Clearwater Paper CLW Form 10-Q filing Q3 FY2025

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 (Loss) 4
• Consolidated Statements of Cash Flows 5
• Consolidated Statements of Stockholders' Equity 6
• Notes to Consolidated Financial Statements 8
• ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
• ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 25
• ITEM 4. Controls and Procedures 25
• PART II. OTHER INFORMATION
• ITEM 1. Legal Proceedings 26
• ITEM 1A. Risk Factors 26
• ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
• ITEM 5. Other Information 26
• ITEM 6. Exhibits 27
• Signatures 28

Part I: Financial Information

ITEM 1. Consolidated Financial Statements

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

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

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

1 Capital expenditures of $11.8 million and $25.5 million that have not been paid as of September 30, 2025 and 2024 were excluded from the Statements of Cash Flows.

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

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

Clearwater Paper Corporation

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 Description of Business and Basis of Presentation

Description of Business

We are a premier manufacturer and supplier of bleached paperboard focused on servicing independent converters in North America. We also offer services that include custom sheeting, slitting, and cutting.

During the year ended December 31, 2024, we sold our tissue (consumer products) operations. Accordingly, the results of our previously-owned tissue operations have been presented as discontinued operations in our Consolidated Statements of Operations for all periods presented. See Note 4, "Discontinued operations."

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature. These consolidated financial statements and related Notes should be read in conjunction with our annual report on Form 10-K for the fiscal year ended December 31, 2024. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. All dollar amounts are shown in millions, except per share amounts.

Note 2 Recently Issued Accounting Standards

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient permitting entities to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable. This ASU is effective or annual reporting periods beginning after December 15, 2025, and for interim periods within those annual reporting periods, with early adoption permitted. We are currently evaluating the impact this ASU will have on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires disaggregated disclosure of certain types of expenses, such as inventory purchases, employee compensation, depreciation, and amortization in commonly presented expense captions such as cost of revenue and selling, general and administrative expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. Adoption of this ASU will result in additional disclosure, but it will not impact our consolidated financial position, results of operations or cash flows.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes—Improvements to Income Tax Disclosures (Topic 740), which requires enhanced disclosures primarily related to the rate reconciliation and disaggregation of income taxes paid. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We will adopt this ASU prospectively and it will result in additional disclosure, but it will not impact our consolidated financial position, results of operations or cash flows.

Note 3 Business Acquisition

On May 1, 2024, we completed the acquisition of a paperboard manufacturing facility and associated business, located in Augusta, Georgia (Augusta). The purchase price of the Augusta acquisition was allocated to assets acquired and liabilities based on the fair values as of the date of acquisition. The purchase price allocation was final as of May 1, 2025.

The purchase price allocation as of May 1, 2025 is as follows:

The following unaudited pro forma consolidated financial information combines our results and the unaudited results of the Augusta operations had the transaction been completed on January 1, 2024. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Augusta acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that we may achieve as a result of the Augusta acquisition.

Note 4 Discontinued Operations

In November 2024, we sold our tissue operations. The results of our tissue operations were classified as discontinued operations in our Consolidated Statements of Operations for all periods presented. Amounts included below, for the quarter and nine months ended September 30, 2025, consist of the settlement of contractual and employment related obligations that are directly related to the disposal. The following table presents the financial results of the tissue segment for the quarter and nine months ended September 30, 2025 and 2024:

The major components of “Other operating charges, net” included in discontinued operations for the quarter and nine months ended September 30, 2025 and 2024 are reflected in the table below.

During the quarter ended September 30, 2025, we finalized the working capital adjustment associated with the business divestiture, resulting in a $1.1 million gain due to the reversal of a portion of the previously accrued settlement amount. The final cash payment totaled $12.1 million.

Operating and investing cash flows of the discontinued operation are presented in the following table:

Note 5 Fair Value Measurements

Carrying amounts reported on the consolidated balance sheets for cash and cash equivalents, 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:

Note 6 Receivables

Receivables consist of:

Note 7 Inventories

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

Note 8 Property, Plant and Equipment

Property, plant and equipment consist of:

Note 9 Goodwill and Intangibles

Changes in the carrying amounts of goodwill and intangible assets are as follows:

During the third quarter of 2025, we concluded that the sustained decline in our stock price (market capitalization) was a triggering event requiring an interim goodwill impairment assessment. We accumulated $35.1 million of goodwill through the acquisition of Manchester Industries in 2016 and $12.9 million of goodwill through the acquisition of the Augusta paperboard facility in 2024. Based on our interim goodwill impairment assessment, we concluded that our carrying value exceeded the estimated fair value. As a result, we have recorded a non-cash goodwill impairment charge of $48.0 million in the third quarter of 2025 which represents a full impairment of the goodwill. The decline in the estimated fair value and the resulting impairment was primarily driven by continued paperboard market softness and additional market capacity coming online which drove a sustained decline in our market capitalization. This was coupled with the increase in our carrying

value related to the divestiture of our tissue business in late 2024. The fair market value considered both the market and income approach. As a result of the triggering event, we conducted a recoverability analysis on other long-term assets, including fixed assets and intangible assets subject to amortization. The results indicated that there was no need for any further impairment charges.

Note 10 Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of:

Included in "Accounts payable and accrued liabilities" are $11.8 million and $25.8 million related to capital expenditures that had not yet been paid as of September 30, 2025 and December 31, 2024.

We maintain a program with a financial institution to provide our vendors with an option to receive payment earlier than our standard payment terms. As of September 30, 2025 and December 31, 2024, $6.3 million and $12.7 million of outstanding obligations under this program were included in "Other" in the table above.

Note 11 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 nine months ended September 30, 2025 and 2024, we recognized an income tax benefit of $6.3 million and $17.4 million on loss from continuing operations. Our effective tax rate for the nine months ended September 30, 2025 varied from the U.S. federal statutory tax rate of 21% primarily due to the effects of state taxes, effects of the tax basis of our goodwill impairment and a change in the state valuation allowance.

Note 12 Debt

Long-term debt at the balance sheet dates consisted of:

PCA CREDIT AGREEMENT

On May 1, 2024, we entered into the PCA Credit Agreement with the lenders party thereto and AgWest Farm Credit, PCA, as administrative agent. The PCA Credit Agreement amended and restated our prior credit agreement dated as of October 27, 2023 with the lenders party thereto and AgWest Farm Credit, PCA as administrative agent. The term revolver

commitment under the PCA Credit Agreement is subject to an annual reduction of 2% of the commitments then in effect and is currently $264.6 million. As of September 30, 2025, no balance was outstanding on the term revolver commitment. 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 91 days prior to the maturity of the Company’s 2020 Notes if the outstanding principal of the 2020 Notes plus $50.0 million at any time during such 91 day period is greater than the sum of our available borrowing liquidity and unrestricted cash.

We may 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). In addition, we must make mandatory prepayments of principal under the PCA Credit Agreement upon the occurrence of certain asset sales.

ABL CREDIT AGREEMENT

Our ABL Credit Agreement matures on November 7, 2027. The revolving loan commitment under the ABL Credit Agreement is $375.0 million, subject to borrowing base limitations based on a percentage of applicable eligible receivables and eligible inventory. As of September 30, 2025, our eligible receivables and inventory supported up to $213.9 million availability under the line, of which we utilized $57.7 million, consisting of $54.0 million borrowings outstanding and $3.7 million to issue letters of credit.

We may, at our option, prepay 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 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.

Note 13 Other Operating Charges

The major components of “Other operating charges, net” in the Consolidated Statements of Operations for the quarter and nine months ended September 30, 2025 and 2024 are reflected in the table below and described in the paragraphs following the table. These items are considered outside of our core operations.

During the third quarter of 2025, we recorded $1.5 million of expense in "Other operating charges, net." The main components of the expense include:

• expense of $0.5 million associated with integration activities related to the Augusta operations;
• loss of $1.9 million associated with impairment of assets; and
• reversal of expense of $1 million relating to directors' equity-based compensation which is remeasured each period based upon changes in our stock price.

During the third quarter of 2024, we recorded $0.3 million of income in "Other operating charges, net." The components of the income include:

• expense of $0.5 million associated with acquisition activities (primarily legal and professional services);
• expense of $2.3 million associated with integration activities (primarily professional services);
• loss of $0.4 million associated with the impairment of property, plant and equipment; and
• reversal of expense of $3.5 million relating to directors' equity-based compensation which is remeasured each period based upon changes in our stock price.

During the nine months ended September 30, 2025, we recorded $20.4 million of expense in "Other operating charges, net." The main components of the expense include:

• expense of $5.2 million associated with integration activities related to the Augusta operations;
• expense of $6.1 million associated with our cost reduction plan (primarily severance cost);
• loss of $5.1 million associated with impairment of assets; and
• reversal of expense of $0.5 million relating to directors' equity-based compensation which is remeasured each period based upon changes in our stock price.

During the nine months ended September 30, 2024, we recorded $20.3 million of expense in "Other operating charges, net." The main components of the expense include:

• expense of $13.9 million associated with integration activities related to the Augusta operations;
• expense of $5.7 million associated with restructuring and integration activities (primarily professional services);
• loss of $1.1 million associated with impairment of assets; and
• reversal of expense of $0.4 million relating to directors' equity-based compensation which is remeasured each period based upon changes in our stock price.

Note 14 Non-Operating Expense

The components of “Non-operating expense” in the Consolidated Statements of Operations for the quarter and nine months ended September 30, 2025 and 2024 are reflected in the table below:

Note 15 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:

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 component of net periodic cost is recorded in "Other non-operating income (expense)" on our Consolidated Statements of Operations. For the quarter and nine months ended September 30, 2025, we recorded $0.6 million and $2.0 million to "Cost of sales" and $0.2 million and $0.4 million to "Selling, general, and administrative

expenses". For the quarter and nine months ended September 30, 2024, we recorded $0.6 million and $1.7 million to "Cost of sales", $0.1 million and $0.4 million to "Selling, general, and administrative expenses", and $0.1 million and $0.2 million to Discontinued Operations.

Note 16 Accumulated Other Comprehensive Loss

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

Note 17 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 September 30, 2025, approximately 0.6 million shares were available for future issuance under our current plan.

As of September 30, 2025, there was $10.8 million of total unrecognized compensation costs related to outstanding restricted stock unit awards.

During the nine months ended September 30, 2025, we granted 198,887 restricted stock units (time vesting) at an average grant date fair value of $28.36 per share and 194,378 restricted stock units (performance vesting) at an average grant date fair value of $31.04 per share.

During the quarter and nine months ended September 30, 2024, stock-based compensation income of $1.3 million and expense of $6.0 million was charged to continuing operations, and expense of $0.4 million and $1.2 million was charged to discontinued operations.

Note 18 Earnings (Loss) per Share

Basic income (loss) per share is based on the weighted-average number of shares of common stock outstanding. Diluted income (loss) 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 from continuing operations are reported because the effect is anti-dilutive.

Shares excluded from the computation of diluted earnings (loss) per share were 0.3 million for the quarter and nine months ended September 30, 2025 and 0.3 million and 0.4 million for the quarter and nine months ended September 30, 2024 due to our loss position on continuing operations in both periods presented.

Note 19 Cost Reduction Plan

In early 2025, we announced a plan to reduce our cost structure across operations and selling, general and administrative expenses as we right-size our operations after the sale of our tissue operations (discussed at Note 4). In connection with these activities, we expect to record employee severance costs of $5 to $7 million by the end of 2025. During the quarter, we recorded a reversal of severance expense of $0.1 million and during the nine months ended September 30, 2025, we recorded expense of $5.0 million associated with this plan. The remaining severance will be recognized from the date of notification until it is earned.

Changes in our severance liability (included in accounts payable and accrued liabilities on the consolidated balance sheet) for the nine months ended September 30, 2025 are as follows:

Note 20 Segment Disclosure

Our Chief Operating Decision Maker (CODM) evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis. Since our CODM evaluates financial performance on a consolidated basis, we have determined that we have a single operating segment composed of the consolidated financial results of Clearwater Paper.

Our CODM also reviews total assets, as reported on our consolidated balance sheets, and purchases of property and equipment, as reported on our consolidated statements of cash flows.

Our CODM utilizes other key operating metrics, including disaggregated measures of net sales by product line, disaggregation of significant segment expenses and Adjusted EBITDA in order to assess our financial performance.

Net sales classified by major product lines and a reconciliation of significant expenses to consolidated income from continuing operations is as follows:

Non-significant expenses is primarily made up of other operating charges, net and changes in inventory.

Note 21 Insurance Recovery

During the first quarter of 2024, we experienced a natural gas disruption due to an extreme weather event that resulted in damage at our Lewiston, Idaho facility. During the quarter ended June 30, 2024, we received $10.5 million in insurance proceeds, of which $4.7 million was related to business interruption insurance and $5.8 million was related to reimbursable costs. We allocated proceeds of $0.9 million to discontinued operations and $9.3 million to continuing operations, and they are recorded within "Cost of sales" in the Consolidated Statement of Operations. Proceeds of $0.3 million were related to property, plant and equipment.

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, 2024, 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, 2024.

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, 2024. There have been no material changes to the critical accounting policies and estimates disclosed in our Annual Report.

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).

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 our prior consumer products division and the pulp and paperboard manufacturing operations. Based upon discontinued operations treatment of the consumer products division, such transfers of pulp and other inputs have been recast to Net sales on the condensed consolidated statement of operations for all periods shown.

NET SALES

Net sales increased 1% for the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024 due to increased sales volume to existing customers offset by market driven price decreases and changes in our product mix. Net sales increased 17% for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 driven by higher sales volume due to the addition of the Augusta operations offset by market driven price decreases and changes in our product mix.

COST OF SALES

Costs included in our cost of sales include input costs (principally raw materials and energy), labor and overhead, supply chain costs (principally freight and outside warehousing). The table below provides the details of our cost of sales for the quarters and nine months ended September 30, 2025 and 2024.

In 2024, planned major maintenance outages occurred at our Lewiston, Idaho facility and Cypress Bend, Arkansas facility in the second quarter, and at our Augusta, Georgia facility in the fourth quarter. For the nine period ended September 30, 2025, we completed the planned major maintenance outages at our Cypress Bend, Arkansas facility in the second quarter, and at our Lewiston, Idaho facility in the third quarter. We plan to complete our planned major maintenance outage at our Augusta, Georgia facility in the fourth quarter of 2025.

Cost of sales increased 5% for the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024 due to the timing of our planned major maintenance outage offset by cost reduction activities. Input costs decreased due to lower fiber costs offset by higher costs of energy and chemicals. Our labor and overhead increased due to timing of our planned major maintenance outage offset by the implementation of our cost reduction plan. Supply chain costs increased due to higher volumes offset by lower freight costs per ton due to improved freight optimization. Other cost increased due to inventory reductions in the third quarter of 2025 due to the planned major maintenance outage at our Lewiston, Idaho facility as compared to the third quarter of 2024 where inventory increased due to the anticipated planned major maintenance outage at our Augusta, Georgia facility.

Cost of sales increased 14% for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due primarily to the inclusion of the Augusta operations offset by cost reduction activities. Input costs increased due to higher production volume with increases on a per ton basis across energy and chemicals offset by reductions on a per ton basis in fiber. Our labor and overhead increased due to the inclusion of the Augusta operations offset by implementation of our cost reduction plan. Depreciation increased due to inclusion of Augusta operations. Supply chain costs increased due to higher volumes offset by lower freight costs per ton due to improved freight optimization related to our revised facility footprint. Other costs decreased due to inventory increases in the first nine months of 2025 as compared to the first nine months of 2024.

GROSS MARGIN

Gross profit decreased for the quarter ended September 30, 2025 compared to the same period in 2024 due to timing on our planned major maintenance outage and lower sales prices offset by increases in sales volume and our planned cost reduction activities.

Gross profit increased for the nine months ended September 30, 2025 compared to the same period in 2024 due to improved operating performance, higher sales volume and our planned cost reduction activities, offset by lower sales prices.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased 22% for the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024 primarily as a result of our planned cost reduction efforts.

Selling, general and administrative expenses decreased 11% for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily as a result of our planned cost reductions offset by additional sales costs associated with the Augusta acquisition.

GOODWILL IMPAIRMENT

See Note 9, "Goodwill and Intangibles," of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.

OTHER OPERATING CHARGES

See Note 13, "Other operating charges," of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.

OVERALL INCOME FROM CONTINUING OPERATIONS AND ADJUSTED EBITDA

Operating income from continuing operations and Adjusted EBITDA from continuing operations decreased for the quarter ended September 30, 2025 as compared to the quarter ended September 30, 2024 due to timing of our major maintenance outage and lower sales prices, offset by higher sales volumes, lower input costs and our planned cost reduction activities. Additionally, impacting operating income from continuing operations was the goodwill and other impairment charges..

Operating income from continuing operations decreased for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 due to lower input costs and our planned cost reduction activities, offset by lower sales pricing. Additionally, impacting operating income from continuing operations were goodwill and other impairment charges, the integration cost associated with the acquisition of the Augusta facility and severance and other costs associated with our planned cost reduction activities.

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.

OUTLOOK

Looking forward to the fourth quarter of fiscal 2025, we expect sales volumes to be down from the third quarter due to seasonality. While we anticipate continued benefits from our fixed costs reduction efforts, we expect energy costs to increase in the fourth quarter due to seasonal trends. In addition, we expect our planned major maintenance outage expense to decrease during the quarter at our Augusta, Georgia facility as compared to Lewiston, Idaho facility that occurred in the third quarter.

One of our union agreements associated with our Lewiston, Idaho facility expired in the third quarter of 2025. Our relationship with this union remains good and we are negotiating a new agreement. When a new agreement is ratified, we expect to incur retroactive payments on wage increases back to the expiration date which cannot be recorded in our financial statements until the ratification process is complete.

During 2025, the U.S. announced a new universal baseline tariff of 10% on imports from nearly all trading partners, excluding Canada and Mexico, plus an additional country-specific tariff for select trading partners. The U.S. has also imposed tariffs of 25% on certain imports from Canada and Mexico, subject to exemptions for goods that comply with the rules of origin of the United States-Mexico-Canada trading agreement (USMCA). These exemptions apply to certain of our raw materials (a portion of our chemicals, pulp and energy) imported from Canada. We are evaluating our other expenditures to assess the impact of the recent tariff announcements, but do not currently expect them to have a significant impact on our fiscal 2025 financial results. Given the timing and uncertainty of tariffs and other trade restrictions, including potential retaliatory tariffs, we have not included any material impact from potential tariffs in our outlook above.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. This did not have a material impact on the Company’s consolidated financial statements for the third quarter of 2025.

AUGUSTA ACQUISITION - REPRESENTATION AND WARRANTY INSURANCE CLAIM

On February 20, 2024, we and Graphic Packaging International, LLC (“GPK”), a wholly owned subsidiary of Graphic Packaging Holding Company, entered into an Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which we acquired a paperboard manufacturing facility and associated business, located in Augusta, Georgia (Augusta). The acquisition was completed on May 1, 2024 and the purchase price was $700 million, subject to adjustments for inventory

and other assets. The amount paid totaled approximately $710.6 million. Our consolidated statement of operations includes the operation of these assets from May 1, 2024 through September 30, 2025.

GPK made customary representations and warranties in the Purchase Agreement for a transaction of this nature relating to periods prior to, and as of, the closing of the acquisition. 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. We have notified the insurance carriers of alleged breaches of certain representations and warranties contained in the Purchase Agreement. In July 2025, we submitted our claims to the insurance carriers for losses arising of the alleged breaches. Although we believe that our claims are meritorious, no assurance can be given as to whether we will recover all, or any part, of the losses for which we have made such claims. No gains or receivables have been recognized related to this claim as of September 30, 2025.

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 flow used in operating activities for the nine months ended September 30, 2025 were $7.3 million compared to net cash flows provided by operating activities of $96.5 million for the nine months ended September 30, 2024. This decrease was driven by lower operating performance due to the divestiture of our tissue operations which are included in discontinued operations in the first nine months of 2024. Additionally, during the first nine months of 2025, we paid $57 million related to our 2024 income tax liability primarily related to the divestiture of our tissue operations in 2024. Accounts receivable and accounts payable agings as of September 30, 2025 have remained relatively consistent with balances as of December 31, 2024.

Investing Activities

Net cash flows provided by investing activities for nine months ended September 30, 2025 were $86.0 million compared to $791.8 million in the same period of the prior year. During the nine months ended September 30, 2025, we paid $74 million related to capital expenditures and paid $12.1 million associated with the working capital adjustment related to our business divestiture that occurred during the fourth quarter of 2024. During the nine months ended September 30, 2024, we paid $83.6 million related to capital expenditures and $708.2 million related to the acquisition of our Augusta, Georgia facility. Included in "Accounts payable and accrued liabilities" on our Consolidated Balance Sheets were $11.8 million and $25.5 million related to unpaid capital expenditures at September 30, 2025 and 2024.

During 2025, we expect cash paid for capital expenditures to be approximately $85 million to $90 million.

Financing Activities

During the nine months ended September 30, 2025, net cash provided by financing activities was $33.5 million. We borrowed $72.0 million and repaid $18.0 million on our ABL.We used $17.2 million to repurchase stock and $2.3 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

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.

ABL Credit Agreement

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 ABL Credit Agreement matures, on November 7, 2027. As of September 30, 2025, our borrowing base supported up to $213.9 million availability under the ABL of which we utilized $57.7 million, consisting of $54.0 million borrowings outstanding and $3.7 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).

Under the ABL Credit Agreement, loans may bear interest based on SOFR or Alternative 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.

At September 30, 2025, we were in compliance with the covenants associated with 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 ABL Credit Agreement or other credit agreements.

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 September 30, 2025. 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, 2024.

ITEM 4. Controls and Procedures

As of September 30, 2025, 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, 2025 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

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.

The matter below is included per Item 103(c)(3) of Regulation S-K of the Securities Exchange Act of 1934, as amended.

Environmental Lawsuit Related to the Company’s Facility in Augusta, Georgia

The Company was named as a defendant in a complaint filed on February 5, 2025 in the Superior Court of Chatham County in the State of Georgia, styled The Mayor and Aldermen of the City of Savannah, Georgia v. 3M Company, et al. (the “Environmental Lawsuit”).

The plaintiff seeks monetary damages and equitable and injunctive relief in connection with the alleged presence of per- and poly-fluoroalkyl substances (“PFAS”) in the plaintiffs’ source water supply used to produce drinking water.

The Environmental Lawsuit names over fifty defendants and categorizes them separately as: (1) the “PFAS Manufacturer” defendants who allegedly created and sold PFAS or PFAS-containing products to various industries in Georgia and South Carolina, and (2) the “PFAS User” defendants who allegedly “purchased and used PFAS and products containing or degrading into PFAS in their industrial processes” and discharged PFAS. The plaintiff alleges the Company, which operates a facility in Augusta, Georgia that it recently acquired in May of 2024, is a PFAS User defendant. The Company believes it has meritorious defenses to the claims and intends to vigorously defend this matter.

ITEM 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. See Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, entitled “Risk Factors.”

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

Our Board of Directors approved a new stock repurchase program on October 31, 2024 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. The authorization has no expiration date.

The following table reflects our shares repurchased during the third quarter of 2025. None of the shares in this table were repurchased directly from any of our officers or directors.

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.

Rule 10b5-1 Trading Arrangements

During the quarter ended September 30, 2025, the following officer (as defined in Rule 16a-1(f) of the Exchange Act) adopted a Rule 10b5-1 trading arrangement, as defined in Item 408 of Regulation S-K, for the sale of our common stock. Shares in the 10b5-1 trading arrangement that are subject to restricted stock units (“RSUs”) and stock options may only be traded following satisfaction of applicable vesting requirements. In addition, because of pricing (such as future share price targets) and timing conditions in the 10b5-1 trading arrangement, it is not yet determinable how many shares actually will be sold under the plan prior to its expiration date.

On August 29, 2025, Steve Bowden, our Senior Vice President, Operations, entered into a Rule 10b5-1 trading arrangement that provides for the sale of up to 8,889 shares of our common stock. This trading arrangement is scheduled to expire on December 31, 2025.

This Rule 10b5-1 trading arrangement was entered into in writing during an open trading window, includes the mandatory cooling-off period and good-faith certification required by Rule 10b5-1(c)(1), and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and our policies regarding transactions in our securities.

During the quarter ended September 30, 2025, none of our other 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:

EXHIBIT EXHIBIT DESCRIPTION Filed herewith?

31* Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32* Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350. X 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.

** Certain schedules, annexes and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of such schedules, annexes and exhibits, or any section thereof, to the SEC upon request.