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DATE

Tuesday, April 28, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • President & Chief Executive Officer — Arsen S. Kitch
  • Senior Vice President & Chief Financial Officer — Sherri J. Baker

TAKEAWAYS

  • Net Sales -- $360 million, reflecting a 5% decline due to lower market pricing despite a 5% increase in shipment volumes.
  • Adjusted EBITDA -- $2 million, slightly above guidance of breakeven, with approximately $15 million negative impact from weather-related disruptions at the mills.
  • Net Loss from Continuing Operations -- $13 million, or $1.29 per diluted share, for the quarter.
  • Insurance Proceeds -- $17.5 million received during the quarter, with $50 million of policy limit still available for claims pursuit.
  • Cypress Bend Restructuring -- Approximately 20% workforce reduction and reduced operating rates, targeting $8 million to $12 million in annual cost savings and $6 million direct benefit expected in the current year.
  • Major Maintenance Outage -- $22 million to $24 million direct cost impact expected in the second quarter at the Lewiston facility; full-year outage cost guidance is $45 million to $50 million.
  • Input Cost Headwinds -- Projecting $3 million to $5 million quarterly cost increases on chemicals, wood, and diesel, attributed to the conflict in the Middle East.
  • Price Increases -- Announced $60 per ton increase on extruded products, affecting about 70,000 tons not indexed to RISI, and a $50 per ton increase on non-extruded grades in March, though implementation has proven challenging.
  • SG&A Ratio -- Remained below the company’s target range of 6%-7% of sales, highlighted by management as "best in class."
  • Shipments and Capacity Utilization -- Targeting 1.2 million tons of profitable production across the mill network, operating below the stated capacity of 1.4 million tons.
  • Product Launch -- Introduction of Velora, a new lightweight folding carton paperboard brand positioned to compete with imported FBB.
  • Capital Expenditures -- Expected in the $65 million to $75 million range for the year.
  • Working Capital Goals -- Management is targeting $20 million to $30 million in working capital improvement.
  • Debt & Liquidity -- Intention to refinance or extend maturities on 2020 notes (due 2027) and the ABL facility (due later this year); current debt levels being held flat.
  • Tax Refunds -- Expecting $27 million to $28 million during the year, with $4 million already received and $23 million anticipated in upcoming quarters.
  • Second Quarter EBITDA Outlook -- Projected range of breakeven to negative $10 million, due primarily to scheduled maintenance and higher input costs, partially offset by cost-reduction actions.
  • Industry Operating Rates -- Recent capacity reductions have halved the 10% prior excess supply, with industry rates forecasted to approach 90% by year-end.
  • Full-Year Revenue Guidance -- Management expects annual revenue in the $1.4 billion to $1.5 billion range with flat to modest shipment growth assumptions.

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RISKS

  • CEO Kitch stated, "today’s margin levels are resulting in negative operating cash flow after the CapEx that is required to maintain these assets," highlighting unsustainable profitability at current industry rates.
  • Management forecasts $3 million to $5 million per quarter in added input costs related to the Middle East conflict, representing a continuing near-term headwind.
  • Arsen S. Kitch stated that implementation of price increases on non-extruded grades "be challenging given our industry’s current oversupply position," signaling ongoing margin pressure in certain product segments.
  • Company guidance anticipates breakeven to negative $10 million adjusted EBITDA for the second quarter, primarily from planned maintenance and higher input costs, raising risk of further negative operational results.

SUMMARY

Clearwater Paper Corporation (CLW +1.57%) directly reported a decline in net sales due to ongoing pricing pressure and significant input cost inflation driven by external geopolitical events. Management is pursuing cost savings, insurance recovery, price increases, and product portfolio expansion to stabilize cash generation and maintain production focus in high-demand segments. Active refinancing of near-term maturities and working capital improvements are intended to support liquidity objectives during a period of unsustainable industry margins and negative operating cash flow after capital expenditures.

  • Management confirmed $17.5 million in additional insurance proceeds were collected, with ongoing pursuit of the $50 million policy remainder.
  • Company-wide production strategy shifted to 1.2 million tons annually, below nameplate capacity, to prioritize sustainable margins given current market conditions.
  • Management indicated a path to breakeven or better free cash flow for the year, citing cumulative benefits from cost reductions, insurance settlements, a $27 million to $28 million tax refund, and targeted working capital efficiency.
  • Full four-year labor agreement ratified at Lewiston, Idaho mill, delivering increased operational flexibility.
  • Engineering for CUK investment at Cypress Bend is complete, with management stating the $60 million project will be considered only as balance sheet strength and sector visibility improve.

INDUSTRY GLOSSARY

  • SBS: Solid Bleached Sulfate — a high-grade, fully bleached paperboard used for premium packaging and folding cartons.
  • CUK: Coated Unbleached Kraft — a paperboard substrate valued for strength, often used in beverage packaging.
  • CRB: Coated Recycled Board — paperboard made from recycled fiber, commonly used in folding cartons for consumer goods.
  • FBB: Folding Boxboard — a multilayer paperboard, typically used in general packaging and food contact applications; frequently imported from overseas suppliers.
  • RISI: Third-party industry information service providing price benchmarks and market intelligence for the global pulp, paper, and packaging sectors.
  • Extruded Products: Paperboard grades with additional polymer coatings for moisture resistance (e.g., cups, poly-coated folding cartons).
  • ABL: Asset-Based Lending facility — a revolving credit line secured by company assets such as receivables and inventory.

Full Conference Call Transcript

Arsen S. Kitch: Good afternoon, and thank you for joining us today. I will begin my comments with a brief overview of the first quarter. I will also provide some perspectives on industry conditions and outline the actions that were taken to navigate the current business environment. I will then turn the call over to Sherri to walk through the financial results in more detail and discuss our outlook. Let us start with the highlights from our first quarter as well as a few updates from April. Our shipment volumes were up 5%, which was more than offset by lower market pricing, resulting in net sales being down 5% compared to the prior year.

We increased share in a highly competitive market environment, with continued growth in foodservice. Adjusted EBITDA for the quarter was $2 million, slightly above our guidance of breakeven. This included approximately $15 million in weather-related impacts at our mills earlier in the quarter. Our team effectively navigated difficult operating conditions with a weather event in the Southeast. We minimized costs, protected our assets, and were able to service customers with minimal disruptions. This quarter, we launched Velora, a new lightweight folding carton paperboard brand that is engineered to compete with imported FBB. We restructured our Cypress Bend, Arkansas facility, resulting in a reduction of approximately 20% of roles at the mill.

We are planning to run the mill at reduced operating rates until industry conditions improve. This action will drive an expected cost reduction of approximately $8 to $12 million on an annualized basis. Our Lewiston, Idaho union ratified a new four-year labor agreement. This agreement combines competitive wages and benefits for our employees with significant additional flexibility in how we can operate the mill. Finally, we received $17.5 million in additional representation and warranty insurance proceeds during the first quarter, for a total of over $40 million. We continue to pursue claims against $50 million of the remaining policy limit. Let me now provide some perspectives on industry conditions and the impact on our business.

SBS shipments were nearly flat in 2026 versus 2025, outpacing CRB and CUK, which declined by around 3%. SBS shipments are forecasted to grow by 4% in 2026. We believe that at least part of the strength can be attributed to lower imports and substitution effects, as SBS is now the low-cost paperboard substrate on a per square foot basis. SBS is highly versatile with diversified end-use applications ranging from high-end folding cartons used in pharmaceuticals and cosmetics to foodservice items for at-home or QSR consumption. From a supply perspective, we started the year with industry capacity substantially exceeding demand by more than 10%.

With recent changes in industry capacity, including our restructuring of the Cypress Bend mill, we now believe that the excess industry supply has been reduced by approximately 50%. RISI is forecasting additional net capacity reductions by the end of this year, resulting in industry operating rates of around 90%. As we have stated previously, margins should start improving to historical cross-cycle averages with industry rates exceeding 90%. Bleached imports were down by 12% in 2025 versus 2024, driven by higher tariffs and a weaker dollar. European producers are facing additional cost pressures this year with higher energy, chemical, and transportation costs, driven by the conflict in the Middle East.

RISI is forecasting total bleached imports to decrease by an additional 12% in 2026 versus 2025. In terms of our business, we are experiencing solid demand with stability in folding carton and strength in foodservice, particularly in cup and plate. Backlogs across our paper machines are strong, and we are sold out on extruded products such as cup and poly-coated folding carton. With our mill restructuring, we have customer demand to run full across our three-mill network for the remainder of the year.

While we are seeing some positive signs of both demand and supply, current industry operating rates are driving margins that do not produce the necessary cash flow or returns to reinvest in our capital-intensive assets in the long run. In fact, we believe that today’s margin levels are resulting in negative operating cash flow after the CapEx that is required to maintain these assets. This is simply not a sustainable position for us to be in. Against this backdrop, we remain focused on controlling what we can control while anticipating a recovery in industry conditions. First, we are continuing to drive costs out of our business and focusing on operating our assets efficiently.

Second, we are protecting share with our strategic customers by delivering the right combination of quality, service, and cost. Third, we are looking for ways to recover the increased costs that we have experienced, including the most recent impacts from the Middle East conflict. Let me provide a bit more context on our actions at Cypress Bend. We reduced roles at the mill by about 20% and improved the mill’s cost structure by an expected $8 to $12 million per year. We are prepared to run at reduced production rates until SBS industry conditions improve, or we invest in other capabilities such as CUK.

Cypress Bend remains a well-invested and cost-competitive mill that provides us with the optionality to grow in the long run. It also provides our customers with North America’s largest independent paperboard mill network, with capabilities to produce a full range of SBS products. In total, we are now focused on producing and profitably selling 1.2 million tons of SBS across all three of our mills versus our stated capacity of around 1.4 million tons. In addition to the industry oversupply that we are facing, we are also experiencing significant cost pressures on certain chemical, wood, and diesel costs because of the conflict in the Middle East.

Altogether, we are projecting $3 to $5 million of quarterly headwinds from these cost increases until the conflict is resolved and global supply chains have returned to normal. With these additional cost headwinds, and due to our sold-out position in our cup business, we have revised our previously announced price increase on cup and other extruded products to $60 per ton effective in May. This increase impacts approximately 70 thousand tons of our extruded business not tied to the RISI price index. The rest of our cup and extruded business, which is approximately 150 thousand tons, will move within a couple of quarters of any change to the RISI price index.

We see momentum in our cup business while we continue to face a highly competitive environment in our non-extruded grades such as folding and plate. We announced a $50 per ton increase on these grades in March, but we found implementation to be challenging given our industry’s current oversupply position. We believe that our margins on these grades are not sustainable in the long run, and we will continue to look for ways to recover the cost pressure that we have faced over the last couple of years. Before I turn the call over to Sherri, I would like to briefly update you on our strategic initiatives to further build and diversify our product portfolio.

We have successfully launched a new lightweight paperboard product line called Velora. We believe that Velora will compete effectively with FBB and support a wide range of general-use packaging applications. While we believe that this type of product has a place in the market, it is not a replacement for a high-quality SBS offering. We continue to evaluate our CUK investment decision as we navigate current industry conditions. The engineering work is complete with an estimated investment of approximately $60 million and an execution timeline of roughly 12 to 18 months.

As a reminder, this project would take place at our Cypress Bend, Arkansas mill, and we would target 100 thousand to 150 thousand tons of CUK volume with conversion while maintaining our ability to produce SBS. In addition to our focus on lightweight SBS and CUK, we are evaluating opportunities to add CRB to our product portfolio. We believe that offering the full range of paperboard substrates positions us to better meet the needs of our independent converter customers and expand our share of their overall paperboard spend. With that, I will turn the call over to Sherri to discuss our first quarter financial results in more detail and provide an outlook for the second quarter.

Sherri J. Baker: Thank you, Arsen. Turning to our first quarter financial performance, for the quarter, we reported a net loss from continuing operations of $13 million, or $1.29 per diluted share. Our results include $17.5 million of insurance proceeds. Net sales were $360 million, down approximately 5% compared to 2025. Higher shipment volumes were more than offset by lower SBS market pricing. Adjusted EBITDA was $2 million, slightly above our guidance which contemplated breakeven performance. As Arsen mentioned earlier, the weather event at our Augusta and Cypress Bend mills impacted EBITDA by approximately $15 million in the quarter. SG&A as a percentage of sales remained below our target range of 6% to 7%, reflecting continued cost discipline.

We believe that this is best in class in our industry. The conflict in the Middle East is putting pressure on chemical, wood, and transportation costs. As Arsen mentioned, we believe that these additional costs will be in the $3 million to $5 million range per quarter. Oil-derived chemicals have experienced increased price volatility, and transportation costs have been impacted by higher fuel prices. We are working to mitigate these impacts through targeted pricing actions and operational productivity, but these dynamics remain a near-term headwind. We will continue to monitor developments closely and provide financial updates as appropriate. Let me also provide an update on the insurance recovery related to the acquisition.

As a reminder, we obtained representation and warranty insurance with a $105 million limit through multiple insurers. We identified certain matters that were not consistent with representations made at the time of the transaction and notified the insurers of these breaches. In the fourth quarter, we received an initial settlement payment of $23 million, including approximately $6 million related to direct operating costs incurred in 2025. In the first quarter, we received a second settlement payment of more than $17 million, of which approximately $6 million relates to direct operating costs incurred in 2026. As of March 31, approximately $50 million of the policy limit remains.

We are actively pursuing the recovery of the remaining claim amount with our insurers and will provide updates in future quarters. Turning now to our outlook. For the second quarter, we expect adjusted EBITDA in the range of breakeven to negative $10 million. This is being driven by our planned major maintenance outage at our Lewiston facility, which will have a direct cost of $22 to $24 million. In addition, we expect $5 to $7 million of higher input costs, including the impact from the Middle East conflict. Partly offsetting those headwinds will be benefits of our cost reduction initiatives and a seasonal uptick in shipment volumes.

Our full-year assumptions remain as follows: revenue of $1.4 billion to $1.5 billion; flat to modest shipment growth; approximately $70 million carryover impact from 2025 market-driven price decreases excluding the effect of recent pricing actions or future RISI price index movements; productivity gains, including carryover from 2025, offsetting 2% to 3% of input cost inflation; major maintenance outage cost of $45 million to $50 million, consistent with 2025 (please note that the Cypress Bend outage has been moved from Q2 to Q4 of this year); approximately $6 million of benefit related to the Cypress Bend restructuring; capital expenditures of $65 million to $75 million; targeted working capital improvement of $20 million to $30 million; and SG&A maintained towards the lower end of our target range of 6% to 7% of sales.

Importantly, we believe that we have a path to breakeven or better free cash flow for the year. This includes impacts from the cost actions that we are taking, insurance recoveries, a tax refund that we are expecting, and reductions in net working capital. As Arsen mentioned earlier, we are focused on controlling the controllables even as we work through a challenging industry environment. Let me wrap up with a few comments on our balance sheet. We have ample liquidity available to us and are managing to keep our overall debt levels relatively flat. Our 2020 notes go current in 2027, while our ABL goes current later this year.

It is our intent to extend or refinance both instruments before they go current. We are in active discussions with our banking partners and will provide an update in the coming quarters. With that, I will turn the call back to Arsen for closing remarks.

Arsen S. Kitch: Thank you, Sherri. I am proud that our team has continued to maintain its focus on running safely and effectively while reducing costs across the business. We are a lean and agile company, which is an advantage regardless of what part of the industry cycle we are in. We have taken important steps to improve our performance, including restructuring the Cypress Bend mill, implementing pricing actions, and advancing our product portfolio diversification. In closing, I would like to summarize our key priorities for the balance of this year. First, we will continue to focus on operating efficiently and reducing costs. Second, we will protect share with our strategic customers.

Third, we are taking actions to be cash flow neutral this year. Finally, we are planning to refinance or extend maturities on our existing debt. I remain confident that this cycle will turn. Over time, we believe we will return to cross-cycle EBITDA margins of 13% to 14% and generate more than $100 million of annual free cash flow. Most importantly, we will continue to make decisions that drive long-term shareholder value while supporting our customers, employees, and the communities in which we operate. Thank you for joining us today. We will now open the call for questions.

Operator: We will now open the call for questions. Your line will remain open for follow-up questions. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Sean Steuart with TD Cowen. Sean, your line is open. Please go ahead.

Sean Steuart: Thank you. Hi, everyone. I want to start with the Cypress Bend restructuring. How quickly do you think the supply response could arrive? And then a couple of follow-ups on that topic.

Arsen S. Kitch: Thanks, Sean. There are a couple of questions in there, so let me try to tackle them all. At Cypress Bend, we reduced roles at the mill by 20%—headcount and open roles—in addition to other costs. That should drive $8 to $12 million of annual savings at the mill. We intend to run the mill at reduced operating rates until industry conditions improve. Given that strategy, we are targeting about 1.2 million tons of volume across the network that we are comfortable producing and selling profitably. After taking this action, we believe we are fully utilized for the balance of the year.

In terms of broader industry changes, if you look at the first half trends and capacity actions that have been announced, those should put us on a path back to a recovery.

Sean Steuart: Thanks. Second question is for Sherri. On the free cash flow bridge commentary, I think I understand the insurance piece. You also mentioned a tax refund coming. Can you give us perspective on how much that will be and specific quarterly timing there?

Sherri J. Baker: Yes. The overall amount for the full year would be $27 million to $28 million, of which we received $4 million in the first quarter. So you have roughly $23 million remaining for the balance of the year.

Sean Steuart: Okay. And one last question, Sherri. The debt rating downgrade from Moody’s—does that have any real bearing on your borrowing costs effectively right now, or would it be more applicable to future credit facility negotiations?

Sherri J. Baker: It would be the latter. It would be more applicable to any future refinancings.

Sean Steuart: Okay. That is all I have for now. Thanks.

Sherri J. Baker: Thanks, Sean.

Operator: Your next question comes from the line of Matthew McKellar with RBC. Matthew, your line is open. Please go ahead.

Matthew McKellar: Good afternoon. Thanks for taking my questions. First for me, I think you mentioned $3 million to $5 million per quarter of input cost pressure until the conflict is resolved. Is that essentially a comparison of where costs are today versus where they were in February? And does that embed any potential recovery against higher costs—whether that be through price or other mechanisms—and if you could speak to what those might be, that would also be helpful. Thank you.

Arsen S. Kitch: Good questions. First, yes, it is a sequential comparison versus where we were a month or two ago before the conflict started. There are really three buckets of cost: number one is chemicals, number two is transportation/diesel, and the third—maybe a little surprising—is wood. We think approximately 20% of wood cost is tied to transportation to get the wood out of the forest, so we are seeing some cost pressure on wood as well related to higher diesel costs. So yes, $3 million to $5 million, sequential. In terms of recovery, we are focused on cost reductions, so the Cypress Bend restructure should deliver about $2 million a quarter of cost reduction sequentially.

As I mentioned on the call, we are also in the process of implementing a $60 per ton price increase on our extruded products. Our extruded products are poly-coated, so they use more chemicals than non-extruded products and were facing some unique cost pressures. We are also sold out on those grades. Between the cost reduction at Cypress Bend and the price increase, we are attempting to recover at least some of that cost increase.

Matthew McKellar: Great, that is helpful. Then just a quick one on Velora. Could you help us understand how that fits into the product portfolio? Are you seeing uptake from customers who had been on FBB so far? And where would your expectations be in terms of what share of folding carton and foodservice volumes that product would eventually represent?

Arsen S. Kitch: Good question as well. We have not sized it yet in terms of number of tons. We do not expect it to be a large number in the near term. We will monitor uptake and then determine how much capacity to allocate to it in the long run.

Matthew McKellar: Great. Thanks for the help. I will turn it back.

Operator: Your next question comes from the line of Mike Roxland with Truist Securities. Mike, your line is open. Please go ahead.

Mike Roxland: Thanks, Arsen and Sherri and team, for taking my questions. First question is, what has the customer response been to the $60 per ton price increase on the extruded products thus far?

Arsen S. Kitch: We are still working through it with our customers. I am not prepared to comment on feedback yet. The important points I raised during the call are that we are facing unique cost pressure on those grades because they are poly-coated, and we are sold out. Our backlogs on those products are well beyond what we normally see with our customers. Between those two variables, we think we have a very strong case to implement this price increase.

Mike Roxland: Got it. Were the backlogs just as strong a couple of months ago? I know you went out with another price increase, I think targeting March, which you have now pushed out. If we are talking about the same price increase, were backlogs the same a couple of months ago? If not, why do you think the conditions warrant the change now, given rising costs and customer pressure?

Arsen S. Kitch: Our original price increase back in March was $50 on folding and $60 on cup. This is a revision. We are at $60 across all extruded products, which includes some poly-coated folding carton as well as poly-coated cup. Our backlogs on those grades have grown—we are pressured on how to satisfy customer demand at this point. They have grown since then, and costs have also grown. So it is a revision from what we discussed back in March.

Mike Roxland: Understood. In terms of CUK, you mentioned the engineering work is now complete, it requires an investment of $60 million, and the timeline is 12 to 18 months. What would get you over the hump to move forward with producing CUK at Cypress Bend? And what optionality do you have with CRB, and where would you be looking to do that?

Arsen S. Kitch: On CUK, it frankly has to do with the balance sheet and cash flows at this point. It is a $60 million investment, and we are working very hard at this point in the cycle to preserve balance sheet strength. On CRB, that is more of a longer-term consideration, including potential M&A. Right now, we are focused on ensuring that we have a strong balance sheet to get through this part of the industry cycle.

Mike Roxland: Thanks. Just to press on CUK, is it fair to say that the $60 million conversion is quite unlikely in the near term because you do not want to stretch the balance sheet given uncertainty in SBS and how excess capacity is absorbed?

Arsen S. Kitch: We will keep reviewing it. We think it is a good project, but $60 million right now is a bit of a stretch. We are pushing the team to figure out what other paths we have to create CUK in our facilities, potentially spending less than $60 million.

Mike Roxland: Final question. If market conditions remain challenging and the largest player does not take further capacity actions, what else can you do from a portfolio perspective?

Arsen S. Kitch: I will not speculate on hypotheticals. Right now, we are focused on actions we control: pricing where appropriate, cost reductions, and the Cypress Bend restructure. We will continue to assess our cost structure and assets to ensure we are in a strong position. We are optimistic that we are seeing enough green shoots for a recovery in our corner of the market as we progress through the year.

Sherri J. Baker: Thank you.

Operator: There are no further questions at this time. This concludes today's call. Thank you for joining Clearwater Paper Corporation’s first quarter 2026 earnings conference call.