Clearwater Paper Corporation

Thank you for standing by. At this time, I would like to welcome everyone to today's Clearwater Paper first quarter 2026 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, please press star one to raise your hand. To withdraw your question, press star one again. I'd now like to turn the call over to Sherry Ellison, Investor Relations. Sherry?

Thank you, Ben. Good afternoon, and thank you for joining Clearwater Papers' first quarter 2026 earnings conference call. Joining me on the call today are Arson Kitsch, President and Chief Executive Officer, and Sherry Baker, Senior Vice President and Chief Financial Officer. Financial results for the first quarter of 2026 were released shortly after today's market close, 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 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 our supplemental information covering forward-looking statements. Rather than reading this slide, we incorporate it by reference into our prepared remarks. With that, let me turn the call over to Arson.

Good afternoon and thank you for joining us today. I'll 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'll then turn the call over to Sherry to walk through the financial results in more detail and discuss our outlook. Let's 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 food service. 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 minimize costs, protected our assets, and were able to service customers with minimal disruptions. This quarter we launched Velora, a new lightweight folding card and paper board brand that is engineered to compete with imported FPV. We restructured our Cypress Bend, Arkansas facility, resulting in a reduction of approximately 20% of rolls at the mill. We're planning to run the mill at reduced operating run 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 the new four year labor agreement. This agreement combines competitive wages and benefits for our employees with significant additional flexibility and 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 the first quarter of 2026 versus the first quarter of 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 food service 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%. RSEI is forecasting additional net capacity reductions by the end of this year, resulting in industry operating rates of around 90%. As we've 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. Recy is forecasting total bleach imports to decrease by an additional 12% in 2026 versus 2025. In terms of our business, we're experiencing solid demand with stability in folding carton and strengthened food service, particularly in cup and plate. Backlogs across our paper machines are strong, and we are sold out on extruded products such as cup and polycoated 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're seeing some positive signs of both demand and supply, current industry operating rates are driving margins that don't 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's 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're continuing to drive costs out of our business and focusing on operating our assets efficiently. Second, we're protecting share with our strategic customers by delivering the right combination of quality, service, and cost. And third, We're looking for ways to recover the increased costs that we've 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 rolls at the mill by about 20% and improved the mills cost structure by an expected 8 to 12 million per year. We're prepared to run and reduce 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 paper board mill network with capabilities to produce a full range of SBS products. In total, we are now focused on producing and profitably selling approximately 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're facing, we're also experiencing significant cost pressures on certain chemical, wood, and diesel costs because of the conflict in the Middle East. Altogether, we're 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 70,000 tons of our extruded business not tied to the RSEI price index. The rest of our cup and extruded business, which is approximately 150,000 tons, we'll move within a couple of quarters of any change to the receipt price index. We see momentum in our cup business while we continue to face a highly competitive environment in our not-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 aren't sustainable in the long run, and we'll continue to look for ways to recover the cost pressure that we faced over the last couple of years. Before I turn the call over to Sherry, I'd 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 Elora. We believe that Velora will compete effectively with FDB 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 SVS 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 to 150,000 tons of CUK volume with this conversion while maintaining our ability to produce SBS. In addition to our focus on lightweight SBS and CUK, we are evaluating opportunities to add CRV 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'll turn the call over to Sherry to discuss our first quarter financial results in more detail and provide an outlook for the second quarter.