing operations - The company uses Adjusted EBITDA from continuing operations as a non-GAAP financial measure to evaluate performance, believing it is useful for investors to compare with other industry companies[64][65] - Adjusted EBITDA from continuing operations excludes interest expense, income tax expense, depreciation and amortization, and other non-core operating charges, and may not be comparable to similarly titled measures reported by other companies[64][65] | Metric (in millions) | Q2 2025 | Q2 2024 | | :------------------- | :------ | :------ | | Net income (loss) | $2.7 | $(25.8) | | Income (loss) from continuing operations | $3.6 | $(41.6) | | Adjusted EBITDA from continuing operations | $39.9 | $(8.6) | | Metric (in millions) | H1 2025 | H1 2024 | | :------------------- | :------ | :------ | | Net income (loss) | $(3.6) | $(8.6) | | Income (loss) from continuing operations | $(2.3) | $(43.7) | | Adjusted EBITDA from continuing operations | $69.6 | $5.6 | Operating Results from Continuing Operations This section analyzes the company's net sales, cost of sales, gross margin, and other operating expenses from ongoing activities | Metric (in millions) | Q2 2025 | Q2 2024 | % Change | | :------------------- | :------ | :------ | :------- | | Net sales | $391.8 | $344.4 | 14% | | Cost of sales | $348.8 | $346.4 | 1% | | Gross margin | $43.0 | $(2.0) | nm | | Income (loss) from continuing operations | $9.8 | $(46.9) | nm | | Adjusted EBITDA from continuing operations | $39.9 | $(8.6) | nm | | Metric (in millions) | H1 2025 | H1 2024 | % Change | | :------------------- | :------ | :------ | :------- | | Net sales | $770.0 | $603.2 | 28% | | Cost of sales | $690.3 | $571.9 | 21% | | Gross margin | $79.6 | $31.4 | 154% | | Income (loss) from continuing operations | $5.8 | $(47.6) | nm | | Adjusted EBITDA from continuing operations | $69.6 | $5.6 | nm | Net Sales This section analyzes the company's revenue performance, including volume and pricing trends - Net sales increased by 14% for Q2 2025 and 28% for H1 2025 compared to the prior year periods, primarily driven by higher sales volume from the Augusta operations, partially offset by market-driven price decreases and changes in product mix[70] | Metric | Q2 2025 | Q2 2024 | % Change | | :----- | :------ | :------ | :------- | | Paperboard shipments (short tons) | 304,713 | 272,585 | 11.8% | | Paperboard sales price (per short ton) | $1,182 | $1,216 | (2.8)% | Cost of Sales This section details the direct costs associated with producing goods sold, including input, labor, and supply chain expenses - Cost of sales increased 1% for Q2 2025 and 21% for H1 2025, primarily due to the inclusion of Augusta operations and timing of planned major maintenance, partially offset by higher inventory build and cost reduction plan implementation[73][74][75] | Component (in millions) | Q2 2025 | Q2 2024 | % Change | | :---------------------- | :------ | :------ | :------- | | Input cost | $174.5 | $145.9 | 19.6% | | Labor and overhead | $128.0 | $134.7 | (4.9)% | | Supply chain costs | $39.0 | $35.7 | 9.4% | | Depreciation and amortization | $21.8 | $16.1 | 35.2% | | Total Cost of Sales | $348.8 | $346.4 | 0.7% | - Input costs increased due to higher sales volume and higher per-ton costs for energy and chemicals, partially offset by lower fiber costs[74] Gross Margin This section discusses the company's profitability after accounting for the cost of goods sold - Gross profit increased for both Q2 and H1 2025 compared to the same periods in 2024, driven by improved operating performance, reduced costs from major maintenance timing, and planned cost reduction activities, despite lower sales prices[76] Selling, General and Administrative Expenses This section analyzes non-production operating expenses, including sales, marketing, and administrative costs - SG&A expenses decreased 14% for Q2 2025 and 6% for H1 2025, primarily due to planned cost reduction efforts[77][78] Other Operating Charges This section details various non-recurring or specific operating charges impacting the company's financial results - Refer to Note 12 for detailed information on other operating charges[79] Overall Income from Continuing Operations and Adjusted EBITDA This section summarizes the company's operating income and Adjusted EBITDA from continuing operations - Operating income and Adjusted EBITDA from continuing operations increased for both Q2 and H1 2025, attributed to major maintenance timing, lower input costs, and cost reduction activities, partially offset by lower sales pricing[80] - Operating income was also impacted by integration costs from the Augusta acquisition and severance/other costs from the cost reduction plan[80] Potential Impairments This section discusses the periodic review of assets for disposition or reorganization, which may lead to impairment charges - The company periodically reviews assets for disposition or reorganization, which may lead to impairment charges if estimated net sales proceeds are less than previous estimates of undiscounted future net cash flows[81] Outlook This section provides the company's expectations for future performance, including sales volumes, costs, and regulatory impacts - For Q3 2025, sales volumes are expected to be flat, energy costs are projected to decrease seasonally, and additional benefits from fixed cost reduction efforts are anticipated[82] - New U.S. tariffs (10% universal, 35% for Canada, 30% for Mexico effective August 1, 2025) are being evaluated, but are not currently expected to have a material impact on fiscal 2025 financial results, excluding potential retaliatory tariffs[83] - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, makes permanent 100% bonus depreciation, domestic research cost expensing, and business interest expense limitation[84] Augusta Acquisition - Representation and Warranty Insurance Claim This section details the Augusta acquisition and the company's submission of representation and warranty insurance claims - The company acquired the Augusta, Georgia paperboard manufacturing facility on May 1, 2024, for approximately $710.6 million[85] - Clearwater Paper obtained representation and warranty insurance ($105 million policy limit) for the Augusta acquisition and has submitted claims in July 2025 for alleged breaches of representations and warranties by the seller, Graphic Packaging International, LLC[86] - No gains or receivables related to this claim have been recognized as of June 30, 2025, and there is no assurance of recovery[86] Liquidity and Capital Resources This section analyzes the company's ability to meet short-term and long-term financial obligations and fund operations - Principal liquidity sources include existing cash, cash from operations, and credit facilities[88] - Principal uses of liquidity are operating costs, debt servicing, and capital expenditures, with potential for debt/share repurchases or asset/business acquisitions[89] Operating Activities This section details cash flows generated or used by the company's primary business operations - Net cash flow used in operating activities for H1 2025 was $26.7 million, a decrease from $80.3 million provided in H1 2024[90] Investing Activities This section outlines cash flows related to the acquisition and disposal of long-term assets and investments - Net cash flows used in investing activities for H1 2025 were $55.6 million, significantly lower than $744.8 million in H1 2024, which included the Augusta acquisition[91] - Cash paid for capital expenditures is expected to be approximately $80 million to $90 million for 2025[92] Financing Activities This section describes cash flows from debt, equity, and dividend transactions affecting the company's capital structure - Net cash provided by financing activities for H1 2025 was $49.3 million, including $65.0 million in ABL borrowings, $18.3 million in debt repayments, $15.1 million for stock repurchases, and $2.3 million for stock-based compensation tax withholdings[93] - In H1 2024, net cash provided by financing activities was $662.1 million, primarily from $723.5 million in long-term debt issuance for the Augusta acquisition, offset by debt repayments and stock repurchases[94] ABL Credit Agreement This section details the company's Asset-Based Lending credit agreement, including commitments, utilization, and covenants - The ABL Credit Agreement provides a $375 million revolving loan commitment, maturing November 7, 2027[95] - Interest rates on ABL loans are based on SOFR or Alternative Base Rate plus an applicable margin (1.25%-1.75% for SOFR, 0.25%-0.75% for ABR), plus a commitment fee on unused availability (0.25%-0.375%)[96] - The ABL Credit Agreement includes a financial covenant requiring a consolidated fixed charge coverage ratio of not less than 1.10x to 1.00x, applicable under specific conditions (event of default or low availability)[97] - As of June 30, 2025, the company was in compliance with ABL covenants and expects to remain so, but acknowledges risks if financial conditions deteriorate[98] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no significant developments regarding market risk exposure during the quarter ended June 30, 2025 - No significant developments regarding market risk exposure occurred during the quarter ended June 30, 2025[100] Item 4. Controls and Procedures This section confirms effective disclosure controls and procedures, noting the integration of Augusta operations' financial controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that material information is recorded, processed, summarized, and reported timely[101] - Financial controls for the Augusta Pulp and Paperboard operations were integrated as of May 1, 2025, following the expiration of a one-year exemption from Section 404 requirements[103] - Except for the Augusta acquisition integration, there have been no other material changes in internal control over financial reporting during Q2 2025[103] Part II. Other Information This part provides additional information on legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings This section discloses ongoing legal proceedings, including an environmental lawsuit, which the company intends to vigorously defend - The company is a defendant in an environmental lawsuit filed February 5, 2025, in Georgia, alleging PFAS contamination from its Augusta mill (acquired May 2024)[105][107] - The lawsuit seeks monetary damages and equitable/injunctive relief related to PFAS in the plaintiff's source water supply[106] - The company believes it has meritorious defenses and intends to vigorously defend the matter, not expecting a material adverse effect on its financial condition from current proceedings in aggregate[104][107] Item 1A. Risk Factors This section confirms no material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K[108] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase program and shares repurchased during the second quarter of 2025 - The Board of Directors approved a new stock repurchase program on October 31, 2024, authorizing up to $100 million of common stock repurchases, with no expiration date[108][109] | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | | :------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------------------- | | April 1, 2025 to April 30, 2025 | — | $— | $85.8 | | May 1, 2025 to May 31, 2025 | 48,200 | $29.39 | $84.4 | | June 1, 2025 to June 30, 2025 | 99,900 | $28.35 | $81.6 | | Total | 148,100 | $28.69 | | Item 5. Other Information This section confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by officers or directors - No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[113] Item 6. Exhibits This section lists the exhibits filed, including CEO/CFO certifications, stock incentive plan amendments, and XBRL documents - Exhibits include certifications (CEO/CFO), an amendment to the 2017 Stock Incentive Plan, and XBRL documents[114] Signatures This section contains the signatures of the President, CEO, and CFO, certifying the report on July 29, 2025 - The report was signed by Arsen S. Kitch (President, CEO, and Director) and Sherri J. Baker (SVP, CFO) on July 29, 2025[119]