Clearwater Paper Corporation

Thank you for standing by. At this time, I would like to welcome everyone to today's Clearwater Paper Second 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 1 to raise your hand. To withdraw your question, press star 1 again. Thank you. I'd now like to turn the call over to Sherri Ellison, Investor Relations. Sherri?

Thank you, operator. Good afternoon, and thank you for joining Clearwater Paper's second quarter 2026 earnings conference call. Joining me on the call today are Arsen Kitch, President and Chief Executive Officer, and Sherri Baker, Senior Vice President and Chief Financial Officer. Financial results for the second quarter of 2026 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 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 Arsen.

Good afternoon and thank you for joining us today. I'll begin my comments with a brief overview of our second quarter results. I will also provide some perspectives on industry conditions and discuss actions that we're taking to reduce costs and improve our margins through the cycle. I'll then turn the call over to Sherri to review the financial results in more detail and discuss our outlook. Turning first to highlights of our second quarter performance. Our shipment volumes were up this quarter with strong 8% year over year growth. This was offset by a 9% year over year decline in market pricing as reflected in the VC index. Adjusted EBITDA for the quarter was negative 8 million, which was within our guidance range. We faced higher than expected transportation costs, partly driven by the Iran war. We successfully completed the major maintenance outage at our Lewiston, Idaho facility on time and on target with total direct expense of around 22 million. We restructured our Cypress and Arkansas facility, resulting in a reduction of approximately 20% of roles at the mill. This action is driving an expected cost reduction of 8 to 12 million on an annualized basis. SG&A expenses were at 5.6% of net sales in the quarter, remaining below our targeted range of 6 to 7%. We believe that these are industry-leading numbers that reflect our continued cost discipline. Last week, we announced the launch of Circa, our new CRB product line. This line will be sold and distributed through our network while being manufactured by Green Paper. This is aligned with our strategy to offer a broader product range to our North American converter customers. Finally, we reduced net debt by $59 million in the quarter and by $50 million year to date, driven by improvements in net working capital, tax refunds, and additional insurance recoveries. Let me now provide you with some industry updates. We are seeing some meaningful green shoots in SBS industry conditions. Our shipment volumes are up 6% year to date. Industry imports are down 11%, continuing a trend that we saw last year. RSEI has reflected approximately 300,000 tons of reduced SBS production across the industry since the beginning of the year. We're seeing evidence of substitution into SBS from other substrates by customers and our integrated competitors. Finally, we also believe that some industry participants have been able to swing some of their SBS capacity to other paper grades. All of these factors are driving an improvement in SBS operating rates from the low 80% range in the first quarter of this year to a receive forecast of 88% in the second quarter and over 90% by year end. As a result of substantial cost pressure and improving industry conditions, were implementing a $60 per ton price increase that we announced in June. We have recently announced a second $60 per ton price increase across all of our products that is to go into effect in August. In its latest monthly report, RSEI has reported a $40 per ton price increase on folding carton and $60 per ton on cup. We expect that our June price increase and the RSEI price index changes will be reflected across all of our tons with a 50 to 60 million annual improvement in EBITDA. This does not take into consideration our second price increase or the additional increases that RSEI is forecasting for later in the year and into 2027. As a reminder, approximately 50% of our volume is tied to the RSEI index while the rest is subject to open market negotiation. It will take us a couple of quarters for the RISI index move to flow through our P&L. Even as industry conditions and pricing are improving, we continue to face substantial cost pressure and margin levels that do not support long-term investment in our industry's capital-intensive assets. We believe that our margins are still around 10% below where they need to be across the cycle to deliver returns on capital required to invest in our assets. even with a recent RSEA reported price improvement. Against this backdrop, we remain focused on the items that are within our control, primarily reducing costs and maintaining share with our customers. Since 2024, we have removed more than 60 million of fixed costs from our system, including restructuring all of our mills and lowering SG&A as percent of sales. These actions have enabled us to weather this industry downturn while continuing to invest in our assets. As part of these efforts, we announced a restructuring of our Cypress Bend, Arkansas facility during the second quarter, resulting in a reduction of approximately 20% of rolls with expected annual savings of $8-12 million. This action limits our network production to approximately 1.2 million tons per year, balancing supply with our current demand. We are currently sold out across our network and are in an oversold position on extruded capacity, which primarily serves the cup market. We believe that the actions we have taken through the down cycle will result in improved margins and cash flow as the industry recovers in the coming quarters. Lastly, I would like to provide an update on our strategic actions to further build and diversify our product portfolio. Last week, we announced the launch of Circa, a new line of CRB for folding carton and beverage carrier applications in the U.S. Circa complements our SBS portfolio and strengthens our ability to serve customers across more end-use applications. It's a high-quality recycled option designed to deliver dependable converting performance, reliable supply, and strong value for everyday applications. Circa was developed through collaboration with Green Paper, a global producer of 100% recycled paperboard at a state-of-the-art facility in Monterrey, Mexico. By combining our market reach, support, and service with Green Paper's manufacturing capabilities, we plan to deliver a high-quality CRV solution to independent converters in North America without the channel conflict that exists with current industry suppliers. This follows our launch earlier this year of Elora, a lightweight paperboard product that we believe can effectively compete with FBV. In addition to launching a CRB line, we continue to explore the possibility of producing CUK at our Citrus Bend facility to further meet demand for non-integrated paperboard options and expand our offering with other substrates. While engineering work is complete for a full capital solution of approximately $60 million, we're exploring a lower cost capital alternative that would enable us to launch a CUK product line sooner. and within our typical annual capital spend. We're in trials at Cypress Bend with this potential solution and we'll share updates on these efforts in the coming quarters. These actions are aligned with our long-term strategy to diversify our product portfolio and become a preferred independent supplier of paper board to North American converters. With that, I'll turn the call over to Sherri to discuss our second quarter financial results in more detail and provide our outlook for the third quarter.