# Clearwater Paper Corp: Form 10-Q for the period ended Sep 30, 2024

- Company: [Clearwater Paper Corp](/companies/clw.md) (CIK 1441236)
- Form: 10-Q
- Filed: 2024-11-04
- Accepted by EDGAR: Nov 4, 2024, 16:10 ET
- Period: 2024-09-30
- Accession: 0001504337-24-000053
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1441236/000150433724000053/clw-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1441236/000150433724000053/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $393.3m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $996.5m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $363.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $935.1m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $31.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $90.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$1.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$48.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $13.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $24.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | −$3.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | −$17.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $5.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$2.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.35 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.17 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.35 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.17 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 16,620,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 16,629,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $96.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $83.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $6.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $35.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $731.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $2.49bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $412.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $1.82bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $1.14bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $7.4m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2024-09-30 | $664.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,473 characters.

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, 2023, 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, 2023.

In connection with the anticipated sale of the consumer products division, we have reported the related assets and liabilities, and the financial results as discontinued operations in our Consolidated Financial Statements for all periods presented. See "Note 4, Discontinued Operations" of the Notes to the Consolidated Financial Statements for additional information.

### OVERVIEW

### Executive Summary

We recorded net sales of $393.3 million for the quarter ended September 30, 2024 compared to $278.9 million for the quarter ended September 30, 2023. We recorded a net loss from continuing operations for the quarter ended September 30, 2024 of $10.7 million, or $0.64 per diluted share, compared to income from continuing operations of $14.9 million or $0.88 per diluted share for the quarter ended September 30, 2023. We recorded Adjusted EBITDA from continuing operations for the quarter ended September 30, 2024 of $20.2 million compared to $32.6 million for the quarter ended September 30, 2023.

We recorded an increase of 15% in net sales to $1.0 billion for the nine months ended September 30, 2024 compared to $867.4 million for the nine months ended September 30, 2023. We recorded loss from continuing operations for the nine months ended September 30, 2024 of $54.4 million, or $3.27 per diluted share, compared to income from continuing operations of $51.4 million or $3.01 per diluted share for the nine months ended September 30, 2023. We recorded Adjusted EBITDA from continuing operations for the nine months ended September 30, 2024 of $25.9 million compared to $107.1 million for the nine months ended September 30, 2023.

### 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.

For a discussion of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes to the critical accounting policies and estimates disclosed in our Annual Report except as discussed below.

### Business Acquisitions

#### Acquisitions

We apply the principles provided in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, *Business Combinations*, to determine whether an acquisition involves an asset or a business. In determining whether an acquisition should be accounted for as a business combination or asset acquisition, we first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is accounted for as an asset acquisition. If this is not the case, we then further evaluate whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the transaction is accounted for as a business combination.

We account for business combinations using the acquisition method of accounting which requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the estimated net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually. We measure and recognize asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets. Goodwill is not recognized in an asset acquisition with any consideration in excess of net assets acquired allocated to acquired assets on a relative estimated fair value basis. Transaction costs are expensed in a business combination and transaction costs directly attributable to the acquisition are considered a component of the cost of the acquisition in an asset acquisition. See Note 3, "Business Acquisition," in the Notes to Consolidated Financial Statements included in Item 1 of this report for additional information.

### 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 earnings from 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 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.

We have included Adjusted EBITDA from continuing operations on a consolidated basis in this report because we use it as an important supplemental measure of our performance and believe that it is 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 use Adjusted EBITDA from continuing operations to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. It should be noted that companies calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA from continuing operations measure may not be comparable to Adjusted EBITDA reported by other companies. Our Adjusted EBITDA from continuing operations measure has material limitations as a performance measure because it excludes interest expense, net, income tax (benefit) expense 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 from continuing operations for the periods presented and a reconciliation to net income (loss).

*(In millions)*

|  | Quarter Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $5.8 | $36.6 | $(2.8) | $90.1 |
| Add (deduct): |  |  |  |  |
| Income from discontinued operations, net of tax | 16.6 | 21.7 | 51.6 | 38.8 |
| Income (loss) from continuing operations | (10.7) | 14.9 | (54.4) | 51.4 |
| Income tax provision (benefit) | (3.3) | 3.7 | (17.4) | 16.7 |
| Interest expense, net | 13.1 | 2.2 | 24.0 | 7.9 |
| Depreciation and amortization | 21.7 | 10.2 | 47.6 | 30.3 |
| Inventory revaluation on acquired business | — | — | 6.8 | — |
| Other operating charges, net | (0.3) | 1.7 | 20.3 | 1.1 |
| Other non-operating income | (0.3) | (0.1) | (1.0) | (0.3) |
| Adjusted EBITDA from continuing operations | $20.2 | $32.6 | $25.9 | $107.1 |

21

### OPERATING RESULTS FROM CONTINUING OPERATIONS

The below financial information reflects reclassifications from previously reported information based upon discontinued operations. Historically, the Company has shown certain intercompany pulp costs as offsets as they represent intercompany transactions between the consumer products division and the pulp and paperboard manufacturing operations. Based upon discontinued operations treatment, such transfers of pulp and other inputs have been recast to Net Sales on the condensed consolidated statement of operations.

|  | Quarter Ended September 30, 2024 | 2023 | % change | Nine months Ended September 30, 2024 | 2023 | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $393.3 | $278.9 | 41% | $996.5 | $867.4 | 15% |
| Cost of sales | 363.2 | 228.3 | 59% | 935.1 | 702.6 | 33% |
| Gross margin | 30.1 | 50.7 | (41)% | 61.4 | 164.9 | (63)% |
| Selling, general and administrative expenses | 31.6 | 28.3 | 12% | 90.0 | 88.0 | 2% |
| Other operating charges, net (1) | (0.3) | 1.7 | (116)% | 20.3 | 1.1 | 1762% |
| Income (loss) from continuing operations | $(1.2) | $20.7 | (106)% | $(48.9) | $75.7 | (165)% |
| Adjusted EBITDA from continuing operations | $20.2 | $32.6 | (38)% | $25.9 | $107.1 | (76)% |

(1) See Note 12, "Other operating charges," of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.

### SALES

Sales increased 41% for the quarter ended September 30, 2024 compared to the same period in the prior year and 15% for the nine months ended September 30, 2024 compared to the same period in the prior year due the inclusion of the Augusta operations (see Note 3 Business Acquisition in our Notes to our Consolidated Financial Statements). This increase was driven by higher sales volume offset by decreases in sales prices due to previously announced price decreases and changes in our product mix.

| Quarter Ended September 30, | Quarter Ended September 30, 2024 | 2023 | % change | Nine months Ended September 30, 2024 | 2023 | % change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Paperboard shipments (short tons) | 314,320 | 187,944 | 67.2% | 774,207 | 563,502 | 37.4% |
| Paperboard sales price (per short ton) | $1,192 | $1,350 | (11.7)% | $1,223 | $1,401 | (12.7)% |

### COST OF SALES

Cost of sales increased 59% for the quarter ended September 30, 2024 compared to the same period in the prior year and 33% for the nine months ended September 30, 2024 compared to the same period in the prior year due the inclusion of the Augusta operations volume. During the third quarter of 2024, we continued to see higher fiber, chemical and energy costs associated with impacts of our planned major maintenance outage at our Lewiston, Idaho facility which occurred during the second quarter of 2024. For the nine months ended September 30, 2024 compared to the same period in the prior year, cost of sales increased due to the inclusion of the Augusta operations volume, although with lower input costs for fiber, chemicals and energy due to reduced inflation.

### GROSS MARGIN

Gross margin declined 41% for the quarter ended September 30, 2024 compared to the same period in the prior year and 63% for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to previously announced price decreases and higher costs due to our planned major maintenance outage at our Lewiston, Idaho facility offset by lower input costs due to reduced inflation.

### SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased 12% the quarter ended September 30, 2024 compared to the same period in the prior year and 2% for the nine months ended September 30, 2024 compared to the same period in the prior year. The increase between periods is primarily related to higher wages and benefits related to additional sales costs associated with the Augusta acquisition partially offset by lower incentives due to lower operational performance.

### OTHER OPERATING CHARGES

See Note 12, "Other operating charges," of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.

### OVERALL

Operating income from continuing operations and Adjusted EBITDA from continuing operations decreased for the quarter and nine months ended September 30, 2024 as compared to the same periods in the prior year due to lower sales prices, the impacts of our planned major maintenance outage at our Lewiston, Idaho facility, higher sales and marketing costs and acquisition and integration costs associated with the Augusta acquisition, partially offset by lower input costs due to reduced inflation.

### OPERATING RESULTS FROM DISCONTINUED OPERATIONS

Retail sales volumes in our consumer products division increased for the quarter and nine months ended September 30, 2024 compared to the same period in the prior year due to the increased demand for private label versus branded products. Retail sales prices decreased in our consumer products division for the quarter and nine months ended September 30, 2024 compared to the same period in the prior year due to changes in our product mix and reductions resulting from contract pricing indexed to certain cost inputs.

Operating income and Adjusted EBITDA increased for the quarter ended September 30, 2024 compared to the same period in the prior year predominately due to higher volumes offset by lower sales prices and higher input costs. The increase in operating income and Adjusted EBITDA for the nine months ended September 30, 2024 compared to the same period in the prior year was driven by lower input costs, primarily in pulp, freight and energy costs.

### 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.

### 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 provided by operating activities for the nine months ended September 30, 2024 were $96.5 million compared to net cash flows provided by operating activities of $125.0 million for the nine months ended September 30, 2023. This decrease was driven by lower operating performance and higher interest payments related to the debt incurred associated with the Augusta acquisition. Accounts receivable and accounts payable agings as of September 30, 2024 have remained relatively consistent with balances as of December 31, 2023.

### Investing Activities

Net cash flows used in investing activities for nine months ended September 30, 2024 were $791.8 million compared to $48.5 million in the same period of the prior year. This amount includes $708.2 million associated with the acquisition of a paperboard manufacturing facility and associated business, located in Augusta, Georgia. Included in "Accounts payable and accrued liabilities" on our Consolidated Balance Sheets was $25.5 million and $16.5 million related to unpaid capital expenditures at September 30, 2024 and 2023.

During 2024, we expect cash paid for capital expenditures to be approximately $100 million to $120 million.

### Financing Activities

During the nine months ended September 30, 2024, net cash provided by financing activities was $688.9 million. We received net proceeds of $753.5 million from the issuance of long-term debt related to the business acquisition and to cover short term cash requirements. We used $4.9 million for debt issuance costs, $6.0 million to repurchase stock, and repaid debt of $50.9 million.

During the nine months ended September 30, 2023, net cash used for financing activities was $20.7 million. We used $15.1 million to repurchase stock though our share repurchase program and $4.7 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans. Additionally, we borrowed and repaid $12.0 million on our ABL Credit Agreement to cover short term cash requirements.

### Term Credit Agreement and ABL Credit Agreement

The Company is a party to a Credit Agreement, dated October 27, 2023, with AgWest Farm Credit, PCA, as administrative agent, and several lenders, as amended and restated on May 1, 2024 (as so amended and restated, the “Term Credit Agreement”) that consists of the following facilities: (i) a term revolver loan commitment in the amount of $270 million (the “Term Revolver Facility”), $150 million of which was borrowed on October 27, 2023 and $120 million of which was borrowed on May 1, 2024, (ii) a term loan commitment in the amount of $400 million (the “Farm Credit Term Loan Facility”), which was fully drawn on May 1, 2024 and (iii) a term loan commitment in the amount of $90 million (the “Commercial Bank Term Loan Facility” and together with the Farm Credit Term Loan Facility, collectively, the “Term Loan Facilities”), which was fully drawn on May 1, 2024. We may also increase commitments under the Term Revolver Facility in an aggregate principal amount of up to $60 million, subject to obtaining commitments from any participating lender and certain other conditions.

The lending commitment under the Term Revolver Facility is subject to an annual reduction of 2% of the commitments then in effect. The Term Credit Agreement matures and the lending obligations under the Term Revolver Facility terminate on the earlier of (i) in the case of the Term Revolver Facility and the Commercial Bank Term Loan Facility, May 1, 2029, (ii) in the case of the Farm Credit Term Loan Facility, May 1, 2031 and (iii) and the date that is 91 days prior to the maturity of the Company’s 4.750% senior notes due 2028 (the “2020 Notes”), unless during such period of time the outstanding principal amount of the 2020 Notes plus $50 million is less than the sum of our available borrowing liquidity and unrestricted cash.

We may, at our option, prepay and reborrow any borrowings under the Term Revolver Facility, in whole or in part, at any time and from time to time without premium or penalty (other than prepayments of the initial advance on the Term Revolver Facility of $150 million to the extent made prior to November 1, 2024 and in certain other circumstances). In addition, we must make mandatory prepayments of principal under the Term Revolver Facility upon the occurrence of certain asset sales. We are required to repay a percentage of the aggregate outstanding principal amount of the borrowings under the Term Loan Facilities in quarterly installments on the last day of each March, June, September and December, commencing on the first day of the third full fiscal quarter after May 1, 2024. We may prepay any borrowings under the Term Loan Facilities, in whole or in part, at any time and from time to time without premium or penalty. In addition, we must make mandatory prepayments of principal under the Term Loan Facilities upon the occurrence of certain specified events, including certain asset sales, debt issuances not permitted under the Term Credit Agreement, and of 50% of our quarterly excess cash flows, less any voluntary prepayments of the Term Loan Facilities.

Under the Term Revolver Facility and the Farm Credit Term Loan Facility, loans generally may bear interest based on the secured overnight financing rate (SOFR) or the agent’s fixed rate, as applicable, plus, in each case, an applicable margin that (i) prior to repayment in full of the Term Loan Facilities, may vary between 2.25% per annum and 4.75% per annum based on our consolidated leverage ratio (as defined under and calculated in accordance with the Term Credit Agreement) and (ii) with respect to the Term Revolver Facility and after payment in full of the Term Loan Facilities, is 3.65% per annum. In the case of the $150 million borrowing disbursed under the Term Revolver Facility on October 27, 2023, the Company previously selected a one-year fixed rate loan bearing interest at an all-in interest rate of 9.13%. Under the Commercial Bank Term Loan Facility, loans generally may bear interest based on SOFR or a base rate, as applicable, plus, in each case, an applicable margin that (x) in the case of SOFR loans, may vary between 1.75% per annum and 4.25% per annum based on the Company’s consolidated leverage ratio and (y) in the case of base rate loans, may vary between 0.75% per annum and 3.25% per annum, in each case, based on the Company’s consolidated leverage ratio.

Until our consolidated leverage ratio is less than or equal to 3.25 to 1.00 and our debt to capitalization ratio is less than or equal to 60%, in each case, for four consecutive fiscal quarters (or as of the end of a quarter, if earlier, if a disposition is consummated which results in indebtedness being reduced by at least $200 million) we must maintain the following financial covenants under the Term Credit Agreement: (i) a maximum consolidated leverage ratio not greater than (x) commencing with the first fiscal quarter ending at least fifteen (15) months after May 1, 2024 and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024, 4.50 to 1.00, and (y) commencing with the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024 and thereafter, 4.00 to 1.00; and (ii) a minimum current ratio (as defined under and calculated in accordance with Term Credit Agreement) not less than 1.25 to 1.00. In addition, until the Commercial Bank Term Loan Facility is paid in full, we must maintain a maximum debt to capitalization ratio no greater than (1) commencing with the first fiscal quarter ending after May 1, 2024 and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024, 70%, (2) commencing with the first fiscal quarter ending at least twenty-four (24) months after May 1, 2024 and until the fiscal quarter ending immediately prior to the first fiscal quarter ending at least forty-eight (48) months after May 1, 2024, 65%, and (3) commencing with the first fiscal quarter ending at least forty-eight (48) months after May 1, 2024 and thereafter, 60%.

The Company is also party to a Credit Agreement, dated July 26, 2019, with JPMorgan Chase Bank, N.A., as administrative agent and several lenders, as amended on May 1, 2024 (as so amended, the “ABL Credit Agreement”) that includes a $375 million revolving loan commitment, subject to borrowing base limitations. The revolving commitments terminate, and the ABL Credit Agreement matures, on November 7, 2027. 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).

Under the ABL Credit Agreement, loans may bear interest based on SOFR or an annual base rate, as applicable, plus, in each case, an applicable margin that is based on availability, as calculated under the ABL Credit Agreement that may vary from 1.25% per annum to 1.75% per annum in the case of SOFR loans and 0.25% per annum to 0.75% per annum in the case of annual base rate loans. In addition, a commitment fee based on unused availability is also payable which may vary from 0.25% per annum to 0.375% per annum.

The ABL Credit Agreement also contains a financial covenant, which requires us to maintain a consolidated fixed charge coverage ratio of not less than 1.10x to 1.00x, provided that the financial covenant under the ABL Credit Agreement is only applicable during an event of default or if availability, as calculated under the ABL Credit Agreement, is at any time less than or equal to the greater of (i) 10.0% of the lesser of the borrowing base and the maximum $375 million of current revolving loan commitments and (ii) $25 million.

The obligations under the Term Credit Agreement and 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.

Both the Term Credit Agreement and the ABL Credit Agreement contain customary representations, warranties, affirmative and negative covenants, and events of default (including with respect to a change of control).

At September 30, 2024, we were in compliance with the currently applicable covenants associated with our Term Credit Agreement and our 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 Term Credit Agreement, our ABL Credit Agreement or other credit agreements.

## Market risk

As filed, 353 characters.

There have been no significant developments with regard to our exposure to market risk for the quarter ended September 30, 2024. 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, 2023.

## Controls and procedures

As filed, 1,262 characters.

As of September 30, 2024, our Chief Executive Officer (CEO) and 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 September 30, 2024 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,660 characters.

Except as set forth below, 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, 2023. See Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, entitled “Risk Factors.”

### RISKS RELATING TO THE SALE OF OUR CONSUMER PRODUCTS DIVISION (OUR TISSUE BUSINESS)

***The completed divestiture may disrupt our remaining business or not achieve its intended benefits.***

On July 21, 2024, we entered into a Membership Interest Purchase Agreement and an Asset Purchase Agreement with Sofidel America Corp. (“Sofidel”), a wholly owned subsidiary of Sofidel S.p.A., pursuant to which, among other things, we agreed to sell our consumer products division to Sofidel. The transaction closed on November 1, 2024. A number of risks and challenges may arise from the divestiture, including, among others:

- there may be unexpected costs, charges or expenses resulting from the divestiture; and
- there may be stockholder litigation in connection with the divestiture or other settlements or investigations may affect the timing or occurrence of the Tissue Divestiture or result in significant costs of defense, indemnification and liability.

In addition, the Tissue Divestiture could cause disruption in our remaining business, including potential adverse changes to relationships with customers, employees, suppliers or other parties resulting from the divestiture process. The Tissue Divestiture may also be disruptive to our regular operations, diverting the attention of our workforce and management team from the day-to-day operation of our business, making the execution of business and other potential strategies more difficult, and could result in increased undesired workforce turnover, including of key leaders or other personnel.

Even if we are successful at separating and divesting our Tissue Business, we may not realize some or all of the anticipated benefits from the Tissue Divestiture with respect to the anticipated performance of our remaining business. The Tissue Divestiture may result in continued financial exposure to the Tissue Business through the retention of certain liabilities, including, for example, with respect to certain environmental claims. The Tissue Divestiture may not enhance long-term stockholder value as anticipated and/or the efforts required to complete the divestiture process may be more costly or time-consuming than expected. Any of the foregoing could result in the imposition of obligations that could have a material adverse effect on our remaining business, operating results or financial condition.

Filed Nov 4, 2024.
Source: SEC EDGAR, the filing index for accession 0001504337-24-000053. Last ingested by Listed: Oct 26, 2026, 16:22 ET. No prices; not investment advice.