The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included herein and our audited Consolidated Financial Statements and Notes thereto for the year ended December 31, 2025, as well as the information under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are part of our Annual Report on Form 10-K for the year ended December 31, 2025.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires our management to select and apply accounting policies that best provide the framework to report our results of operations and financial position. The selection and application of those policies requires management to make difficult, subjective and complex judgments concerning reported amounts of revenue and expenses during the reporting period and the reported amounts of assets and liabilities at the date of the financial statements. As a result, it is possible that materially different amounts would be reported under different conditions or using different assumptions.
For a discussion of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no material changes to the critical accounting policies and estimates disclosed in our Annual Report.
NON-GAAP MEASURES
In evaluating our business, we utilize several non-GAAP financial measures. A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so excluded or included under applicable GAAP guidance. In this report on Form 10-Q, we disclose overall and segment earnings from operations before interest expense, net, non-operating pension and other post employment benefit costs, income tax expense (benefit), depreciation and amortization, other operating charges, net, and debt retirement costs as Adjusted EBITDA from continuing operations which is a non-GAAP financial measure. Adjusted EBITDA from continuing operations is not a substitute for the GAAP measure of net income or for any other GAAP measures of operating performance.
We have included Adjusted EBITDA from continuing operations on a consolidated basis in this report because we use it as an important supplemental measure of our performance and believe that it is frequently used by securities analysts, investors and other interested persons in the evaluation of companies in our industry, some of which present Adjusted EBITDA when reporting their results. We use Adjusted EBITDA from continuing operations to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. It should be noted that companies calculate Adjusted EBITDA differently and, therefore, our Adjusted EBITDA from continuing operations measure may not be comparable to Adjusted EBITDA reported by other companies. Our Adjusted EBITDA from continuing operations measure has material limitations as a performance measure because it excludes interest expense, net, income tax (benefit) expense and depreciation and amortization which are necessary to operate our business or which we otherwise incur or experience in connection with the operation of our business. In addition, we exclude other income and expense items which are outside of our core operations.
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The following table reconciles our Net income (loss) to Adjusted EBITDA from continuing operations for the periods presented.
Quarter Ended June 30, Six Months Ended June 30,
(In millions) 2026 2025 2026 2025
Net income (loss) $ (21.5) $ 2.7 $ (34.3) $ (3.6)
Less: loss from discontinued operations, net of tax — (0.9) — (1.3)
Income (loss) from continuing operations (21.5) 3.6 (34.3) (2.3)
Income tax provision (benefit) (8.6) 1.9 (12.3) 0.1
Interest expense, net 5.1 3.9 10.0 7.3
Depreciation and amortization 23.2 23.0 46.6 45.0
Other operating charges, net (7.5) 7.1 (18.7) 18.9
Other non-operating expense 1.1 0.3 2.3 0.6
Adjusted EBITDA from continuing operations $ (8.2) $ 39.9 $ (6.4) $ 69.6
OPERATING RESULTS FROM CONTINUING OPERATIONS
Quarter Ended June 30, Six Months Ended June 30,
2026 2025 % change 2026 2025 % change
Net sales $ 374.8 $ 391.8 (4) % $ 735.1 $ 770.0 (5) %
Cost of sales 385.2 348.8 10 % 746.4 690.3 8 %
Selling, general and administrative expenses 21.1 26.1 (19) % 41.7 55.0 (24) %
Other operating charges, net (7.5) 7.1 nm (18.7) 18.9 nm
Income (loss) from continuing operations (23.9) 9.8 nm $ (34.3) $ 5.8 nm
Adjusted EBITDA from continuing operations $ (8.2) $ 39.9 nm $ (6.4) $ 69.6 nm
Adjusted EBITDA margin (2) % 10 % (1) % 9 %
NET SALES
Net sales decreased 4% and 5% for the quarter and six months ended June 30, 2026 compared to the quarter and six months ended June 30, 2025. These decrease primarily resulted from market driven price decreases and changes in our product mix offset by increases in sales volume to existing customers. Additionally, pulp sales declined for the quarter and six months ended June 30, 2026 compared to same periods in 2025 due to the planned major maintenance outage at our Lewiston facility which limited our pulp production capability.
Quarter Ended June 30, Six Months Ended June 30,
2026 2025 % change 2026 2025 % change
Paperboard shipments (short tons) 328,722 304,713 8 % 631,640 594,200 6 %
Paperboard sales price (per short ton) $ 1,077 $ 1,182 (9) % $ 1,089 $ 1,185 (8) %
Pulp shipments (short tons) 29,313 38,936 (25) % 70,379 84,167 (16) %
Pulp sales price (per short ton) $ 557 $ 710 (22) % 556 678 (18) %
COST OF SALES
Costs included in our cost of sales include input costs (principally raw materials and energy), labor and overhead and supply chain costs (principally freight and outside warehousing). The table below provides the details of our cost of sales for the quarters and six months ended June 30, 2026 and 2025.
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Quarter Ended June 30, Six Months Ended June 30,
2026 2025 % change 2026 2025 % change
Input cost $ 164.9 $ 174.5 (6) % 332.6 342.9 (3) %
Labor and overhead 144.0 128.0 13 % 265.7 245.1 8 %
Supply chain costs 44.1 39.0 13 % 83.7 75.3 11 %
Other 10.2 (14.5) nm 20.0 (15.8) nm
Depreciation and amortization 22.0 21.8 1 % 44.4 42.8 4 %
Cost of sales $ 385.2 $ 348.8 10 % $ 746.4 $ 690.3 8 %
In 2025, planned major maintenance outage occurred at our Cypress Bend, Arkansas facility in the second quarter, our Lewiston, Idaho facility in the third quarter and our Augusta, Georgia facility in the fourth quarter. We completed the planned major maintenance outage at our Lewiston, Idaho facility in the second quarter of 2026. We anticipate completing the planned major maintenance outage at our Cypress Bend, Arkansas facility in the fourth quarter of 2026. We anticipate completing a reduced scope planned major maintenance outage at our Augusta, Georgia location in the fourth quarter of 2026, followed by an additional reduced scope outage in the first quarter of 2027.
Cost of sales increased 10% for the quarter ended June 30, 2026 compared to the quarter ended June 30, 2025 due to the planned major maintenance outage. Input costs decreased due to lower production offset by per unit increases in chemicals. Our labor and overhead increased due to higher maintenance costs associated with the planned major maintenance outage. Supply chain costs increased due to higher volumes and higher freight costs per ton due to inflation. Other costs increased due to inventory reductions in the second quarter of 2026 which was driven by lower production due to the planned major maintenance outage.
Cost of sales increased 8% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Input costs decreased due to lower production related to the planned major maintenance outage in the second quarter of 2026 and the weather event in the first quarter of 2026 offset by per unit increases in chemicals. Our labor and overhead increased due to higher maintenance costs associated with the planned major maintenance outage and the weather event. Supply chain costs increased due to higher sales volumes and higher freight costs per ton due to inflation. Other costs increased due to inventory reductions driven by lower production caused by the planned major maintenance and weather events.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 19% and 24% for the quarter and six months ended June 30, 2026 primarily as a result of our planned cost reduction efforts.
OTHER OPERATING CHARGES
See Note 11, "Other operating charges," of the Notes to the Consolidated Financial Statements included in Item 1 of this report for additional information.
OVERALL INCOME FROM CONTINUING OPERATIONS AND ADJUSTED EBITDA
Operating income from continuing operations decreased for the quarter ended June 30, 2026 as compared to the quarter ended June 30, 2025 due to the planned major maintenance outage at our Lewiston, Idaho facility and lower sales prices, offset by higher sales volumes and insurance recovery. For the quarter ended June 30, 2026, Adjusted EBITDA from continuing operations decreased as compared to the quarter ended June 30, 2025 due to the planned major maintenance outage at our Lewiston, Idaho facility and lower sales prices, offset by higher sales volumes.
Operating income from continuing operations decreased for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 due to the planned major maintenance outage at our Lewiston, Idaho facility in the second quarter of 2026 and the weather event in the first quarter of 2026 and lower sales prices, offset by higher sales volumes and insurance recoveries. For the six months ended June 30, 2026, Adjusted EBITDA from continuing operations decreased as compared to the six months ended June 30, 2025 due to the to the planned major maintenance outage at our Lewiston, Idaho facility, the weather event and lower sales prices, offset by higher sales volumes.
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POTENTIAL IMPAIRMENTS
We review from time to time possible dispositions or reorganization of various assets in light of current and anticipated economic and industry conditions, our strategic plan and other relevant factors. Because a determination to dispose or reorganize particular assets may require management to make assumptions regarding the transaction structure of the disposition or reorganization and to estimate the net sales proceeds, which may be less than previous estimates of undiscounted future net cash flows, we may be required to record impairment charges in connection with decisions to dispose of assets.
OUTLOOK
Looking forward to the third quarter of fiscal 2026, we expect operating costs to be lower due to the absence of a planned major maintenance outage offset by expected increases in petroleum based input costs, including chemicals and transportation related costs.
AUGUSTA ACQUISITION - REPRESENTATION AND WARRANTY INSURANCE CLAIM
In connection with our acquisition of our Augusta, Georgia mill from Graphic Packaging International, LLC, a wholly owned subsidiary of Graphic Packaging Holding Company, we obtained representation and warranty insurance, subject to exclusions, a policy limit of $105 million, and certain other terms and conditions, to cover losses resulting from a breach of these representations and warranties. During 2025, we notified the insurance carriers of alleged breaches of certain representations and warranties contained in the Purchase Agreement. During the six months ended June 30, 2026 we received proceeds of $32.5 million, of which $9.2 million was related to reimbursable costs and recorded within "Cost of sales" and $23.3 million related to other breaches and reported within "Other operating charges, net" in our Consolidated Statements of Operations. As of June 30, 2026, we have $25.0 million remaining under our policy limit. Although we believe that our claims are meritorious, no assurance can be given as to whether we will recover additional proceeds related to these claims.
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LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are existing cash, cash generated by our operations and our ability to borrow under such credit facilities as we may have in effect from time to time. At times, we may also issue equity, debt or hybrid securities or engage in other capital market transactions. Due to the competitive and cyclical nature of the markets in which we operate, there is uncertainty regarding the amount of cash flows we will generate during the next twelve months. However, we believe that our cash flows from operations, our cash on hand and our borrowing capacity under our credit agreements will be adequate to fund debt service requirements and provide cash to support our ongoing operations, capital expenditures and working capital needs for the next twelve months.
Our principal uses of liquidity are paying the costs and expenses associated with our operations, servicing outstanding indebtedness and making capital expenditures. We may also from time to time prepay or repurchase outstanding indebtedness or shares or acquire assets or businesses that are complementary to our operations. Any such repurchases may be commenced, suspended, discontinued or resumed, and the method or methods of affecting any such repurchases may be changed at any time or from time to time without prior notice.
Operating Activities
Net cash flows provided by operating activities for the six months ended June 30, 2026 were $69.5 million compared to cash used by operating activities of $26.7 million for the six months ended June 30, 2025. This increase was driven by insurance recoveries of $32.5 million, income tax refunds of $30 million and targeted inventory reductions offset by lower operating performance. Accounts receivable and accounts payable agings as of June 30, 2026 have remained relatively consistent with balances as of December 31, 2025.
Investing Activities
Net cash flows used in investing activities for the six months ended June 30, 2026 were $18.7 million compared to $55.6 million in the same period of the prior year related to capital expenditures. Included in "Accounts payable and accrued liabilities" on our Consolidated Balance Sheets were $13.3 million and $15.5 million related to unpaid capital expenditures at June 30, 2026 and 2025.
During 2026, we expect cash paid for capital expenditures to be approximately $65 million to $75 million.
Financing Activities
During the six months ended June 30, 2026, net cash provided by financing activities was $13.9 million. We borrowed $15.0 million under our credit agreements. We used $0.6 million in connection with income tax withholding requirements associated with our employee stock-based compensation plans.
During the six months ended June 30, 2025, net cash provided by financing activities was $49.3 million. We borrowed $65.0 million and repaid $18.3 million on our ABL. We used $15.1 million to repurchase stock and $2.3 million in connection with income tax withholding requirements associated with our employee stock-based plans. Additionally, as of June 30, 2025, we had collected $20.1 million in cash related to the transition services agreement which was remitted during the third quarter of 2025.
ABL Credit Agreement
We are party to a Credit Agreement, dated July 26, 2019, with JPMorgan Chase Bank, N.A., as administrative agent and several lenders (which may be amended from time to time, the “ABL Credit Agreement”) that consists of a $375 million revolving loan commitment, subject to borrowing base limitations. The ABL Credit Agreement matures on November 7, 2027. As of June 30, 2026, our eligible receivables and inventory supported up to $197.7 million availability under the ABL Credit Agreement of which we utilized $82.8 million, consisting of $79.0 million borrowings outstanding and $3.8 million under letters of credit. Borrowings under the ABL Credit Agreement are subject to mandatory prepayment in certain circumstances. We may also increase commitments under the ABL Credit Agreement in an aggregate principal amount of up to $100 million, subject to obtaining commitments from any participating lenders and certain other conditions. We may, at our option, prepay and reborrow any borrowings under the ABL Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances).
Under the ABL Credit Agreement, loans may bear interest based on SOFR (secured overnight financing rate) or annual base rate, as applicable, plus, in each case, an applicable margin that is based on availability, as calculated under the ABL Credit Agreement that may vary from 1.25% per annum to 1.75% per annum in the case of SOFR loans and 0.25% per annum to 0.75% per annum in the case of annual base rate loans. In addition, a commitment fee based on unused availability is also payable which may vary from 0.25% per annum to 0.375% per annum.
The ABL Credit Agreement also contains a financial covenant, which requires us to maintain a consolidated fixed charge coverage ratio of not less than 1.10x to 1.00x, provided that the financial covenant under the ABL Credit
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Agreement is only applicable during an event of default or if availability, as calculated under the ABL Credit Agreement, is at any time less than or equal to the greater of (i) 10.0% of the lesser of the borrowing base and the maximum $375 million of current revolving loan commitments and (ii) $25 million.
PCA Credit Agreement
We are party to an amended and restated credit agreement dated as of May 1, 2024 with AgWest Farm Credit, PCA, as administrative agent and several lenders (which may be amended from time to time, the “PCA Credit Agreement”) that consists of a term revolver commitment in the amount of $259.3 million and which is subject to an annual reduction of 2% of the commitments then in effect. As of June 30, 2026, we had no borrowings on the term revolver. We may increase term revolver commitments under the PCA Credit Agreement in an aggregate amount of up to $60.0 million, subject to obtaining commitments from any participating lenders and certain other conditions. The PCA Credit Agreement matures on May 1, 2029, subject to a springing maturity beginning on the day that is 91 days prior to the maturity of the Company’s 2020 Notes if the outstanding principal amount of the 2020 Notes plus $50.0 million is at any time during such 91 day period greater than the sum of our available borrowing liquidity and unrestricted cash.
We may prepay and reborrow any borrowings under the PCA Credit Agreement, in whole or in part, at any time and from time to time without premium or penalty (except in certain circumstances). In addition, we must make mandatory prepayments of principal under the PCA Credit Agreement upon the occurrence of certain asset sales.
Under the PCA Credit Agreement, loans generally may bear interest based on SOFR or the administrative agent’s fixed rate, as applicable, plus, in each case, an applicable margin of 3.64% per annum. We may receive patronage dividends under the PCA Credit Agreement. Patronage dividends are distributions of profits from banks in the farm credit system. Patronage dividends, which are generally made in cash, are accrued as earned and recorded as a reduction to interest expense.
At June 30, 2026, we were in compliance with the covenants associated with our ABL Credit Agreement and PCA Credit Agreement, and based on our current financial projections, we expect to remain in compliance. However, if our financial position, results of operations or market conditions deteriorate, we may not be able to remain in compliance. There can be no assurance that we will be able to remain in compliance with our credit agreements.
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