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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
ý Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2020
or
¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number: 001-34146
CLW-20200630_G1.JPG
CLEARWATER PAPER CORPORATION
(Exact name of registrant as specified in its charter)
DE   20-3594554
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification No.)
601 West Riverside, Suite 1100   99201
Spokane, WA
(Address of principal executive offices)   (Zip Code)
(509) 344-5900
(Registrant’s telephone number, including area code)
__________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.0001 per share CLW New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ý     No  ¨    
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨  
Accelerated filer ý
Non-accelerated filer ¨   Smaller reporting company ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  ý 

The number of shares of common stock of the registrant outstanding as of August 4, 2020 was 16,571,798.


FORWARD-LOOKING STATEMENTS
Our disclosure, discussion and analysis in this report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding impacts of COVID-19 on our business and operations; accounting standards; liquidity; capital expenditures; cash flow; borrowing and credit facilities; credit agreement compliance; disclosure controls and legal proceedings. Words such as anticipate, expect, intend, plan, target, project, believe, schedule, estimate, may, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, assumptions and projections that are subject to change. Our actual results of operations may differ materially from those expressed or implied by the forward-looking statements contained in this report. Important factors that could cause or contribute to such differences include those risks discussed in the section entitled “Risk Factors” in our 2019 Form 10-K and the "Risk Factor" included in Part II of this report, as well as the following:
•impact of COVID-19 on our operations, our suppliers' operations and our customer demand;
•competitive pricing pressures for our products, including as a result of increased capacity as additional manufacturing facilities are operated by our competitors and the impact of foreign currency fluctuations on the pricing of products globally;
•the loss of, changes in prices in regard to, or reduction in, orders from a significant customer;
•changes in the cost and availability of wood fiber and wood pulp;
•changes in transportation costs and disruptions in transportation services;
•changes in customer product preferences and competitors' product offerings;
•larger competitors having operational and other advantages;
•customer acceptance and timing and quantity of purchases of our tissue products, including the existence of sufficient demand for and the quality of tissue produced by our expanded Shelby, North Carolina operations;
•consolidation and vertical integration of converting operations in the paperboard industry;
•our ability to successfully implement our operational efficiencies and cost savings strategies, along with related capital projects, and achieve the expected operational or financial results of those projects, including from the continuous digester at our Lewiston, Idaho facility;
•changes in the U.S. and international economies and in general economic conditions in the regions and industries in which we operate;
•manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunctions and damage to our manufacturing facilities;
•cyber-security risks;
•changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs;
•labor disruptions;
•cyclical industry conditions;
•changes in expenses, required contributions and potential withdrawal costs associated with our pension plans;
•environmental liabilities or expenditures;
•reliance on a limited number of third-party suppliers for raw materials;
•our ability to attract, motivate, train and retain qualified and key personnel;
•our substantial indebtedness and ability to service our debt obligations;
•restrictions on our business from debt covenants and terms;
•negative changes in our credit agency ratings; and
•changes in laws, regulations or industry standards affecting our business.
Forward-looking statements contained in this report present management’s views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of management’s views to reflect events or circumstances occurring after the date of this report.



CLEARWATER PAPER CORPORATION
Index to Form 10-Q
 
    Page
Number
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
2
3
4
5
6
ITEM 2.
16
ITEM 3.
22
ITEM 4.
23
PART II. OTHER INFORMATION
ITEM 1.
24
ITEM 1A.
24
ITEM 6.
26
27


Part I: Financial Information
ITEM 1. Consolidated Financial Statements
CLEARWATER PAPER CORPORATION
Consolidated Balance Sheets
(Unaudited)
 
(In millions, except share data) June 30, 2020 December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents $ 48.2    $ 20.0   
Restricted cash —    1.4   
Receivables, net 191.9    159.4   
Inventories 235.3    281.4   
Other current assets 9.0    3.6   
Total current assets 484.4    465.8   
Property, plant and equipment, net 1,219.7    1,257.7   
Operating lease right-of-use assets 68.2    73.1   
Goodwill and intangible assets, net 50.4    52.0   
Other assets, net 18.7    29.1   
TOTAL ASSETS $ 1,841.5    $ 1,877.7   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt $ 1.6    $ 17.9   
Trade payables 137.5    158.2   
Accrued compensation 47.3    45.0   
Other accrued liabilities 61.1    59.3   
Total current liabilities 247.5    280.4   
Long-term debt 827.9    884.5   
Long-term operating lease liabilities 60.1    65.6   
Liability for pension and other postretirement employee benefits 74.4    76.6   
Other long-term obligations 21.6    17.3   
Deferred tax liabilities 139.3    121.3   
TOTAL LIABILITIES 1,370.7    1,445.7   
Stockholders’ equity:
Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares,
   no shares issued
—    —   
Common stock, par value $0.0001 per share, 100,000,000 authorized shares,
  16,571,000 and 16,515,813 shares issued
—    —   
Additional paid-in capital 11.8    9.8   
Retained earnings 514.8    481.7   
Accumulated other comprehensive loss, net of tax (55.8)   (59.5)  
TOTAL STOCKHOLDERS' EQUITY 470.8    432.0   
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,841.5    $ 1,877.7   
See accompanying Notes to the Consolidated Financial Statements.
2

CLEARWATER PAPER CORPORATION
Consolidated Statements of Operations
(Unaudited) 



  Three Months Ended June 30, Six Months Ended June 30,
(In millions, except per-share data) 2020 2019 2020 2019
Net sales $ 480.5    $ 452.0    $ 958.4    $ 880.8   
Costs and expenses:
Cost of sales 396.7    409.8    819.7    794.1   
Selling, general and administrative expenses 32.6    26.5    60.1    56.9   
Other operating charges, net 3.0    0.4    11.5    0.1   
Total operating costs and expenses 432.4    436.7    891.4    851.1   
Income from operations 48.1    15.3    67.0    29.7   
Interest expense, net (12.0)   (10.9)   (24.9)   (19.4)  
Other non-operating expense (2.0)   (1.5)   (3.8)   (2.8)  
Debt retirement costs (1.0)   —    (1.0)   —   
   Total non-operating expense (14.9)   (12.4)   (29.6)   (22.2)  
Income before income taxes 33.2    2.9    37.3    7.5   
Income tax provision 10.4    3.3    4.2    4.0   
Net income (loss) $ 22.8    $ (0.4)   $ 33.1    $ 3.4   
Net income (loss) per common share:
Basic $ 1.37    $ (0.03)   $ 2.00    $ 0.21   
Diluted 1.36    (0.03)   1.99    0.21   
Average shares of common stock used to compute net income (loss) per share:
(in thousands)
Basic 16,594    16,539    16,575    16,528   
Diluted 16,686    16,539    16,644    16,552   

See accompanying Notes to the Consolidated Financial Statements.
3

CLEARWATER PAPER CORPORATION
Consolidated Statements of Comprehensive Income
(Unaudited)


  Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2020 2019 2020 2019
Net income (loss) $ 22.8    $ (0.4)   $ 33.1    $ 3.4   
Other comprehensive income:
Defined benefit pension and other postretirement employee benefits:
Amortization of actuarial loss included in
   net periodic cost, net of tax of $0.6, $0.5, $1.3, $0.9
1.8    1.3    3.7    2.6   
Other comprehensive income, net of tax 1.8    1.3    3.7    2.6   
Comprehensive income $ 24.6    $ 0.9    $ 36.8    $ 6.0   

See accompanying Notes to the Consolidated Financial Statements.

4

CLEARWATER PAPER CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
  Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2020 2019 2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 22.8    $ (0.4)   $ 33.1    $ 3.4   
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation and amortization 27.8    28.5    55.8    54.3   
Stock-based compensation expense 3.4    1.2    4.8    2.1   
Deferred taxes 8.9    4.3    10.7    5.2   
Pension and other post retirement employment benefits 1.2    0.3    2.0    0.3   
Debt retirement costs 1.0    —    1.0    —   
Gain on divested assets —    —    (1.4)   —   
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 18.8    (2.7)   (18.5)   (25.8)  
(Increase) decrease in inventory 5.1    (3.4)   46.1    (25.0)  
(Increase) decrease in other current assets 3.6    3.1    (5.4)   (5.7)  
Increase (decrease) in trade payables (11.6)   3.5    (24.6)   (7.3)  
Increase (decrease) in accrued compensation 16.5    7.7    5.6    (4.2)  
Increase in other accrued liabilities 10.4    2.8    10.3    16.3   
Other, net 1.2    (0.8)   1.6    1.2   
Net cash flows provided by operating activities 109.0    44.1    121.1    14.7   
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7.3)   (36.8)   (17.8)   (108.4)  
Net cash flows used in investing activities (7.3)   (36.8)   (17.8)   (108.4)  
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of short-term debt 20.0    146.6    108.5    436.9   
Repayments of short-term debt (73.9)   (123.8)   (122.7)   (322.8)  
Repayments of long-term debt (60.4)   —    (61.5)   —   
Other, net —    (0.4)   (0.9)   (1.1)  
Net cash flows provided by (used in) financing activities (114.3)   22.4    (76.5)   113.0   
Increase (decrease) in cash, cash equivalents and restricted cash (12.6)   29.7    26.7    19.3   
Cash, cash equivalents and restricted cash at beginning of period 61.8    14.6    22.4    24.9   
Cash, cash equivalents and restricted cash at end of period $ 49.2    $ 44.3    $ 49.2    $ 44.3   
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized $ 4.9    $ 1.3    $ 24.2    $ 16.4   
Cash paid for income taxes, net of amounts received for refunds $ (2.2)   $ 1.9    $ (2.2)   $ 1.7   
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents $ 48.2    $ 41.8    $ 48.2    $ 41.8   
Restricted cash —    1.4    —    1.4   
Restricted cash included in Other assets, net 1.1    1.0    1.1    1.0   
Total cash, cash equivalents and restricted cash $ 49.2    $ 44.3    $ 49.2    $ 44.3   
See accompanying Notes to the Consolidated Financial Statements.
5

CLEARWATER PAPER CORPORATION
Consolidated Statements of Stockholders’ Equity
(Unaudited)
 
  Common Stock Additional Paid-In Capital Retained
Earnings 		Accumulated
Other
Comprehensive
Loss 		Total
Stockholders'
Equity
(In millions, except share amounts which are in thousands) Shares Amount
Balance at December 31, 2018 16,482    $ —    $ 6.4    $ 487.3    $ (67.3)   $ 426.4   
Net income —    —    —    3.8    —    3.8   
Stock-based compensation expense
—    —    1.2    —    —    1.2   
Issuance of shares under stock plans, net 33    —    (0.4)   —    —    (0.4)  
Pension and other postretirement employee benefit plans,
   net of tax of $0.5
—    —    —    —    1.2    1.2   
Balance at March 31, 2019 16,515    $ —    $ 7.2    $ 491.1    $ (66.1)   $ 432.2   
Net loss —    —    —    (0.4)   —    (0.4)  
Stock-based compensation expense
—    —    1.2    —    —    1.2   
Pension and other postretirement employee benefit plans,
net of tax of $0.5
—    —    —    —    1.3    1.3   
Balance at June 30, 2019 16,515    $ —    $ 8.4    $ 490.7    $ (64.8)   $ 434.3   

6

CLEARWATER PAPER CORPORATION
Consolidated Statements of Stockholders’ Equity
(Unaudited)
  Common Stock Additional Paid-In Capital Retained
Earnings 		Accumulated
Other
Comprehensive
Loss 		Total
Stockholders'
Equity
(In millions, except share amounts which are in thousands) Shares Amount
Balance at December 31, 2019 16,515    $ —    $ 9.8    $ 481.7    $ (59.5)   $ 432.0   
Net income —    —    —    10.3    —    10.3   
Stock-based compensation expense
—    —    1.3    —    —    1.3   
Issuance of shares under stock plans, net 54    —    (0.7)   —    —    (0.7)  
Pension and other postretirement employee benefit plans,
 net of tax of $0.6
—    —    —    —    1.8    1.8   
Balance at March 31, 2020 16,569    $ —    $ 10.4    $ 492.1    $ (57.7)   $ 444.8   
Net income —    —    —    22.8    —    22.8   
Stock-based compensation expense
—    —    1.4    —    1.4   
Issuance of shares under stock plans, net 2    —    —    —    —    —   
Pension and other postretirement employee benefit plans,
 net of tax of $0.6
—    —    —    —    1.8    1.8   
Balance at June 30, 2020 16,571    $ —    $ 11.8    $ 514.8    $ (55.8)   $ 470.8   

See accompanying Notes to the Consolidated Financial Statements.
7

Clearwater Paper Corporation
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, the consolidated financial position, results of operations, stockholders' equity and cash flows for us and our subsidiaries for the interim periods presented. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. All dollar amounts are shown in millions, except per share.
NOTE 2 RECENTLY ADOPTED AND NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
In March 2020, the SEC issued a final rule that amended the disclosure requirements under SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. The final rule is based on the premise that the primary source of information that investors in guaranteed debt rely on is the consolidated financial statements of the parent company. The final rule replaces the previous requirement to provide separate condensed consolidating financial information of the guarantors. The final rule is effective for filings on or after January 4, 2021, and early adoption is permitted. We have elected to early adopt this rule which resulted in the removal of the supplemental guarantor financial information footnote.
New Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. This ASU is applicable to our contracts that reference LIBOR. The amendments may be applied through December 31, 2022. We will apply this guidance to transactions and modifications of these arrangements. We reviewed all other new accounting pronouncements issued in the period and concluded that they are not applicable or not material to our business.
NOTE 3 FAIR VALUE MEASUREMENTS
Carrying amounts reported on the balance sheet for cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. We estimated the Senior Notes due 2023 and 2025 to have a total fair market value of $576.6 million and $574.0 million at June 30, 2020 and December 31, 2019 based upon market quotations. We estimated the fair value of the Term Loan to be $236.9 million and $300.0 million at June 30, 2020 and December 31, 2019.
NOTE 4 RECEIVABLES
Receivables consist of:
June 30, 2020 December 31, 2019
Trade accounts receivable $ 168.8    $ 157.0   
Allowance for current expected credit losses (1.7)   (1.5)  
Taxes receivable 23.4    0.3   
Interest receivable —    1.0   
Other 1.4    2.6   
$ 191.9    $ 159.4   
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NOTE 5 INVENTORIES
Inventories consist of:
June 30, 2020 December 31, 2019
Logs, pulpwood, chips and sawdust $ 11.8    $ 19.4   
Materials and supplies 92.6    93.1   
Pulp, paperboard and tissue products 130.9    168.9   
$ 235.3    $ 281.4   
NOTE 6 LEASES
We have operating leases for manufacturing, office, warehouse and distribution space, paperboard sheeting and chipping facilities, equipment and vehicles. We also have finance leases related to our North Carolina converting and manufacturing facilities, as well as for certain office and other equipment. Our leases have remaining lease terms from less than one year to eleven years years, and some of our leases include one or more options to renew.

The tables below present financial information associated with our leases.
9

Lease expense Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Operating lease costs $ 3.9    $ 3.5    $ 7.8    $ 7.0   
Finance lease costs:
Amortization of right-of-use assets 0.4    0.5    0.9    0.9   
Interest on lease liabilities 0.4    0.5    0.9    0.9   
Total finance lease costs 0.9    0.9    1.8    1.8   
Variable lease costs 0.4    0.3    0.8    0.6   
Total lease costs $ 5.2    $ 4.8    $ 10.4    $ 9.4   

Supplemental cash flow information Six Months Ended June 30,
2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 8.8    $ 8.1   
Operating cash flows from finance leases 0.9    0.9   
Financing cash flows from finance leases 0.7    0.6   
Non-cash amounts for lease liabilities arising from obtaining right-of-use assets:
Operating leases $ 1.7    $ 0.9   
Finance leases 0.3    0.5   
Supplemental balance sheet information
Classification June 30, 2020 December 31, 2019
Lease ROU Assets
Operating lease assets Operating lease right-of-use assets $ 68.2    $ 73.1   
Finance lease assets Property, plant and equipment, net 26.7    26.5   
Accumulated depreciation (11.8)   (11.1)  
Total lease ROU assets $ 83.1    $ 88.5   
Lease Liabilities
Current operating lease liabilities Other accrued liabilities $ 14.5    $ 13.9   
Current finance lease liabilities Short-term debt 1.6    1.4   
Total current lease liabilities 16.1    15.3   
Non-current operating lease liabilities Long-term operating lease liabilities 60.1    65.6   
Non-current finance lease liabilities Long-term debt 20.0    20.6   
Total non-current lease liabilities 80.1    86.2   
Total operating lease liabilities 74.6    79.5   
Total finance lease liabilities 21.6    22.0   
Total lease liabilities $ 96.2    $ 101.5   


10

NOTE 7 DEBT
Long-term debt consists of:
June 30, 2020 December 31, 2019
Interest Rate at
June 30, 2020 		Principal Unamortized Debt Costs Total Principal Unamortized Debt Costs Total
Term loan maturing 2026,
variable interest rate 		4.3% $ 239.3    $ (3.8)   $ 235.4    $ 300.0    $ (5.1)   $ 294.9   
2013 Notes, maturing 2023,
fixed interest rate 		4.5% 275.0    (1.2)   273.8    275.0    (1.5)   273.5   
2014 Notes, maturing 2025,
fixed interest rate 		5.4% 300.0    (1.3)   298.7    300.0    (1.5)   298.5   
ABL Credit Agreement,
variable interest rate 		3.3% —    —    —    13.5    —    13.5   
Finance leases 21.6    —    21.6    22.0    —    22.0   
Total debt 835.9    (6.4)   829.5    910.5    (8.1)   902.4   
Less: current portion (1.6)   —    (1.6)   (17.9)   —    (17.9)  
Net long-term portion $ 834.2    $ (6.4)   $ 827.9    $ 892.6    $ (8.1)   $ 884.5   

At June 30, 2020, we were in compliance with covenants in our various credit agreements. The maturities of our Term loan and our ABL Credit Agreement are subject to the refinancing of our 2013 Notes. If the 2013 Notes are not refinanced 91 days before their maturity, the ABL Credit Agreement and Term Loan Credit Agreement will become due.
Term Loan Credit Agreement
The Term Loan Credit Agreement matures on July 26, 2026. We are required to repay the aggregate outstanding principal amount in quarterly installments in an aggregate amount for each such date equal to the aggregate principal amount of the initial loan amount (as such amount may be adjusted pursuant to the prepayment provisions of the Term Loan Credit Agreement) multiplied by 0.25%. In the second quarter, we made a voluntary prepayment of $60 million. This prepayment was applied against our quarterly required installments through 2026.
In addition, we must make mandatory prepayments of principal under the Term Loan Credit Agreement upon the occurrence of certain specified events, including certain asset sales (subject to customary reinvestment rights), debt issuances not permitted under the Term Loan Credit Agreement, and based on a percentage, which may vary from 0% to 50% depending on our secured leverage ratio, of annual Excess Cash Flows in excess of certain threshold amounts, less any voluntary prepayments under the Term Loan Credit Agreement. Any remaining outstanding principal balance under the Term Loan Credit Agreement is repayable on the maturity date. Amounts repaid or prepaid by us with respect to the loans under the Term Loan Credit Agreement cannot be reborrowed. We may, at our option, prepay any borrowings under the Term Loan 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 add one or more incremental term loan facilities to the Term Loan Credit Agreement, subject to obtaining commitments from any participating lenders and certain other conditions, in an amount not to exceed (1) $100 million, plus (2) the amount of all voluntary prepayments of the Term Loan Credit Agreement (other than prepayments funded with long-term indebtedness), plus (3) an additional amount, so long as after giving effect to the incurrence of such additional amount, our pro forma first lien secured leverage ratio would not exceed 2.00x to 1.00x. At June 30, 2020 our pro forma first lien secured ratio was 0.97x. Under the Term Loan Credit Agreement, loans generally may bear interest based on LIBOR or an annual base rate, as applicable, plus, in each case, an applicable margin. When our leverage ratio is (i) less than or equal to 4.25 to 1.00, the margin is 3.00% per annum in the case of LIBOR loans and of 2.00% per annum in the case of annual base rate loans and (ii) greater than 4.25 to 1.00, the margin is 3.25% per annum in the case of LIBOR loans and of 2.25% per annum in the case of annual base rate loans. At June 30, 2020, our leverage ratio was 3.59x and therefore our applicable margin on LIBOR loans was 3.00%.
11

ABL Credit Agreement
The ABL Credit Agreement matures on July 26, 2024 and includes a $250 million revolving loan commitment, subject to borrowing base limitations based on a percentage of applicable eligible receivables and eligible inventory. Based upon our Consolidated Balance Sheet as of June 30, 2020, our borrowings supported up to $220.6 million availability under the line of which we utilized $4.4 million, no borrowings outstanding and $4.4 million under 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). Borrowings under the ABL Credit Agreement are also subject to mandatory prepayment in certain circumstances, including in the event that borrowings exceed applicable borrowing base limits. 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.
The ABL Credit Agreement also contains a financial covenant, which requires us to maintain a consolidated fixed charge coverage ratio of not less than 1.10 to 1.00, provided that the financial covenant under the ABL Credit Agreement is only applicable when unused availability falls below $25 million. As of June 30, 2020, our fixed charge coverage ratio was approximately 1.50x which included the impact of our voluntary debt prepayments. Our ability to utilize our ABL Credit Agreement could be limited in the future by our bond indentures which have limitations on liens.

NOTE 8 INCOME TAXES
For interim periods, accounting standards require that income tax expense be determined by applying the estimated annual effective income tax rate to year-to-date results, unless this method does not result in a reliable estimate of year-to-date income tax expense. Each period, the income tax accrual is adjusted to the latest estimate and the difference from the previously accrued year-to-date balance is adjusted to the current quarter.

For the first six months of 2020, our income tax expense reflects a rate of 11% as compared to rate of 54% in the comparable period of 2019. For the first six months of 2020, the primary differences between the U.S. federal income tax rate of 21% and the effective rate of 11% relates to the effect of tax credits and a $7.1 million benefit from the provisions of the Coronavirus Aid, Relief, and Economic Security Act. For the first six months of 2019, the primary differences between the U.S. federal income tax rate of 21% and the effective rate of 54% relates to the effect of tax credits and non-deductible compensation expense.

NOTE 9 OTHER OPERATING CHARGES
The major components of “Other operating charges, net” in the Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 are reflected in the table below and described in the paragraphs following the table:
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Reorganization expenses $ 0.6    $ 0.1    $ 3.4    $ 0.1   
Union settlement —    —    6.6    —   
Gain on divested assets —    —    (1.4)   —   
Directors' equity-based compensation expense (benefit) 1.9    —    2.1    (0.3)  
Other 0.5    0.3    0.8    0.4   
$ 3.0    $ 0.4    $ 11.5    $ 0.1   
2020
During the second quarter of 2020, we recorded  $3.0 million of expenses in "Other operating charges, net." The components of the expenses include:
•expenses of $0.6 million related to reorganization expenses (primarily related to corporate expenses), and
•expense of $1.9 million relating to directors' equity based compensation.

During the first quarter of 2020, we recorded $8.5 million of expenses in "Other operating charges, net." The components of the expenses include:
•expenses of $2.8 million related to reorganization expenses (primarily related to corporate expenses),
12

•expenses of $6.6 million associated with union settlement retroactive wage payments ($2.6 million associated with Consumer Products and $4.0 million associated with Paperboard segments),
•gain of $1.4 million associated with the Ladysmith Consumer Products facility sale escrow release, and
•expense of $0.2 million relating to directors' equity based compensation.
NOTE 10 NON-OPERATING INCOME (EXPENSE)
The components of “Non-operating expense” in the Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 are reflected in the table below:
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Interest expense $ (11.5)   $ (12.7)   $ (23.7)   $ (24.6)  
Capitalized interest —    2.0    —    5.4
Amortization of debt issuance costs (0.5)   (0.4)   (1.1)   (0.9)  
Interest income —    0.3    —    0.7
Interest expense, net (12.0)   (10.9)   (24.9)   (19.4)  
Debt retirement costs (1.0)   —    (1.0)   —   
Non-operating pension and other postretirement employee
benefits income (expense) 		(2.0)   (1.5)   (3.8)   (2.8)  
Total non-operating expense $ (14.9)   $ (12.4)   $ (29.6)   $ (22.2)  

NOTE 11 PENSION AND POSTRETIREMENT EMPLOYEE BENEFIT PLANS
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:
  Three Months Ended June 30, Six Months Ended June 30,
Pension Benefit Plans 2020 2019 2020 2019
Service cost $ 0.6    $ 0.7    $ 1.2    $ 1.2   
Interest cost 2.6    3.1    5.2    6.2   
Expected return on plan assets (3.7)   (4.1)   (7.5)   (8.3)  
Amortization of actuarial loss (gain) 2.5    1.8    5.0    3.7   
Net periodic cost $ 2.0    $ 1.4    $ 3.9    $ 2.9   
  Three Months Ended June 30, Six Months Ended June 30,
Other Postretirement Employee  Benefit Plans 2020 2019 2020 2019
Service cost $ —    $ —    $ —    $ —   
Interest cost $ 0.6    $ 0.8    $ 1.1    $ 1.4   
Amortization of actuarial loss (gain) —    —    —    (0.2)  
Net periodic cost $ 0.6    $ 0.8    $ 1.2    $ 1.2   

We record the service component of net periodic cost (benefit) as part of "Cost of sales" and "Selling, general, and administrative expenses," while the non-service components of net periodic cost (benefit) are recorded to "Other non-operating expense" on our Consolidated Statements of Operations. For the three and six months ended June 30, 2020, we recorded $0.4 million and $0.7 million to "Cost of sales" and $0.2 million and $0.5 million to "Selling, general, and administrative expenses". For the three and six months ended June 30, 2019, we recorded $0.4 million and $0.8 million to "Cost of sales" and $0.3 million and $0.5 million to "Selling, general, and administrative expenses".
13

NOTE 12 ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss, net of tax, is comprised of the following:
Pension Plan Adjustments Other Post Retirement Employee Benefit Plan Adjustments Total
Balance at December 31, 2018 $ (83.0)   $ 15.7    $ (67.3)  
Amounts reclassified from accumulated other comprehensive loss 2.7    (0.1)   2.5   
Other comprehensive income, net of tax 2.7    (0.1)   2.5   
Balance at June 30, 2019 $ (80.3)   $ 15.6    $ (64.8)  
Balance at December 31, 2019 $ (67.8)   $ 8.3    $ (59.5)  
Amounts reclassified from accumulated other comprehensive loss 3.7    —    3.7   
Other comprehensive income, net of tax 3.7    —    3.7   
Balance at June 30, 2020 $ (64.1)   $ 8.3    $ (55.8)  
NOTE 13 STOCKHOLDERS' EQUITY
Common Stock Plans
We have stock-based compensation plans under which restricted stock awards and stock options are granted according to time or performance vesting requirements. At June 30, 2020, approximately 1.3 million shares were available for future issuance under our current plan.
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Total stock-based compensation expense
(selling, general and administrative and other operating charges, net) 		$ 3.4    $ 1.2    $ 4.8    $ 2.1   
Income tax benefit related to stock-based compensation $ 0.9    $ 0.3    $ 1.3    $ 0.5   
Impact on cash flow due to taxes paid related to net share settlement of equity awards $ —    $ —    $ 0.7    $ 0.4   
At June 30, 2020, $12.2 million of compensation cost related to unvested restricted stock units, performance awards and stock options attributable to future service had not yet been recognized.
During the first six months ended June 30, 2020, we granted 371,267 restricted stock units (time vesting) at an average grant date fair value of $23.18 per share and 120,382 restricted stock units (performance vesting) at an average grant date fair value of $27.67.
NOTE 14 EARNINGS 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.
  Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2020 2019 2020 2019
Basic weighted-average common shares outstanding1
16,594    16,539    16,575    16,528   
Incremental shares due to:
Stock-based awards 92    —    70    24   
Diluted weighted-average common shares outstanding 16,686    16,539    16,644    16,552   
1Basic weighted-average common shares outstanding includes restricted stock unit awards that are fully vested, but are deferred for future issuance.
Anti-dilutive shares excluded from the calculation were 0.7 million and 1.1 million for the three months ended June 30, 2020 and 2019 and 0.8 million and 1.0 million for the six months ended June 30, 2020 and 2019.
14

NOTE 15 SEGMENT INFORMATION
We operate in two segments: Consumer Products and Paperboard. Our business units have been aggregated into these two segments based upon the similarity of economic characteristics, customers and distribution methods. Our results of operations are summarized below for each of these segments separately. Segment information was prepared in accordance with the same accounting principles as those described in Note 1 of the Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Segment net sales:
Consumer Products $ 275.1    $ 224.3    $ 540.8    $ 447.7   
Paperboard 205.4    227.7    417.6    433.1   
Total segment net sales $ 480.5    $ 452.0    $ 958.4    $ 880.8   
Operating income (loss):
Consumer Products $ 36.6    $ (5.1)   $ 50.9    $ (3.9)  
Paperboard 32.2    33.6    58.7    63.0   
Corporate (17.6)   (12.7)   (31.1)   (29.3)  
       Other operating charges, net (3.0)   (0.4)   (11.5)   (0.1)  
Income from operations $ 48.1    $ 15.3    $ 67.0    $ 29.7   

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Major products:
Paperboard $ 204.1    $ 226.2    $ 415.1    $ 429.2   
Retail tissue 260.4    210.5    508.4    415.1   
Non-retail tissue 10.2    12.3    24.1    30.7   
Other 5.8    3.0    10.7    5.8   
Total net sales $ 480.5    $ 452.0    $ 958.4    $ 880.8   
15

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
Impact of COVID-19 on Our Business
In response to the outbreak and business disruption caused by the novel coronavirus (COVID-19) pandemic, we are focused on two priorities - the health and safety of our employees and continuing to safely operate our facilities to meet the needs of our customers. We have implemented important health and safety measures across our facilities, including temperature checks, social distancing guidelines, sanitation practices, remote work for those whose jobs allow them to do so, and travel and visitor restrictions.
The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and may adversely affect our business. To date, our industry has been classified as essential by the Federal Government, through the Department of Homeland Security’s Cyber and Infrastructure Security Agency (CISA), and in each of the jurisdictions in which we operate, which enabled us to operate our facilities through the first six months of 2020. We do not expect there to be any changes in this designation and as a result, we do not anticipate having to curtail or cease our operations due to any governmental imposed shutdown.
Our company and our competitors have experienced a significant increase in demand for "at home" tissue products in the first six months of 2020 as a result of COVID-19. We expect that demand for tissue will normalize and will eventually return to pre-COVID-19 levels. Demand for paperboard products has also been affected by the COVID-19 pandemic, with increases in some end-market segments like food packaging and decreases in food service and commercial print.
The effects of the COVID-19 pandemic may negatively impact various aspects of our business including, but are not limited to:
•the ability of our suppliers to meet delivery requirements and commitments;
•disruptions to our supply chains;
•the ability of our employees to perform their work due to illness caused by the pandemic, the complete or partial closure of one or more of our manufacturing facilities, or local, state, or federal orders requiring employees to remain at home and ;
•disruptions or delays in the delivery of our products to customers;
•a decrease in demand for our products;
•disruptions in our manufacturing operations due to localized conditions;
•limitations on the ability of our customers to pay us on a timely basis; and
•negative impact on some of our customers due to challenging economic conditions.
We are evaluating and taking actions to monitor and ensure appropriate levels of available liquidity and may experience disruptions in our business as we implement modifications to preserve adequate liquidity and ensure that our business can continue to operate during this uncertain time. 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.
As the COVID-19 pandemic continues to evolve, we will continue to actively monitor the situation and may take actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers, and shareholders.
Executive Summary
We recorded an increase of 6% in sales to $480.5 million for the three months ended June 30, 2020 compared to $452.0 million for the three months ended June 30, 2019. We recorded net income for the three months ended June 30, 2020 of $22.8 million, or $1.36 per diluted share, compared to net loss of $0.4 million or $0.03 per diluted share in the second quarter of 2019. We recorded Adjusted EBITDA for the three months ended June 30, 2020 of $79.0 million compared to $44.3 million reported in the second quarter of 2019.
We recorded an increase of 9% in sales to $958.4 million for the six months ended June 30, 2020 compared to $880.8 million in the six months ended June 30, 2019. We recorded net income for the six months ended June 30, 2020 of $33.1 million, or $1.99 per diluted share, compared to net income of $3.4 million or $0.21 per diluted share in the six months
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ended June 30, 2019. We recorded Adjusted EBITDA for the six months ended June 30, 2020 of $134.3 million compared to $84.1 million reported in the first six months of 2019.
The increase in sales, net income and Adjusted EBITDA for both the three and six month periods ended June 30, 2020 was primarily driven by a significantly higher sales volume for retail tissue as a result of the COVID-19 pandemic and increases in demand based upon new customer programs. Increased demand resulted in improved margins due to increased production that drove increased fixed cost absorption.
See discussion on segment level results regarding sales, operating results and Adjusted EBITDA in “Our Operating Results” below.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with GAAP requires our management to select and apply accounting policies that best provide the framework to report our results of operations and financial position. The selection and application of those policies requires management to make difficult, subjective and complex judgments concerning reported amounts of revenue and expenses during the reporting period and the reported amounts of assets and liabilities at the date of the financial statements. As a result, it is possible that materially different amounts would be reported under different conditions or using different assumptions.
As of June 30, 2020, there have been no significant changes with regard to the critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

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 (loss) from operations before interest expense, net, non-operating pension and other post employment benefit costs, taxes, depreciation and amortization, goodwill impairment, other operating charges, net, and debt retirement costs as Adjusted EBITDA which is a non-GAAP financial measure. Adjusted EBITDA is not a substitute for the GAAP measure of net income or for any other GAAP measures of operating performance.
We have included Adjusted EBITDA on a consolidated and segment basis in this report because we use them as important supplemental measures of our performance and believe that they are frequently used by securities analysts, investors and other interested persons in the evaluation of companies in our industry, some of which present Adjusted EBITDA when reporting their results. We also use Adjusted EBITDA to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. It should be noted that companies calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA measures may not be comparable to Adjusted EBITDA reported by other companies. Our Adjusted EBITDA measures have material limitations as performance measures because they exclude interest expense, income tax (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.
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The following table provides our Adjusted EBITDA for the periods presented, as well as a reconciliation to net income.
Three Months Ended June 30, Six Months Ended June 30,
(In millions) 2020 2019 2020 2019
Net income (loss) $ 22.8    $ (0.4)   $ 33.1    $ 3.4   
Income tax provision 10.4    3.3    4.2    4.0   
Interest expense, net 12.0    10.9    24.9    19.4   
Depreciation and amortization expense 27.8    28.5    55.8    54.3   
Other operating charges, net 3.0    0.4    11.5    0.1   
Other non-operating expense 2.0    1.5    3.8    2.8   
Debt retirement costs 1.0    —    1.0    —   
Adjusted EBITDA $ 79.0    $ 44.3    $ 134.3    $ 84.1   
Consumer Products segment income $ 36.6    $ (5.1)   $ 50.9    $ (3.9)  
Depreciation and amortization 17.1    17.4    34.4    32.1   
Adjusted EBITDA Consumer Products segment $ 53.7    $ 12.3    $ 85.3    $ 28.2   
Paperboard segment income $ 32.2    $ 33.6    $ 58.7    $ 63.0   
Depreciation and amortization 9.2    9.5    18.5    19.0   
Adjusted EBITDA Paperboard segment $ 41.4    $ 43.1    $ 77.2    $ 82.0   
Corporate and other expense $ (17.6)   $ (12.7)   $ (31.1)   $ (29.3)  
Depreciation and amortization 1.5    1.6    3.0    3.2   
Adjusted EBITDA Corporate and other $ (16.2)   $ (11.1)   $ (28.1)   $ (26.1)  
Consumer Products segment $ 53.7    $ 12.3    $ 85.3    $ 28.2   
Paperboard segment 41.4    43.1    77.2    82.0   
Corporate and other (16.2)   (11.1)   (28.1)   (26.1)  
Adjusted EBITDA $ 79.0    $ 44.3    $ 134.3    $ 84.1   
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OUR OPERATING RESULTS
Our results of operations for each of our segments are discussed below. See Note 15 "Segment Information" of the Notes to the Consolidated Financial Statements included in Item 1 of this report for further information regarding our segments.

Consumer Products
   Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions,
except per unit) 		2020 2019 Increase (decrease) 2020 2019 Increase (decrease)
Sales:
Retail tissue $ 260.4    $ 210.5    23.7  % $ 508.4    $ 415.1    22.5  %
Non-retail tissue 10.2    12.3    (17.2) % 24.1    30.7    (21.6) %
Other 4.5    1.6    n.m. 8.3    1.9    n.m.
$ 275.1    $ 224.3    22.6  % $ 540.8    $ 447.7    20.8  %
Operating income (loss) $ 36.6    $ (5.1)   n.m. $ 50.9    $ (3.9)   n.m.
Operating margin 13.3  % (2.3) % 9.4  % (0.9) %
Adjusted EBITDA $ 53.7    $ 12.3    337.8  % $ 85.3    $ 28.2    202.3  %
Adjusted EBITDA margin 19.5  % 5.5  % 15.8  % 6.3  %
Shipments (short tons)
Retail 95,432    76,175    25.3  % 186,223    149,531    24.5  %
Non-retail 5,812    6,623    (12.2) % 14,814    16,889    (12.3) %
101,244    82,798    22.3  % 201,037    166,420    20.8  %
Cases (in thousands) 16,016    12,488    28.3  % 31,220    24,808    25.8  %
Sales price (per short ton)
Retail $ 2,729    $ 2,764    (1.3) % $ 2,730    $ 2,776    (1.7) %
Non-retail 1,746    1,851    (5.7) % 1,626    1,819    (10.6) %
n.m. - not meaningful

Sales volumes increased in our Consumer Products segment for the three and six month periods ended June 30, 2020 compared to the same periods in the prior year due to significantly higher sales volume for retail tissue as a result of the COVID-19 pandemic and increases in demand based upon new customer programs which were implemented prior to the COVID-19 pandemic. Sales prices decreased slightly in our Consumer Products segment for the three and six month periods ended June 30, 2020 compared to the same periods in the prior year due primarily to changes in product mix. From a product perspective, we saw the largest increases in period to period bath tissue and napkin sales with smaller increases in paper towel and facial tissue. As a percentage of our Consumer Products segment, paper towel and bath tissue represent more than 80% of our business.
Overall, the increase in operating income and Adjusted EBITDA for the three and six month periods ended June 30, 2020 compared to the same periods in the prior year was driven by higher sales as noted above as well as improvement in margin due to increased production that drove increased fixed cost absorption. Additionally, we realized lower input costs, primarily in external pulp prices and freight costs.
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Paperboard
   Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions,
except per ton amounts) 		2020 2019 Increase (decrease) 2020 2019 Increase (decrease)
Sales:
Paperboard $ 204.1    $ 226.2    (9.7) % $ 415.1    $ 429.2    (3.3) %
Other 1.3    1.5    (12.4) % 2.5    3.9    (36.8) %
$ 205.4    $ 227.7    (9.8) % $ 417.6    $ 433.1    (3.6) %
Operating income 32.2    33.6    (4.2) % 58.7    63.0    (6.8) %
Operating margin 15.7  % 14.8  % 14.1  % 14.5  %
Adjusted EBITDA $ 41.4    $ 43.1    (3.8) % $ 77.2    $ 82.0    (5.9) %
Adjusted EBITDA margin 20.2  % 18.9  % 18.5  % 18.9  %
Shipments (short tons) 207,410    225,188    (7.9) % 418,706    428,022    (2.2) %
Sales price (per short tons) $ 984    $ 1,004    (2.0) % $ 991    $ 1,003    (1.2) %

Sales volumes decreased in our Paperboard segment for the three and six month periods ended June 30, 2020 compared to the same periods in the prior year due to impacts of COVID-19 which lead to a reduction in our commodity food service business offset by increases in our folding carton and coated cup business. Sales prices decreased in our Paperboard segment for the three and six month periods ended June 30, 2020 compared to the same periods in the prior year due to the impacts of price reductions reported by RISI in February 2020.
Overall, the slight decrease in operating income and Adjusted EBITDA for the three and six month periods ended June 30, 2020 as compared to the same periods in the prior year was driven by reduced sales offset by improved input costs, primarily consisting of natural gas, wood and pulp.
Corporate expenses
Corporate expenses for the three and six month periods ended June 30, 2020 were $17.6 million and $31.1 million and $12.7 million and $29.3 million in the same periods in the prior year. The increases for the three and six month periods ended June 30, 2020 compared to the same periods in the prior year were related to higher incentive pay due to improved results and increased costs associated with professional services. Corporate expenses primarily consist of corporate overhead such as wages and benefits, professional fees, insurance and other expenses for corporate functions including certain executive officers, public company costs, information technology, financial services, environmental and safety, legal, supply management, human resources and other corporate functions not directly associated with the business operations.
Other operating charges
See Note 9 "Other operating charges" of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.
Interest expense
Interest expense for the three and six month periods ended June 30, 2020 were $1.1 million and $5.5 million higher compared to the same periods in the prior year due to lower capitalized interest due to the completion of our Shelby expansion in the latter portion of 2019. See Note 10 "Non-operating income (expense)" of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.
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LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are existing cash balances, cash generated by our operations and our ability to borrow under such credit facilities as we may have in effect from time to time. 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 (including by issuing new indebtedness subject to market conditions to refinance such outstanding indebtedness) or acquire assets or businesses that are complementary to our operations.
Operating Activities
Net cash flows provided by operating activities for the six months ended June 30, 2020 were $121.1 million compared to $14.7 million in the first six months of 2019. This increase was driven by increases in our net income and changes in working capital due to increased demand in our consumer products division which resulted in lower inventories. Accounts receivable and accounts payable agings have remained relatively consistent with balances as of December 31, 2019.
Investing Activities
During the six months ended June 30, 2020, net cash flows used for investing activities was $17.8 million compared to $108.4 million in the prior year period. This decrease is primarily due to the completion of our Shelby expansion as well as the Lewiston pulp optimization project in late 2019. Included in "Other accrued liabilities" on our Consolidated Balance Sheets was $4.6 million and $28.7 million related to capital expenditures that had not yet been paid at June 30, 2020 and 2019.
Throughout 2020, we expect cash paid for capital expenditures to be approximately $45 to $50 million.
Financing Activities
Net cash flows used by financing activities were $76.5 million for the six months ended June 30, 2020 as compared to provided by financing activities of $113.0 million for the same period of 2019. The change was driven by improved operating results and lower capital expenditures, resulting in additional available cash to fund debt repayments in the first six months of 2020.
Credit Agreements
We must make mandatory prepayments of principal under the Term Loan Credit Agreement upon the occurrence of certain specified events, including based upon a percentage of annual Excess Cash Flow and Senior Secured Leverage Ratio as defined by the Term Loan Credit Agreement. There is uncertainty in the amount of Excess Cash Flow that we may generate during the current fiscal year, therefore, we are unable to estimate the mandatory prepayment under the Term Loan Credit Agreement that could be required at the time such payment is due in 2021. The $60 million prepayment of debt in the first six months of 2020 can offset the mandatory Excess Cash Flow amount. Amounts repaid or prepaid cannot be reborrowed. However, we may add one or more incremental term loan facilities to the Term Loan Credit Agreement, subject to obtaining commitments from any participating lenders and certain other conditions, so long as our first lien secured leverage ratio does not exceed 2.00x to 1.00. At the end of the second quarter of 2020, our first lien secured ratio was 0.97x.
The ABL Credit Agreement includes a $250 million revolving loan commitment, subject to borrowing base limitations. Borrowings under the ABL Credit Agreement are subject to mandatory prepayment in certain circumstances. We may also increase commitments under the ABL Credit Agreement in an aggregate principal amount of up to $100 million, subject to obtaining commitments from any participating lenders and certain other conditions.
Both Credit Agreements contain certain customary representations, warranties, and affirmative and negative covenants. 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 when availability falls below $25 million.
At June 30, 2020, we were in compliance with all covenants in both of our credit agreements, and based on our current financial projections, we expect to remain in compliance. However, if our financial position, results of operations or market conditions deteriorate, we may not be able to remain in compliance. There can be no assurance that we will be able to remain in compliance with our credit agreements. If we are unable to do so, it would be necessary to seek an amendment from our lenders, which, if obtained, could require payment of additional fees, increased interest rates or other conditions or restrictions.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our exposure to market risks on financial instruments includes interest rate risk on our Term Loan and ABL Credit Agreement. As of June 30, 2020, there were $239.3 million in borrowings outstanding under our credit agreements. The reference interest rate applied to borrowings under the Credit Agreements is adjusted, at our option, at one, two, three, or six month intervals for LIBOR-based borrowings (or daily in the case of alternative based rate borrowings). A one percentage point increase or decrease in interest rates, based on outstanding credit facilities' borrowings of $239.3 million, would have an approximate $2.4 million annual effect on interest expense.

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ITEM 4. Controls and Procedures
As of June 30, 2020, 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 three months ended June 30, 2020 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

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Part II
ITEM 1. Legal Proceedings
We may from time to time be involved in claims, proceedings and litigation arising from our business and property ownership. We believe, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on our financial condition.

ITEM 1A. Risk Factors
The COVID-19 pandemic may adversely affect our operations and financial condition.
Since being reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.
The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.
As has been widely reported in the media, companies like ours experienced a significant increase in demand for tissue and paperboard products in the first six months of 2020 as a result of the COVID-19 pandemic, particularly due to residential consumer purchasing behavior. The stocking up of tissue products by residential consumers during the pandemic will likely lead to a drop in regular purchasing as the pandemic, or concerns as to tissue shortages as a result of the pandemic, subside. We expect that residential consumer demand will flatten and that sales of tissue and paperboard products will eventually normalize in terms of annual volumes.
Nevertheless, our business, the businesses of our customers and the businesses of our suppliers could be materially and adversely affected by the impact and risks of the pandemic. Such risks include, but are not limited to, the following:
•the complete or partial closure of one or more of our manufacturing facilities;
•limitations on our ability to operate our business as a result of any federal, state or local regulations, including any changes to the designation of our business as “essential” by the US Department of Homeland Security;
•disruptions to international trade, or further restrictions or prohibitions on international travel, on which we rely to make our products (for example, an interruption in eucalyptus pulp from Brazil or lack of availability for spare parts or technical support from European suppliers of our production and converting equipment);
•a decrease in demand for our products as a result of a prolonged economic downturn or global recession (for example, during previous, extreme recessionary periods in the U.S., we experienced significant declines in demand for our paperboard used in folding carton, cup and liquid packaging applications);
•the interruption of our distribution system or delays in the delivery of our products;
•temporary or long-term disruption in our supply chains (for example, governmental restrictions on construction and the resulting decline in lumber production could result in a decline in the availability of wood residuals);
•volatility related to pension plan assets (for example, we may need to make additional contributions to address an increase in obligations and/or a loss in plan assets as a result of the combination of declining market interest rates and/or past or future plan asset investment losses);
•significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future;
•a decline in our ability to collect on accounts receivable, which could materially affect our liquidity;
•bankruptcy of customers that leads to a decrease in demand for our products;
•the loss of our management team and employee base that possess unique technical skills for the execution of our business plan; and
•an interruption in processing or an inability to process accounts payable by our third-party processor, which could result in our suppliers and vendors withholding supplies or services.
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The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as information is rapidly evolving with respect to the duration and severity of the pandemic. At this point, we cannot reasonably estimate the duration and severity of the COVID-19 pandemic, or its overall impact on our business. Moreover, many of the risk factors set forth in our Form 10-K for the year ended December 31, 2019 should be interpreted as heightened risks as a result of the COVID-19 pandemic.
There are no other material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019. See Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, entitled “Risk Factors.”

ITEM 2. Unregistered Sale of Equity Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
Not applicable.
ITEM 5. Other Information
None.
25





ITEM 6. Exhibits
 
EXHIBIT
NUMBER 		  DESCRIPTION
10.1
10.2
10.3
31  
32**  
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.
*
Incorporated by reference.
**
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.











26

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
    CLEARWATER PAPER CORPORATION
  (Registrant)
August 4, 2020 By: /s/ ARSEN S. KITCH
    Arsen S. Kitch
    President, Chief Executive Officer and Director (Principal Executive Officer)
August 4, 2020 By: /s/ MICHAEL J. MURPHY
    Michael J. Murphy
    Senior Vice President, Finance and Chief Financial Officer (Principal Financial Officer)
27

AMENDMENTS TO THE CLEARWATER PAPER CORPORATION 2017 STOCK INCENTIVE PLAN

The Clearwater Paper Corporation 2017 Stock Incentive Plan (the “Plan”), as adopted by the Board of Directors of Clearwater Paper Corporation (the “Corporation”) on February 28, 2017, is hereby amended as follows effective as of May 13, 2020, subject to approval of such amendments by the Corporation’s stockholders:
1. Section 5 of the Plan (“Stock Subject to Plan”) is hereby amended by revising subsections (a) and (c) thereof to read as follows:
(a) Basic Limitation. Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares. The aggregate number of Shares authorized for issuance as Awards under the Plan shall be determined as follows:
(i) For the period beginning on the Effective Date and ending on May 12, 2020, (the “Initial Share Reserve Period”), the aggregate number of Shares authorized for issuance as Awards under the Plan shall not exceed 2,100,000 Shares, minus the number of Shares subject to awards granted under the Prior Plan on or after May 1, 2017 and prior to the Effective Date, and plus the number of Shares subject to outstanding awards under the Prior Plan as of the Effective Date which thereafter are forfeited, settled in cash, cancelled or expire. Upon the Effective Date, the Prior Plan will terminate, provided that all outstanding awards under the Prior Plan as of the Effective Date shall remain outstanding and shall be administered and settled in accordance with their terms and the provisions of the Prior Plan, as applicable. For Awards granted during the Initial Share Reserve Period, any Shares issued in connection with Options and SARs shall be counted against this limitation as one Share for every one Share so issued, and any Shares issued in connection with Awards other than Options and SARs shall be counted against this limitation as 2.5 Shares for every one Share so issued. Effective as of the last day of the Initial Share Reserve Period, any remaining Shares authorized for issuance under the Plan under this clause (i) but not subject to outstanding Awards as of such date shall be cancelled and shall no longer be available for issuance under the Plan.
(ii) On and after May 13, 2020 (the “New Share Reserve Period”), the aggregate number of Shares authorized for issuance as Awards under the Plan shall not exceed 1,000,000 Shares, plus the number of Shares subject to outstanding awards under the Prior Plan as of such date which thereafter are forfeited, settled in cash, cancelled or expire. Any Shares issued in connection with any type of Award granted during the New Share Reserve Period shall be counted against this limitation as one Share for every one Share so issued.
The Share limitation of this Section 5(a) shall be subject to adjustment pursuant to Section 12. The number of Shares that are subject to Awards outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Corporation, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.
(c) Additional Shares. If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Shares, Restricted Stock Units or Performance Shares, is forfeited to or repurchased by the Corporation due to failure to vest, the unpurchased Shares (or for Awards other than Options or SARs the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Shares, Restricted Stock Units or Performance Shares are repurchased by the Corporation or are forfeited to the Corporation, such Shares will become available for future grant or sale under the Plan. Shares used to satisfy the tax withholding obligations related to an Award of Restricted Shares, Restricted Stock Units or Performance Shares will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather


than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing,
(i) The following Shares issued or delivered under this Plan shall not again be available for grant as described above: (A) Shares tendered in payment of the exercise price of an Option; (B) Shares withheld by the Corporation or any Subsidiary to satisfy a tax withholding obligation with respect to an Option or SAR; and (C) Shares that are repurchased by the Corporation with Option proceeds. Without limiting the foregoing, with respect to any SAR that is settled in Shares, the full number of Shares subject to the Award shall count against the number of Shares available for Awards under the Plan regardless of the number of Shares used to settle the SAR upon exercise.
(ii) During the New Share Reserve Period, any Shares that are subject outstanding Awards of Restricted Shares, Restricted Stock Units or Performance Shares that become available for future grant or sale under the Plan pursuant to the foregoing provisions of this Section 5(c) (i.e., because the Awards or underlying Shares expire or are forfeited, repurchased or used to satisfy the tax withholding obligations related to such Awards) will become available for future grant or sale under the Plan as one Share for every one Share so expired, forfeited, repurchased or withheld, regardless of whether such Awards were originally granted under the Prior Plan or during the Initial Share Reserve Period or the New Share Reserve Period.
2. Section 7 of the Plan (“Terms and Conditions of Options”) is hereby amended by revising subsection (h) thereof to read as follows:
(h) No Rights as a Stockholder. An Optionee, or a permitted transferee of an Optionee, shall have no rights as a stockholder of the Corporation with respect to any Shares covered by the Option until the date of the issuance of the Shares underlying the Option upon a valid exercise thereof. Without limiting the foregoing, no Optionee, or a permitted transferee of an Optionee, shall receive payment of any dividends or dividend equivalents on the Shares underlying their Options while such Options are unvested.
3. Section 9 of the Plan (“Stock Appreciation Rights”) is hereby amended by adding the following new subsection (i) to the end thereof:
(i) No Rights as a Stockholder. An Optionee, or a permitted transferee of an Optionee, shall have no rights as a stockholder of the Corporation with respect to any Shares covered by the SAR until the date of the issuance of the Shares underlying the SAR upon a valid exercise thereof. Without limiting the foregoing, no Optionee, or a permitted transferee of an Optionee, shall receive payment of any dividends or dividend equivalents on the Shares underlying their SARs while such SARs are unvested.
To record adoption of this Amendment by the Board of Directors, Clearwater Paper Corporation has caused its authorized officer to execute the same.

Date: May 13, 2020  CLEARWATER PAPER CORPORATION
             By: /s/ Kari G. Moyes
      Name: Kari G. Moyes
      Title: Senior Vice President, Human Resources


AMENDMENT TO THE CLEARWATER PAPER CORPORATION MANAGEMENT DEFERRED COMPENSATION PLAN
The Clearwater Paper Corporation Management Deferred Compensation Plan, as amended and restated as of January 1, 2016 (the “Plan”), is hereby amended as follows effective as of May 1, 2020:
Section 5(b) of the Plan is hereby amended to read as follows:
(b) At the time of an Employee’s initial election to defer base salary or an award under the AIP, the Employee shall file an election which shall indicate whether such deferred Compensation shall be paid in a lump sum or paid in annual installments over a period of fifteen (15) or fewer years. Installment payments under the Plan shall be treated as a single distribution for purposes of Section 409A of the Code. An Employee who elects to participate in the Plan for Plan Years beginning prior to January 1, 2014 shall have only one form of payment election in effect for all amounts deferred under the Plan in such Plan Years. For amounts deferred in any Plan Year beginning on or after January 1, 2014 and prior to January 1, 2016, an Employee who elects to participate in the Plan for such Plan Year shall be permitted to make a separate form of payment election for all amounts to be deferred in such Plan Year. For any Plan Year beginning on or after January 1, 2016, an Employee who elects to participate in the Plan for such Plan Year shall be permitted to make one form of payment election for all base salary to be deferred in such Plan Year and a separate form of payment election for any AIP award to be deferred in such Plan Year. An Employee’s form of payment elections in effect for any Plan Year shall remain in effect for similar amounts (base salary or AIP awards) deferred in each subsequent Plan Year unless and until the Employee makes a new form of payment election in the manner prescribed by the Committee; provided, however, that for any election to defer an AIP award or base salary submitted on or after May 1, 2020, the Employee shall be required to submit a separate form of payment election for the amount to be deferred (or allow the default form of payment described in the next sentence to apply). Deferred Compensation shall be distributed in a single lump sum payment unless the Employee elects otherwise.
To record adoption of this Amendment, Clearwater Paper Corporation has caused its authorized officer to execute the same.

Date: 6/25/20  CLEARWATER PAPER CORPORATION


             By: Kari G. Moyes      Name: Kari G. Moyes      Title: Senior Vice President, Human Resources
2
4834-6202-7196.v2

AMENDMENT TO THE CLEARWATER PAPER CORPORATION SALARIED SUPPLEMENTAL BENEFIT PLAN
The Clearwater Paper Corporation Salaried Supplemental Benefit Plan, as amended and restated as of January 1, 2016 (the “Plan”), is hereby amended as follows effective as of May 1, 2020:
Section 5(b) of the Plan is hereby amended to read as follows:
(b) 401(k) Plan Supplemental Benefit. By the later of (i) January 31st of the calendar year immediately following the first calendar year in which the Participant first accrues a benefit under this Plan (or if earlier, thirty (30) days after first becoming eligible to participate in the Clearwater Paper Corporation Management Deferred Compensation Plan or any successor plan), or (ii) December 31, 2008, each Participant shall elect to receive distribution of the Participant’s vested 401(k) Plan Supplemental Benefit in fifteen or fewer annual installments or in a lump sum beginning in the Plan Year (but no later than March 15th of such Plan Year) following the Plan Year in which the Participant Separates from Service by filing the prescribed form with the Corporation. A Participant shall have only one form of payment election in effect for the entire 401(k) Plan Supplemental Benefit accrued during all Plan Years beginning prior to January 1, 2014. Prior to each Plan Year beginning on or after January 1, 2014, a Participant shall be permitted to make a separate form of payment election for the 401(k) Plan Supplemental Benefit to be accrued in such Plan Year, provided that a Participant’s form of payment election in effect for any Plan Year shall remain in effect for the 401(k) Plan Supplemental Benefit accrued in each subsequent Plan Year ending prior to January 1, 2021 unless and until the Participant makes a new form of payment election in the manner prescribed by the Committee. Prior to each Plan Year beginning on or after January 1, 2021, a Participant shall be required to make a separate form of payment election for the 401(k) Plan Supplemental Benefit to be accrued in such Plan Year (failure to make such an election shall result in payment being made in the form of a lump sum as provided below). Each form of payment election made pursuant to this Section 5(b) shall be irrevocable. Distribution will be made in accordance with the Participant’s election except as provided below. The amount of any annual installment shall be determined by dividing the amount credited to the Participant’s bookkeeping account as of the last day of the Plan Year preceding the date of distribution of such installment by the total number of installments elected by the participant less the number of installments already paid. For purposes of the Plan, installment payments shall be treated as a single distribution under section 409A of the Code. All annual installment payments shall be payable no later than March 15th of the payment year.



To record adoption of this Amendment, Clearwater Paper Corporation has caused its authorized officer to execute the same.

Date: 6/25/20  CLEARWATER PAPER CORPORATION
             By: Kari G. Moyes      Name: Kari G. Moyes      Title: Senior Vice President, Human Resources
2

Exhibit (31)
CERTIFICATION
I, Arsen S. Kitch, certify that:
1.I have reviewed this report on Form 10-Q of Clearwater Paper Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date : August 4, 2020
     /s/    Arsen S. Kitch
     Arsen S. Kitch
     President and Chief Executive Officer




CERTIFICATION
I, Michael J. Murphy, certify that:
1.I have reviewed this report on Form 10-Q of Clearwater Paper Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date : August 4, 2020
     /s/     MICHAEL J. MURPHY
     Michael J. Murphy
     Senior Vice President, Finance and Chief Financial Officer



Exhibit (32)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Arsen S. Kitch, President and Chief Executive Officer of Clearwater Paper Corporation (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/    ARSEN S. KITCH
Arsen S. Kitch
President and Chief Executive Officer
August 4, 2020
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.





CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Murphy, Senior Vice President, Finance and Chief Financial Officer of Clearwater Paper Corporation (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/    MICHAEL J. MURPHY        
Michael J. Murphy
Senior Vice President, Finance and Chief Financial Officer
August 4, 2020
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.