CLW 10-K & 10-Q changes, risk factors and insider trading

RISKS RELATED TO OUR BUSINESS OPERATIONS ANDINDUSTRY, THE MARKETS IN WHICH WE OPERATEOPERATE, AND THE PRODUCTS THAT WE OFFER

Difficult industry and market demand conditions have in the past and may continue to adversely affect the operating results and cash flows of our business.

Our business has historically been affected by cyclical market demand. Difficult industry and market conditions may adversely affect our utilization rates due to decreases in product demand. During such periods, our facilities may not operate at full capacity or may need to take production downtime. During periods of lower capacity utilization and production downtimes, we not only experience lost revenue from lower shipment volumes but are also forced to continue to incur our fixed manufacturing costs, which are not absorbed by our lower production levels. Our results of operations and cash flows may be materially adversely affected in a period of prolonged and significant market weakness. We are not able to predict market conditions or our ability to sustain pricing and production levels during periods of weak demand.

Increases in paperboard supply couldhave and may continue to adversely affect our operating results and financial condition.

Several significant investments in paperboard manufacturing facilities in North America and globally have been announced, whichwith one large facility beginning production in 2025. This expanded supply has and could continue to significantly increase the production and supply of Solid Bleached Sulfate (SBS) and Folding Boxboard (FBB) paperboard in the market. If demand does not increase commensurate with supply, it could continue to result in lower capacity utilization and effectaffect the price of SBS, which could materially and adversely affect our results of operations and cash flows.

Unexpected production disruptions could cause us to shut down or curtail operations at any of our facilities. Disruptions could occur due to any number of circumstances, including prolonged power outages, mechanical or process failures, faults in aging equipment, shortages of raw materials, natural catastrophes, disruptions in the availability of transportation, labor disputes, cyber-attacks and malware, terrorism, changes in or non-compliance with environmental or safety laws, and the lack of availability of services from any of our facilities key suppliers. For example, in the fourthfirst quarter of 2023,2024, weextreme werecold forcedand torelated partiallynatural shutgas downsupply partsissues resulted in the shutdown of our mill and curtail production at ourLewiston, Idaho facility due to damage to a natural gas pipeline that supplied the region.mill. Any facility shutdowns may be followed by prolonged startup periods, regardless of the reason for the shutdown. Those startup periods could range from several days to several weeks, depending on the reason for the shutdown and other factors. Any prolonged disruption in operations at any of our facilities could cause significant lost production, which would have a material adverse effect on our results of operations.

The primary source for wood fiber is timber, the availability of which may be limited by adverse weather, fire, insect infestation, disease, ice storms, windstorms, flooding and other natural and man-made causes, including those caused by climate change, thereby reducing supply and increasing prices.

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes that appear elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” and elsewhere in this report. A discussion of the earliest year may be found in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K filed on February 24, 2025.

We are a premier manufacturer and supplier of Solid Bleached Sulfate (SBS) paperboard packaging products to independent converters. We believe we are well positioned to capitalize on sustainability trends towardstoward renewable and recyclable materials. We focus on food service and folding carton markets and provide limited distribution and sheeting services. Additionally, we sell minor amounts of pulp to outside customers. We believe our status as an independent, non-integrated supplier is core to our value proposition. We strive to develop new products and innovative solutions to expand and diversify our paperboard portfolio. In 2024, our business and production capabilities, we completed the acquisition of a paperboard manufacturing facility and associated business in AugustaAugusta, Georgia.

The paperboard industry is affected by macro-economic conditions around the world and has historically experienced cyclical market conditions. As a result, prices for products and sales volumes have historically been volatile. Product pricing is significantly affected by the relationship between supply and demand for our products. Product supply in the industry is influenced primarily by fluctuations in available manufacturing production, which tends to increase during periods when prices remain strong. During 2023 and 2024,2025, the paperboard industry saw significant weakness due to customer destocking after a lengthy period of constrained supply given high demand coupled with increasing supply.

Our operating costs include raw materials, labor and selling, general and administrative expenses. We manage these costs through cost saving and productivity initiatives, sourcing programs, and pricing actions. Additionally, our operations, as do all pulp and paperboard manufacturing operations, require regular annual planned maintenance outages. During 2024, we incurred planned maintenance outages at our Lewiston, Idaho and our Augusta, Georgia facilities. During 2023, we incurred a planned maintenance outage at our Cypress Bend, Arkansas facility. During 2022, we incurred a planned maintenance outage at our Lewiston, Idaho facility. Starting in 2025, we plan to move to annual outages for each of our facilities.

A discussion of our significant accounting policies and significant accounting estimates and judgments is presented in Note 1, "Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements in Item 8 of this report. Throughout the preparation of the financial statements, we employ significant judgments in the application of accounting principles and methods. We believe that the accounting estimates discussed below represent the accounting estimates requiring the exercise of judgment where a different set of judgments could result in the greatest changes to reported results. We reviewed the development, selection and disclosure of our critical accounting estimates with the Audit Committee of our Board of Directors. For 2024,2025, thesethe significant accounting estimatesestimate and judgmentsjudgment includeincludes:

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-K, we disclose income (loss) from continuing operations before interest expense, net, non-operating pension and other post employment benefit costs, income tax expense, depreciation and amortization, other operating charges, net, and debt retirement costscosts, and goodwill impairment as Adjusted EBITDA from continuing operations which is a non-GAAP financial measure. Adjusted EBITDA from continuing operations is not a substitute for the GAAP measure of net income or for any other GAAP measures of operating performance.

(1) See Note 7, "Goodwill and Intangible Assets" and Note 10, "Other operating charges," of the Notes to the Consolidated Financial Statements included in Item 8 of this report for additional information.

Net sales increased 21.8% forFor the year ended December 31, 20242025, net sales increased compared to Decemberthe 31,prior 2023year primarily due to the inclusion of the Augusta operations (see Note 3, "Business Acquisition" of the Notes to the Consolidated Financial Statements included in Item 8 of this report for additional information). ThisThe increaseaddition of Augusta operations was driven by higher sales volume offset by decreasesdeclines in salesmarket prices due to previously announced price decreases and changes in our product mix.

Cost of sales increased 39.8% forFor the year ended December 31, 20242025, cost of sales increased compared to the yearprior endedyear, December 31, 2023primarily due to the inclusion of the Augusta operations.operations offset by cost reduction activities. Input costs increased due to higher salesproduction volume with increases on a per ton basis across energy and chemicals offset by reductions on a per ton basis acrossin fiber, energy and chemicals due to deflation.fiber. Our labor and overhead increased due to the inclusion of the Augusta operationoperations asoffset wellby asimplementation planned annual maintenance at bothof our Lewiston,cost Idahoreduction and our Augusta, Georgia facilities.plan. Depreciation increased due to the inclusion of the Augusta operations. Supply chain costcosts increased due to higher volumes offset by lower freight costs per ton due to deflation.improved freight optimization related to our revised facility footprint. Other costs decreased due to inventory increases related to the additional absorption of labor and overhead as of the year ended December 31, 2025 as compared to inventory decreases for the year ended December 31, 2024.

Gross profit declined 5.6% forFor the year ended December 31, 20232025, comparedgross toprofit the year ended December 31, 2022increased due to reducedimproved operating performance, higher sales volumesvolume and our planned productioncost downtimereduction to manage inventory partiallyactivities, offset by deflationlower insales input and supply chain costs.prices.

Selling, general and administrative expenses decreased 2.3% forFor the year ended December 31, 20242025 compared to the year ended December 31, 20232024, primarilyselling, asgeneral aand resultadministrative ofexpenses lowerdecreased due our planned cost reductions and reductions in incentive paycompensation duelinked to lowerreduced operational performanceresults, partially offset by higher wages and benefits related to additionalincreased sales costscost associatedresulting withfrom the Augusta acquisition.

Overall income (loss) from continuing operations and Adjusted EBITDA

During 2024,2025, we generated $61.4$12.3 million of cash from operations, as compared to $190.7$61.4 million in 2023.2024. This decrease was driven by lower operating performance anddue changesto the divestiture of our tissue operations which are included in workingdiscontinued capital.operations for the year ended December 31, 2024. Additionally, we paid $57 million related to our 2024 income tax liability primarily related to the divestiture of our tissue operations in 2024 and received $23.0 million in insurance proceeds. Accounts receivable and accounts payable agings have remained relatively consistent with balances as of December 31, 2023.2024.

During 20232025, we used $73.7$100.4 million in cash forfrom investing activities, as compared to $33.5generating $167.7 million in cash2024. forDuring investingthe activitiesyear inended 2022.December In31, both2025, years,we cashpaid used$88.8 for investing activities wasmillion related to capital expenditures.expenditures and paid $11.6 million associated with the working capital adjustment related to our business divestiture that occurred during 2024. Included in accounts payable and accrued liabilities was $13.0$7.4 million in related to capital expenditures that had not yet been paid at December 31, 2023.2025.

Net cash flows usedprovided inby financing activities were $191.4$39.3 million for 2024.2025. We receivedborrowed net proceeds of $753.4$82.0 million from the issuance of long-term debt related to the Augusta acquisition and torepaid cover$18.6 shortmillion termunder cashour requirements.Credit Agreements. We repaid $931.1 million of long-term debt. Additionally, we used $5.6 million for debt issuance costs and $10.0$17.2 million to repurchase stock underand $2.3 million in connection with income tax withholding requirements associated with our stockemployee repurchasestock-based programcompensation plans during the year ended December 31, 2024.2025.

We are party to an amended and restated credit agreement (which may be amended from time to time, the “PCA Credit Agreement”) that consists of a term revolver commitment in the amount of $270$264.6 million. We may also increase term revolver commitments under the PCA Credit Agreement in an aggregate amount of up to $60 million, subject to obtaining commitments from any participating lenders and certain other conditions. The obligations under the PCA Credit Agreement are secured by liens on substantially all of our personal property assets and each of our domestic subsidiaries that are guarantors of the PCA Credit Agreement. Borrowings under the PCA Credit Agreement are subject to mandatory prepayment in certain circumstances. We may, at our option, prepay and reborrow any borrowings under the PCA Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances). The PCA Credit Agreement matures on May 1, 2029, subject to a springing maturity beginning on the date that is 91 days prior to the maturity of the Company’s 2020 Notes if the outstanding principal amount of the 2020 Notes plus $50 million is at any time during such 91 day period greatgreater than the sum of our available borrowing liquidity and unrestricted cash.

We are also party to an asset-based loan credit agreement (which may be amended from time to time, the “ABL Credit Agreement,” and together with the PCA Credit Agreement, the “Credit Agreements”)) that consists of a $375 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 the revolving commitments under the ABL Credit Agreement in an aggregate amount of up to $100 million, subject to obtaining commitments from any participating lenders and certain other conditions. The obligations under the ABL Credit Agreement are secured by liens on substantially all of our personal property assets and each of our domestic subsidiaries that are guarantors of the ABL Credit Agreement. We may, at our option, prepay and reborrow any borrowings under the ABL Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances). The ABL Credit Agreement matures on November 7, 2027. As of December 31, 2024,2025, we had noborrowings of $64.0 million outstanding borrowings under this facility and $3.7$3.5 million drawn to support our letters of credit.

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 earnings from operations before interest expense, net, non-operating pension and other post employment benefit costs, income tax expense,expense (benefit), depreciation and amortization, other operating charges, net, and debt retirement costs as Adjusted EBITDA from continuing operations which is a non-GAAP financial measure. Adjusted EBITDA from continuing operations is not a substitute for the GAAP measure of net income or for any other GAAP measures of operating performance.

The following table reconciles our Net income (loss) to Adjusted EBITDA from continuing operations for the periods presented.

Costs included in our cost of sales include input costs (principally raw materials and energy), labor and overhead and supply chain costs (principally freight and outside warehousing). The table below provides the details of our cost of sales for the quarters and six months ended MarchJune 31,30, 2026 and 2025.

Cost of sales increased 6%10% for the quarter ended MarchJune 31,30, 2026 compared to the quarter ended MarchJune 31,30, 2025 due to price spikes in natural gas and other adverse impacts associated with the coldplanned weathermajor eventsmaintenance that occurred early in the first quarter of 2026.outage. Input costs weredecreased relativelydue flatto withlower minorproduction offset by per unit increases in chemicals and energy.chemicals. Our labor and overhead increased due to higher maintenance costs associated with the weatherplanned events.major maintenance outage. Supply chain costs increased due to higher volumes and higher freight costs per ton because of inefficiencies due to the weather events.inflation. Other costcosts increased due to inventory reductions in the firstsecond quarter of 2026 which was driven by lower production whichdue wasto causedthe byplanned weathermajor events.maintenance outage.

Selling, general and administrative expenses decreased 29%19% and 24% for the quarter endedand Marchsix 31, 2026 compared to the quartermonths ended MarchJune 31,30, 20252026 primarily as a result of our planned cost reduction efforts.

Operating income from continuing operations decreased for the quarter ended MarchJune 31,30, 2026 as compared to the quarter ended MarchJune 31,30, 2025 due to the weatherplanned eventmajor maintenance outage at our Lewiston, Idaho facility and lower sales prices, offset by higher sales volumes and insurance recovery. For the quarter ended MarchJune 31,30, 2026, Adjusted EBITDA from continuing operations decreased as compared to the quarter ended MarchJune 31,30, 2025 due to the weatherplanned eventmajor maintenance outage at our Lewiston, Idaho facility and lower sales prices, offset by higher sales volumes.

Looking forward to the secondthird quarter of fiscal 2026, we expect operating costs to be higherlower due to ourthe absence of a planned major maintenance outage atoffset ourby Lewiston, Idaho facility andexpected increases in petroleum based input costs, including chemicals, energychemicals and transportation related costs.

In connection with our acquisition of our Augusta, Georgia mill from Graphic Packaging International, LLC, a wholly owned subsidiary of Graphic Packaging Holding Company, we obtained representation and warranty insurance, subject to exclusions, a policy limit of $105 million, and certain other terms and conditions, to cover losses resulting from a breach of these representations and warranties. During 2025, we notified the insurance carriers of alleged breaches of certain representations and warranties contained in the Purchase Agreement. During the quartersix months ended MarchJune 31,30, 2026,2026 we received a partial settlementproceeds of $17.5$32.5 million related to these claims,million, of which $5.6$9.2 million was related to reimbursable costs and recorded within "Cost of sales" and $11.9$23.3 million related to other breaches and reported within "Other operating charges, net" in our Consolidated Statements of Operations. As of MarchJune 31,30, 2026, we have $50$25.0 million remaining under our policy limit. Although we believe that our claims are meritorious, no assurance can be given as to whether we will recover additional proceeds related to these claims.

Net cash flows provided by operating activities for the quartersix months ended MarchJune 31,30, 2026 were $0.5$69.5 million compared to $1.5cash used by operating activities of $26.7 million for the quartersix months ended MarchJune 31,30, 2025. This decreaseincrease was driven by lower operating performance offset by insurance recoveries of $17.5$32.5 million andmillion, income tax refunds of $4$30 million.million and targeted inventory reductions offset by lower operating performance. Accounts receivable and accounts payable agings as of MarchJune 31,30, 2026 have remained relatively consistent with balances as of December 31, 2025.

Net cash flows used in investing activities for the quartersix months ended MarchJune 31,30, 2026 were $9.1$18.7 million compared to $32.7$55.6 million in the same period of the prior year related to capital expenditures. Included in "Accounts payable and accrued liabilities" on our Consolidated Balance Sheets were $6.9$13.3 million and $16.6$15.5 million related to unpaid capital expenditures at MarchJune 31,30, 2026 and 2025.

During the quartersix months ended MarchJune 31,30, 2026, net cash provided by financing activities was $14.3$13.9 million. We borrowed $15.0 million under our credit agreements. We used $0.5$0.6 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

During the quartersix months ended MarchJune 31,30, 2025, net cash usedprovided inby financing activities was $4.4$49.3 million. We borrowed $65.0 million and repaid $18.3 million on our ABL. We used $10.9$15.1 million to repurchase stock and $2.3 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans. Additionally, as of MarchJune 31,30, 2025, we had collected $8.9$20.1 million in cash related to the transition services agreement which was remitted during the secondthird quarter of 2025.

We are party to a Credit Agreement, dated July 26, 2019, with JPMorgan Chase Bank, N.A., as administrative agent and several lenders (which may be amended from time to time, the “ABL Credit Agreement”) that consists of a $375 million revolving loan commitment, subject to borrowing base limitations. The ABL Credit Agreement matures on November 7, 2027. As of MarchJune 31,30, 2026, our eligible receivables and inventory supported up to $213.3$197.7 million availability under the ABL Credit Agreement of which we utilized $82.5$82.8 million, consisting of $79.0 million borrowings outstanding and $3.5$3.8 million under letters of credit. 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. We may, at our option, prepay and reborrow any borrowings under the ABL Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances).

We are party to an amended and restated credit agreement dated as of May 1, 2024 with AgWest Farm Credit, PCA, as administrative agent and several lenders (which may be amended from time to time, the “PCA Credit Agreement”) that consists of a term revolver commitment in the amount of $264.6$259.3 million and which is subject to an annual reduction of 2% of the commitments then in effect. As of MarchJune 31,30, 2026, we had no borrowings on the term revolver. We may increase term revolver commitments under the PCA Credit Agreement in an aggregate amount of up to $60.0 million, subject to obtaining commitments from any participating lenders and certain other conditions. The PCA Credit Agreement matures on May 1, 2029, subject to a springing maturity beginning on the day that is 91 days prior to the maturity of the Company’s 2020 Notes if the outstanding principal amount of the 2020 Notes plus $50.0 million is at any time during such 91 day period greater than the sum of our available borrowing liquidity and unrestricted cash.

At MarchJune 31,30, 2026, we were in compliance with the covenants associated with our ABL Credit Agreement and PCA 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 credit agreements.