Clearwater Paper Corporation

Good afternoon, my name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the Clearwater Paper third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Sloan Boland, Investor Relations. Please go ahead.

Thank you, Dennis. Good afternoon, and thank you for joining Clearwater Papers' third quarter 2022 earnings conference call. Joining me on the call today are Arsene Kitsch, President and Chief Executive Officer, and Mike Murphy, Chief Financial Officer. Financial results for the third quarter 2022 were released shortly after today's market close, along with the filing of our 10Q. You will find a presentation of supplemental information, including a slide providing the company's current outlook, posted on the investor relations page of our website at clearwaterpaper.com. Additionally, we will be providing certain non-GAAP information in this afternoon's discussion. The reconciliation of the non-GAAP information to comparable GAAP information is included in the press release and in the supplemental information provided on our website. Please note slide two of our supplemental information covering forward-looking statements Rather than rereading this slide, we are going to incorporate it by reference in our prepared remarks. With that, let me turn the call over to Arson.

Good afternoon, and thank you for joining us today. Before reviewing our third quarter earnings, I wanted to wish everyone a safe and enjoyable Halloween. Please turn to slide three. We had a great third quarter, which exceeded our expectations. On a consolidated basis, we reported net sales of $539 million, which was 20% higher than prior year. Adjusted net income was $31 million, and adjusted EBITDA was $77 million. Let me share a few highlights. Both paperboard and tissue demand were strong, with increased pricing in both businesses. Inflation remained a headwind across most of our input costs, particularly in pulp, fiber, chemicals, and energy. In addition to price increases, we continued to improve our operating performance to help mitigate the impact of rising costs. We reduced net debt by $6 million in the quarter and $106 million in the first nine months of the year. We also repurchased $25 million of our outstanding notes due in 2025. And finally, we repurchased $1 million of shares during the quarter for a total of $5 million in the first nine months of the year. We have $25 million remaining on our buyback authorization. With that, let's discuss some additional details about both of our businesses. Let's start on slide four with a few comments on our paperboard business. The industry continues to experience strong demand with higher SPS pricing, as reported by RSEI. Since the beginning of 2021, RSEI has reported price increases for the U.S. market that total $500 per ton. 250 of increases were reported in 2022, including $20 per ton in September and $30 in October. As a reminder, it typically takes us up to two quarters for price changes to be reflected in our financials. It is also worth noting that our portfolio includes additional grades and price mechanisms that are not reflected in RSEI's reporting. We're monitoring economic trends given concerns about a global economic slowdown. Our backlogs remain stable with continued strong demand. Even with the economic uncertainty, we continue to believe that the overall industry demand is robust as evidenced by Reese's reported price increases a few weeks ago. Now please turn to slide five for some additional comments on our tissue business. The underlying operating performance of our tissue business was very strong, and we continue to observe consumers shifting their demand to our private branded tissue products to help offset inflation. Private branded dollar share of the tissue market climbed to over 35% in September, which is an all-time high. We shipped 12.6 million cases in the third quarter, matching our second quarter shipments and slightly above the third quarter of last year. We believe that we're well positioned to support our customers and their shoppers during this time of economic uncertainty. We recognize that inflation has outpaced price increases in tissue in 2021 and 2022, and we're diligently working to recover our margins. We're implementing recently announced price increases that will provide additional benefits in 2023 and are working diligently to continuously lower our cost position. As discussed in previous quarters, both of our businesses continued to see substantial inflation in the third quarter. In addition to price increases, we continued to focus on improving operating and supply chain performance. Our focus on pricing and productivity is helping to offset the inflationary headwinds that we cannot control. I will now ask Mike to discuss our third quarter results in more detail.