Clearwater Paper Corporation

Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Calvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clearwater Paper fourth quarter and full year 2024 earnings 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 the star button followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Stone Bowen, Head of Investor Relations. Please go ahead.

Thank you, Kelvin. Good afternoon, and thank you for joining Clearwater Papers' fourth 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 fourth quarter 2024 were released shortly after today's market close. 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 financial 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 reading this slide, we'll incorporate it by reference into our prepared remarks. And with that, let me turn the call over to Arshad.

Thank you for joining us and good afternoon. I'm going to structure my remarks today across three key areas. First, I'll provide a summary of our major strategic accomplishments in 2024. Next, I'll discuss our fourth quarter performance, including our perspective on current industry conditions. And lastly, I will outline our near and long term priorities, including actions that we're taking to reduce our cost structure. I will then turn the call over to Sherry to provide additional details on our fourth quarter and full year results, as well as our outlook for 2025. Let's start with an overview of our strategic accomplishments in 2024. We announced the planned acquisition of the Augusta Paperboard Facility in February of last year. This was our first major step to transform Clearwater to premier independent paperboard packaging supplier in North America. The Augusta acquisition increased our paperboard capacity by around 70% and improved our geographic footprint. We closed the transaction on May 1st and are well on track to integrate the Augusta mill into our network. We believe that this acquisition can contribute $140 to $150 million of annual adjusted EBITDA to Clearwater once we capture volume synergies and assuming the industry returns to normalized cross cycle utilization levels. Within three short months of closing on the Augusta acquisition, we announced the planned sale of our tissue business for $1.06 billion. Our team worked tirelessly over the last several years to improve our tissue business, leading to this outstanding outcome for Clearwater. We completed the sale on November 1st and utilized the net proceeds to significantly deliver our balance sheet. These two deals transform Clearwater and position our company for future growth in paperboard. I'm very proud of our team for these tremendous accomplishments in such a short period of time and look forward to the next chapter of our story. Let me now turn the focus to our performance in the fourth quarter. We delivered $21 million of adjusted EBITDA across total operations, which included one month of discontinued operations from our tissue business. The quarter was impacted by Hurricane Helene, particularly operations at our Augusta facility. The mill suffered some damage, which was then followed by a planned major maintenance outage that took place within a few weeks of the hurricane. These events created a very challenging operating environment, which led to higher costs and operational disruptions. The Augusta team did an outstanding job of recovering, and the mill was back on track as of year end. As we've discussed throughout 2024, while market demand has continued to gradually improve, the industry continued to operate with utilization rates below historical averages, resulting in lower market pricing and margin pressure. Lastly, our board authorized a new $100 million share repurchase program, and we repurchased approximately $9 million of our shares through February 7th of this year. Let me now provide some comments on market and industry conditions. Let's start with demand. Based on AFMPA data, industry shipments increased by 4% in 2024 versus 2023. Demand is further projected to grow by 3 to 5% in 2025 based on various industry publications returning to pre-COVID levels. This supports our view that demand continues to recover, and we're optimistic about the long-term prospects for paperboard packaging. Now let's turn to supply. Industry utilization rates improved in 2024 to 85% versus 82% in 2023. Net exports decreased by approximately 250,000 tons in total, driven by increased global supply and competition. North American capacity remained largely unchanged in 2024, although new industry capacity is forecasted to be added in 2025. As we've discussed previously, we believe a balanced market will have utilization rates between 90 and 95%. Let me provide you with an overview of the actions that we're taking to drive revenue growth and reduce our cost structure. We recently signed a major long-term supply agreement with a customer that should help us fill out our open capacity and capture volume synergies from the Augusta acquisition. We expect this volume to gradually ramp over the next several years. We have incorporated this volume into our 2025 assumptions that Sherry will discuss in a moment. In addition, we're taking actions to reduce our cost structure. We're targeting 30 to 40 million in cost savings in 2025 across SG&A and operations. We took a major step in January with a 10% reduction in all positions across the company. This action eliminated more than 200 positions in salaried and hourly roles. We're also targeting spend reductions in other areas, including contractors, professional services, and maintenance. We expect benefits from these initiatives to ramp through the year. We have also incorporated the impact of all these actions in our 2025 outlook. Finally, we're continuing to explore ways to broaden our product offering to better service our converter customers. We're focused on compostability, increasing the recycled content of our products, and lightweighting, to name a few. We have product development efforts underway to deliver these solutions to our customers. These are near term initiatives and we expect that they will require modest capital investments that fit into our overall capital outlook. We're also exploring options to diversify into additional paperboard substrates. This may include beverage carrier grades, white top or recycle board. These are larger and longer term investments that will likely take 24 to 36 months to execute. We're kicking off market studies as well as engineering efforts to explore these options. Let me conclude my comments by reiterating our view of the industry. We operate in an inherently cyclical industry driven by supply and demand. With demand being relatively stable, this balance is greatly impacted by changes in supply. Across the cycle, we would expect utilization rates to average around 90 to 95%, while in an up cycle, these rates can exceed 95% with increasing margins. SBS is currently in a down cycle, which we believe to be a temporary condition until supply and demand come back into balance. As we navigate the current environment, we're focused on actions that are within our control, including improving our operational performance, reducing cost, and strengthening our product offering. With that, let me turn the call over to Sherry for a more in-depth review of our financials.