Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kevin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clearwater Paper Fourth Quarter and Full Year 2020 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there’ll be a question and answer session. [Operator Instructions] I would now like to turn the call over to Sloan Bohlen, Head of Investor Relations. Please go ahead.

Thank you, Kevin. Good afternoon, and thank you for joining Clearwater Paper's fourth quarter 2024 earnings conference call. Joining me on the call today are Arsen Kitch, President and Chief Executive Officer; and Sherri Baker, Senior Vice President and Chief Financial Officer. Financial results for the fourth quarter of 2024 were released shortly after today's market close. You will find a presentation of supplemental information, including a slide providing the company's current outlook posted on the Investor Relations page of our website at clearwaterpaper.com. Additionally, we will be providing certain non-GAAP financial information in this afternoon's discussion. A reconciliation of the non-GAAP information to comparable GAAP information is included in the press release and in the supplemental information provided on our website. Please note Slide 2 of the supplemental information covering forward-looking statements. Rather than reading this slide will incorporate it by reference into our prepared remarks. And with that, let me turn the call over to Arsen.

Thank you for joining us, and good afternoon. I'm going to structure my remarks today across three key areas. First, I'll provide a summary of our major strategic accomplishments in 2024. Next, I'll discuss our fourth quarter performance, including our perspective on current industry conditions. And lastly, I will outline our near and long-term priorities, including actions that we're taking to reduce our cost structure. I will then turn the call over to Sherri to provide additional details on our fourth quarter and full year results as well as our outlook for 2025. Let's start with an overview of our strategic accomplished in 2024. We announced the planned acquisition of the Augusta Paperboard facility in February of last year. This was our first major step to transform Clearwater to premier independent paperboard packaging supplier in North America. The Augusta acquisition increased our paperboard capacity by around 70% and improved our geographic footprint. We closed the transaction on May 1 and are well on track to integrate the Augusta mill into our network. We believe that this acquisition can contribute $140 million to $150 million of annual adjusted EBITDA to Clearwater once we capture volume synergies and assuming the industry returns to normalized cross-cycle utilization levels. Within three short months of closing on the Augusta acquisition, we announced the planned sale of our tissue business for $1.06 billion. Our team worked tirelessly over the last several years to improve our tissue business, leading to this outstanding outcome for Clearwater. We completed the sale on November 1 and utilize the net proceeds to significantly delever our balance sheet. These two deals transform Clearwater and position our company for future growth in paperboard. I'm very proud of our team for these tremendous accomplishments in such a short period of time and look forward…

Thank you, Arsen. As Arsen mentioned earlier, we delivered $21 million of adjusted EBITDA in the fourth quarter down from $63 million in the previous year. This decline was driven by two fewer months of contributions from the tissue business, which we divested on November 1. The other sources of the decline were major maintenance expenses at our Augusta mill and lower paperboard pricing. This was partly offset by higher sales and production volumes from the addition of the Augusta mill and lower input costs. As we turn to the full year 2024, adjusted EBITDA from total operations was $182 million, down from $281 million in 2023. The change in year-over-year results was predominantly driven by a $90 million impact from lower paperboard pricing. Two fewer months of contribution from the tissue business also lowered our results versus 2023 partly offsetting these headwinds was additional volume as a result of our Augusta acquisition and some input cost deflation. With the completion of the divestiture of our tissue business, we generated significant value. We recognized a gain on the sale of the business of $307 million in Q4, contributing significantly to our full year net income. We utilized the approximately $850 million of net proceeds to significantly delever our balance sheet and meaningfully reduce our debt. For full year 2024, we reduced net debt by $199 million and as of year-end, we have $275 million of notes outstanding due in 2028 and a net leverage ratio of 1.1 times. Turning to our outlook for the first quarter of 2025. In the first quarter, we expect to deliver $20 million to $30 million of adjusted EBITDA. We will not incur planned major maintenance outage costs in the first quarter, and we'll continue to match supply to meet demand. We expect approximately $4…

Thank you, Sherri. I'll summarize where we are today. We completed two major strategic transactions in 2024 that transform Clearwater into a paperboard focused company. We're now focused on strengthening our position as an independent supplier of paperboard packaging products to North American converters. We will look for opportunities to expand our product offering, which may include new applications for existing paperboard as well as new substrates. We have a well-invested asset base and a strong balance sheet that will help us weather this part of the industry cycle. We remain optimistic about the medium to long-term prospects for our industry and our company. As a result, we expect strong margins and cash flows through the cycle and aim to strategically deploy capital to create long-term shareholder value. Finally, I'd like to thank our people for their efforts to remain focused on operating safely and providing excellent service to our customers during this time of change in transition. I would also like to thank our customers for putting their trust in us and our shareholders for their continued interest. With that, we'll open it up to your questions.

[Operator Instructions] Your first question comes from the line of Matthew McKellar RBC Capital Markets. Please go ahead.

Good afternoon. Thanks for taking my questions. Maybe first starting with -- good afternoon, management. Just starting with the new agreements you mentioned. I recognize that it's supposed to ramp over several years. But are you able to help us get a better sense of how meaningful those incremental volumes could be it time or what the shape of that ramp-up curve looks like?

Yes. So we incorporated into our '25 volume assumptions. This was part of our assumption set that we were contemplating with the Augusta acquisition. So it's going to take several years to ramp, but it should provide us with enough volume to fill out our open capacity and capture Augusta synergies. And Matthew, if you recall, when we purchased Augusta, the mill was approximately 70% full, which provides us with approximately 150,000 to 200,000 tons of open capacity. So I think it provides you a bit of an idea of what this could look like over the long run.

Okay. That's helpful. And maybe one other kind of cleanup just in your opening remarks there. You talked about you're expecting improving operating performance to help offset the pricing and inflation headwinds as much in your, I think, initial 2025 assumptions, you kind of dimensionalize is $40 million to $50 million year-over-year. Just wanted to, I guess, make sure I'm understanding the moving parts here. Are you expecting, I guess, incremental benefits now versus your initial assumptions around how you run your mill system? Or I just wanted to make sure we're thinking about that message in the correct way.

I think there's probably three areas to think about. I think the first area is improving operational performance. As you mentioned, that should offset that -- those price and cost headwinds. I mean we talked about $40 million to $50 million last quarter. The next set of improvement will come from, hopefully, fewer disruptions due to the major weather events that we experienced in 2024. Hard to predict, but it's also hard to imagine having such two large events like we did last year in Lewiston and Augusta. And the third bucket is the $30 million to $40 million of cost reductions that we're pursuing. And we took actions here in January to capture some of those savings. So I think those are the three buckets of improvement that we're expecting in '25 versus 2024.

Thank you. That's very helpful. Maybe sticking with those headcount reductions and other fixed cost savings. Are you expecting much benefit from those initiatives in Q1? Or does that really start to show up in Q2?

It would be, I'd say, a modest amount that you'll see in Q1. It will start to ramp more through Q2 with the, I'd say, the bulk of the savings really happening in the second half of the year.

Great. Okay. That's helpful. And then just backing up a little bit here. If the U.S. applies tariffs to Mexico and Canada and they apply reciprocal tariffs in return, what do you think the impact of the SBS market would be? Or I mean, SBS and other grades you consider yourself competing against and then how are your thinking change if we also see tariffs on the European Union? I realize there's a lot of moving parts there and a lot of ambiguity, but just any high-level thoughts would be helpful. Thank you.

Yes. So let me talk about how it potentially could impact us. We purchased some of our supplies from Canada chemicals and pulp would be two good examples. We do some export into Mexico and a little bit into Canada. So there will be an impact that we would feel, but it will primarily come from higher costs passed on to us from our chemical suppliers potentially and pulp suppliers. Our goal in that scenario would be to pass on those cost increases to our customers. But it's kind of -- it's hard to predict how all those tariffs and the flows would be impacted by these tariffs. So that's how we think about impact on Clearwater. It's higher cost to us, which we would then pass on to our customers. We're primarily a domestic supplier. So there could be some impact in the global flow of paperboard, but it's really hard to predict what that would look like.

Okay. That's fair. Thank you. And if I get one more in. Obviously, your balance sheet is in a great place now. And I recognize their options are considering that you could have to put some capital against some of the medium term. But where the stock is today, do you think you have more room to get aggressive on the share repurchases versus maybe the $9 million done since November? Or how are you thinking about that option for capital allocation? Thanks.

I think what we said all along is we'd be opportunistic buyers of our shares when they trade at a sufficient discount to what we think our intrinsic value is. Our top priority remains investing in our assets and maintaining a strong balance sheet. And as we see our cash flow generation in 2025, I think we'll make adjustments to the share buyback program. But again, it's -- we view this as an investment, but our top two priorities are investing back into our assets to maintain their competitiveness and also to maintain a really strong balance sheet.

Okay. That's great. And if I could do one more, just looking at how demand has started the year here versus maybe where you saw things trend in Q4, any comments on what you're seeing, any differences across folding carton versus common plates? Any other trends to call out here? Thanks.

Yes. I think this is maybe a little bit anecdotal, but the conversations we're having with our customers are positive. I think they're expecting '25 to be a better year than '24. I would also tell you that some of our food service demand is more robust than our folding carton demand. In fact, we are on several of our machines -- on a couple of our machines, we are close to being sold out, especially on what I'd call extruded products, so think up we're essentially being pretty close to being sold out. So it really depends on the category, but we're seeing some hopeful signs of demand continue to recover.

Okay, great. Thanks for all the color. I’ll turn it back.

There are no further questions at this time. And with that, ladies and gentlemen, that concludes your conference call. And thank you for participating, and ask that you please disconnect your lines.