Clearwater Paper(US:CLW)2025-10-28 20:10Financial Performance - Net sales increased by 1% to $399.0 million for the quarter ended September 30, 2025, and by 17% to $1,169.0 million for the nine months ended September 30, 2025, driven by higher sales volume despite market-driven price decreases [76]. - Adjusted EBITDA from continuing operations decreased by 15% to $17.8 million for the quarter and increased by 229% to $87.4 million for the nine months compared to the same periods in 2024 [75]. - Gross margin decreased to 5% for the quarter ended September 30, 2025, from 8% in the same quarter of 2024, while gross margin for the nine months increased to 8% from 6% [75]. - Cost of sales increased by 5% to $380.3 million for the quarter and by 14% to $1,070.6 million for the nine months ended September 30, 2025, primarily due to the inclusion of Augusta operations [80]. - Selling, general and administrative expenses decreased by 22% for the quarter and by 11% for the nine months ended September 30, 2025, attributed to planned cost reduction efforts [83][84]. Market Outlook - The company expects sales volumes to decline in the fourth quarter due to seasonality, while anticipating increased energy costs [90]. - The paperboard sales price decreased by 2.7% to $1,160 per short ton for the quarter and by 3.8% to $1,176 per short ton for the nine months [77]. Acquisitions and Agreements - The company acquired a paperboard manufacturing facility in Augusta, Georgia, for a total purchase price of approximately $710.6 million, effective May 1, 2024 [94][95]. - The company is negotiating a new union agreement for the Lewiston, Idaho facility, which may incur retroactive wage increases upon ratification [91]. - The company submitted claims for losses related to alleged breaches of representations and warranties from the Augusta acquisition, with a policy limit of $105 million for representation and warranty insurance [96]. Regulatory and Tax Impacts - In 2025, the U.S. implemented a universal baseline tariff of 10% on imports from nearly all trading partners, with an additional 25% tariff on certain imports from Canada and Mexico, but the company does not expect a significant impact on fiscal 2025 results [92]. - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, making permanent key elements of the Tax Cuts and Jobs Act, but it did not materially impact the company's consolidated financial statements for Q3 2025 [93]. Cash Flow and Financing - Net cash flow used in operating activities for the nine months ended September 30, 2025, was $7.3 million, a decrease from $96.5 million in the same period of 2024, primarily due to lower operating performance following the divestiture of tissue operations [99]. - Net cash flows provided by investing activities for the nine months ended September 30, 2025, were $86.0 million, down from $791.8 million in the same period of the prior year [100]. - The company expects cash paid for capital expenditures in 2025 to be approximately $85 million to $90 million [101]. - During the nine months ended September 30, 2025, net cash provided by financing activities was $33.5 million, with $72.0 million borrowed and $18.0 million repaid on the ABL [102]. - As of September 30, 2025, the company had $213.9 million availability under the ABL Credit Agreement, utilizing $57.7 million of that amount [104][107]. - The company was in compliance with the covenants associated with the ABL Credit Agreement as of September 30, 2025, and expects to remain compliant based on current financial projections [107]. Impairments - Goodwill impairment of $48.0 million was recorded for both the quarter and nine months ended September 30, 2025 [75]. Production Metrics - Paperboard shipments increased by 3.1% to 324,198 short tons for the quarter and by 18.6% to 918,399 short tons for the nine months ended September 30, 2025 [77].