Clearwater Paper Corporation

like to turn the conference over to Sloan Bolin, Investor Relations. Please go ahead.

Thank you, Brianna. Good afternoon, and thank you for joining Clearwater Papers' first quarter 2024 earnings conference call. Joining me on the call today are Arsene Kitsch, President and Chief Executive Officer, and Sherry Baker, Senior Vice President and Chief Financial Officer. Financial results for the first quarter of 2024 were released shortly after today's market closed, along with the filing of our 10-Q. 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. A 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 the supplemental information covering forward-looking statements Rather than rereading this slide, we are going to incorporate it by reference into our prepared remarks. With that, let me turn the call over to Arsene.

Good afternoon, and thank you for joining us today. As you saw from our press release, we had a great first quarter driven by the continued outstanding performance of our tissue business and lower input costs. We also generated strong cash flows and reduced our net debt by an additional $33 million during the quarter. This resulted in 1.38 times leverage ratio at the end of the quarter. Slide 3 of our supplementals provides a summary of our consolidated results. We reported net sales of $496 million and adjusted EBITDA of $62 million, which is at the higher end of our expectations. Our tissue business drove the improvement by more than doubling its adjusted EBITDA from $19 million in the first quarter of last year to $46 million this year. Our paperboard business delivered 34 million of adjusted EBITDA in the first quarter, at a margin of 14%, even as the business was significantly impacted by a severe weather event that disrupted our Lewiston operations in January. Let me share a few highlights with you. Issue demand remained strong, and we saw an improvement in customer demand for paperboard, with higher order entry and growing backlogs. Pricing per paperboard decreased by 11% as compared to a year ago, which reflects market conditions and pricing trends as reported by RSEI. Both businesses experienced favorable input costs as compared to the first quarter of 2023, particularly in wood fiber, pulp, energy, and freight. We estimate that the Lewiston weather event impacted us by $15 to $17 million during the quarter. primarily in our paperboard business. We repurchased $1 million of our stock with the goal of offsetting shareholder dilution due to employee stock grants. Finally, we have made significant progress on our planned acquisition of the Augusta, Georgia Paperboard Manufacturing Facility from Graphic Packaging. We believe that we've cleared regulatory hurdles and expect to complete the acquisition shortly. We're looking forward to welcoming the Augusta team to Clearwater Paper and building a scaled, high performing and diversified paperboard business that is well matched to the needs of paperboard converters in North America. With that, let's review each of our segments and provide some additional details. Let's begin with our paperboard business on slide four of our supplemental materials. The most recent AFMPA data has shipments up 7.1% and production up 10.5% in the first quarter of this year versus the fourth quarter of last year. Operating rates also rose to 88.3% in the first quarter versus 79.3% in the fourth quarter. This aligns with our view that customer demand is improving and that inventory destocking is now largely behind us. In terms of pricing, RECI reported the $40 per ton decrease in February for a total of $120 per ton since the middle of last year. This also aligns with our experience as softening demand drove prices lower in 2023. Our volume was mostly flat in the first quarter of this year compared to the first and fourth quarters of last year. While customer orders and backlogs grew, our volumes were negatively impacted by lost production during the January weather event in Lewiston. As I mentioned previously, we have strong conviction about the long term prospects for our paperboard business and maintain our outlook for gradual improvement and demand in 2024 and 2025. Sherry will provide additional details for our second quarter outlook later in our prepared remarks, but we expect roughly 35 to $40 million in additional maintenance costs in Q2 versus Q1 due to the planned major maintenance outage in Lewiston. as well as additional scheduled maintenance work at our other sites. In addition to the normal outage work being completed in Lewiston, we will also be replacing the recovery boiler tubes in the lower furnace, which is a $40 million capital project, of which approximately $28 million is being spent this year. Our team has done a great job preparing for this extended outage to complete all the necessary work, as well as to continue servicing our customers. Please turn to slide five and let me provide you with a brief update on our tissue business. Let's start with some broader industry trends. Private branded market share held steady at 36%, according to the latest CERCANA panel data. As we've noted in the past, consumers are continuing to embrace private brands due to economic uncertainty and inflation. Industry utilization rates rose to around 96% in January and February, according to RISI. which we believe reflects strong market conditions. As we mentioned previously, more than 200,000 tons of net capacity were removed between 2021 and 2023, which is driving the high industry utilization rates. Looking forward, approximately 370,000 tons of capacity have been announced to be added between 2024 and 2026, and we believe that normal demand growth will absorb these additional tons And we continue to expect industry tissue industry conditions to remain positive in the near to medium term. Let's turn to our performance in the quarter. Revenues grew by 2% year over year and adjusted EBITDA more than doubled. Our adjusted EBITDA margin was at 18% compared to 8% in the first quarter of 2023. This was driven by strong operating performance, lower input costs and continued robust demand. We expect to continue these strong levels of operating performance as we move through 2024. With that, I'll turn the call over to Sherry to cover our financial results.