UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


ý			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~March 31,~~June 30, 2023


¨			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-34146

CLEARWATER PAPER CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		20-3594554
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

601 West Riverside,	Suite 1100	99201
Spokane,	WA
(Address of principal executive offices)		(Zip Code)

(509) 344-5900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	CLW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of shares of common stock of the registrant outstanding as of ~~May 1,~~July 30, 2023 was ~~16,916,299.~~16,712,582.

FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding accounting standards; our strategy; our operations and expectations; borrowing and credit facilities; cash flows; capital expenditures; disclosure controls; compliance with our loan and financing agreements; tax rates; debt repayments; operating costs; selling, general and administrative expenses; liquidity; benefit plan funding levels; stockholder equity; capitalized interest; interest expenses; and legal proceedings. Words such as “anticipate,” “expect,” “intend,” “plan,” “target,” “project,” “believe,” “schedule,” “estimate,” “may,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, assumptions and projections that are subject to change. Our actual results of operations may differ materially from those expressed or implied by the forward-looking statements contained in this report. Important factors that could cause or contribute to such differences in operating results include those risks discussed in Item 1A “Risk Factors” in our 2022 Form 10-K, as well as the following:

•competitive pricing pressures for our products, including as a result of capacity additions, demand reductions and the impact of foreign currency fluctuations on the pricing of products globally;

•changes in the U.S. and international economies and in general economic conditions in the regions and industries in which we operate;

•manufacturing or operating disruptions, including equipment malfunctions and damage to our manufacturing facilities;

•the loss of, changes in prices in regard to, or reduction in, orders from a significant customer;

•changes in the cost and availability of wood fiber and wood pulp;

•changes in energy, chemicals, packaging and freight costs and disruptions in transportation services impacting our ability to receive inputs or ship products to customers;

•reliance on a limited number of third-party suppliers, vendors and service providers required for the production of our products and our operations;

•changes in customer product preferences and competitors' product offerings;

•cyber-security risks;

•larger competitors having operational, financial and other advantages;

•consolidation and vertical integration of converting operations in the paperboard industry;

•our ability to successfully execute capital projects and other activities to operate our assets, including effective maintenance, implement our operational efficiencies and realize higher throughput or lower costs;

•IT system disruptions and IT system implementation failures;

•labor disruptions;

•cyclical industry conditions;

•changes in expenses, required contributions and potential withdrawal costs associated with our pension plans;

•environmental liabilities or expenditures and climate change;

•our ability to attract, motivate, train and retain qualified and key personnel;

•ability to service our debt obligations and restrictions on our business from debt covenants and terms;

•changes in our banking relations, or in our customer supply chain financing negative

•changes in our credit agency ratings; and

•changes in laws, regulations or industry standards affecting our business.

Forward-looking statements contained in this report present management’s views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of management’s views to reflect events or circumstances occurring after the date of this report. You are advised, however, to consult any further disclosures we make on related subjects in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the Securities and Exchange Commission, or SEC.



Table of Contents		Page Number

PART I.	FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements (Unaudited)

	Consolidated Balance Sheets	2

	Consolidated Statements of Operations	3

	Consolidated Statements of Comprehensive Income	4

	Consolidated Statements of Cash Flows	5

	Consolidated Statements of Stockholders' Equity	6

	Notes to Consolidated Financial Statements	78

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1314

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	1920

ITEM 4.	Controls and Procedures	2021

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	2122

ITEM 1A.	Risk Factors	2122

ITEM 2.	Unregistered Sales of Equity Securities and ~~Uses~~Use of Proceeds	2122

ITEM 5.	Other Information	22

ITEM 6.	Exhibits	2223

	Signatures	24

Part I: Financial Information


ITEM 1.			Consolidated Financial Statements

CLEARWATER PAPER CORPORATION

Consolidated Balance Sheets

(Unaudited)


(In millions, except share data)	(In millions, except share data)	March 31, 2023		December 31, 2022		(In millions, except share data)	June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	16.7	$	53.7	Cash and cash equivalents	$	41.7	$	53.7
Receivables, net of allowance for current expected credit losses	Receivables, net of allowance for current expected credit losses	186.3		188.8		Receivables, net of allowance for current expected credit losses	196.6		188.8
Inventories, net	Inventories, net	345.5		324.0		Inventories, net	340.4		324.0
Other current assets	Other current assets	19.5		19.9		Other current assets	13.4		19.9
Total current assets	Total current assets	567.9		586.3		Total current assets	592.1		586.3
Property, plant and equipment, net	Property, plant and equipment, net	1,004.6		1,017.1		Property, plant and equipment, net	1,000.2		1,017.1
Other assets, net	Other assets, net	117.9		100.1		Other assets, net	112.7		100.1
Total assets	Total assets	$	1,690.5	$	1,703.5	Total assets	$	1,705.0	$	1,703.5

Liabilities and stockholders' equity	Liabilities and stockholders' equity					Liabilities and stockholders' equity
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	0.9	$	0.9	Current portion of long-term debt	$	0.9	$	0.9
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	264.6		311.1		Accounts payable and accrued liabilities	262.6		311.1
Total current liabilities	Total current liabilities	265.5		312.0		Total current liabilities	263.5		312.0
Long-term debt	Long-term debt	564.9		564.9		Long-term debt	564.8		564.9
Liability for pension and other postretirement employee benefits	Liability for pension and other postretirement employee benefits	57.8		58.2		Liability for pension and other postretirement employee benefits	57.2		58.2
Deferred tax liabilities and other long-term obligations	Deferred tax liabilities and other long-term obligations	210.4		196.4		Deferred tax liabilities and other long-term obligations	205.0		196.4
Total liabilities	Total liabilities	1,098.5		1,131.5		Total liabilities	1,090.5		1,131.5

Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued	Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued	—		—		Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued	—		—
Common stock, par value $0.0001 per share, 100,000,000 authorized shares, 16,953,399 and 16,761,869 shares issued		—		—
Common stock, par value $0.0001 per share, 100,000,000 authorized shares, 16,707,995 and 16,761,869 shares issued						Common stock, par value $0.0001 per share, 100,000,000 authorized shares, 16,707,995 and 16,761,869 shares issued	—		—
Additional paid-in capital	Additional paid-in capital	24.7		28.5		Additional paid-in capital	17.7		28.5
Retained earnings	Retained earnings	600.6		576.8		Retained earnings	630.3		576.8
Accumulated other comprehensive loss, net of tax	Accumulated other comprehensive loss, net of tax	(33.4)		(33.3)		Accumulated other comprehensive loss, net of tax	(33.4)		(33.3)
Total stockholders' equity	Total stockholders' equity	592.0		572.1		Total stockholders' equity	614.5		572.1
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,690.5	$	1,703.5	Total liabilities and stockholders' equity	$	1,705.0	$	1,703.5

The accompanying notes are an integral part of these consolidated financial statements.

CLEARWATER PAPER CORPORATION

Consolidated Statements of Operations

(Unaudited)


		Quarter Ended March 31,					Quarter Ended June 30,				Six Months Ended June 30,
(In millions, except per-share data)	(In millions, except per-share data)	2023		2022		(In millions, except per-share data)	2023		2022		2023		2022
Net sales	Net sales	$	525.4	$	488.2	Net sales	$	524.6	$	526.4	$	1,050.0	$	1,014.6
Costs and expenses:	Costs and expenses:					Costs and expenses:
Cost of sales	Cost of sales	448.5		422.0		Cost of sales	438.7		455.2		887.2		877.2
Selling, general and administrative expenses	Selling, general and administrative expenses	36.0		32.8		Selling, general and administrative expenses	39.1		33.9		75.1		66.7
Other operating charges, net		1.1		0.5
Other operating (income) charges, net						Other operating (income) charges, net	(0.4)		5.7		0.6		6.3
Total operating costs and expenses	Total operating costs and expenses	485.6		455.3		Total operating costs and expenses	477.3		494.9		962.9		950.2
Income from operations	Income from operations	39.8		32.9		Income from operations	47.3		31.5		87.1		64.4
Interest expense, net	Interest expense, net	(7.6)		(8.6)		Interest expense, net	(7.5)		(10.7)		(15.1)		(19.3)
Debt retirement costs	Debt retirement costs	—		(0.2)		Debt retirement costs	—		(0.3)		—		(0.5)
Other non-operating (expense) income	Other non-operating (expense) income	0.1		(1.4)		Other non-operating (expense) income	0.1		(1.4)		0.2		(2.8)
Total non-operating expense	Total non-operating expense	(7.5)		(10.3)		Total non-operating expense	(7.4)		(12.4)		(14.9)		(22.7)
Income before income taxes	Income before income taxes	32.3		22.6		Income before income taxes	39.9		19.1		72.2		41.7
Income tax provision	Income tax provision	8.4		6.0		Income tax provision	10.2		4.4		18.6		10.4
Net income	Net income	$	23.8	$	16.6	Net income	$	29.7	$	14.7	$	53.5	$	31.3

Net income per common share:	Net income per common share:					Net income per common share:
Basic	Basic	$	1.42	$	0.99	Basic	$	1.76	$	0.87	$	3.18	$	1.86
Diluted	Diluted	1.40		0.97		Diluted	1.75		0.86		3.15		1.83

Average shares of common stock used to compute net income per share: (in thousands)	Average shares of common stock used to compute net income per share: (in thousands)					Average shares of common stock used to compute net income per share: (in thousands)
Basic	Basic	16,834		16,728		Basic	16,865		16,849		16,849		16,788
Diluted	Diluted	17,036		17,073		Diluted	16,958		17,078		17,003		17,080

The accompanying notes are an integral part of these consolidated financial statements.

CLEARWATER PAPER CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)


		Quarter Ended March 31,					Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022		2023		2022
Net income	Net income	$	23.8	$	16.6	Net income	$	29.7	$	14.7	$	53.5	$	31.3
Other comprehensive income (loss):
Other comprehensive income:						Other comprehensive income:
Defined benefit pension and other postretirement employee benefits:	Defined benefit pension and other postretirement employee benefits:					Defined benefit pension and other postretirement employee benefits:
Amortization of actuarial (gain) loss included in net periodic cost, net of immaterial tax and $0.4		(0.1)		1.1
Other comprehensive income (loss), net of tax		(0.1)		1.1
Amortization of actuarial (gain) loss included in net periodic cost, net of tax of $0.0, $0.4, $0.1 and $0.8						Amortization of actuarial (gain) loss included in net periodic cost, net of tax of $0.0, $0.4, $0.1 and $0.8	(0.1)		1.1		(0.1)		2.3
Other comprehensive income, net of tax						Other comprehensive income, net of tax	(0.1)		1.1		(0.1)		2.3
Comprehensive income	Comprehensive income	$	23.8	$	17.7	Comprehensive income	$	29.6	$	15.8	$	53.4	$	33.6

The accompanying notes are an integral part of these consolidated financial statements.

CLEARWATER PAPER CORPORATION

Consolidated Statements of Cash Flows

~~(Unaudited)~~


		Quarter Ended March 31,
(unaudited)						(unaudited)	Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022		2023		2022
Operating activities	Operating activities					Operating activities
Net income	Net income	$	23.8	$	16.6	Net income	$	29.7	$	14.7	$	53.5	$	31.3
Adjustments to reconcile net income to net cash flows (used in) provided by operating activities:
Adjustments to reconcile net income to net cash flows provided by operating activities:						Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	Depreciation and amortization	24.8		25.4		Depreciation and amortization	24.6		25.7		49.4		51.2
Equity-based compensation expense	Equity-based compensation expense	1.9		0.7		Equity-based compensation expense	1.5		4.9		3.4		5.5
Deferred taxes	Deferred taxes	(1.3)		(2.2)		Deferred taxes	(1.6)		(1.9)		(2.9)		(4.1)
Defined benefit pension and other postretirement employee benefits	Defined benefit pension and other postretirement employee benefits	(0.5)		0.7		Defined benefit pension and other postretirement employee benefits	(0.6)		0.8		(1.1)		1.5
Amortization of deferred debt costs and debt retirement						Amortization of deferred debt costs and debt retirement	0.3		0.7		0.6		1.3
Loss on sale or impairment associated with assets	Loss on sale or impairment associated with assets	1.1		—		Loss on sale or impairment associated with assets	—		4.6		1.1		4.6
Increase (decrease) in cash from changes in operating assets and liabilities:	Increase (decrease) in cash from changes in operating assets and liabilities:					Increase (decrease) in cash from changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(6.4)		(10.6)		Accounts receivable	(7.7)		(11.3)		(14.1)		(21.8)
Inventories	Inventories	(22.3)		(4.2)		Inventories	5.3		(5.8)		(17.0)		(10.0)
Other current assets						Other current assets	5.4		4.2		5.8		4.2
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(31.7)		13.9		Accounts payable and accrued liabilities	(10.7)		40.6		(42.5)		54.5
Other, net	Other, net	1.4		0.7		Other, net	(0.1)		1.3		0.6		1.4
Net cash flows provided by (used in) operating activities		(9.1)		41.1
Net cash flows provided by operating activities						Net cash flows provided by operating activities	46.0		78.5		36.9		119.5
Investing activities	Investing activities					Investing activities
Additions to property, plant and equipment, net 1	Additions to property, plant and equipment, net 1	(21.5)		(7.9)		Additions to property, plant and equipment, net 1	(12.8)		(5.4)		(34.3)		(13.2)
Net cash flows used in investing activities	Net cash flows used in investing activities	(21.5)		(7.9)		Net cash flows used in investing activities	(12.8)		(5.4)		(34.3)		(13.2)
Financing activities	Financing activities					Financing activities
Borrowings on short-term debt	Borrowings on short-term debt	12.0		—		Borrowings on short-term debt	—		—		12.0		—
Repayments of borrowings on short-term debt	Repayments of borrowings on short-term debt	(12.0)		—		Repayments of borrowings on short-term debt	—		—		(12.0)		—
Repayments of long-term debt	Repayments of long-term debt	(0.2)		(20.4)		Repayments of long-term debt	(0.2)		(35.1)		(0.5)		(55.5)
Taxes paid related to net share settlement of equity awards	Taxes paid related to net share settlement of equity awards	(4.2)		(1.5)		Taxes paid related to net share settlement of equity awards	(0.4)		(1.0)		(4.6)		(2.5)
Repurchases of common stock	Repurchases of common stock	(1.7)		—		Repurchases of common stock	(8.4)		(3.9)		(10.1)		(3.9)
Other, net	Other, net	(0.1)		—		Other, net	—		—		(0.1)		—
Net cash flows used in financing activities	Net cash flows used in financing activities	(6.3)		(21.9)		Net cash flows used in financing activities	(8.9)		(40.0)		(15.3)		(61.9)
Increase (decrease) in cash, cash equivalents and restricted cash	Increase (decrease) in cash, cash equivalents and restricted cash	(37.0)		11.2		Increase (decrease) in cash, cash equivalents and restricted cash	24.3		33.1		(12.7)		44.4
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	54.4		26.2		Cash, cash equivalents and restricted cash at beginning of period	17.4		37.5		54.4		26.2
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	17.4	$	37.5	Cash, cash equivalents and restricted cash at end of period	$	41.7	$	70.6	$	41.7	$	70.6

Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information					Supplemental disclosures of cash flow information
Cash paid for interest, net of amounts capitalized	Cash paid for interest, net of amounts capitalized	$	14.6	$	15.6	Cash paid for interest, net of amounts capitalized	$	0.8	$	1.2	$	15.4	$	16.9
Cash paid for income taxes						Cash paid for income taxes	$	15.1	$	12.5	$	15.1	$	12.5

Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash					Cash, cash equivalents, and restricted cash
Cash and cash equivalents	Cash and cash equivalents	$	16.7	$	36.4	Cash and cash equivalents	$	41.7	$	69.5	$	41.7	$	69.5
Restricted cash included in other current assets and other assets, net		0.7		1.1
Restricted cash included in other assets, net						Restricted cash included in other assets, net	—		1.1		—		1.1
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	17.4	$	37.5	Total cash, cash equivalents and restricted cash	$	41.7	$	70.6	$	41.7	$	70.6

1 Capital expenditures of ~~$7.0~~$14.0 million and ~~$4.7~~$5.1 million that have not been paid as of ~~March 31,~~June 30, 2023 and 2022 were excluded from the Statements

of Cash Flows.

The accompanying notes are an integral part of these consolidated financial statements.

CLEARWATER PAPER CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)


		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity			Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(In millions, except share amounts which are in thousands)	(In millions, except share amounts which are in thousands)	Shares	Amount										(In millions, except share amounts which are in thousands)	Shares	Amount
Balance at December 31, 2021	Balance at December 31, 2021	16,692	$	—	$	23.6	$	530.7	$	(42.6)	$	511.7	Balance at December 31, 2021	16,692	$	—	$	23.6	$	530.7	$	(42.6)	$	511.7
Net income	Net income	—	—		—		16.6		—		16.6		Net income	—	—		—		16.6		—		16.6
Stock-based compensation expense	Stock-based compensation expense	—	—		2.0		—		—		2.0		Stock-based compensation expense	—	—		2.0		—		—		2.0
Issuance of shares under stock plans, net	Issuance of shares under stock plans, net	119	—		(1.5)		—		—		(1.5)		Issuance of shares under stock plans, net	119	—		(1.5)		—		—		(1.5)
Pension and other postretirement employee benefits, net of tax of $0.4	Pension and other postretirement employee benefits, net of tax of $0.4	—	—		—		—		1.1		1.1		Pension and other postretirement employee benefits, net of tax of $0.4	—	—		—		—		1.1		1.1
Balance at March 31, 2022	Balance at March 31, 2022	16,811	$	—	$	24.1	$	547.3	$	(41.4)	$	530.0	Balance at March 31, 2022	16,811	$	—	$	24.1	$	547.3	$	(41.4)	$	530.0
Net income													Net income	—	—		—		14.7		—		14.7
Stock-based compensation expense													Stock-based compensation expense	—	—		3.8		—		—		3.8
Issuance of shares under stock plans, net													Issuance of shares under stock plans, net	78	—		(1.0)		—		—		(1.0)
Pension and other postretirement employee benefits, net of tax of $0.4													Pension and other postretirement employee benefits, net of tax of $0.4	—	—		—		—		1.1		1.1
Repurchases of common stock													Repurchases of common stock	(119)	—		(3.9)		—		—		(3.9)
Balance at June 30, 2022													Balance at June 30, 2022	16,770	$	—	$	23.0	$	562.0	$	(40.3)	$	544.7

Common Stock Additional Paid-In Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Stockholders'
Equity
(In millions, except share amounts which are in thousands) Shares Amount
Balance at December 31, 2022 16,762 $ — $ 28.5 $ 576.8 $ (33.3) $ 572.1
Net income — — — 23.8 — 23.8
Stock-based compensation expense — — 2.2 — — 2.2
Issuance of shares under stock plans, net 242 — (4.2) — — (4.2)
Pension and other postretirement employee benefits, net of immaterial tax — — — — (0.1) (0.1)
Repurchases of common stock (51) — (1.7) — — (1.7)
Balance at March 31, 2023 16,953 $ — $ 24.7 $ 600.6 $ (33.4) $ 592.0


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(In millions, except share amounts which are in thousands)	Shares	Amount
Balance at December 31, 2022	16,762	$	—	$	28.5	$	576.8	$	(33.3)	$	572.1
Net income	—	—		—		23.8		—		23.8
Stock-based compensation expense	—	—		2.2		—		—		2.2
Issuance of shares under stock plans, net	242	—		(4.2)		—		—		(4.2)
Pension and other postretirement employee benefits, net of immaterial tax	—	—		—		—		(0.1)		(0.1)
Repurchases of common stock	(51)	—		(1.7)		—		—		(1.7)
Balance at March 31, 2023	16,953	$	—	$	24.7	$	600.6	$	(33.4)	$	592.0
Net income	—	—		—		29.7		—		29.7
Stock-based compensation expense	—	—		1.7		—		—		1.7
Issuance of shares under stock plans, net	18	—		(0.4)		—		—		(0.4)
Pension and other postretirement employee benefits, net of immaterial tax	—	—		—		—		(0.1)		(0.1)
Repurchases of common stock	(263)	—		(8.4)		—		—		(8.4)
Balance at June 30, 2023	16,708	$	—	$	17.7	$	630.3	$	(33.4)	$	614.5

The accompanying notes are an integral part of these consolidated financial statements.

Clearwater Paper Corporation

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, the consolidated financial position, results of operations, stockholders' equity and cash flows for us and our subsidiaries for the interim periods presented. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. All dollar amounts are shown in millions, except per share.

Note 2 Recently Adopted Accounting Standards

In September 2022, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50). This standard requires disclosure of the key terms of outstanding supplier finance programs and a roll forward of the related obligations. The new standard does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The ASU became effective January 1, 2023, except for the roll forward requirement, which becomes effective January 1, 2024. This ASU, except for the roll forward requirement, was adopted retrospectively as of January 1, 2023 and did not have a material impact on our consolidated financial statements other than expanded disclosures.

Note 3 Fair Value Measurements

Carrying amounts reported on the balance sheet for cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

The fair value of our debt is included in the following table:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
2014 Notes, maturing 2025, fixed interest rate	2014 Notes, maturing 2025, fixed interest rate	$	262.3	$	263.1	2014 Notes, maturing 2025, fixed interest rate	$	261.4	$	263.1
2020 Notes, maturing 2028, fixed interest rate	2020 Notes, maturing 2028, fixed interest rate	247.1		241.2		2020 Notes, maturing 2028, fixed interest rate	242.2		241.2
		$	509.4	$	504.3		$	503.6	$	504.3

Note 4 Receivables

Receivables consist of:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Trade accounts receivable	Trade accounts receivable	$	175.7	$	167.6	Trade accounts receivable	$	187.7	$	167.6
Allowance for current expected credit losses	Allowance for current expected credit losses	(1.3)		(1.4)		Allowance for current expected credit losses	(1.5)		(1.4)
Unbilled receivables	Unbilled receivables	7.9		9.1		Unbilled receivables	3.7		9.1
Taxes receivable	Taxes receivable	1.7		10.6		Taxes receivable	4.2		10.6

Other	Other	2.4		2.9		Other	2.5		2.9
		$	186.3	$	188.8		$	196.6	$	188.8

Note 5 Inventories

Inventories are stated at the lower of net realizable value or current cost using the average cost method and consist of:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Logs, chips and sawdust	Logs, chips and sawdust	$	21.7	$	23.6	Logs, chips and sawdust	$	18.7	$	23.6
Pulp	Pulp	22.4		16.8		Pulp	16.8		16.8
Paperboard and tissue products	Paperboard and tissue products	187.3		171.9		Paperboard and tissue products	186.3		171.9
Materials and supplies	Materials and supplies	114.1		111.7		Materials and supplies	118.6		111.7
		$	345.5	$	324.0		$	340.4	$	324.0

Note 6 Property, plant and equipment

Property, plant and equipment consist of:

March 31, 2023 December 31, 2022
Land and land improvements $ 106.1 $ 106.1
Buildings and improvements 457.4 456.8
Machinery and equipment 2,348.8 2,346.5
Construction in progress 26.1 23.9
2,938.4 2,933.4
Less accumulated depreciation and amortization (1,933.7) (1,916.3)
Property, plant and equipment, net $ 1,004.6 $ 1,017.1


	June 30, 2023		December 31, 2022
Land and land improvements	$	106.1	$	106.1
Buildings and improvements	457.6		456.8
Machinery and equipment	2,356.3		2,346.5
Construction in progress	37.1		23.9
	2,957.1		2,933.4
Less accumulated depreciation and amortization	(1,956.9)		(1,916.3)
Property, plant and equipment, net	$	1,000.2	$	1,017.1

Note 7 Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of:


		March 31, 2023		December 31, 2022			June 30, 2023		December 31, 2022
Trade payables	Trade payables	$	179.1	$	213.0	Trade payables	$	169.7	$	213.0
Accrued compensation	Accrued compensation	31.6		41.9		Accrued compensation	32.8		41.9
Operating lease liabilities	Operating lease liabilities	14.8		12.0		Operating lease liabilities	13.9		12.0
Other accrued liabilities	Other accrued liabilities	39.1		44.2		Other accrued liabilities	46.2		44.2
		$	264.6	$	311.1		$	262.6	$	311.1

Included in accounts payable and accrued liabilities are ~~$7.0~~$14.0 million and $15.7 million related to capital expenditures that had not yet been paid as of ~~March 31,~~June 30, 2023 and December 31, 2022.

We maintain a program with a financial institution to provide our vendors with an option to receive payment earlier than our standard payment terms. Vendors receive payment directly from the financial institution. We are obligated to repay the financial institution in the next billing cycle which is generally 35 to 60 days later than payment to the supplier. As of ~~March 31,~~June 30, 2023 and December 31, 2022, ~~$13.5~~$13.7 million and $14.5 million of outstanding obligations under this program were included in other accrued liabilities in the Consolidated Balance Sheets.

Note 8 Income Taxes

For interim periods, accounting standards require that income tax expense be determined by applying the estimated annual effective income tax rate to year-to-date results, unless this method does not result in a reliable estimate of year-to-date income tax expense. Each period, the income tax accrual is adjusted to the latest estimate and the difference from the previously accrued year-to-date balance is adjusted to the current quarter.

For the ~~quarter~~six months ended ~~March 31,~~June 30, 2023, our income tax provision was ~~$8.4~~$18.6 million as compared to ~~$6.0~~$10.4 million in ~~first quarter of~~the same period in 2022. Our effective tax rate for the ~~quarters~~six months ended ~~March 31,~~June 30, 2023 and 2022 varied from the U.S. federal statutory tax rate of 21.0% primarily due to the effects of state taxes and nondeductible compensation.

Note 9 Other Operating Charges

The major components of “Other operating (income) charges, net” in the Consolidated Statements of Operations for the ~~quarters~~quarter and six months ended ~~March 31,~~June 30, 2023 and 2022 are reflected in the table below and described in the paragraphs following the table. These items are considered outside of our core operations.


		Quarter Ended March 31,					Quarter Ended June 30,				Six Months Ended June 30,
		2023		2022			2023		2022		2023		2022
Reorganization and other expenses	Reorganization and other expenses	$	—	$	1.5	Reorganization and other expenses	$	—	$	0.1	$	—	$	1.6
Costs associated with mill closure	Costs associated with mill closure	—		0.4		Costs associated with mill closure	—		—		—		0.4
Loss on sale or impairment associated with assets	Loss on sale or impairment associated with assets	1.1		—		Loss on sale or impairment associated with assets	—		4.6		1.1		4.6
Directors' equity-based compensation expense	Directors' equity-based compensation expense	(0.2)		(1.4)		Directors' equity-based compensation expense	(0.2)		1.1		(0.4)		(0.3)
Other	Other	0.2		—		Other	(0.3)		—		(0.1)		—
		$	1.1	$	0.5		$	(0.4)	$	5.7	$	0.6	$	6.3

2023

During the second quarter of 2023, we recorded $0.4 million of income in "Other operating (income) charges, net." The components of the income include:

•reversal of expense of $0.2 million relating to directors' equity based compensation which is remeasured each period based upon changes in our stock price.

During the first quarter of 2023, we recorded $1.1 million of expenses in "Other (income) operating charges, net." The components of the expense include:

•loss of $1.1 million associated with the impairment of equipment and related spare parts no longer being used; and

•reversal of expense of $0.2 million relating to directors' equity based compensation which is remeasured each period based upon changes in our stock price.

2022

During the second quarter of 2022, we recorded $5.7 million of expenses in "Other (income) operating charges, net." The components of the expense include:

•loss of $4.6 million associated with the impairment of equipment previously located at a closed facility which will not be re-installed; and

•expense of $1.1 million relating to directors' equity based compensation which is remeasured each period based upon changes in our stock price.

During the first quarter of 2022, we recorded $0.5 million of expenses in "Other operating (income) charges, net." The components of the expense include:

•expense of $1.5 million related to reorganization and other expenses including consulting fees associated with our efforts to achieve long-term performance improvements;

•expense of $0.4 million associated with mill closure costs; and

•reversal of expense of $1.4 million relating to directors' equity based compensation which is remeasured each period based upon changes in our stock price.

Note 10 Non-Operating Expense

The components of “Non-operating expense” in the Consolidated Statements of Operations for the quarter and six months ended ~~March 31,~~June 30, 2023 and 2022 are reflected in the table below:


		Quarter Ended March 31,				Quarter Ended June 30,						Six Months Ended June 30,
		2023		2022				2023		2022			2023		2022
Interest expense	Interest expense	$	(7.6)	$	(8.2)		Interest expense	$	(7.6)	$	(10.4)		$	(15.2)	$	(18.6)
Amortization of deferred debt costs	Amortization of deferred debt costs	(0.3)		(0.4)			Amortization of deferred debt costs	(0.3)		(0.4)			(0.6)		(0.8)
Interest income	Interest income	0.3		—			Interest income	0.3		0.1			0.6		0.1
Interest expense, net	Interest expense, net	(7.6)		(8.6)			Interest expense, net	(7.5)		(10.7)			(15.1)		(19.3)

Debt retirement costs	Debt retirement costs	—		(0.2)			Debt retirement costs	—		(0.3)			—		(0.5)
Non-operating pension and other postretirement employee benefits (expense) benefit		0.1		(1.4)
Non-operating pension and other postretirement employee benefits (expense)							Non-operating pension and other postretirement employee benefits (expense)	0.1		(1.4)			0.2		(2.8)
Total non-operating expense	Total non-operating expense	$	(7.5)	$	(10.3)		Total non-operating expense	$	(7.4)	$	(12.4)		$	(14.9)	$	(22.7)

Note 11 Retirement Plans and Postretirement Benefits

The following table details the components of net periodic cost of our company-sponsored pension and other postretirement employee benefit plans for the periods presented:


		Quarter Ended March 31,				Quarter Ended June 30,						Six Months Ended June 30,
Pension Benefit Plans	Pension Benefit Plans	2023		2022			Pension Benefit Plans	2023		2022			2023		2022
Service cost	Service cost	$	0.9	$	0.5		Service cost	$	0.9	$	0.5		$	1.7	$	1.1
Interest cost	Interest cost	3.1		2.2			Interest cost	3.1		2.2			6.2		4.4
Expected return on plan assets	Expected return on plan assets	(3.8)		(2.8)			Expected return on plan assets	(3.8)		(2.8)			(7.6)		(5.7)
Amortization of actuarial loss	Amortization of actuarial loss	—		1.5			Amortization of actuarial loss	—		1.5			—		3.1
Net periodic cost	Net periodic cost	$	0.2	$	1.5		Net periodic cost	$	0.2	$	1.5		$	0.4	$	2.9


		Quarter Ended March 31,					Quarter Ended June 30,		Six Months Ended June 30,
Other Postretirement Employee Benefit Plans	Other Postretirement Employee Benefit Plans		2023		2022			Other Postretirement Employee Benefit Plans		2023		2022		2023		2022
Service cost	Service cost		$	—	$	0.1		Service cost		$	—	$	0.1	$	0.1	$	0.2
Interest cost	Interest cost		0.7		0.5			Interest cost		0.7		0.5		1.4		1.0
Amortization of actuarial gain	Amortization of actuarial gain		(0.1)		—			Amortization of actuarial gain		(0.1)		—		(0.3)		—
Net periodic cost	Net periodic cost		$	0.6	$	0.6		Net periodic cost		$	0.6	$	0.6	$	1.2	$	1.2

We record the service component of net periodic cost as part of "Cost of sales" and "Selling, general, and administrative expenses," while the non-service components of net periodic cost are recorded to "Other non-operating (expense) income" on our Consolidated Statements of Operations. For the quarter and six months ended ~~March 31,~~June 30, 2023, we recorded $0.8 million and $1.5 million to "Cost of sales" and $0.1 million and $0.3 million to "Selling, general, and administrative expenses." For the quarter and six months ended ~~March 31,~~June 30, 2022, we recorded $0.5 million and $1.1 million to "Cost of sales" and less than $0.1 million and $0.2 million to "Selling, general, and administrative expenses."

Note 12 Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of tax, is comprised of the following:


		Pension Plan Adjustments		Other Post Retirement Employee Benefit Plan Adjustments		Total			Pension Plan Adjustments		Other Post Retirement Employee Benefit Plan Adjustments		Total
Balance at December 31, 2021	Balance at December 31, 2021	$	(42.8)	$	0.3	$	(42.6)	Balance at December 31, 2021	$	(42.8)	$	0.3	$	(42.6)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	1.1		—		1.1		Amounts reclassified from accumulated other comprehensive loss	2.3		—		2.3
Balance at March 31, 2022		$	(41.7)	$	0.3	$	(41.4)
Balance at June 30, 2022								Balance at June 30, 2022	$	(40.5)	$	0.3	$	(40.3)

Balance at December 31, 2022	Balance at December 31, 2022	$	(46.5)	$	13.3	$	(33.3)	Balance at December 31, 2022	$	(46.5)	$	13.3	$	(33.3)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	—		(0.1)		(0.1)		Amounts reclassified from accumulated other comprehensive loss	—		(0.1)		(0.1)
Balance at March 31, 2023		$	(46.5)	$	13.2	$	(33.4)
Balance at June 30, 2023								Balance at June 30, 2023	$	(46.5)	$	13.1	$	(33.4)

Note 13 Stockholders' Equity

Common Stock Plans

We have stock-based compensation plans under which restricted stock awards and stock options are outstanding or granted subject to time or performance vesting requirements. At ~~March 31,~~June 30, 2023, approximately ~~0.7~~0.9 million shares were available for future issuance under our current plan.


		Quarter Ended March 31,				Quarter Ended June 30,						Six Months Ended June 30,
		2023		2022				2023		2022			2023		2022
Total stock-based compensation expense	Total stock-based compensation expense	$	1.9	$	0.7		Total stock-based compensation expense	$	1.5	$	4.9		$	3.4	$	5.5
Income tax benefit related to stock-based compensation	Income tax benefit related to stock-based compensation	$	0.5	$	0.2		Income tax benefit related to stock-based compensation	$	0.4	$	1.2		$	0.9	$	1.4
Impact on cash flow due to taxes paid related to net share settlement of equity awards	Impact on cash flow due to taxes paid related to net share settlement of equity awards	$	4.2	$	1.5		Impact on cash flow due to taxes paid related to net share settlement of equity awards	$	0.4	$	1.0		$	4.6	$	2.5

At ~~March 31,~~June 30, 2023, there was ~~$21.2~~$16.8 million of total unrecognized compensation cost related to outstanding restricted stock unit awards.

During the ~~quarter~~six months ended ~~March 31,~~June 30, 2023, we granted ~~188,074~~195,127 restricted stock units (time vesting) at an average grant date fair value of ~~$38.20~~$37.99 per share and 196,451 restricted stock units (performance vesting) at an average grant date fair value of $40.47 per share.

Note 14 Earnings per Share

Basic income per share is based on the weighted-average number of shares of common stock outstanding. Diluted income per share is based upon the weighted-average number of shares of common stock outstanding plus all potentially dilutive securities that were assumed to be converted into common shares at the beginning of the period under the treasury stock method. This method requires the effect of potentially dilutive common stock equivalents be excluded from the calculation of diluted earnings per share for the periods in which net losses are reported because the effect is anti-dilutive.


		Quarter Ended March 31,			Quarter Ended June 30,		Six Months Ended June 30,
(In thousands)	(In thousands)	2023	2022	(In thousands)	2023	2022	2023	2022
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	16,834	16,728	Basic weighted-average common shares outstanding	16,865	16,849	16,849	16,788
Incremental shares due to:	Incremental shares due to:			Incremental shares due to:
Stock-based awards	Stock-based awards	202	229	Stock-based awards	91	105	152	171
Performance shares	Performance shares	—	116	Performance shares	2	125	2	120
Diluted weighted-average common shares outstanding	Diluted weighted-average common shares outstanding	17,036	17,073	Diluted weighted-average common shares outstanding	16,958	17,078	17,003	17,080

Shares excluded from the computation of diluted earnings per share were 0.5 million and 0.4 million for the ~~quarters~~quarter and six months ended ~~March 31,~~June 30, 2023 and 0.4 million and 0.4 million for the quarter and six months ended June 30, 2022 as they were either antidilutive (not in-the-money). or the required performance conditions were not met.

Note 15 Segment Information

We operate in two segments: Pulp and Paperboard and Consumer Products. Our business units have been aggregated into these two segments based upon the similarity of economic characteristics, customers and distribution methods. Our results of operations are summarized below for each of these segments separately. Segment information was prepared in accordance with the same accounting principles as those described in Note 1 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Quarter Ended March 31,
2023 2022
Segment net sales:
Pulp and Paperboard $ 278.8 $ 266.2
Consumer Products 248.3 223.0
Eliminations (1.7) (1.1)
Net sales $ 525.4 $ 488.2
Operating income (loss):
Pulp and Paperboard $ 57.1 $ 50.3
Consumer Products 4.2 0.9
Corporate and eliminations (20.4) (17.8)
Other operating charges, net (1.1) (0.5)
Income from operations $ 39.8 $ 32.9


	Quarter Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Segment net sales:
Pulp and Paperboard	$	272.3	$	295.8	$	551.0	$	562.0
Consumer Products	253.6		232.1		502.0		455.2
Eliminations	(1.3)		(1.5)		(3.0)		(2.6)
Net sales	$	524.6	$	526.4	$	1,050.0	$	1,014.6

Operating income (loss):
Pulp and Paperboard	$	42.0	$	52.0	$	99.1	$	102.3
Consumer Products	25.0		3.5		29.2		4.4
Corporate and eliminations	(20.1)		(18.2)		(40.6)		(36.0)
Other operating income (charges), net	0.4		(5.7)		(0.6)		(6.3)
Income from operations	$	47.3	$	31.5	$	87.1	$	64.4

Net sales, classified by major products, were as follows:


		Quarter Ended March 31,				Quarter Ended June 30,						Six Months Ended June 30,
		2023		2022				2023		2022			2023		2022
Major products:	Major products:						Major products:
Paperboard	Paperboard	$	272.9	$	254.3		Paperboard	$	263.0	$	287.6		$	536.4	$	541.9
Retail tissue	Retail tissue	246.0		216.6			Retail tissue	252.8		228.6			498.8		445.2
Pulp	Pulp	3.2		8.3			Pulp	7.0		5.6			10.3		14.0
Other	Other	5.0		10.1			Other	3.1		6.1			7.5		16.2
Eliminations	Eliminations	(1.7)		(1.1)			Eliminations	(1.3)		(1.5)			(3.0)		(2.6)
Total net sales	Total net sales	$	525.4	$	488.2		Total net sales	$	524.6	$	526.4		$	1,050.0	$	1,014.6

1213


ITEM 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included herein and our audited Consolidated Financial Statements and Notes thereto for the year ended December 31, 2022, as well as the information under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are part of our Annual Report on Form 10-K for the year ended December 31, 2022.

OVERVIEW

Executive Summary

We recorded ~~an increase of 8% in~~ net sales ~~to $525.4~~of $524.6 million for the quarter ended ~~March 31,~~June 30, 2023 compared to ~~$488.2~~$526.4 million for the quarter ended ~~March 31,~~June 30, 2022. We recorded net income for the quarter ended ~~March 31,~~June 30, 2023 of ~~$23.8~~$29.7 million, or ~~$1.40~~$1.75 per diluted share, compared to a net income of ~~$16.6~~$14.7 million or ~~$0.97~~$0.86 per diluted share for the quarter ended ~~March 31,~~June 30, 2022. We recorded Adjusted EBITDA for the quarter ended ~~March 31,~~June 30, 2023 of ~~$65.7~~$71.5 million compared to ~~$58.9~~$63.0 million for the quarter ended ~~March 31,~~June 30, 2022.

We recorded an increase of 3% in net sales to $1.1 billion for the six months ended June 30, 2023 compared to $1.0 billion for the six months ended June 30, 2022. We recorded net income for the six months ended June 30, 2023 of $53.5 million, or $3.15 per diluted share, compared to net income of $31.3 million or $1.83 per diluted share for the six months ended June 30, 2022. We recorded Adjusted EBITDA for the six months ended June 30, 2023 of $137.2 million compared to $121.9 million for the six months ended June 30, 2022.

See discussion on segment level results regarding net sales, operating results and Adjusted EBITDA in “Our Operating Results” below.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires our management to select and apply accounting policies that best provide the framework to report our results of operations and financial position. The selection and application of those policies requires management to make difficult, subjective and complex judgments concerning reported amounts of revenue and expenses during the reporting period and the reported amounts of assets and liabilities at the date of the financial statements. As a result, it is possible that materially different amounts would be reported under different conditions or using different assumptions.

As of ~~March 31,~~June 30, 2023 there have been no significant changes with regard to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

NON-GAAP MEASURES

In evaluating our business, we utilize several non-GAAP financial measures. A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so excluded or included under applicable GAAP guidance. In this report on Form 10-Q, we disclose overall and segment income from operations before interest expense, net, other non-operating costs, taxes, depreciation and amortization, debt retirement costs, other operating charges, net, and Adjusted EBITDA which is a non-GAAP financial measure. Adjusted EBITDA is not a substitute for the GAAP measure of net income or for any other GAAP measures of operating performance.

We have included Adjusted EBITDA on a consolidated and segment basis in this report because we use them as important supplemental measures of our performance and believe that they are frequently used by securities analysts, investors and other interested persons in the evaluation of companies in our industry, some of which present Adjusted EBITDA when reporting their results. We also use Adjusted EBITDA to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. In addition, we use Adjusted EBITDA: (i) as a factor in evaluating management’s performance when determining incentive compensation, (ii) to evaluate the effectiveness of the company's business strategies, and (iii) because the company's credit agreement and the indentures governing the company's outstanding notes use metrics similar to Adjusted EBITDA to measure the company's compliance with certain covenants.

It should be noted that companies calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA measures may not be comparable to Adjusted EBITDA reported by other companies. Our Adjusted EBITDA measures have material limitations as performance measures because they exclude interest expense, income tax provision and depreciation and amortization which are necessary to operate our business or which we otherwise incur or experience in connection with the

operation of our business. In addition, we exclude other income and expense items which are outside of our core operations.

The following table provides our Adjusted EBITDA for the periods presented, as well as a reconciliation to net income and segment operating ~~income (loss).~~income.


		Quarter Ended March 31,					Quarter Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022		2023		2022
Net income	Net income	$	23.8	$	16.6	Net income	$	29.7	$	14.7	$	53.5	$	31.3
Income tax provision	Income tax provision	8.4		6.0		Income tax provision	10.2		4.4		18.6		10.4
Interest expense, net	Interest expense, net	7.6		8.6		Interest expense, net	7.5		10.7		15.1		19.3
Depreciation and amortization	Depreciation and amortization	24.8		25.4		Depreciation and amortization	24.6		25.7		49.4		51.2
Other operating charges, net		1.1		0.5
Other operating (income) charges, net						Other operating (income) charges, net	(0.4)		5.7		0.6		6.3
Debt retirement costs	Debt retirement costs	—		0.2		Debt retirement costs	—		0.3		—		0.5
Other non-operating expense (income)		(0.1)		1.4
Other non-operating (income) expense						Other non-operating (income) expense	(0.1)		1.4		(0.2)		2.8
Adjusted EBITDA	Adjusted EBITDA	$	65.7	$	58.9	Adjusted EBITDA	$	71.5	$	63.0	$	137.2	$	121.9

Pulp and Paperboard segment income	Pulp and Paperboard segment income	$	57.1	$	50.3	Pulp and Paperboard segment income	$	42.0	$	52.0	$	99.1	$	102.3
Depreciation and amortization	Depreciation and amortization	9.1		9.3		Depreciation and amortization	9.3		9.2		18.5		18.5
Adjusted EBITDA Pulp and Paperboard segment	Adjusted EBITDA Pulp and Paperboard segment	$	66.2	$	59.5	Adjusted EBITDA Pulp and Paperboard segment	$	51.3	$	61.2	$	117.6	$	120.8

Consumer Products segment income	Consumer Products segment income	$	4.2	$	0.9	Consumer Products segment income	$	25.0	$	3.5	$	29.2	$	4.4
Depreciation and amortization	Depreciation and amortization	15.0		15.3		Depreciation and amortization	14.7		15.6		29.7		30.9
Adjusted EBITDA Consumer Products segment	Adjusted EBITDA Consumer Products segment	$	19.2	$	16.2	Adjusted EBITDA Consumer Products segment	$	39.7	$	19.1	$	58.9	$	35.3

Corporate and other expense	Corporate and other expense	$	(20.4)	$	(17.8)	Corporate and other expense	$	(20.1)	$	(18.2)	$	(40.6)	$	(36.0)
Depreciation and amortization	Depreciation and amortization	0.6		0.9		Depreciation and amortization	0.6		0.9		1.2		1.8
Adjusted EBITDA Corporate and other	Adjusted EBITDA Corporate and other	$	(19.8)	$	(16.9)	Adjusted EBITDA Corporate and other	$	(19.5)	$	(17.3)	$	(39.3)	$	(34.2)

Pulp and Paperboard segment	Pulp and Paperboard segment	$	66.2	$	59.5	Pulp and Paperboard segment	$	51.3	$	61.2	$	117.6	$	120.8
Consumer Products segment	Consumer Products segment	19.2		16.2		Consumer Products segment	39.7		19.1		58.9		35.3
Corporate and other	Corporate and other	(19.8)		(16.9)		Corporate and other	(19.5)		(17.3)		(39.3)		(34.2)
Adjusted EBITDA	Adjusted EBITDA	$	65.7	$	58.9	Adjusted EBITDA	$	71.5	$	63.0	$	137.2	$	121.9

1415

OUR OPERATING RESULTS

Our operating results for each of our segments are discussed below. See Note 15 "Segment Information" of the Notes to the Consolidated Financial Statements included in Item 1 of this report for further information regarding our segments.

Pulp and Paperboard Segment


		Quarter Ended March 31,									Quarter Ended June 30,								Six Months Ended June 30,
(Dollars in millions, except per unit and paperboard shipments)	(Dollars in millions, except per unit and paperboard shipments)	2023			2022			Increase (decrease)		(Dollars in millions, except per unit and paperboard shipments)	2023			2022			Increase (decrease)		2023			2022			Increase (decrease)
Sales:	Sales:									Sales:
Paperboard	Paperboard	$	272.9		$	254.3		7.3	%	Paperboard	$	263.0		$	287.6		(8.6)	%	$	536.4		$	541.9		(1.0)	%
Pulp	Pulp	3.2			8.3			(61.0)	%	Pulp	7.0			5.6			24.5	%	10.3			14.0			(26.4)	%
Other	Other	2.6			3.6			(27.8)	%	Other	2.3			2.6			(10.7)	%	4.3			6.2			(30.6)	%
		$	278.8		$	266.2		4.7	%		$	272.3		$	295.8		(7.9)	%	$	551.0		$	562.0		(2.0)	%

Operating income	Operating income	$	57.1		$	50.3		13.6	%	Operating income	$	42.0		$	52.0		(19.3)	%	$	99.1		$	102.3		(3.1)	%
Operating margin	Operating margin	20.5		%	18.9		%			Operating margin	15.4		%	17.6		%			18.0		%	18.2		%

Adjusted EBITDA	Adjusted EBITDA	$	66.2		$	59.5		11.3	%	Adjusted EBITDA	$	51.3		$	61.2		(16.2)	%	$	117.6		$	120.8		(2.6)	%
Adjusted EBITDA margin	Adjusted EBITDA margin	23.8		%	22.4		%			Adjusted EBITDA margin	18.8		%	20.7		%			21.3		%	21.5		%

Paperboard shipments (short tons)	Paperboard shipments (short tons)	189,398			201,356			(5.9)	%	Paperboard shipments (short tons)	186,160			215,903			(13.8)	%	375,558			417,259			(10.0)	%
Paperboard sales price (per short ton)	Paperboard sales price (per short ton)	$	1,441		$	1,263		14.1	%	Paperboard sales price (per short ton)	$	1,413		$	1,332		6.1	%	$	1,428		$	1,299		9.9	%

Sales volumes in our Pulp and Paperboard segment decreased for the quarter and the six months ended ~~March 31,~~June 30, 2023 compared to the same ~~period~~periods in the prior year due to weaker demand as customers rebalance inventory levels. Sales prices increased in our Pulp and Paperboard segment for the quarter and the six months ended ~~March 31,~~June 30, 2023 compared to the same ~~period~~periods in the prior year due to the impacts of our previously announced price increases.

Overall, the ~~increase~~decrease in operating income and Adjusted EBITDA for the quarter ended ~~March 31,~~June 30, 2023 as compared to the same period in the prior year was primarily driven by lower sales volumes, higher maintenance costs and planned production downtime to manage inventory, partially offset by higher sales ~~prices~~prices. The decrease in operating income and Adjusted EBITDA for the six month ended ended June 30, 2023 as compared to the same period in the prior year was primarily driven by lower sales volumes and planned production downtime to manage inventory, partially offset by ~~cost inflation specifically related to fiber, chemicals and energy.~~higher sales prices.

1516

Consumer Products Segment


		Quarter Ended March 31,									Quarter Ended June 30,								Six Months Ended June 30,
(Dollars in millions, except per unit and shipments)	(Dollars in millions, except per unit and shipments)	2023			2022			Increase (decrease)		(Dollars in millions, except per unit and shipments)	2023			2022			Increase (decrease)		2023			2022			Increase (decrease)
Sales:	Sales:									Sales:
Retail tissue	Retail tissue	$	246.0		$	216.6		13.6	%	Retail tissue	$	252.8		$	228.6		10.6	%	$	498.8		$	445.2		12.0	%
Other	Other	2.4			6.4			(62.9)	%	Other	0.8			3.6			(77.8)	%	3.2			10.0			(68.0)	%
		$	248.3		$	223.0		11.4	%		$	253.6		$	232.1		9.3	%	$	502.0		$	455.2		10.3	%

Operating income	Operating income	$	4.2		$	0.9		353.3	%	Operating income	$	25.0		$	3.5		620.3	%	$	29.2		$	4.4		564.0	%
Operating margin	Operating margin	1.7		%	0.4		%			Operating margin	9.9		%	1.5		%			5.8		%	1.0		%

Adjusted EBITDA	Adjusted EBITDA	$	19.2		$	16.2		18.5	%	Adjusted EBITDA	$	39.7		$	19.1		107.8	%	$	58.9		$	35.3		66.9	%
Adjusted EBITDA margin	Adjusted EBITDA margin	7.7		%	7.3		%			Adjusted EBITDA margin	15.7		%	8.2		%			11.7		%	7.8		%

Shipments (short tons)	Shipments (short tons)									Shipments (short tons)
Retail	Retail	76,848			75,426			1.9	%	Retail	78,672			76,604			2.7	%	155,520			152,030			2.3	%
Other	Other	1,017			5,073			(80.0)	%	Other	103			2,614			(96.1)	%	1,120			7,687			(85.4)	%
		77,865			80,499			(3.3)	%		78,775			79,218			(0.6)	%	156,640			159,717			(1.9)	%

Sales price (per short ton)	Sales price (per short ton)									Sales price (per short ton)
Retail	Retail	$	3,201		$	2,872		11.5	%	Retail	$	3,214		$	2,984		7.7	%	$	3,207		$	2,928		9.5	%

Retail sales volumes in our Consumer Products segment increased for the quarter and the six months ended ~~March 31,~~June 30, 2023 compared to the same ~~period~~periods in ~~2022 driven by~~the prior year due to the increased demand for private label versus branded products. Retail sales prices increased in our Consumer Products segment for the quarter and the six months ended ~~March 31,~~June 30, 2023 compared to the same ~~period~~periods in the prior year due to our previously announced price increases and improved product mix.

Overall, the increase in operating income and Adjusted EBITDA for the quarter ended ~~March 31,~~June 30, 2023 compared to the same period in the prior year was driven by higher sales prices and lower input costs, primarily in freight and energy costs. The increase in operating income and Adjusted EBITDA for the six months ended June 30, 2023 compared to the same period in the prior year was driven by higher sales prices partially offset by higher input costs, primarily in pulp, freight and energy costs.

Corporate expenses

Corporate expenses for the quarter and six months ended ~~March 31,~~June 30, 2023 were ~~$20.4~~$20.1 million and $40.6 million compared to ~~$17.8~~$18.2 million and $36.0 million in the same ~~period~~periods in the prior year. The increase between periods is primarily related to costs associated with business process improvement ~~projects.~~projects and increased charitable contributions. Corporate expenses primarily consist of corporate overhead such as wages and benefits, professional fees, insurance and other expenses for corporate functions including certain executive officers, public company costs, information technology, financial services, environmental and safety, legal, supply management, human resources and other corporate functions not directly associated with the business operations.

Other operating charges

See Note 9 "Other operating charges" of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.

1617

Potential impairments

We review from time to time possible dispositions or reorganization of various assets in light of current and anticipated economic and industry conditions, our strategic plan and other relevant factors. Because a determination to dispose or reorganize particular assets may require management to make assumptions regarding the transaction structure of the disposition or reorganization and to estimate the net sales proceeds, which may be less than previous estimates of undiscounted future net cash flows, we may be required to record impairment charges in connection with decisions to dispose of assets.

1718

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are existing cash, cash generated by our operations and our ability to borrow under such credit facilities as we may have in effect from time to time. At times, we may also issue equity, debt or hybrid securities or engage in other capital market transactions. Due to the competitive and cyclical nature of the markets in which we operate, there is uncertainty regarding the amount of cash flows we will generate during the next twelve months. However, we believe that our cash flows from operations, our cash on hand and our borrowing capacity under our credit agreements will be adequate to fund debt service requirements and provide cash to support our ongoing operations, capital expenditures and working capital needs for the next twelve months.

Our principal uses of liquidity are paying the costs and expenses associated with our operations, servicing outstanding indebtedness and making capital expenditures. We may also from time to time prepay or repurchase outstanding indebtedness or shares or acquire assets or businesses that are complementary to our operations. Any such repurchases may be commenced, suspended, discontinued or resumed, and the method or methods of affecting any such repurchases may be changed at any time or from time to time without prior notice.

Operating Activities

Net cash flows ~~used in~~provided by operating activities for the ~~quarter~~six months ended ~~March 31,~~June 30, 2023 were ~~$9.1~~$36.9 million compared to net cash flows provided by operating activities of ~~$41.1~~$119.5 million for the ~~quarter~~six months ended ~~March 31,~~June 30, 2022. This decrease was driven by higher cash outflows related to the major outage that occurred in the later portion of 2022 which did not occur in 2021 and higher inventory levels. This was partially offset by improved operating performance. Accounts receivable and accounts payable agings have remained relatively consistent with balances as of December 31, 2022.

Investing Activities

Net cash flows used in investing activities for the ~~quarter~~six months ended ~~March 31,~~June 30, 2023 were ~~$21.5~~$34.3 million compared to ~~$7.9~~$13.2 million in the same period of the prior year. Included in "Accounts payable and accrued liabilities" on our Consolidated Balance Sheets was ~~$7.0~~$14.0 million and ~~$4.7~~$5.1 million related to capital expenditures that had not yet been paid at ~~March 31,~~June 30, 2023 and 2022.

During 2023, we expect cash paid for capital expenditures to be approximately $70 million to $80 million.

Financing Activities

During the ~~quarter~~six months ended ~~March 31,~~June 30, 2023, net cash used for financing activities was ~~$6.3 million.~~$15.3 million. We used ~~$1.7~~$10.1 million to repurchase stock though our share repurchase program and ~~$4.2~~$4.6 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans. Additionally, we borrowed and repaid $12 million on our ABL credit facility ~~during the quarter~~ to cover short term cash requirements.

During the ~~quarter~~six months ended ~~March 31,~~June 30, 2022, net cash used for financing activities was ~~$21.9 million.~~$61.9 million. We used ~~$20~~$50 million to payoff of our Term Loan Credit Agreement, $5 million to make ~~voluntary debt repayments~~open market purchases of our 2014 Notes and ~~used $1.5~~$3.9 million ~~in connection with income tax withholding requirements associated with~~for common stock repurchases under our ~~employee stock-based compensation plans.~~stock repurchase program.

ABL Credit Agreement

The ABL Credit Agreement includes a $275 million revolving loan commitment, subject to borrowing base limitations. Borrowings under the ABL Credit Agreement are subject to mandatory prepayment in certain circumstances. We may also increase commitments under the ABL Credit Agreement in an aggregate principal amount of up to $100 million, subject to obtaining commitments from any participating lenders and certain other conditions. This agreement contains certain customary representations, warranties, and affirmative and negative covenants.

At ~~March 31,~~June 30, 2023, we were in compliance with the ABL Credit Agreement, and based on our current financial projections, we expect to remain in compliance. However, if our financial position, results of operations or market conditions deteriorate, we may not be able to remain in compliance. There can be no assurance that we will be able to remain in compliance with our ABL Credit Agreement.

1819


ITEM 3.			Quantitative and Qualitative Disclosures About Market Risk

There have been no significant developments with regard to our exposure to market risk for the quarter ended ~~March 31,~~June 30, 2023. For a discussion of certain market risks to which we may be exposed, see Part II, “Item 7A, Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2022.

1920


ITEM 4.			Controls and Procedures

As of ~~March 31,~~June 30, 2023, our Chief Executive Officer (CEO) and Interim Chief Financial Officer (CFO) have carried out, with the participation of our Disclosure Committee and management, an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Act). Based upon this evaluation, the CEO and CFO have concluded that our disclosure controls and procedures are effective to provide reasonable assurance that material information required to be disclosed by us in reports we file under the Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that information required to be disclosed by us in the reports we file or submit under the Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended ~~March 31,~~June 30, 2023 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

2021

Part II


ITEM 1.			Legal Proceedings

We may from time to time be involved in claims, proceedings and litigation arising from our business and property ownership. We believe, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on our financial condition.


ITEM 1A.			Risk Factors

There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. See Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, entitled “Risk Factors.”


ITEM 2.			Unregistered Sales of Equity Securities and Use of Proceeds.

On December 15, 2015, we announced that our Board of Directors had approved a stock repurchase program authorizing the repurchase of up to $100 million of our common stock. The repurchase program authorizes purchases of our common stock from time to time through open market purchases, negotiated transactions or other means, including accelerated stock repurchases and 10b5-1 trading plans in accordance with applicable securities laws and other restrictions. We have no obligation to repurchase stock under this program and may suspend or terminate the program at any time.

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
January 1, 2023 to January 31, 2023 — $ — — $ 24.9
February 1, 2023 to February 28, 2023 6,000 $ 37.00 6,000 $ 24.6
March 1, 2023 to March 31, 2023 44,557 $ 34.22 44,557 $ 23.1
Total 50,557 $ — 50,557


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1, 2023 to April 30, 2023	53,690	$	32.81	53,690	$	21.3
May 1, 2023 to May 31, 2023	88,117	$	32.20	88,117	$	18.5
June 1, 2023 to June 30, 2023	121,574	$	30.85	121,574	$	14.7
Total	263,381	$	31.70	263,381

Shares of common stock withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are not required to be disclosed under Item 703 of Regulation S-K and accordingly are excluded from the amounts in the table above.


ITEM 5.			Other Information.

During the quarter ended June 30, 2023, none of our officers or directors adopted or terminated a Rule 10b5-1 arrangement or non-Rule 10b5-1 trading arrangement, as each is defined in Item 408(a) of regulation S-K.

ITEM 6. Exhibits

The following exhibits are filed as part of, or are incorporated by reference in, this report:

~~Incorporated by Reference~~

~~EXHIBIT~~

~~EXHIBIT DESCRIPTION~~

~~Filed herewith?~~

~~Form~~

~~Exhibit No.~~

~~Date Filed~~

31**

~~Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32**

~~Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350.~~

~~101.INS~~

~~XBRL Instance Document~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema.~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase.~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase.~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase.~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase.~~

~~104~~

~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).~~

Incorporated by Reference

EXHIBIT

EXHIBIT DESCRIPTION

Filed herewith?

Form

Exhibit No.

Date Filed

31**

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32**

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350.

10.1

Amendment to the Clearwater Paper 2017 Stock Incentive Plan

8-K

10.1

May 15, 2023

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase.

101.DEF

XBRL Taxonomy Extension Definition Linkbase.

101.LAB

XBRL Taxonomy Extension Label Linkbase.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


**			In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

2223

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CLEARWATER PAPER CORPORATION

(Registrant)

~~May 2,~~August 1, 2023

By:

/s/ ARSEN S. KITCH

Arsen S. Kitch

President, Chief Executive Officer and Director (Principal Executive Officer)

~~May 2,~~August 1, 2023

By:

/s/ ~~MICHAEL J. MURPHY~~REBECCA A. BARCKLEY

~~Michael J. Murphy~~Rebecca A. Barckley

~~Senior Vice President, Finance~~Corporate Controller (Principal Accounting Officer) and Interim Chief Financial Officer (Principal Financial Officer)

2324