Clearwater Paper Corp
For the period ended Mar 31, 2025. Filed Apr 29, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 29, 2025
CLW$13.27-4.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-04.
0001504337-24-000053
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-29.
0001504337-25-000017
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 60 previous paragraphs and 41 current paragraphs.
21 unchanged; 9 reworded; 11 added; 29 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
NET SALES
Current report
Costs included in our cost of sales include input costs (principally raw materials and energy), labor and overhead, supply chain costs (principally freight and outside warehousing). The table below provides the details of our cost of sales for the quarters ended March 31, 2025 and 2024.
Current report
Cost of sales increased 51% for the quarter ended March 31, 2025 compared to the quarter ended March 31, 2024 due primarily to the inclusion of the Augusta operations. Input costs increased due to higher sales volume with reductions on a per ton basis across fiber, energy and chemicals due to the lack of weather related expenses which occurred during the first quarter of 2024, partially offset by inflation. Our labor and overhead increased due to the inclusion of the Augusta operations offset by lack of weather related expenses which occurred during the first quarter of 2024 and implementation of our cost reduction plan. Depreciation increased due to inclusion of Augusta operations. Supply chain costs increased due to higher volumes offset by lower freight costs per ton due to deflation.
Current report
Gross profit increased 10% for the quarter ended March 31, 2025 compared to the quarter ended March 31, 2024 due to improved operating performance, lack of a significant weather event and reduced costs due to planned cost reduction activities.
Current report
Selling, general and administrative expenses increased 3% for the quarter ended March 31, 2025 compared to the quarter ended March 31, 2024 primarily as a result of additional sales costs associated with the Augusta acquisition offset by our planned cost reduction efforts.
Current report
Operating income from continuing operations and Adjusted EBITDA from continuing operations increased for the quarter ended March 31, 2025 as compared to the quarter ended March 31, 2024 due to the lack of a significant weather event, deflation on our input costs and our planned cost reduction activities. Additionally, impacting operating income from continuing operations were the integration cost associated with the acquisition of the Augusta facility and severance and other costs associated with our planned cost reduction activities.
Current report
OUTLOOK
Current report
Looking forward to the second quarter of fiscal 2025, we expect sales volumes to be higher than in the first quarter. We expect energy costs to decrease in the second quarter due to seasonal trends and expect additional benefits from our fixed cost reduction efforts. In addition, we expect an increase in planned maintenance expense due to our annual outage at our Cypress Bend Arkansas mill.
Current report
On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S. imports. The recently announced tariffs exempt imports that are compliant with the United States-Mexico-Canada trading agreement (USMCA), which includes certain of our raw materials (a portion of our chemicals, pulp and energy) imported from Canada. We are evaluating our other expenditures to assess the impact of the recent tariff announcements, but do not currently expect them to have a significant impact on our fiscal 2025 financial results Given the timing and uncertainty of tariffs, including potential retaliatory tariffs, we have not included any impact from potential tariffs in our outlook above.
Current report
During thequarter ended March 31, 2025, net cash used in financing activities was$4.4 million. We used $10.9 million to repurchase stock and $2.3 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans. Additionally, as of March 31, 2025, we collected $8.9 million in cash related to the transition services agreement which will be remitted during the second quarter of 2025.
Current report
Credit Agreements
Removed paragraphs (29)
Previous report
In connection with the anticipated sale of the consumer products division, we have reported the related assets and liabilities, and the financial results as discontinued operations in our Consolidated Financial Statements for all periods presented. See "Note 4, Discontinued Operations" of the Notes to the Consolidated Financial Statements for additional information.
Previous report
OVERVIEW
Previous report
Executive Summary
Previous report
We recorded net sales of $393.3 million for the quarter ended September 30, 2024 compared to $278.9 million for the quarter ended September 30, 2023. We recorded a net loss from continuing operations for the quarter ended September 30, 2024 of $10.7 million, or $0.64 per diluted share, compared to income from continuing operations of $14.9 million or $0.88 per diluted share for the quarter ended September 30, 2023. We recorded Adjusted EBITDA from continuing operations for the quarter ended September 30, 2024 of $20.2 million compared to $32.6 million for the quarter ended September 30, 2023.
Previous report
We recorded an increase of 15% in net sales to $1.0 billion for the nine months ended September 30, 2024 compared to $867.4 million for the nine months ended September 30, 2023. We recorded loss from continuing operations for the nine months ended September 30, 2024 of $54.4 million, or $3.27 per diluted share, compared to income from continuing operations of $51.4 million or $3.01 per diluted share for the nine months ended September 30, 2023. We recorded Adjusted EBITDA from continuing operations for the nine months ended September 30, 2024 of $25.9 million compared to $107.1 million for the nine months ended September 30, 2023.
Previous report
Business Acquisitions
Previous report
Acquisitions
Previous report
We apply the principles provided in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations, to determine whether an acquisition involves an asset or a business. In determining whether an acquisition should be accounted for as a business combination or asset acquisition, we first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is accounted for as an asset acquisition. If this is not the case, we then further evaluate whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the transaction is accounted for as a business combination.
Previous report
We account for business combinations using the acquisition method of accounting which requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the estimated net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually. We measure and recognize asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets. Goodwill is not recognized in an asset acquisition with any consideration in excess of net assets acquired allocated to acquired assets on a relative estimated fair value basis. Transaction costs are expensed in a business combination and transaction costs directly attributable to the acquisition are considered a component of the cost of the acquisition in an asset acquisition. See Note 3, "Business Acquisition," in the Notes to Consolidated Financial Statements included in Item 1 of this report for additional information.
Previous report
SALES
Previous report
Cost of sales increased 59% for the quarter ended September 30, 2024 compared to the same period in the prior year and 33% for the nine months ended September 30, 2024 compared to the same period in the prior year due the inclusion of the Augusta operations volume. During the third quarter of 2024, we continued to see higher fiber, chemical and energy costs associated with impacts of our planned major maintenance outage at our Lewiston, Idaho facility which occurred during the second quarter of 2024. For the nine months ended September 30, 2024 compared to the same period in the prior year, cost of sales increased due to the inclusion of the Augusta operations volume, although with lower input costs for fiber, chemicals and energy due to reduced inflation.
Previous report
Gross margin declined 41% for the quarter ended September 30, 2024 compared to the same period in the prior year and 63% for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to previously announced price decreases and higher costs due to our planned major maintenance outage at our Lewiston, Idaho facility offset by lower input costs due to reduced inflation.
Previous report
Selling, general and administrative expenses increased 12% the quarter ended September 30, 2024 compared to the same period in the prior year and 2% for the nine months ended September 30, 2024 compared to the same period in the prior year. The increase between periods is primarily related to higher wages and benefits related to additional sales costs associated with the Augusta acquisition partially offset by lower incentives due to lower operational performance.
Previous report
OVERALL
Previous report
OPERATING RESULTS FROM DISCONTINUED OPERATIONS
Previous report
Retail sales volumes in our consumer products division increased for the quarter and nine months ended September 30, 2024 compared to the same period in the prior year due to the increased demand for private label versus branded products. Retail sales prices decreased in our consumer products division for the quarter and nine months ended September 30, 2024 compared to the same period in the prior year due to changes in our product mix and reductions resulting from contract pricing indexed to certain cost inputs.
Previous report
Operating income and Adjusted EBITDA increased for the quarter ended September 30, 2024 compared to the same period in the prior year predominately due to higher volumes offset by lower sales prices and higher input costs. The increase in operating income and Adjusted EBITDA for the nine months ended September 30, 2024 compared to the same period in the prior year was driven by lower input costs, primarily in pulp, freight and energy costs.
Previous report
During thenine months ended September 30, 2024, net cash provided by financing activities was$688.9 million. We received net proceeds of $753.5 million from the issuance of long-term debt related to the business acquisition and to cover short term cash requirements. We used $4.9 million for debt issuance costs, $6.0 million to repurchase stock, and repaid debt of $50.9 million.
Previous report
Term Credit Agreement and ABL Credit Agreement
Previous report
The Company is a party to a Credit Agreement, dated October 27, 2023, with AgWest Farm Credit, PCA, as administrative agent, and several lenders, as amended and restated on May 1, 2024 (as so amended and restated, the “Term Credit Agreement”) that consists of the following facilities: (i) a term revolver loan commitment in the amount of $270 million (the “Term Revolver Facility”), $150 million of which was borrowed on October 27, 2023 and $120 million of which was borrowed on May 1, 2024, (ii) a term loan commitment in the amount of $400 million (the “Farm Credit Term Loan Facility”), which was fully drawn on May 1, 2024 and (iii) a term loan commitment in the amount of $90 million (the “Commercial Bank Term Loan Facility” and together with the Farm Credit Term Loan Facility, collectively, the “Term Loan Facilities”), which was fully drawn on May 1, 2024. We may also increase commitments under the Term Revolver Facility in an aggregate principal amount of up to $60 million, subject to obtaining commitments from any participating lender and certain other conditions.
Previous report
The lending commitment under the Term Revolver Facility is subject to an annual reduction of 2% of the commitments then in effect. The Term Credit Agreement matures and the lending obligations under the Term Revolver Facility terminate on the earlier of (i) in the case of the Term Revolver Facility and the Commercial Bank Term Loan Facility, May 1, 2029, (ii) in the case of the Farm Credit Term Loan Facility, May 1, 2031 and (iii) and the date that is 91 days prior to the maturity of the Company’s 4.750% senior notes due 2028 (the “2020 Notes”), unless during such period of time the outstanding principal amount of the 2020 Notes plus $50 million is less than the sum of our available borrowing liquidity and unrestricted cash.
Previous report
We may, at our option, prepay and reborrow any borrowings under the Term Revolver Facility, in whole or in part, at any time and from time to time without premium or penalty (other than prepayments of the initial advance on the Term Revolver Facility of $150 million to the extent made prior to November 1, 2024 and in certain other circumstances). In addition, we must make mandatory prepayments of principal under the Term Revolver Facility upon the occurrence of certain asset sales. We are required to repay a percentage of the aggregate outstanding principal amount of the borrowings under the Term Loan Facilities in quarterly installments on the last day of each March, June, September and December, commencing on the first day of the third full fiscal quarter after May 1, 2024. We may prepay any borrowings under the Term Loan Facilities, in whole or in part, at any time and from time to time without premium or penalty. In addition, we must make mandatory prepayments of principal under the Term Loan Facilities upon the occurrence of certain specified events, including certain asset sales, debt issuances not permitted under the Term Credit Agreement, and of 50% of our quarterly excess cash flows, less any voluntary prepayments of the Term Loan Facilities.
Previous report
Under the Term Revolver Facility and the Farm Credit Term Loan Facility, loans generally may bear interest based on the secured overnight financing rate (SOFR) or the agent’s fixed rate, as applicable, plus, in each case, an applicable margin that (i) prior to repayment in full of the Term Loan Facilities, may vary between 2.25% per annum and 4.75% per annum based on our consolidated leverage ratio (as defined under and calculated in accordance with the Term Credit Agreement) and (ii) with respect to the Term Revolver Facility and after payment in full of the Term Loan Facilities, is 3.65% per annum. In the case of the $150 million borrowing disbursed under the Term Revolver Facility on October 27, 2023, the Company previously selected a one-year fixed rate loan bearing interest at an all-in interest rate of 9.13%. Under the Commercial Bank Term Loan Facility, loans generally may bear interest based on SOFR or a base rate, as applicable, plus, in each case, an applicable margin that (x) in the case of SOFR loans, may vary between 1.75% per annum and 4.25% per annum based on the Company’s consolidated leverage ratio and (y) in the case of base rate loans, may vary between 0.75% per annum and 3.25% per annum, in each case, based on the Company’s consolidated leverage ratio.
Previous report
Until our consolidated leverage ratio is less than or equal to 3.25 to 1.00 and our debt to capitalization ratio is less than or equal to 60%, in each case, for four consecutive fiscal quarters (or as of the end of a quarter, if earlier, if a disposition is consummated which results in indebtedness being reduced by at least $200 million) we must maintain the following financial covenants under the Term Credit Agreement: (i) a maximum consolidated leverage ratio not greater than (x) commencing with the first fiscal quarter ending at least fifteen (15) months after May 1, 2024 and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024, 4.50 to 1.00, and (y) commencing with the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024 and thereafter, 4.00 to 1.00; and (ii) a minimum current ratio (as defined under and calculated in accordance with Term Credit Agreement) not less than 1.25 to 1.00. In addition, until the Commercial Bank Term Loan Facility is paid in full, we must maintain a maximum debt to capitalization ratio no greater than (1) commencing with the first fiscal quarter ending after May 1, 2024 and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024, 70%, (2) commencing with the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024 and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least forty-eight (48) months after May 1, 2024, 65%, and (3) commencing with the first fiscal quarter ending at least forty-eight (48) months after May 1, 2024 and thereafter, 60%.
Previous report
The Company is also party to a Credit Agreement, dated July 26, 2019, with JPMorgan Chase Bank, N.A., as administrative agent and several lenders, as amended on May 1, 2024 (as so amended, the “ABL Credit Agreement”) that includes a $375 million revolving loan commitment, subject to borrowing base limitations. The revolving commitments terminate, and the ABL Credit Agreement matures, on November 7, 2027. Borrowings under the ABL Credit Agreement are subject to mandatory prepayment in certain circumstances. We may also increase commitments under the ABL Credit Agreement in an aggregate principal amount of up to $100 million, subject to obtaining commitments from any participating lenders and certain other conditions. We may, at our option, prepay and reborrow any borrowings under the ABL Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances).
Previous report
Under the ABL Credit Agreement, loans may bear interest based on SOFR or an annual base rate, as applicable, plus, in each case, an applicable margin that is based on availability, as calculated under the ABL Credit Agreement that may vary from 1.25% per annum to 1.75% per annum in the case of SOFR loans and 0.25% per annum to 0.75% per annum in the case of annual base rate loans. In addition, a commitment fee based on unused availability is also payable which may vary from 0.25% per annum to 0.375% per annum.
Previous report
The ABL Credit Agreement also contains a financial covenant, which requires us to maintain a consolidated fixed charge coverage ratio of not less than 1.10x to 1.00x, provided that the financial covenant under the ABL Credit Agreement is only applicable during an event of default or if availability, as calculated under the ABL Credit Agreement, is at any time less than or equal to the greater of (i) 10.0% of the lesser of the borrowing base and the maximum $375 million of current revolving loan commitments and (ii) $25 million.
Previous report
The obligations under the Term Credit Agreement and the ABL Credit Agreement are secured by liens on substantially all of our personal property assets and each of our domestic subsidiaries that are guarantors.
Previous report
Both the Term Credit Agreement and the ABL Credit Agreement contain customary representations, warranties, affirmative and negative covenants, and events of default (including with respect to a change of control).
Reworded paragraphs (9)
Previous wording
For a discussion of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes to the critical accounting policies and estimates disclosed in our Annual Report except as discussed below.
Current wording
For a discussion of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes to the critical accounting policies and estimates disclosed in our Annual Report.
Previous wording
The below financial information reflects reclassifications from previously reported information based upon discontinued operations. Historically, the Company has shown certain intercompany pulp costs as offsets as they represent intercompany transactions between the consumer products division and the pulp and paperboard manufacturing operations. Based upon discontinued operations treatment, such transfers of pulp and other inputs have been recast to Net Sales on the condensed consolidated statement of operations.
Current wording
The below financial information reflects reclassifications from previously reported information based upon discontinued operations. Historically, the Company has shown certain intercompany pulp costs as offsets as they represent intercompany transactions between our prior consumer products division and the pulp and paperboard manufacturing operations. Based upon discontinued operations treatment of the consumer products division, such transfers of pulp and other inputs have been recast to Net Sales on the condensed consolidated statement of operations.
Previous wording
Sales increased 41% for the quarter ended September 30, 2024 compared to the same period in the prior year and 15% for the nine months ended September 30, 2024 compared to the same period in the prior year due the inclusion of the Augusta operations (see Note 3 Business Acquisition in our Notes to our Consolidated Financial Statements). This increase was driven by higher sales volume offset by decreases in sales prices due to previously announced price decreases and changes in our product mix.
Current wording
Net sales increased 46% for the quarter ended March 31, 2025 compared to quarter ended March 31, 2024. This increase was driven by higher sales volume due to the Augusta operations offset by market driven price decreases and changes in our product mix.
Previous wording
Operating income from continuing operations and Adjusted EBITDA from continuing operations decreased for the quarter and nine months ended September 30, 2024 as compared to the same periods in the prior year due to lower sales prices, the impacts of our planned major maintenance outage at our Lewiston, Idaho facility, higher sales and marketing costs and acquisition and integration costs associated with the Augusta acquisition, partially offset by lower input costs due to reduced inflation.
Current wording
OVERALL INCOME FROM CONTINUING OPERATIONS AND ADJUSTED EBITDA
Previous wording
Net cash flows provided by operating activities for the nine months ended September 30, 2024 were $96.5 million compared to net cash flows provided by operating activities of $125.0 million for the nine months ended September 30, 2023. This decrease was driven by lower operating performance and higher interest payments related to the debt incurred associated with the Augusta acquisition. Accounts receivable and accounts payable agings as of September 30, 2024 have remained relatively consistent with balances as of December 31, 2023.
Current wording
Net cash flows provided by operating activities for the quarter ended March 31, 2025 were $1.5 million compared to net cash flows provided by operating activities of $59.2 million for the quarter ended March 31, 2024. This decrease was driven by lower operating performance due to the divestiture of our tissue operations which are included in discontinued operations in the first quarter of 2024 and reduced cash flows from remaining operations due to market weakness and lower pricing environment. Accounts receivable and accounts payable agings as of March 31, 2025 have remained relatively consistent with balances as of December 31, 2024.
Previous wording
Net cash flows used in investing activities for nine months ended September 30, 2024 were $791.8 million compared to $48.5 million in the same period of the prior year. This amount includes $708.2 million associated with the acquisition of a paperboard manufacturing facility and associated business, located in Augusta, Georgia. Included in "Accounts payable and accrued liabilities" on our Consolidated Balance Sheets was $25.5 million and $16.5 million related to unpaid capital expenditures at September 30, 2024 and 2023.
Current wording
Net cash flows used in investing activities for quarter ended March 31, 2025 were $32.7 million compared to $18.5 million in the same period of the prior year related to capital expenditures. Included in "Accounts payable and accrued liabilities" on our Consolidated Balance Sheets was $16.6 million and $10.3 million related to unpaid capital expenditures at March 31, 2025 and 2024.
Previous wording
During 2024, we expect cash paid for capital expenditures to be approximately $100 million to $120 million.
Current wording
During 2025, we expect cash paid for capital expenditures to be approximately $80 million to $90 million.
Previous wording
During thenine months ended September 30, 2023, net cash used for financing activities was$20.7 million. We used $15.1 million to repurchase stock though our share repurchase program and $4.7 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans. Additionally, we borrowed and repaid $12.0 million on our ABL Credit Agreement to cover short term cash requirements.
Current wording
During thequarter ended March 31, 2024, net cash used for financing activities was$27.6 million. We used $0.5 million to repurchase stock, $3.1 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans, and repaid debt of $23.5 million, including $3.3 million in commitment fees.
Previous wording
At September 30, 2024, we were in compliance with the currently applicable covenants associated with our Term Credit Agreement and our ABL Credit Agreement, and based on our current financial projections, we expect to remain in compliance. However, if our financial position, results of operations or market conditions deteriorate, we may not be able to remain in compliance. There can be no assurance that we will be able to remain in compliance with our Term Credit Agreement, our ABL Credit Agreement or other credit agreements.
Current wording
At March 31, 2025, we were in compliance with the covenants in the Credit Agreements, and based on our current financial projections, we expect to remain in compliance. However, if our financial position, results of operations or market conditions deteriorate, we may not be able to remain in compliance. There can be no assurance that we will be able to remain in compliance with the Credit Agreements.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
(1)See Note 12, "Other operating charges," of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.