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[ "Item 1.", "Financial Statements", "Condensed Balance Sheets 1", "Condensed Statement of Operations (Unaudited) 2", "Condensed Statement of Changes in Stockholders' Equity (Unaudited) 3", "Condensed Statement of Cash Flows (Unaudited) 4", "Notes to Condensed Financial Statements (Unaudited) 5", "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17", "Item 3. Quantitative and Qualitative Disclosures about Market Risk 19", "Item 4. Control and Procedures 19", "PART II – OTHER INFORMATION", "Item 1. Legal Proceedings 19", "Item 1A. Risk Factors 19", "Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19", "Item 3. Defaults Upon Senior Securities 20", "Item 4. Mine Safety Disclosures 20", "Item 5. Other Information 20", "Item 6. Exhibits 20", "SIGNATURES 22", "i", "LEFTERIS ACQUISITION CORP.", "CONDENSED BALANCE SHEETS", "", "| March 31, 2021 | December 31, 2020 |\n| (Unaudited) |\n| ASSETS |\n| Current assets |\n| Cash | $ | 713,851 | $ | 1,017,569 |\n| Due from Sponsor | — | 141,979 |\n| Prepaid expenses | 405,505 | 416,800 |\n| Total Current Assets | 1,119,356 | 1,576,348 |\n| Cash and investment held in Trust Account | 207,156,661 | 207,128,528 |\n| Total Assets | $ | 208,276,017 | $ | 208,704,876 |\n| LIABILITIES AND STOCKHOLDERS' EQUITY |\n| Current liabilities |\n| Accrued expenses | $ | 1,370,039 | $ | 520,828 |\n| Accrued offering costs | 10,000 | 48,475 |\n| Promissory note — related party | — | 170,337 |\n| Total Current Liabilities | 1,380,039 | 739,640 |\n| Warrant liability | 13,043,262 | 23,890,377 |\n| Deferred underwriting fee payable | 7,248,463 | 7,248,463 |\n| Total Liabilities | 21,671,764 | 31,878,480 |\n| Commitments and Contingencies |\n| Class A common stock subject to possible redemption, 18,160,425 and 17,182,639 shares at March 31, 2021 and December 31, 2020 at $10.00 per share redemption value | 181,604,250 | 171,826,390 |\n| Stockholders' Equity |\n| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | — | — |\n| Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 2,549,469 and 3,527,255 issued and outstanding (excluding 18,160,425 and 17,182,639 shares subject to possible redemption) at March 31, 2021 and December 31, 2020, respectively | 255 | 353 |\n| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,177,473 shares issued and outstanding at March 31, 2021 and December 31, 2020 | 518 | 518 |\n| Additional paid-in capital | 8,095,726 | 17,873,488 |\n| Accumulated deficit | (3,096,496 | ) | (12,874,353 | ) |\n| Total Stockholders' Equity | 5,000,003 | 5,000,006 |\n| Total Liabilities and Stockholders' Equity | $ | 208,276,017 | $ | 208,704,876 |\n", "The accompanying notes are an integral part of the unaudited condensed financial statements.", "1", "LEFTERIS ACQUISITION CORP.", "CONDENSED STATEMENT OF OPERATIONS", "THREE MONTHS ENDED MARCH 31, 2021", "(Unaudited)", "", "| General and administrative expenses | $ | 1,097,391 |\n| Loss from operations | (1,097,391 | ) |\n| Other income: |\n| Interest earned on investments held in Trust Account | 28,133 |\n| Change in fair value of warrant liability | 10,847,115 |\n| Net income | $ | 9,777,857 |\n| Weighted average shares outstanding of Class A common stock subject to possible redemption | 20,709,894 |\n| Basic and diluted income per share, Class A common stock subject to possible redemption | $ | 0.00 |\n| Weighted average shares outstanding of Class A and Class B non-redeemable common stock | 5,177,473 |\n| Basic and diluted net income per share, Class A and Class B non-redeemable common stock | $ | 1.89 |\n", "The accompanying notes are an integral part of the unaudited condensed financial statements.", "2", "| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ |\n| Shares | Amount | Shares | Amount | Capital | Deficit | Equity |\n| Balance – January 1, 2021 | 3,527,255 | $ | 353 | 5,177,473 | $ | 518 | $ | 17,873,488 | $ | (12,874,353 | ) | $ | 5,000,006 |\n| Change in Class A Common stock subject to possible redemption | (977,786 | ) | (98 | ) | — | — | (9,777,762 | ) | — | (9,777,860 | ) |\n| Net income | — | — | — | — | — | 9,777,857 | 9,777,857 |\n| Balance – March 31, 2021 | 2,549,469 | $ | 255 | 5,177,473 | $ | 518 | $ | 8,095,726 | $ | (3,096,496 | ) | $ | 5,000,003 |\n| Cash Flows from Operating Activities: |\n| Net income | $ | 9,777,857 |\n| Adjustments to reconcile net income to net cash used in operating activities: |\n| Change in fair value of warrant liability | (10,847,115 | ) |\n| Interest earned on investments held in Trust Account | (28,133 | ) |\n| Changes in operating assets and liabilities: |\n| Prepaid expenses | 11,295 |\n| Accrued expenses | 849,211 |\n| Due from sponsor | 141,979 |\n| Net cash used in operating activities | (94,906 | ) |\n| Cash Flows from Financing Activities: |\n| Repayment of promissory note to related party | (170,337 | ) |\n| Payment of offering costs | (38,475 | ) |\n| Net cash used in financing activities | (208,812 | ) |\n| Net Change in Cash | (303,718 | ) |\n| Cash – Beginning of period | 1,017,569 |\n| Cash – End of period | $ | 713,851 |\n| Non-Cash Financing Activities: |\n| Change in value of Class A common stock subject to possible redemption | $ | 9,777,860 |\n| Offering costs included in accrued offering costs | $ | 10,000 |\n| For the Three Months Ended March 31, 2021 |\n| Class A common stock subject to possible redemption |\n| Numerator: Earnings allocable to common stock subject to possible redemption |\n| Interest earned on marketable securities held in Trust Account | $ | 28,133 |\n| Unrealized gain on marketable securities held in Trust Account |\n| Less: interest available to be withdrawn for payment of taxes | (28,133 | ) |\n| Net income attributable to Class A common stock subject to possible redemption | $ | — |\n| Denominator: Weighted Average Class A common stock subject to possible redemption |\n| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | 20,709,894 |\n| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | 0.00 |\n| Non-Redeemable common stock |\n| Numerator: Net Income minus Net Earnings |\n| Net income | $ | 9,777,857 |\n| Less: Net income allocable to Class A Common stock subject to possible redemption | — |\n| Non-Redeemable Net Income | $ | 9,777,857 |\n| Denominator: Weighted Average Non-Redeemable common stock |\n| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | 5,177,473 |\n| Basic and diluted net income per share, Non-redeemable common stock | $ | 1.89 |\n| ● | in whole and not in part; |\n| ● | at a price of $0.01 per warrant; |\n| ● | upon not less than 30 days’ prior written notice of redemption, or the 30-day redemption period, to each warrant holder; and |\n| ● | if, and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |\n| ● | in whole and not in part; |\n| ● | at a price of $0.10 per warrant provided that holders will be able to exercise their warrants prior to redemption and receive that number of shares of Class A common stock determined based on the redemption date and the “fair market value” of the Company’s Class A common stock; |\n| ● | upon a minimum of 30 days’ prior written notice of redemption; |\n| ● | if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; |\n| ● | if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto is available throughout the 30-day period after the written notice of redemption is given. |\n| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |\n| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |\n| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |\n| Held-To-Maturity | Level | Amortized Cost | Gross Holding Gain | Fair Value |\n| March 31, 2021 | N/A | - | $ | - | $ | - | $ | - |\n| December 31, 2020 | U.S. Treasury Securities (Matured on 2/18/2021) | 1 | $ | 207,127,900 | $ | 5,527 | $ | 207,133,427 |\n| Description | Level | March 31, 2021 | December 31, 2020 |\n| Assets: |\n| Cash and investments held in Trust Account | 1 | 207,156,661 | 207,128,528 |\n| Liabilities: |\n| Warrant Liability – Public Warrants | 1 | $ | 8,076,857 | $ | 14,704,023 |\n| Warrant Liability – Private Placement Warrants | 3 | $ | 4,966,405 | $ | 9,186,354 |\n| At December 31, 2020 | As of March 31, 2021 |\n| Stock price | $ | 10.35 | $ | 9.84 |\n| Strike price | $ | 11.50 | $ | 11.50 |\n| Volatility | 10.0 | % | 15.0 | % |\n| Risk-free rate | 0.46 | % | 0.44 | % |\n| Time until Business Combination occurring (years) | 0.66 | 0.53 |\n| Dividend yield | 0.0 | % | 0.0 | % |\n| ​ | Private Placement | Public | Warrant Liabilities |\n| Fair value as of January 1, 2021 | $ | 9,186,354 | $ | 14,704,023 | $ | 23,890,377 |\n| Change in valuation inputs or other assumptions | (4,219,949 | ) | (6,627,166 | ) | (10,847,115 | ) |\n| Fair value as of March 31, 2021 | $ | 4,966,405 | $ | 8,076,857 | $ | 13,043,262 |\n", "ITEM 2.", "MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", "References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Lefteris Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Lefteris Holdings, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.", "Special Note Regarding Forward-Looking Statements", "This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K/A filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.", "Overview", "We are a blank check company formed under the laws of the State of Delaware on August 20, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.", "We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.", "Results of Operations", "We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through March 31, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.", "For the three months ended March 31, 2021, we had a net income of $9,777,857, which consisted of interest earned on investments held in the Trust Account of $28,133 and a change in fair value of warrant liability of $10,847,115, less formation and operation costs of $1,097,391.", "Liquidity and Capital Resources", "As of March 31, 2021, we had $713,851 in cash. Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of common stock by the Sponsor and loans from our Sponsor.", "On October 23, 2020, we consummated the Initial Public Offering of 20,000,00 Units at a price of $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,000,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant in a private placement to our stockholders, generating gross proceeds of $6,000,000.", "On November 17, 2020, the Company issued an additional 709,894 Units issued for total gross proceeds of $7,098,940 in connection with the underwriters’ partial exercise of their over-allotment option. Simultaneously with the partial closing of the over-allotment option, we also consummated the sale of an additional 94,653 Private Placement Warrants at $1.50 per Private Placement Warrant, generating total proceeds of $141,979.", "Following the Initial Public Offering, the partial exercise of the over-allotment option by the underwriters’ and the sale of the Private Placement Units, a total of $207,098,940 was placed in the Trust Account. We incurred $11,808,264 in transaction costs, including $4,141,979 of underwriting fees, $7,248,463 of deferred underwriting fees and $417,822 of other offering costs.", "For the three months ended, cash used in operating activities was $94,906. Net income of $9,777,857 was affected by interest earned on investments held in the Trust Account of $28,133, a change in fair value of the warrant liability of $10,847,115, and changes in operating assets and liabilities, which provided $1,002,485 of cash from operating activities.", "17", "As of March 31, 2020, we had cash held in the Trust Account of $207,156,661. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. We may withdraw interest to pay taxes. During the three months ended March 31, 2021, we did not withdraw any interest income from the Trust Account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.", "We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.", "In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $2,000,000 of such loans may be convertible into warrants, at a price of $1.50 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.", "We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.", "Off-Balance Sheet Financing Arrangements", "We did not have any off-balance sheet arrangements as of March 31, 2021.", "Contractual Obligations", "We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.", "The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,248,463 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.", "Critical Accounting Policies", "The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.", "Warrant Liability", "We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.", "For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.", "Class A Common Stock Subject to Possible Redemption", "We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our balance sheets.", "Net Income per Common Share", "We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding for the period. Net income per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period presented.", "18", "Net Income per Common Share", "We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding for the period. Net loss per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period presented.", "Recent Accounting Standards", "In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We are currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.", "Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.", "", "", "Item 3.", "Quantitative and Qualitative Disclosures About Market Risk", "Not required for smaller reporting companies.", "", "", "Item 4.", "Controls and Procedures", "Evaluation of Disclosure Controls and Procedures", "Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.", "Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that, solely due to the events that led the company’s restatement of its financial statements to reclassify the Company’s Warrants as liabilities (which are described in Amendment No. 1 to the Company’s Annual Report on Form 10-K/A filed on July 6, 2021) (the “Restatement”), during the period covered by this report, a material weakness existed and our disclosure controls and procedures were not effective.", "Changes in Internal Control over Financial Reporting", "There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In light of the material weakness identified and the resulting Restatement, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standard that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication amount our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects.", "PART II - OTHER INFORMATION", "", "", "Item 1.", "Legal Proceedings.", "None.", "", "", "Item 1A.", "Risk Factors.", "Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K/A filed with the SEC. As of the date of this Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K/A filed with the SEC.", "", "", "Item 2.", "Unregistered Sales of Equity Securities and Use of Proceeds.", "On October 23, 2020, we consummated the Initial Public Offering of 20,000,000 Units. On November 17, 2020, in connection with the underwriters’ election to partially exercise their over-allotment option, we sold an additional 709,894 Units. The Units sold in the Initial Public Offering and the closing of the over-allotment option, were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $207,098,940. Morgan Stanley & Co. LLC acted as sole book-running manager. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-249290). The Securities and Exchange Commission declared the registration statement effective on October 20, 2020.", "Simultaneous with the consummation of the Initial Public Offering and the closing of the over-allotment option, we consummated the private placement of an aggregate of 4,094,653 units at a price of $1.5 per Private Placement Warrant, generating total proceed of $6,141,979. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.", "19", "The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.", "Of the gross proceeds received from the Initial Public Offering, the closing of the over-allotment option and the Private Placement Warrants, $207,098,940 was placed in the Trust Account.", "We paid a total of $4,141,979 in underwriting discounts and commissions and $417,822 for other offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $7,248,463 in underwriting discounts and commissions.", "", "", "Item 3.", "Defaults Upon Senior Securities.", "None.", "", "", "Item 4.", "Mine Safety Disclosures.", "Not Applicable.", "", "", "Item 5.", "Other Information.", "None.", "", "", "Item 6.", "Exhibits", "The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.", "", "| Exhibit No. | Description of Exhibit |\n| 3.1 | Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636) |\n| 3.2 | Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1, filed on October 2, 2020 (File No. 333-249290)) |\n| 4.1 | Warrant Agreement, dated October 20, 2020, between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636) |\n| 4.2 | Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 to the Company’s amended Form S-1, filed on October 13, 2020 (File No. 333-249290)) |\n| 4.3 | Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company’s amended Form S-1, filed on October 13, 2020 (File No. 333-249290)) |\n| 4.6 | Description of Registrant’s Securities (incorporated by reference to Exhibit 4.6 of the Company’s Form 10-K, filed on March 30, 2021 (File No. 001-39140) |\n| 10.1 | Warrant Purchase Agreement, dated October 20, 2020, between the Company and Lefteris Holdings LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |\n| 10.2 | Investment Management Trust Account Agreement, dated October 20, 2020, between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636) |\n| 10.3 | Registration and Stockholder Right Agreement, dated October 20, 2020, between the Company and certain security holders (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |\n| 10.4 | Letter Agreement, dated October 20, 2020, between the Company, Lefteris Holdings LLC, each of the officers and directors of the Company (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |\n| 10.5 | Form of Indemnity Agreement, dated October 20, 2020, between the Company and each of the officers and directors of the Company (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on October 26, 2020 (File No. 001-39636)) |\n| 14.1 | Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s Form 10-K filed on March 30, 2021 (File No. 001-39140) |\n| 24.1 | Power of Attorney (incorporated by reference to Exhibit 24.1 of the Company’s Form 10-K filed on March 30, 2021 (File No. 001-39140) |\n", "20", "| 31.1* | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |\n| 31.2* | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |\n| 32.1** | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |\n| 32.2** | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |\n| 101 | Interactive Data File |\n| * | Filed herewith. |\n| ** | Furnished. |\n", "21", "SIGNATURES", "In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.", "", "| LEFTERIS ACQUISITION CORP. |\n| Date: July 15, 2021 | By: | /s/ Karl Roessner |\n| Name: | Karl Roessner |\n| Title: | Chief Executive Officer and Director |\n| (Principal Executive Officer) |\n| Date: July 15, 2021 | By: | /s/ Jon Isaacson |\n| Name: | Jon Isaacson |\n| Title: | Chief Financial Officer and Chief Corporate Development Officer |\n| (Principal Financial Officer and Principal Accounting Officer) |\n", "22" ]

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[ "| ITEM 1. |\n| Consolidated Financial Statements |\n", "Clearwater Paper Corporation", "Consolidated Statements of Operations", "Unaudited (Dollars in thousands - except per-share amounts)", "", "| Three Months Ended |\n| March 31, |\n| 2019 | 2018 |\n| Net sales | $ | 428,779 | $ | 436,952 |\n| Costs and expenses: |\n| Cost of sales | (384,246 | ) | (392,433 | ) |\n| Selling, general and administrative expenses | (30,171 | ) | (32,980 | ) |\n| Total operating costs and expenses | (414,417 | ) | (425,413 | ) |\n| Income from operations | 14,362 | 11,539 |\n| Interest expense, net | (8,486 | ) | (8,020 | ) |\n| Non-operating pension and other postretirement benefit costs | (1,314 | ) | (1,279 | ) |\n| Earnings before income taxes | 4,562 | 2,240 |\n| Income tax (provision) benefit | (725 | ) | 360 |\n| Net earnings | $ | 3,837 | $ | 2,600 |\n| Net earnings per common share: |\n| Basic | $ | 0.23 | $ | 0.16 |\n| Diluted | 0.23 | 0.16 |\n", "The accompanying condensed notes are an integral part of these consolidated financial statements.", "2", "Clearwater Paper Corporation", "Consolidated Statements of Comprehensive Income", "Unaudited (Dollars in thousands)", "", "| Three Months Ended |\n| March 31, |\n| 2019 | 2018 |\n| Net earnings | $ | 3,837 | $ | 2,600 |\n| Other comprehensive income: |\n| Defined benefit pension and other postretirement employee benefits: |\n| Amortization of actuarial loss included in net periodic cost, net of tax of $442 and $617 | 1,239 | 1,728 |\n| Amortization of prior service credit included in net periodic cost, net of tax of $- and $(110) | — | (309 | ) |\n| Other comprehensive income, net of tax | 1,239 | 1,419 |\n| Comprehensive income | $ | 5,076 | $ | 4,019 |\n", "The accompanying condensed notes are an integral part of these consolidated financial statements.", "3", "Clearwater Paper Corporation", "Consolidated Balance Sheets", "Unaudited (Dollars in thousands – except per-share amounts)", "", "| March 31, 2019 | December 31, 2018 |\n| ASSETS |\n| Current assets: |\n| Cash and cash equivalents | $ | 12,160 | $ | 22,484 |\n| Restricted cash | 1,440 | — |\n| Receivables, net | 168,093 | 145,519 |\n| Taxes receivable | 6,981 | 6,301 |\n| Inventories | 285,909 | 266,244 |\n| Other current assets | 12,237 | 3,399 |\n| Total current assets | 486,820 | 443,947 |\n| Property, plant and equipment, net | 1,292,002 | 1,269,271 |\n| Operating lease right-of-use assets | 77,479 | — |\n| Goodwill | 35,074 | 35,074 |\n| Intangible assets, net | 22,295 | 24,080 |\n| Other assets, net | 14,608 | 15,746 |\n| TOTAL ASSETS | $ | 1,928,278 | $ | 1,788,118 |\n| LIABILITIES AND STOCKHOLDERS’ EQUITY |\n| Current liabilities: |\n| Short-term debt | $ | 212,216 | $ | 120,833 |\n| Accounts payable and accrued liabilities | 295,574 | 321,032 |\n| Current liability for pensions and other postretirement employee benefits | 7,430 | 7,430 |\n| Total current liabilities | 515,220 | 449,295 |\n| Long-term debt | 671,484 | 671,292 |\n| Operating lease liabilities | 72,647 | — |\n| Liability for pensions and other postretirement employee benefits | 76,507 | 78,191 |\n| Other long-term obligations | 33,859 | 38,977 |\n| Accrued taxes | 3,111 | 2,785 |\n| Deferred tax liabilities | 123,206 | 121,182 |\n| TOTAL LIABILITIES | 1,496,034 | 1,361,722 |\n| Stockholders’ equity: |\n| Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued | — | — |\n| Common stock, par value $0.0001 per share, 100,000,000 authorized shares -16,515,156 and 16,482,345 shares issued | 2 | 2 |\n| Additional paid-in capital | 7,175 | 6,403 |\n| Retained earnings | 491,176 | 487,339 |\n| Accumulated other comprehensive loss, net of tax | (66,109 | ) | (67,348 | ) |\n| TOTAL STOCKHOLDERS' EQUITY | 432,244 | 426,396 |\n| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,928,278 | $ | 1,788,118 |\n", "The accompanying condensed notes are an integral part of these consolidated financial statements.", "4", "Clearwater Paper Corporation", "Consolidated Statements of Cash Flows", "Unaudited (Dollars in thousands)", "| Three Months Ended |\n| March 31, |\n| 2019 | 2018 |\n| CASH FLOWS FROM OPERATING ACTIVITIES |\n| Net earnings | $ | 3,837 | $ | 2,600 |\n| Adjustments to reconcile net earnings to net cash flows from operating activities: |\n| Depreciation and amortization | 25,836 | 25,167 |\n| Equity-based compensation expense | 828 | 781 |\n| Deferred taxes | 914 | (240 | ) |\n| Other non-cash activity, net | (564 | ) | 648 |\n| Changes in working capital, net | (62,131 | ) | 1,244 |\n| Changes in taxes receivable, net | (680 | ) | 1,463 |\n| Other, net | 2,561 | (803 | ) |\n| Net cash flows from operating activities | (29,399 | ) | 30,860 |\n| CASH FLOWS FROM INVESTING ACTIVITIES |\n| Additions to property, plant and equipment | (71,588 | ) | (48,430 | ) |\n| Other, net | — | 768 |\n| Net cash flows from investing activities | (71,588 | ) | (47,662 | ) |\n| CASH FLOWS FROM FINANCING ACTIVITIES |\n| Borrowings on short-term debt | 290,362 | 87,325 |\n| Repayments of borrowings on short-term debt | (198,979 | ) | (73,825 | ) |\n| Other, net | (716 | ) | (365 | ) |\n| Net cash flows from financing activities | 90,667 | 13,135 |\n| Decrease in cash, cash equivalents, and restricted cash | (10,320 | ) | (3,667 | ) |\n| Cash, cash equivalents, and restricted cash at beginning of period | 24,947 | 16,738 |\n| Cash, cash equivalents, and restricted cash at end of period | $ | 14,627 | $ | 13,071 |\n| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |\n| Cash paid for interest, net of amounts capitalized | $ | 15,147 | $ | 13,927 |\n| Cash paid for income taxes | 19 | 142 |\n| Cash received from income tax refunds | 190 | 1,873 |\n| (Decrease) increase in accrued property, plant and equipment | (28,443 | ) | 1,317 |\n| Other non-cash additions to property, plant and equipment | 493 | — |\n", "The accompanying condensed notes are an integral part of these consolidated financial statements.", "5", "CLEARWATER PAPER CORPORATION", "Consolidated Statements of Stockholders’ Equity", "Unaudited (In thousands)", "", "| Common Stock | Additional Paid-In Capital | RetainedEarnings | AccumulatedOtherComprehensiveLoss | TotalStockholders'Equity |\n| Shares | Amount |\n| Balance at December 31, 2017 | 16,448 | $ | 2 | $ | 1,161 | $ | 618,254 | $ | (43,983 | ) | $ | 575,434 |\n| Net earnings | — | — | — | 2,600 | — | 2,600 |\n| Performance share, restricted stock unit, and stock option awards | 13 | — | 1,267 | — | — | 1,267 |\n| Reclassification of the income tax effects of the Tax Cuts and Jobs Act | — | — | — | 12,852 | (12,852 | ) | — |\n| Pension and other postretirement employee benefit plans, net of tax of $507 | — | — | — | — | 1,419 | 1,419 |\n| Balance at March 31, 2018 | 16,461 | $ | 2 | $ | 2,428 | $ | 633,706 | $ | (55,416 | ) | $ | 580,720 |\n| Balance at December 31, 2018 | 16,482 | $ | 2 | $ | 6,403 | $ | 487,339 | $ | (67,348 | ) | $ | 426,396 |\n| Net earnings | — | — | — | 3,837 | — | 3,837 |\n| Performance share, restricted stock unit, and stock option awards | 33 | — | 772 | — | — | 772 |\n| Pension and other postretirement employee benefit plans, net of tax of $442 | — | — | — | — | 1,239 | 1,239 |\n| Balance at March 31, 2019 | 16,515 | $ | 2 | $ | 7,175 | $ | 491,176 | $ | (66,109 | ) | $ | 432,244 |\n", "The accompanying condensed notes are an integral part of these consolidated financial statements.", "6", "Clearwater Paper Corporation", "Condensed Notes to Consolidated Financial Statements", "Unaudited", "NOTE 1 Nature of Operations and Basis of Presentation", "GENERAL", "Clearwater Paper manufactures quality consumer tissue, away-from-home tissue, parent roll tissue, bleached paperboard and pulp at manufacturing facilities across the nation. The company is a premier supplier of private label tissue to major retailers and wholesale distributors, including grocery, drug, mass merchants and discount stores. In addition, the company produces bleached paperboard used by quality-conscious printers and packaging converters, and offers services that include custom sheeting, slitting and cutting. Clearwater Paper's employees build shareholder value by developing strong customer relationships through quality and service.", "In the second half of 2017, we began a review of our selling, general and administrative cost structure as part of our effort to maintain our longer-term competitiveness. As a result of this review, in the fourth quarter of 2017 we began executing on a plan that reduced selling, general and administrative expenses beginning in 2018. For the three months ended March 31, 2018, we incurred $5.1 million of expenses associated with these efforts, which consisted primarily of severance and professional services expenses. We did not incur expenses associated with these efforts in the first quarter of 2019 as the plan implementation was substantially complete in 2018.", "FINANCIAL STATEMENT PREPARATION AND PRESENTATION", "The accompanying Consolidated Balance Sheets at March 31, 2019 and December 31, 2018, and the related Consolidated Statements of Operations, Comprehensive Income, Cash Flows and Stockholders' Equity for the three months ended March 31, 2019 and 2018, have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. We believe that all adjustments necessary for a fair presentation of the results of the interim periods presented have been included. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.", "This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission, or SEC, on March 18, 2019.", "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES", "SIGNIFICANT ESTIMATES", "The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Significant areas that may require the use of estimates and measurement of uncertainty include determination of net realizable value for deferred tax assets, uncertain income tax positions, assessment of impairment of long-lived assets and goodwill, assessment of environmental matters, equity-based compensation and pension and postretirement obligation assumptions. Actual results could differ from those estimates and assumptions.", "CASH, CASH EQUIVALENTS, AND RESTRICTED CASH", "We consider all highly liquid instruments with maturities of three months or less at date of purchase to be cash equivalents. Cash that is held by a third party and has restrictions on its availability to us is classified as restricted cash. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Consolidated Balance Sheets that sum to the total of those same amounts shown in our Consolidated Statements of Cash Flows.", "| (In thousands) | March 31, 2019 | March 31, 2018 |\n| Cash and cash equivalents | $ | 12,160 | $ | 12,064 |\n| Restricted cash | 1,440 | — |\n| Restricted cash included in other assets, net | 1,027 | 1,007 |\n| Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows | $ | 14,627 | $ | 13,071 |\n", "7", "PROPERTY, PLANT AND EQUIPMENT", "Property, plant and equipment are stated at cost, including any interest costs capitalized, less accumulated depreciation. Depreciation of buildings, equipment and other depreciable assets is determined using the straight-line method. Assets we acquire through business combinations have estimated lives that are typically shorter than the assets we construct or buy new. Accumulated depreciation totaled $1,715.2 million and $1,691.7 million at March 31, 2019 and December 31, 2018, respectively.", "For the three months ended March 31, 2019, we capitalized $3.2 million of interest expense associated with the construction of a paper machine at our Shelby, North Carolina consumer products facility and $0.2 million of interest expense associated with the construction of a continuous pulp digester at our Lewiston, Idaho pulp and paperboard facility. For the three months ended March 31, 2018, we capitalized $1.0 million of interest expense associated with the Shelby paper machine and $0.3 million of interest expense associated with the continuous pulp digester project.", "We review the carrying amount of long-lived assets with definite lives that are held-for-use and evaluate them for recoverability whenever events or changes in circumstances indicate that we may be unable to recover the carrying amount of the assets.", "LEASES", "All significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use, or ROU, assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases) and we recognize lease expense for these leases as incurred over the lease term.", "ROU assets represent our right to use an underlying asset during the reasonably certain lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We primarily use our incremental borrowing rate, which is updated quarterly, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Refer to Note 4, \"Leases,\" for additional information.", "REVENUE RECOGNITION", "We enter into contracts that can include various combinations of tissue and paperboard products, which are generally distinct and accounted for as separate performance obligations.", "Revenue is recognized at a point in time upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when title and the risk of loss have passed. Revenue is recognized at shipment for sales when shipping terms are free on board, or FOB, shipping point. For sales where shipping terms are FOB destination, revenue is recognized when the goods are received by the customer. Revenue from both domestic and foreign sales of our products can involve shipping terms of either FOB shipping point or FOB destination or other shipping terms, depending upon the sales agreement with the customer. We have elected to treat shipping and handling costs for FOB shipping point contracts as a fulfillment cost, not as a separate performance obligation. No revenue is recognized over time. We typically expense incremental direct costs of obtaining a contract (sales commissions) when incurred because the amortization period is generally 12 months or less. We have also elected to use the practical expedient to not disclose unsatisfied or partially satisfied performance obligations as we have no unsatisfied contracts where the remaining portions are expected to be satisfied in a period greater than one year.", "We provide for trade promotions, customer cash discounts, customer returns and other deductions as reductions to net sales, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. Revenue net of returns and credits is only recognized to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Significant judgment is required to determine the most probable amount of variable consideration to apply as a reduction to net sales. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.", "Payment terms and conditions vary by contract. Terms generally include a requirement of payment within 30 days, and do not include a significant financing component.", "Trade accounts receivable are stated at the amount we expect to collect. Trade accounts receivable do not bear interest. The allowance for doubtful accounts is our best estimate of the losses we expect will result from the inability of our customers to make required payments. We generally determine the allowance based on a combination of actual historical write-off experience and an analysis of specific customer accounts. As of March 31, 2019 and December 31, 2018, we had allowances for doubtful accounts of $1.7 million and $1.5 million, respectively.", "8", "Refer to Note 14, \"Segment Information,\" for further information, including the disaggregation of revenue by segment, primary geographical market, and major product type.", "ACCOUNT PURCHASE AGREEMENT", "In June 2018, we entered into an agreement (the “Account Purchase Agreement”) to offer to sell, on a revolving and discounted basis, certain trade accounts receivable balances to an unrelated third-party financial institution. If the financial institution purchases receivables thereunder, in its sole discretion, such transfers are accounted for as sales of receivables resulting in the receivables being de-recognized from our Consolidated Balance Sheet. The Account Purchase Agreement provides for the continuing sale of certain receivables on a revolving basis until June 2020 and automatically renews for successive one year terms, unless either party elects to terminate the Account Purchase Agreement in accordance with its terms. The maximum amount of receivables that may be sold at any time, prior to the settlement thereof, is $30.0 million.", "For the three months ended March 31, 2019, $29.6 million of receivables were sold under the Account Purchase Agreement. As of March 31, 2019, $16.6 million of accounts receivable sold under the Asset Purchase Agreement were outstanding. The proceeds from these sales of receivables are included within the \"Changes in working capital, net\" line item in the operating activities section of the Consolidated Statements of Cash Flows. For the three months ended March 31, 2019, we recorded factoring expense on sales of receivables of less than $0.1 million, which is included in the \"Selling, general and administrative expenses\" line in the Consolidated Statement of Operations.", "We have no retained interest in the receivables sold under the Account Purchase Agreement, however, we do have servicing responsibilities for the sold receivables. The fair value of the servicing arrangement was not material to the financial statements. As of March 31, 2019 and December 31, 2018, we had collected $12.7 million and $4.9 million of cash, respectively, from customers that had not yet been remitted to the third-party financial institution.", "SUPPLY-CHAIN FINANCING", "We have entered into supply-chain financing programs with financial intermediaries, which provide certain of our vendors the option to be paid by the financial intermediaries on our trade payables earlier than the due date on the applicable invoice. When a vendor receives an early payment on a trade payable it invoiced us for from a financial intermediary, we pay that financial intermediary the face amount of the invoice on the regularly scheduled due date. If we reimburse these vendors for certain fees they may incur in connection with receiving an early payment on an invoice, the amount of such invoice that would have otherwise been included in our trade payables is included in our short term debt. As of March 31, 2019 and December 31, 2018, $10.2 million and $20.8 million, respectively, was included in “Short-term debt” on our Consolidated Balance Sheets related to invoices for which we had reimbursed our vendors’ fees.", "DERIVATIVES", "We had no activity during the three months ended March 31, 2019 and 2018 that required hedge or derivative accounting treatment. To help mitigate our exposure to market risk for changes in utility commodity pricing, we use firm price contracts to supply a portion of the natural gas requirements for our manufacturing facilities. As of March 31, 2019, these contracts covered approximately 25% of our expected average monthly natural gas requirements for the remainder of 2019. Historically, these contracts have qualified for treatment as “normal purchases or normal sales” under authoritative guidance and thus required no mark-to-market adjustment.", "9", "NOTE 2 Recently Adopted and New Accounting Standards", "Recently Adopted", "On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), and subsequent ASUs related to Topic 842. The new guidance increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of Topic 842 had a material impact on our Consolidated Balance Sheet due to the recognition of right-of-use assets of $82.5 million and lease liabilities of $87.7 million, respectively, as of January 1, 2019. The difference between these lease assets and lease liabilities represents existing deferred rent balances that were reclassified on the balance sheet. The adoption of Topic 842 did not have a material impact on our Consolidated Statement of Operations or our Consolidated Statement of Cash Flows. We will continue to report periods prior to January 1, 2019 under prior guidance as outlined in Accounting Standards Codification Topic 840, \"Leases.\" Refer to Note 4, \"Leases,\" for further discussion.", "New Accounting Standards", "In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This ASU requires capitalization of certain implementation costs incurred in a cloud computing arrangement that is a service contract. Amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and for interim periods therein, with early adoption permitted. We do not believe this ASU will have a material impact on our consolidated financial statements.", "In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), which modifies the disclosure requirements for defined benefit and other postretirement plans. This ASU eliminates certain disclosures associated with accumulated other comprehensive income, plan assets, related parties, and the effects of interest rate basis point changes on assumed health care costs, with other disclosures being added to address significant gains and losses related to changes in benefit obligations. This ASU also clarifies disclosure requirements for projected benefit and accumulated benefit obligations. The amendments in this ASU are effective for fiscal years ending after December 15, 2020, with early adoption permitted and adoption on a retrospective basis for all periods presented required. We are currently assessing the timing of our adoption of this ASU and do not believe it will have a material impact on our consolidated financial statements beyond updating footnote disclosures.", "We reviewed all other new accounting pronouncements issued in the period and concluded that they are not applicable to our business.", "NOTE 3 Inventories", "Inventories at the balance sheet dates consist of:", "| (In thousands) | March 31, 2019 | December 31, 2018 |\n| Pulp, paperboard and tissue products | $ | 176,788 | $ | 159,499 |\n| Materials and supplies | 90,470 | 86,892 |\n| Logs, pulpwood, chips and sawdust | 18,651 | 19,853 |\n| $ | 285,909 | $ | 266,244 |\n", "NOTE 4 Leases", "Our adoption of ASU 2016-02, Leases (Topic 842), and subsequent ASUs related to Topic 842, requires us to recognize substantially all leases on the balance sheet as an ROU asset and a corresponding lease liability. The new guidance also requires additional disclosures as detailed below. We adopted this standard on the effective date of January 1, 2019 and used this effective date as the date of initial application. Under this application method, we were not required to restate prior period financial information or provide Topic 842 disclosures for prior periods. We elected the ‘package of practical expedients,’ which permitted us to not reassess our prior conclusions related to lease identification, lease classification, and initial direct costs, and we did not elect the use of hindsight.", "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. We determine if a contract is a lease at the inception of the arrangement. We review all options to extend, terminate, or purchase the ROU assets, and when reasonably certain to exercise, we include the option in the determination of the lease term and lease liability. Our leases have remaining lease terms from 1 year to 12 years, and some of our leases include one or more options to renew.", "10", "Lease ROU assets and liabilities are recognized at commencement date of the lease, based on the present value of lease payments over the lease term. The lease ROU asset also includes any lease payments made and excludes any lease incentives. When readily determinable, we use the implicit rate in determining the present value of lease payments. When leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date, including the lease term.", "Short-term leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. As of March 31, 2019, we did not have any short-term leases. Certain of our leases contain lease and non-lease components that are treated as a single lease component. Our variable lease costs include these non-lease components, which primarily consist of expenses for common area maintenance, taxes, and insurance. For the three months ended March 31, 2019, sublease income was immaterial to the financial statements.", "The tables below present financial information associated with our leases. This information is only presented as of, and for the three months ended, March 31, 2019. As noted above, we adopted Topic 842 using a transition method that does not require application to periods prior to adoption.", "LEASE EXPENSE", "| Three Months Ended |\n| (In thousands) | March 31, 2019 |\n| Operating lease costs | $ | 3,480 |\n| Finance lease costs: |\n| Amortization of right-of-use assets | 415 |\n| Interest on lease liabilities | 472 |\n| Total finance lease costs | 887 |\n| Variable lease costs | 219 |\n| Total lease costs | $ | 4,586 |\n", "SUPPLEMENTAL CASH FLOW INFORMATION", "| Three Months Ended |\n| (In thousands) | March 31, 2019 |\n| Cash paid for amounts included in the measurement of lease liabilities: |\n| Operating cash flows from operating leases | $ | 4,097 |\n| Operating cash flows from finance leases | 472 |\n| Financing cash flows from finance leases | 289 |\n| Right-of-use assets obtained in exchange for new lease liabilities: |\n| Operating leases | $ | 75 |\n| Finance leases | 493 |\n", "11", "SUPPLEMENTAL BALANCE SHEET INFORMATION", "| (In thousands) | Classification | March 31, 2019 |\n| Lease ROU Assets |\n| Operating lease assets | Operating lease right-of-use assets | $ | 77,479 |\n| Finance lease assets | Property, plant and equipment, net | 16,695 |\n| Total lease ROU assets | $ | 94,174 |\n| Lease Liabilities |\n| Current operating lease liabilities | Accounts payable and accrued liabilities | $ | 12,097 |\n| Current finance lease liabilities | Accounts payable and accrued liabilities | 1,365 |\n| Total current lease liabilities | 13,462 |\n| Non-current operating lease liabilities | Operating lease liabilities | 72,647 |\n| Non-current finance lease liabilities | Other long-term obligations | 21,692 |\n| Total non-current lease liabilities | 94,339 |\n| Total lease liabilities | $ | 107,801 |\n", "LEASE TERM AND DISCOUNT RATE", "| March 31, 2019 |\n| Weighted average remaining lease term (years) |\n| Operating leases | 7.4 |\n| Finance leases | 11.3 |\n| Weighted average discount rate |\n| Operating leases | 4.9 | % |\n| Finance leases | 8.3 | % |\n", "12", "MATURITY OF LEASE LIABILITIES", "As of March 31, 2019, our maturities of lease liabilities were as follows:", "| (In thousands) | Operating | Finance |\n| 2019 (excluding the three months ended March 31, 2019) | $ | 11,883 | $ | 2,437 |\n| 2020 | 15,929 | 3,175 |\n| 2021 | 15,215 | 3,220 |\n| 2022 | 14,348 | 3,128 |\n| 2023 | 9,590 | 2,897 |\n| Thereafter | 34,633 | 21,468 |\n| Total lease payments | 101,598 | $ | 36,325 |\n| Less interest portion | (16,854 | ) | (13,268 | ) |\n| Total | 84,744 | $ | 23,057 |\n", "As of December 31, 2018, as previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, we had future minimum lease payments as follows:", "| (In thousands) | Operating | Capital |\n| 2019 | $ | 12,038 | $ | 3,093 |\n| 2020 | 11,421 | 3,062 |\n| 2021 | 10,424 | 3,112 |\n| 2022 | 9,489 | 3,019 |\n| 2023 | 7,163 | 2,789 |\n| Thereafter | 24,276 | 21,710 |\n| Total future minimum lease payments | $ | 74,811 | $ | 36,785 |\n| Less interest portion | (13,887 | ) |\n| Present value of future minimum lease payments | $ | 22,898 |\n", "NOTE 5 Intangible Assets", "Intangible assets at the balance sheet dates comprise the following:", "| March 31, 2019 |\n| (Dollars in thousands, lives in years) | Weighted Average UsefulLife | HistoricalCost | AccumulatedAmortization | NetBalance |\n| Customer relationships | 9.4 | $ | 56,453 | $ | (36,978 | ) | $ | 19,475 |\n| Trade names and trademarks | 7.4 | 6,786 | (4,286 | ) | 2,500 |\n| Other intangibles | 6.0 | 572 | (252 | ) | 320 |\n| $ | 63,811 | $ | (41,516 | ) | $ | 22,295 |\n| December 31, 2018 |\n| (Dollars in thousands, lives in years) | Weighted Average UsefulLife | HistoricalCost | AccumulatedAmortization | NetBalance |\n| Customer relationships | 9.4 | $ | 56,453 | $ | (35,469 | ) | $ | 20,984 |\n| Trade names and trademarks | 7.4 | 6,786 | (4,029 | ) | 2,757 |\n| Other intangibles | 6.0 | 572 | (233 | ) | 339 |\n| $ | 63,811 | $ | (39,731 | ) | $ | 24,080 |\n", "For the three months ended March 31, 2019 and 2018, intangible assets amortization expense was $1.8 million and $2.0 million, respectively.", "13", "NOTE 6 Income Taxes", "Consistent with authoritative guidance, our estimated annual effective tax rate is used to allocate expected annual income tax expense to interim periods. The rate is the ratio of estimated annual income tax expense to estimated pre-tax ordinary income, and excludes \"discrete items,\" which are significant, unusual or infrequent items reported separately net of their related tax effect. The estimated annual effective tax rate is applied to the current interim period's ordinary income to determine the income tax expense allocated to the interim period. The income tax effects of discrete items are then determined separately and recognized in the interim period in which the income or expense items arise.", "Our estimated annual effective tax rate applied to the first quarter of 2019 is approximately 6%, compared with approximately 25% for the comparable interim period in 2018. The decrease in the rate is due to an increase in the benefit from tax credits in the current year.", "NOTE 7 Accounts Payable and Accrued Liabilities", "Accounts payable and accrued liabilities at the balance sheet dates consist of:", "| (In thousands) | March 31, 2019 | December 31, 2018 |\n| Trade accounts payable | $ | 198,289 | $ | 228,059 |\n| Accrued wages, salaries and employee benefits | 29,549 | 41,426 |\n| Lease liabilities | 13,462 | — |\n| Accrued account purchase agreement liabilities | 12,664 | 4,885 |\n| Accrued utilities | 8,561 | 6,934 |\n| Accrued taxes other than income taxes payable | 7,789 | 6,243 |\n| Accrued discounts and allowances | 7,230 | 8,143 |\n| Accrued interest | 7,175 | 14,672 |\n| Other | 10,855 | 10,670 |\n| $ | 295,574 | $ | 321,032 |\n", "NOTE 8 Debt", "REVOLVING CREDIT FACILITIES", "As of March 31, 2019, there was an aggregate of $302.0 million in borrowings outstanding under the credit facilities and $7.5 million of the credit facilities was being used to support outstanding standby letters of credit. As of December 31, 2018, there was an aggregate of $200.0 million in borrowings outstanding under the credit facilities. Our borrowings outstanding under the revolving credit facilities as of March 31, 2019 consisted of $202.0 million of short-term base and LIBOR rate loans classified as current liabilities that are included in \"Short-term debt\" in our Consolidated Balance Sheet and $100.0 million of fixed rate, three-year borrowings classified as a non-current liability that are included in \"Long-term debt\" in our Consolidated Balance Sheet. As of March 31, 2019, we would have been permitted to draw an additional $90.5 million under the credit facilities.", "NOTE 9 Other Long-Term Obligations", "Other long-term obligations at the balance sheet dates consist of:", "| (In thousands) | March 31, 2019 | December 31, 2018 |\n| Finance lease obligations, net of current portion | $ | 21,692 | $ | 21,589 |\n| Deferred proceeds | 4,350 | 4,511 |\n| Deferred compensation | 3,912 | 2,585 |\n| Other | 3,905 | 10,292 |\n| $ | 33,859 | $ | 38,977 |\n", "14", "NOTE 10 Pension and Other Postretirement Employee Benefit Plans", "The following table details the components of net periodic cost of our company-sponsored pension and other postretirement employee benefit, or OPEB, plans for the periods presented:", "| Three Months Ended March 31, |\n| (In thousands) | 2019 | 2018 | 2019 | 2018 |\n| Pension Benefit Plans | Other PostretirementEmployee Benefit Plans |\n| Service cost | $ | 550 | $ | 434 | $ | 25 | $ | 48 |\n| Interest cost | 3,121 | 3,000 | 647 | 607 |\n| Expected return on plan assets | (4,135 | ) | (4,254 | ) | — | — |\n| Amortization of prior service cost (credit) | — | — | — | (419 | ) |\n| Amortization of actuarial loss (gain) | 1,909 | 2,570 | (228 | ) | (225 | ) |\n| Net periodic cost | $ | 1,445 | $ | 1,750 | $ | 444 | $ | 11 |\n", "", "During the three months ended March 31, 2019 and 2018, we made no contributions to our qualified pension plans. We do not expect, nor are we required, to make contributions in 2019.", "During the three months ended March 31, 2019, we made contributions of $0.1 million to our company-sponsored non-qualified pension plan. We estimate contributions will total $0.4 million in 2019. We do not anticipate funding our OPEB plans in 2019 except to pay benefit costs as incurred during the year by plan participants.", "During the three months ended March 31, 2019 and 2018, pension and OPEB changes in accumulated other comprehensive loss, net of tax, in our Consolidated Balance Sheets totaled $1.2 million and $1.4 million, respectively. Refer to the Consolidated Statements of Stockholders' Equity for additional information.", "NOTE 11 Earnings per Share", "Basic earnings per share are based on the weighted average number of shares of common stock outstanding. Diluted earnings per share are 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.", "The following table reconciles the number of common shares used in calculating the basic and diluted net earnings per share:", "| Three Months Ended March 31, |\n| 2019 | 2018 |\n| Basic weighted-average common shares outstanding1 | 16,516,335 | 16,476,011 |\n| Incremental shares due to: |\n| Restricted stock units | 33,651 | 27,261 |\n| Performance shares | 13,300 | 65,469 |\n| Stock options | — | 8,670 |\n| Diluted weighted-average common shares outstanding | 16,563,286 | 16,577,411 |\n| Basic net earnings per common share | $ | 0.23 | $ | 0.16 |\n| Diluted net earnings per common share | 0.23 | 0.16 |\n| Anti-dilutive shares excluded from calculation | 882,475 | 558,319 |\n", "| 1 | Basic average common shares outstanding include restricted stock awards that are fully vested, but are deferred for future issuance. |\n", "15", "NOTE 12 Equity-Based Compensation", "We recognize equity-based compensation expense for all equity-based payment awards made to employees and directors, including restricted stock units, or RSUs, performance shares and stock options, based on estimated fair values.", "EMPLOYEE AWARDS", "Employee equity-based compensation expense was recognized as follows:", "| Three Months Ended March 31, |\n| (In thousands) | 2019 | 2018 |\n| Restricted stock units | $ | 502 | $ | 422 |\n| Performance shares | 334 | 533 |\n| Stock options | 342 | 535 |\n| Total employee equity-based compensation expense | $ | 1,178 | $ | 1,490 |\n", "As provided in the Clearwater Paper Corporation 2017 Stock Incentive Plan, the performance measure used to determine the number of performance shares ultimately issuable for performance shares granted in 2019 is a free cash flow performance measure for 70% of the performance share awards. For the remaining 30% of the grants, a return on invested capital measure is used. The combined performance of these measures is then subject to an adjustment (increase or decrease) of up to 25% based on our total shareholder return, or TSR, compared to the TSR performance of a selected index.", "The number of performance shares actually issued, as a percentage of the amount subject to the performance share award, could range from 0%-200%.", "During the first three months of 2019, 47,264 RSUs were settled and distributed. After adjusting for minimum tax withholdings, a net 32,811 shares were issued. In connection with the issued RSUs, the minimum tax withholding payments made during the three months ended March 31, 2019 totaled $0.4 million.", "During the three months ended March 31, 2019, we had 18,180 stock option awards expire with a weighted-average exercise price of $53.71. At March 31, 2019, we had 572,481 stock option awards that were exercisable with a weighted-average exercise price of $51.17.", "The following table summarizes the number of share-based awards granted under the Clearwater Paper Corporation 2017 Stock Incentive Plan during the three months ended March 31, 2019 and the grant-date fair value of the awards:", "| Three Months Ended |\n| March 31, 2019 |\n| Number ofShares Subject to Award | Average FairValue of Award Per Share |\n| Restricted stock units | 127,135 | $ | 27.13 |\n| Performance shares | 140,536 | 27.11 |\n", "DIRECTOR AWARDS", "Annually, each outside member of our Board of Directors receives deferred equity-based awards that are measured in units of our common stock and ultimately settled in cash at the time of payment. Accordingly, the compensation expense associated with these awards is subject to fluctuations each quarter based on mark-to-market adjustments at each reporting period in line with changes in the market price of our common stock. As a result of the mark-to-market adjustment, we recorded director equity-based compensation benefit of $0.4 million and $0.7 million for the three months ended March 31, 2019 and 2018, respectively.", "As of March 31, 2019, the liability amounts associated with director equity-based compensation included in \"Other long-term obligations\" on the accompanying Consolidated Balance Sheet were $1.8 million. At December 31, 2018, the liability amounts associated with director equity-based compensation included in \"Other long-term obligations\" and \"Accounts payable and accrued liabilities\" totaled $0.8 million and $1.3 million, respectively.", "16", "NOTE 13 Fair Value Measurements", "The estimated fair values of our financial instruments at the dates presented below are as follows:", "| March 31, | December 31, |\n| 2019 | 2018 |\n| Carrying | Fair | Carrying | Fair |\n| (In thousands) | Amount | Value | Amount | Value |\n| Cash, cash equivalents, and restricted cash (Level 1) | $ | 14,627 | $ | 14,627 | $ | 24,947 | $ | 24,947 |\n| Borrowings under revolving credit facilities (Level 2) | 202,000 | 201,943 | 100,000 | 99,909 |\n| Other short-term debt (Level 1) | 10,216 | 10,216 | 20,833 | 20,833 |\n| Long-term debt (Level 2) | 675,000 | 644,798 | 675,000 | 612,546 |\n", "Accounting guidance establishes a framework for measuring the fair value of financial instruments, providing a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities, or “Level 1” measurements, followed by quoted prices of similar assets or observable market data considering the assets' underlying maturities, or “Level 2” measurements, and the lowest priority to unobservable inputs, or “Level 3” measurements.", "The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should seek to maximize the use of observable inputs and minimize the use of unobservable inputs.", "Cash, cash equivalents, and restricted cash, borrowings under the revolving credit facilities, other short-term debt and long-term debt are the only items measured at fair value on a recurring basis.", "We do not have any financial assets measured at fair value on a nonrecurring basis.", "NOTE 14 Segment Information", "Our reportable segments are described below.", "Consumer Products", "Our Consumer Products segment manufactures and sells a complete line of at-home tissue products, or retail products, and away-from-home tissue products, or non-retail products, and parent rolls. Retail products include bath, paper towels, facial and napkin product categories. Non-retail products include conventional one and two-ply bath tissue, two-ply paper towels, hard wound towels and dispenser napkins sold to customers with commercial and industrial tissue needs. Each category is further distinguished according to quality segments: ultra, premium, value and economy.", "Pulp and Paperboard", "Our Pulp and Paperboard segment manufactures and markets solid bleached sulfate paperboard for the high-end segment of the packaging industry as well as offers custom sheeting, slitting and cutting of paperboard. Our overall production consists primarily of folding carton, liquid packaging, cup and plate products and commercial printing grades. The majority of our Pulp and Paperboard customers are packaging converters, folding carton converters, merchants and commercial printers.", "17", "The table below presents information about our reportable segments:", "| Three Months Ended March 31, |\n| (In thousands) | 2019 | 2018 |\n| Segment net sales: |\n| Consumer Products | $ | 223,336 | $ | 238,842 |\n| Pulp and Paperboard | 205,443 | 198,110 |\n| Total segment net sales | $ | 428,779 | $ | 436,952 |\n| Earnings (loss) before income taxes: |\n| Consumer Products1 | $ | 1,271 | $ | 1,629 |\n| Pulp and Paperboard1 | 29,388 | 26,154 |\n| 30,659 | 27,783 |\n| Corporate1 | (16,297 | ) | (16,244 | ) |\n| Income from operations | 14,362 | 11,539 |\n| Interest expense, net | (8,486 | ) | (8,020 | ) |\n| Non-operating pension and other postretirement benefit (costs) income | (1,314 | ) | (1,279 | ) |\n| Earnings before income taxes | $ | 4,562 | $ | 2,240 |\n| Depreciation and amortization: |\n| Consumer Products | $ | 14,771 | $ | 14,297 |\n| Pulp and Paperboard | 9,485 | 9,429 |\n| Corporate | 1,580 | 1,441 |\n| Total depreciation and amortization | $ | 25,836 | $ | 25,167 |\n", "| 1 | Income from operations for the Consumer Products, Pulp and Paperboard and Corporate segments for the three months ended March 31, 2018 include $1.4 million, $0.3 million and $3.4 million, respectively, of expenses associated with our selling, general and administrative cost control measures. |\n", "For the three months ended March 31, 2019, no customer accounted for more than 10% of our total company net sales. For the three months ended March 31, 2018, one customer, the Kroger Company, accounted for approximately 16.3% of our total company net sales.", "Net sales, classified by the major geographic areas in which our customers are located and by major products, were as follows:", "| Three Months Ended March 31, |\n| (In thousands) | 2019 | 2018 |\n| Primary geographical markets: |\n| United States | $ | 414,769 | $ | 420,820 |\n| Other countries | 14,010 | 16,132 |\n| Total net sales | $ | 428,779 | $ | 436,952 |\n| Major products: |\n| Retail tissue | $ | 204,585 | $ | 219,842 |\n| Paperboard | 203,025 | 198,110 |\n| Non-retail tissue | 18,469 | 16,959 |\n| Other | 2,700 | 2,041 |\n| Total net sales | $ | 428,779 | $ | 436,952 |\n", "18", "NOTE 15 Supplemental Guarantor Financial Information", "All of our subsidiaries that are 100% directly or indirectly owned by Clearwater Paper, guarantee our $275 million aggregate principal amount of 4.5% senior notes issued in January 2013 and due 2023, which we refer to as the 2013 Notes, on a full and unconditional, and joint and several basis. There are no significant restrictions on the ability of the guarantor subsidiaries to make distributions to Clearwater Paper, the issuer of the 2013 Notes. The following tables present the results of operations, financial position and cash flows of Clearwater Paper and its subsidiaries, the guarantor subsidiaries, and the eliminations necessary to arrive at the information for Clearwater Paper on a consolidated basis.", "Clearwater Paper Corporation", "Consolidating Statement of Operations and Comprehensive Income", "Three Months Ended March 31, 2019", "| Guarantor |\n| (In thousands) | Issuer | Subsidiaries | Eliminations | Total |\n| Net sales | $ | 412,395 | $ | 67,540 | $ | (51,156 | ) | $ | 428,779 |\n| Costs and expenses: |\n| Cost of sales | (367,800 | ) | (59,518 | ) | 43,072 | (384,246 | ) |\n| Selling, general and administrative expenses | (26,245 | ) | (3,926 | ) | — | (30,171 | ) |\n| Total operating costs and expenses | (394,045 | ) | (63,444 | ) | 43,072 | (414,417 | ) |\n| Income from operations | 18,350 | 4,096 | (8,084 | ) | 14,362 |\n| Interest expense, net | (8,385 | ) | (101 | ) | — | (8,486 | ) |\n| Non-operating pension and other postretirement benefit costs | (1,314 | ) | — | — | (1,314 | ) |\n| Earnings before income taxes | 8,651 | 3,995 | (8,084 | ) | 4,562 |\n| Income tax provision | (1,806 | ) | (852 | ) | 1,933 | (725 | ) |\n| Equity in income of subsidiary | 3,143 | — | (3,143 | ) | — |\n| Net earnings | $ | 9,988 | $ | 3,143 | $ | (9,294 | ) | $ | 3,837 |\n| Other comprehensive income, net of tax | 1,239 | — | — | 1,239 |\n| Comprehensive income | $ | 11,227 | $ | 3,143 | $ | (9,294 | ) | $ | 5,076 |\n", "", "19", "Clearwater Paper Corporation", "Consolidating Statement of Operations and Comprehensive Income", "Three Months Ended March 31, 2018", "| (In thousands) | Issuer | GuarantorSubsidiaries | Eliminations | Total |\n| Net sales | $ | 455,177 | $ | 46,213 | $ | (64,438 | ) | $ | 436,952 |\n| Costs and expenses: |\n| Cost of sales | (412,957 | ) | (40,360 | ) | 60,884 | (392,433 | ) |\n| Selling, general and administrative expenses | (27,632 | ) | (5,348 | ) | — | (32,980 | ) |\n| Total operating costs and expenses | (440,589 | ) | (45,708 | ) | 60,884 | (425,413 | ) |\n| Income from operations | 14,588 | 505 | (3,554 | ) | 11,539 |\n| Interest expense, net | (7,929 | ) | (91 | ) | — | (8,020 | ) |\n| Non-operating pension and other postretirement benefit costs | (1,279 | ) | — | — | (1,279 | ) |\n| Earnings before income taxes | 5,380 | 414 | (3,554 | ) | 2,240 |\n| Income tax (provision) benefit | (382 | ) | (13 | ) | 755 | 360 |\n| Equity in earnings of subsidiary | 401 | — | (401 | ) | — |\n| Net earnings | $ | 5,399 | $ | 401 | $ | (3,200 | ) | $ | 2,600 |\n| Other comprehensive income, net of tax | 1,419 | — | — | 1,419 |\n| Comprehensive income | $ | 6,818 | $ | 401 | $ | (3,200 | ) | $ | 4,019 |\n", "", "20", "Clearwater Paper Corporation", "Consolidating Balance Sheet", "| (In thousands) | Issuer | GuarantorSubsidiaries | Eliminations | Total |\n| ASSETS |\n| Current assets: |\n| Cash and cash equivalents | $ | 12,160 | $ | — | $ | — | $ | 12,160 |\n| Restricted cash | 1,440 | — | — | 1,440 |\n| Receivables, net | 148,494 | 19,599 | — | 168,093 |\n| Taxes receivable | 6,965 | 4 | 12 | 6,981 |\n| Inventories | 241,746 | 47,136 | (2,973 | ) | 285,909 |\n| Other current assets | 11,988 | 249 | — | 12,237 |\n| Total current assets | 422,793 | 66,988 | (2,961 | ) | 486,820 |\n| Property, plant and equipment, net | 1,217,402 | 74,600 | — | 1,292,002 |\n| Operating lease right-of-use assets | 72,161 | 5,318 | — | 77,479 |\n| Goodwill | 35,074 | — | — | 35,074 |\n| Intangible assets, net | 784 | 21,511 | — | 22,295 |\n| Intercompany (payable) receivable | (56,409 | ) | 53,436 | 2,973 | — |\n| Investment in subsidiary | 178,444 | — | (178,444 | ) | — |\n| Other assets, net | 13,473 | 3,793 | (2,658 | ) | 14,608 |\n| TOTAL ASSETS | $ | 1,883,722 | $ | 225,646 | $ | (181,090 | ) | $ | 1,928,278 |\n| LIABILITIES AND STOCKHOLDERS’ EQUITY |\n| Current liabilities: |\n| Short-term debt | $ | 212,216 | $ | — | $ | — | $ | 212,216 |\n| Accounts payable and accrued liabilities | 271,005 | 24,557 | 12 | 295,574 |\n| Current liability for pensions and other postretirement employee benefits | 7,430 | — | — | 7,430 |\n| Total current liabilities | 490,651 | 24,557 | 12 | 515,220 |\n| Long-term debt | 671,484 | — | — | 671,484 |\n| Operating lease liabilities | 68,742 | 3,905 | — | 72,647 |\n| Liability for pensions and other postretirement employee benefits | 76,507 | — | — | 76,507 |\n| Other long-term obligations | 33,859 | — | — | 33,859 |\n| Accrued taxes | 2,238 | 873 | — | 3,111 |\n| Deferred tax liabilities | 107,997 | 17,867 | (2,658 | ) | 123,206 |\n| TOTAL LIABILITIES | 1,451,478 | 47,202 | (2,646 | ) | 1,496,034 |\n| Stockholders’ equity excluding accumulated other comprehensive loss | 498,353 | 178,444 | (178,444 | ) | 498,353 |\n| Accumulated other comprehensive loss, net of tax | (66,109 | ) | — | — | (66,109 | ) |\n| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,883,722 | $ | 225,646 | $ | (181,090 | ) | $ | 1,928,278 |\n", "21", "Clearwater Paper Corporation", "Consolidating Balance Sheet", "At December 31, 2018", "| (In thousands) | Issuer | GuarantorSubsidiaries | Eliminations | Total |\n| ASSETS |\n| Current assets: |\n| Cash and cash equivalents | $ | 22,484 | $ | — | $ | — | $ | 22,484 |\n| Receivables, net | 127,952 | 17,567 | — | 145,519 |\n| Taxes receivable | 16,634 | 41 | (10,374 | ) | 6,301 |\n| Inventories | 222,960 | 48,361 | (5,077 | ) | 266,244 |\n| Other current assets | 3,346 | 53 | — | 3,399 |\n| Total current assets | 393,376 | 66,022 | (15,451 | ) | 443,947 |\n| Property, plant and equipment, net | 1,192,716 | 76,555 | — | 1,269,271 |\n| Goodwill | 35,074 | — | — | 35,074 |\n| Intangible assets, net | 1,045 | 23,035 | — | 24,080 |\n| Intercompany (payable) receivable | (62,846 | ) | 57,769 | 5,077 | — |\n| Investment in subsidiary | 175,301 | — | (175,301 | ) | — |\n| Other assets, net | 14,839 | 2,618 | (1,711 | ) | 15,746 |\n| TOTAL ASSETS | $ | 1,749,505 | $ | 225,999 | $ | (187,386 | ) | $ | 1,788,118 |\n| LIABILITIES AND STOCKHOLDERS’ EQUITY |\n| Current liabilities: |\n| Short-term debt | $ | 120,833 | $ | — | $ | — | $ | 120,833 |\n| Accounts payable and accrued liabilities | 299,715 | 31,691 | (10,374 | ) | 321,032 |\n| Current liability for pensions and other postretirement employee benefits | 7,430 | — | — | 7,430 |\n| Total current liabilities | 427,978 | 31,691 | (10,374 | ) | 449,295 |\n| Long-term debt | 671,292 | — | — | 671,292 |\n| Liability for pensions and other postretirement employee benefits | 78,191 | — | — | 78,191 |\n| Other long-term obligations | 38,977 | — | — | 38,977 |\n| Accrued taxes | 1,918 | 867 | — | 2,785 |\n| Deferred tax liabilities | 104,753 | 18,140 | (1,711 | ) | 121,182 |\n| TOTAL LIABILITIES | 1,323,109 | 50,698 | (12,085 | ) | 1,361,722 |\n| Stockholders’ equity excluding accumulated other comprehensive loss | 493,744 | 175,301 | (175,301 | ) | 493,744 |\n| Accumulated other comprehensive loss, net of tax | (67,348 | ) | — | — | (67,348 | ) |\n| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,749,505 | $ | 225,999 | $ | (187,386 | ) | $ | 1,788,118 |\n", "22", "Clearwater Paper Corporation", "Consolidating Statement of Cash Flows", "Three Months Ended March 31, 2019", "| (In thousands) | Issuer | GuarantorSubsidiaries | Eliminations | Total |\n| CASH FLOWS FROM OPERATING ACTIVITIES |\n| Net earnings | $ | 9,988 | $ | 3,143 | $ | (9,294 | ) | $ | 3,837 |\n| Adjustments to reconcile net earnings to net cash flows from operating activities: |\n| Depreciation and amortization | 22,763 | 3,073 | — | 25,836 |\n| Equity-based compensation expense | 828 | — | — | 828 |\n| Deferred taxes | 2,251 | (1,337 | ) | — | 914 |\n| Other non-cash activity, net | (569 | ) | 5 | (564 | ) |\n| Changes in working capital, net | (73,447 | ) | 930 | 10,386 | (62,131 | ) |\n| Changes in taxes receivable, net | 9,669 | 37 | (10,386 | ) | (680 | ) |\n| Other, net | 2,666 | (105 | ) | — | 2,561 |\n| Net cash flows from operating activities | (25,851 | ) | 5,746 | (9,294 | ) | (29,399 | ) |\n| CASH FLOWS FROM INVESTING ACTIVITIES |\n| Additions to property, plant and equipment | (71,309 | ) | (279 | ) | — | (71,588 | ) |\n| Net cash flows from investing activities | (71,309 | ) | (279 | ) | — | (71,588 | ) |\n| CASH FLOWS FROM FINANCING ACTIVITIES |\n| Borrowings on short-term debt | 290,362 | — | — | 290,362 |\n| Repayments of borrowings on short-term debt | (198,979 | ) | — | — | (198,979 | ) |\n| Investment (to) from parent | (3,827 | ) | (5,467 | ) | 9,294 | — |\n| Other, net | (716 | ) | — | — | (716 | ) |\n| Net cash flows from financing activities | 86,840 | (5,467 | ) | 9,294 | 90,667 |\n| Decrease in cash, cash equivalents, and restricted cash | (10,320 | ) | — | — | (10,320 | ) |\n| Cash, cash equivalents, and restricted cash at beginning of period | 24,947 | — | — | 24,947 |\n| Cash, cash equivalents, and restricted cash at end of period | $ | 14,627 | $ | — | $ | — | $ | 14,627 |\n", "23", "Clearwater Paper Corporation", "Consolidating Statement of Cash Flows", "Three Months Ended March 31, 2018", "| (In thousands) | Issuer | Guarantor Subsidiaries | Eliminations | Total |\n| CASH FLOWS FROM OPERATING ACTIVITIES |\n| Net earnings | $ | 5,399 | $ | 401 | $ | (3,200 | ) | $ | 2,600 |\n| Adjustments to reconcile net earnings to net cash flows from operating activities: |\n| Depreciation and amortization | 19,958 | 5,209 | — | 25,167 |\n| Equity-based compensation expense | 781 | — | — | 781 |\n| Deferred taxes | (119 | ) | (121 | ) | — | (240 | ) |\n| Other non-cash activity, net | 655 | (7 | ) | — | 648 |\n| Changes in working capital, net | 4,661 | (3,109 | ) | (308 | ) | 1,244 |\n| Changes in taxes receivable, net | 1,462 | 1 | — | 1,463 |\n| Other, net | (902 | ) | 99 | — | (803 | ) |\n| Net cash flows from operating activities | 31,895 | 2,473 | (3,508 | ) | 30,860 |\n| CASH FLOWS FROM INVESTING ACTIVITIES |\n| Additions to property, plant and equipment | (47,670 | ) | (760 | ) | — | (48,430 | ) |\n| Other, net | 761 | 7 | 768 |\n| Net cash flows from investing activities | (46,909 | ) | (753 | ) | — | (47,662 | ) |\n| CASH FLOWS FROM FINANCING ACTIVITIES |\n| Borrowings on short-term debt | 87,325 | — | — | 87,325 |\n| Repayments of borrowings on short-term debt | (73,825 | ) | — | — | (73,825 | ) |\n| Investment from (to) parent | (1,788 | ) | (1,720 | ) | 3,508 | — |\n| Other, net | (365 | ) | — | — | (365 | ) |\n| Net cash flows from financing activities | 11,347 | (1,720 | ) | 3,508 | 13,135 |\n| Decrease in cash, cash equivalents, and restricted cash | (3,667 | ) | — | — | (3,667 | ) |\n| Cash, cash equivalents, and restricted cash at beginning of period | 16,738 | — | — | 16,738 |\n| Cash, cash equivalents, and restricted cash at end of period | $ | 13,071 | $ | — | $ | — | $ | 13,071 |\n", "24", "ITEM 2.", "Management’s Discussion and Analysis of Financial Condition and Results of Operations", "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 production quality and quantity, costs and timing associated with the expansion of our Shelby, North Carolina facility; our strengths and related benefits; our strategy; pulp production and the continuous digester at our Idaho facility; competitive market conditions, raw materials and input usage and costs, including energy costs and usage; selling, general and administrative cost reduction benefits; strategic projects and related costs and benefits; energy conservation; cash flows; capital expenditures; return on investment from capital projects; tax rates; potential impact following the establishment of applicable accounting standards; operating costs; selling, general and administrative expenses; timing of and costs related to major maintenance and repairs; liquidity; benefit plan funding levels; capitalized interest; and interest expenses. 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 2018 Form 10-K, as well as the following:", "| • | competitive pricing pressures for our products, including as a result of increased capacity as additional manufacturing facilities are operated by our competitors; |\n", "| • | the loss of, changes in prices in regard to, or reduction in, orders from a significant customer; |\n", "| • | changes in customer product preferences and competitors' product offerings; |\n", "| • | our ability to complete construction of our new tissue manufacturing operations in Shelby, North Carolina on time and within current cost expectations; |\n", "| • | 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 when they are completed; |\n", "| • | consolidation and vertical integration of converting operations in the paperboard industry; |\n", "| • | 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; |\n", "| • | changes in the cost and availability of wood fiber and wood pulp; |\n", "| • | changes in transportation costs and disruptions in transportation services; |\n", "| • | labor disruptions; |\n", "| • | changes in the U.S. and international economies and in general economic conditions in the regions and industries in which we operate; |\n", "| • | manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunctions and damage to our manufacturing facilities; |\n", "| • | changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs; |\n", "| • | larger competitors having operational and other advantages; |\n", "| • | cyclical industry conditions; |\n", "| • | changes in expenses, required contributions and potential withdrawal costs associated with our pension plans; |\n", "| • | environmental liabilities or expenditures; |\n", "| • | cyber-security risks; |\n", "| • | reliance on a limited number of third-party suppliers for raw materials; |\n", "| • | our ability to attract, motivate, train and retain qualified and key personnel; |\n", "| • | material weaknesses in our internal control over financial reporting; |\n", "| • | our substantial indebtedness and ability to service our debt obligations; |\n", "| • | restrictions on our business from debt covenants and terms; and |\n", "| • | changes in laws, regulations or industry standards affecting our business. |\n", "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.", "25", "OVERVIEW", "Background", "We manufacture quality consumer tissue, away-from-home tissue, parent roll tissue, bleached paperboard and pulp at manufacturing facilities across the nation. We are a premier supplier of private label tissue to major retailers and wholesale distributors, including grocery, drug, mass merchant and discount stores. In addition, we produce bleached paperboard used by quality-conscious printers and packaging converters. Our employees build shareholder value by developing strong customer relationships through quality and service.", "Recent Events", "Shelby Expansion Project", "We are nearing completion of building a new tissue machine and related converting equipment at a site adjacent to our existing facility in Shelby, North Carolina. The new tissue machine will produce a variety of high-quality private label ultra and premium bath, paper towel and napkin products. At full production capacity, the new tissue machine is expected to produce approximately 70,000 tons of tissue products annually. The estimated cost for the project includes approximately $360 million for the tissue machine, converting equipment and buildings, and approximately $60 million for warehouse expansion that will consolidate all southeastern warehousing in Shelby.", "We project that the construction of the new facility will be completed in the second quarter of 2019 and will be fully operational in 2020. During the three months ended March 31, 2019, we incurred costs of $35.2 million on construction related activities and the new tissue machine in Shelby. We also capitalized $3.2 million of interest during the three months ended March 31, 2019 related to the Shelby expansion. In addition, in association with the startup of the new tissue machine, we expect to incur approximately $2.5 million of startup-related costs during the second quarter of 2019.", "Components and Trends in our Business", "Net sales", "Prices for our consumer tissue products are affected by competitive conditions and the prices of branded tissue products. Our Consumer Products segment competes based on product quality, customer service and price. We deliver customer-focused business solutions by assisting in managing product assortment, category management, and pricing and promotion optimization.", "In recent years, the industry has seen an increase in ultra and premium tissue products as industry participants have added or improved through-air-dried, or TAD, or equivalent production capacity as well as added conventional tissue capacity. Demand and pricing for consumer tissue products is currently being affected by this increased capacity, as well as changing dynamics in the at-home tissue segment as a result of changing consumer purchasing habits, consolidations and new entrants in the consumer retail channel, and new and evolving sales and distribution channels. These changing conditions contributed to a very competitive environment for consumer tissue over the past several years, which has continued into 2019. Reflecting these competitive conditions, in the third quarter of 2017, our largest tissue customer made the decision to go from a single source model to a multi-source model for its private label tissue supply beginning in the first quarter of 2018. This significantly affected sales volumes for our conventional tissue in 2018 and into 2019.", "Our pulp and paperboard business is affected by macro-economic conditions around the world and has historically experienced cyclical market conditions. As a result, historical prices for our products and sales volumes have been volatile. Product pricing is significantly affected by the relationship between supply and demand for our products. Product supply in the industry is influenced primarily by fluctuations in available manufacturing production, which tends to increase during periods when prices remain strong. In addition, currency exchange rates affect U.S. supplies of paperboard, as non-U.S. manufacturers are more attracted to the U.S. market when the dollar is relatively strong.", "The markets for our products are highly competitive. Our business is capital intensive, which leads to high fixed costs and large capital outlays and generally results in continued production as long as prices are sufficient to cover variable costs. These conditions have contributed to substantial price competition, particularly during periods of reduced demand. Some of our competitors have lower production costs, greater buying power and are integrated, and, as a result, may be less adversely affected than we are by price decreases.", "Net sales consist of sales of consumer tissue, paperboard, and to a lesser extent pulp, net of discounts, returns and allowances and any sales taxes collected.", "26", "Operating Costs", "Prices for our principal operating cost items are variable and directly affect our results of operations. In a strong economy, we normally would expect our operating costs to increase. Competitive market conditions, however, can limit our ability to pass cost increases through to our customers. The following table shows our principal operating cost items and associated percentage of net sales for the periods presented:", "| Cost of sales |\n| Three Months Ended March 31, |\n| (Dollars in thousands) | 2019 | 2018 |\n| Cost | Percentage ofSales | Cost3 | Percentage ofSales | Cost Variance |\n| Wages and benefits | $ | 65,552 | 15.3 | % | $ | 70,452 | 16.1 | % | $ | (4,900 | ) |\n| Purchased pulp | 50,680 | 11.8 | 48,254 | 11.0 | 2,426 |\n| Transportation1 | 49,059 | 11.4 | 54,806 | 12.5 | (5,747 | ) |\n| Chemicals | 39,351 | 9.2 | 42,674 | 9.8 | (3,323 | ) |\n| Chips, sawdust and logs | 38,087 | 8.9 | 38,427 | 8.8 | (340 | ) |\n| Packaging and operating supplies | 35,993 | 8.4 | 37,970 | 8.7 | (1,977 | ) |\n| Energy | 29,566 | 6.9 | 21,882 | 5.0 | 7,684 |\n| Depreciation | 22,435 | 5.2 | 21,722 | 5.0 | 713 |\n| Maintenance and repairs2 | 15,392 | 3.6 | 18,650 | 4.3 | (3,258 | ) |\n| 346,115 | 80.7 | 354,837 | 81.2 | (8,722 | ) |\n| Other operating costs | 38,131 | 8.9 | 37,596 | 8.6 | 535 |\n| Total cost of sales | $ | 384,246 | 89.6 | % | $ | 392,433 | 89.8 | % | $ | (8,187 | ) |\n", "| 1 | Includes internal and external transportation costs. |\n", "| 2 | Excludes related labor costs. |\n", "| 3 | Certain 2018 operating costs were reclassified to conform to the 2019 presentation. |\n", "Wages and benefits. Costs related to our employees primarily consist of wages and related benefit costs and payroll taxes. For the three months ended March 31, 2019, wage and benefit costs decreased compared to the same period in 2018, primarily due to reduced headcount driven by the sale of our Ladysmith, Wisconsin facility in August 2018 and the reduction of hourly workers at our Lewiston facility in 2018.", "Purchased pulp. We purchase a significant amount of the pulp needed to manufacture our consumer products and, to a lesser extent our paperboard, from external suppliers. Purchased pulp costs increased in the three months ended March 31, 2019, compared to the same period in 2018, mainly due to higher overall prices.", "Transportation. Fuel prices, mileage driven and line-haul rates largely impact transportation costs for the delivery of raw materials to our manufacturing facilities, internal inventory transfers and the delivery of our finished products to customers. Changing fuel prices particularly affect our margins for consumer products because we supply customers throughout the U.S. and transport unconverted parent rolls from our tissue mills to our tissue converting facilities. Transportation costs decreased in the three month period ended March 31, 2019, compared to the same period in 2018, due largely to improvements in our Consumer Products segment's operating model resulting in lower miles shipped overall, a decrease in tons shipped in our Consumer Products segment and lower paperboard shipments in our Pulp and Paperboard segment, partially offset by higher line-haul rates.", "Chemicals. We consume a substantial amount of chemicals in the production of pulp and paperboard, as well as in the production of TAD tissue. The chemicals we generally use include polyethylene, caustic, starch, sodium chlorate, latex and paper processing chemicals. A portion of the chemicals used in our manufacturing processes, particularly in the paperboard extrusion process, are petroleum based and are impacted by petroleum prices.", "Chemical costs decreased in the three months ended March 31, 2019, compared to the same period in 2018, due to decreased paperboard production and, to a lesser extent, favorable pricing on polyethylene and caustic.", "27", "Chips, sawdust and logs. We purchase chips, sawdust and logs to manufacture pulp. We source residual wood fibers under both long-term and short-term supply agreements, as well as in the spot market. Chips, sawdust and log costs were flat for the three months ended March 31, 2019, compared to the same period in 2018, as higher pricing was offset by lower paperboard production.", "Packaging and operating supplies. As a significant producer of private label consumer tissue products, we package to order for retail chains, wholesalers and cooperative buying organizations. Under our agreements with those customers, we are responsible for the expenses related to the unique packaging of our products for direct retail sale to their consumers. Packaging costs decreased for the three months ended March 31, 2019, compared to the same period in 2018, due to favorable pricing.", "Energy. We use energy in the form of electricity, hog fuel, steam and natural gas to operate our mills. Energy prices may fluctuate widely from period-to-period primarily due to volatility in temperatures and electricity and natural gas rates. We generally strive to reduce our exposure to volatile energy prices through conservation. In addition, a co-generation facility that produces steam and electricity at our Lewiston, Idaho manufacturing site helps to lower our energy costs. Energy costs for the three months ended March 31, 2019 increased compared to the same period in 2018, primarily due to a shortage of natural gas supply in the Pacific Northwest due to a pipeline disruption resulting in higher natural gas pricing at our Lewiston, Idaho facility, as well as increased natural gas usage at our Idaho pulp and paperboard facility as a result of a recovery boiler outage and colder weather in the first quarter of 2019.", "To help mitigate our exposure to changes in natural gas prices, we use firm-price contracts to supply a portion of our natural gas requirements. As of March 31, 2019, these contracts covered approximately 25% of our expected average monthly natural gas requirements for the remainder of 2019.", "Depreciation. We record substantially all of our depreciation expense associated with our plant and equipment in \"Cost of sales\" on our Consolidated Statements of Operations. Depreciation expense for the three months ended March 31, 2019 increased compared to the same period in 2018 as a result of higher capital spending, primary related to our Shelby, North Carolina expansion.", "Maintenance and repairs. We regularly incur significant costs to maintain our manufacturing equipment. We perform routine maintenance on our machines and periodically replace a variety of parts such as motors, pumps, pipes and electrical parts. Major equipment maintenance and repairs in our Pulp and Paperboard segment also require maintenance shutdowns approximately every 18 to 24 months at both our Idaho and Arkansas facilities, which increase costs and may reduce net sales in the quarters in which the major maintenance shutdowns occur. During the three months ended March 31, 2019, maintenance and repair spending was lower than the same period in 2018 due to the absence in the 2019 period of planned maintenance that took place at our Arkansas Pulp and Paperboard facility in the first quarter of 2018. We expect to incur approximately $5 million in unplanned maintenance related primarily to our recovery boiler at our Idaho facility during the second quarter of 2019. We expect our 2019 planned major maintenance costs to be approximately $17 million at our Idaho facility during the third quarter of 2019, and approximately $8 million at our Arkansas facility during the fourth quarter of 2019.", "Other operating costs. Other costs primarily consist of miscellaneous operating costs, which were relatively flat for the three months ended March 31, 2019, compared to the same period in 2018, due mainly to reduced outside warehouse costs for both segments being offset by increased equipment rentals and certain other costs at our pulp and paperboard segment.", "Selling, general and administrative expenses", "Selling, general and administrative expenses primarily consist of compensation and associated expenses for sales and administrative personnel, as well as commission expenses related to sales of our products.", "Interest expense", "Interest expense for the three months ended March 31, 2019 and 2018 includes interest on our $275 million aggregate principal amount of 4.5% senior notes issued in January 2013 and due 2023, which we refer to as the 2013 Notes, and interest on our $300 million aggregate principal amount of 5.375% senior notes issued in 2014 and due 2025, which we refer to as the 2014 Notes. Interest expense also includes interest on the amount drawn under our revolving credit facilities and amortization of deferred issuance costs associated with all of our notes and revolving credit facilities. These interest expense amounts are partially offset by capitalized interest associated with major capital project spending.", "Income taxes", "Income taxes are based on reported earnings and tax rates in the jurisdictions in which our operations occur and offices are located, adjusted for available credits, changes in valuation allowances and differences between reported earnings and taxable income using current tax laws and rates. We generally expect our effective income tax rate, excluding discrete items, to remain fairly constant, although it could fluctuate due to changes in tax law.", "28", "RESULTS OF OPERATIONS", "Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018", "The following table sets forth data included in our Consolidated Statements of Operations as a percentage of net sales.", "| Three Months Ended March 31, |\n| (Dollars in thousands) | 2019 | 2018 |\n| Net sales | $ | 428,779 | 100.0 | % | $ | 436,952 | 100.0 | % |\n| Costs and expenses: |\n| Cost of sales | (384,246 | ) | 89.6 | (392,433 | ) | 89.8 |\n| Selling, general and administrative expenses | (30,171 | ) | 7.0 | (32,980 | ) | 7.5 |\n| Total operating costs and expenses | (414,417 | ) | 96.7 | (425,413 | ) | 97.4 |\n| Income from operations | 14,362 | 3.3 | 11,539 | 2.6 |\n| Interest expense, net | (8,486 | ) | 2.0 | (8,020 | ) | 1.8 |\n| Non-operating pension and other postretirement benefit costs | (1,314 | ) | 0.3 | (1,279 | ) | 0.3 |\n| Earnings before income taxes | 4,562 | 1.1 | 2,240 | 0.5 |\n| Income tax (provision) benefit | (725 | ) | 0.2 | 360 | 0.1 |\n| Net earnings | $ | 3,837 | 0.9 | % | $ | 2,600 | 0.6 | % |\n", "Net sales—First quarter 2019 net sales decreased compared to the first quarter of 2018, as higher tissue and paperboard average net selling prices were more than offset by decreased tissue and paperboard sales volumes. The decreased tissue sales volumes were impacted by the sale of our Ladysmith, Wisconsin facility in August 2018. These items are further discussed below under “Discussion of Business Segments.”", "Cost of sales—Cost of sales was 89.6% of net sales for the first quarter of 2019 and 89.8% of net sales for the same period in 2018. Our overall cost of sales was $8.2 million lower than the first quarter of 2018, primarily due to lower transportation, wage and benefit, chemical and maintenance costs, partially offset by higher energy and purchased pulp costs.", "Selling, general and administrative expenses—Selling, general and administrative expenses for the first quarter of 2019 decreased $2.8 million compared to the first quarter of 2018. The lower expense was due in part to the absence of $5.1 million of reorganization related expenses that were incurred in the first quarter of 2018, partially offset by increased legal and professional services fees in the first quarter of 2019.", "Interest expense—Interest expense for the first quarter of 2019 was slightly higher than the first quarter of 2018, as higher interest expense associated with a larger average balance on our revolving credit facilities was largely offset by increased capitalized interest in the first quarter of 2019.", "Income tax provision—We recorded an income tax provision of $0.7 million for the three months ended March 31, 2019, compared to a benefit of $0.4 million in the same period of 2018. The rate determined under generally accepted accounting principles, or GAAP, for the three months ended March 31, 2019 was approximately 16% compared to a beneficial rate of approximately 16% for the same period of 2018. The net change to our rate was primarily the result of an increase in the benefit from credits offset by certain discrete items.", "", "29", "Discussion of Business Segments", "Consumer Products", "| Three Months Ended |\n| March 31, |\n| (Dollars in thousands - except per ton amounts) | 2019 | 2018 |\n| Net sales | $ | 223,336 | $ | 238,842 |\n| Operating income | 1,271 | 1,629 |\n| Percent of net sales | 0.6 | % | 0.7 | % |\n| Shipments (short tons) |\n| Retail | 73,356 | 80,971 |\n| Non-retail | 10,266 | 11,236 |\n| Total tissue tons | 83,622 | 92,207 |\n| Converted products cases (in thousands) | 12,320 | 13,262 |\n| Sales price (per short ton) |\n| Retail | $ | 2,789 | $ | 2,715 |\n| Non-retail | 1,799 | 1,509 |\n| Total tissue | $ | 2,667 | $ | 2,568 |\n", "Net sales for the Consumer Products segment during the first quarter of 2019 decreased by $15.5 million compared to the first quarter of 2018 due to a reduction in sales volume in both parent roll and retail sales, primarily due to volume lost from a significant customer in 2018 and the impact from the sale of our Ladysmith facility in August 2018, partially offset by a favorable mix shift to increased ultra towel and bath sales.", "The segment had operating income of $1.3 million for the first quarter of 2019, compared to $1.6 million in the first quarter of 2018. The slight decrease was primarily attributable to the decreased sales, which was partially offset by lower transportation and warehousing costs and the absence of reorganization related expenses in the first quarter of 2019 that existed in the first quarter of 2018.", "Pulp and Paperboard", "| Three Months Ended |\n| March 31, |\n| (Dollars in thousands - except per ton amounts) | 2019 | 2018 |\n| Net sales | $ | 205,443 | $ | 198,110 |\n| Operating income | 29,388 | 26,154 |\n| Percent of net sales | 14.3 | % | 13.2 | % |\n| Paperboard shipments (short tons) | 202,834 | 206,309 |\n| Paperboard sales price (per short ton) | $ | 1,001 | $ | 960 |\n", "Net sales for the Pulp and Paperboard segment increased by $7.3 million during the first quarter of 2019, compared to the first quarter of 2018. The increase was due primarily to higher average net selling prices resulting from a favorable mix shift, partially offset by lower sales volume. Lower sales volumes during the first quarter of 2019 were primarily due to customers purchasing product in the prior quarter before a previously announced price increase went into effect.", "Operating income for the segment increased by $3.2 million during the first quarter of 2019, compared to the first quarter of 2018, primarily due to increased sales and lower wage and benefit, maintenance and chemical costs, partially offset by higher energy, pulp and transportation costs.", "30", "NON-GAAP MEASURES", "We use earnings before interest, taxes, depreciation and amortization, or EBITDA, and EBITDA adjusted for certain items, or Adjusted EBITDA, as supplemental performance measures that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA should not be considered as alternatives to net earnings, operating income or any other performance measure derived in accordance with GAAP, or as alternatives to cash flows from operating activities or a measure of our liquidity or profitability. In addition, our calculation of EBITDA and Adjusted EBITDA may or may not be comparable to similarly titled measures used by other companies.", "We present EBITDA and Adjusted EBITDA because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use EBITDA and Adjusted EBITDA: (i) as factors in evaluating management’s performance when determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit agreement and the indenture governing the 2013 Notes use metrics similar to EBITDA to measure our compliance with certain covenants.", "The following table provides our EBITDA and Adjusted EBITDA for the periods presented, as well as a reconciliation to net earnings.", "| Three Months Ended |\n| March 31, |\n| (In thousands) | 2019 | 2018 |\n| Net earnings | $ | 3,837 | $ | 2,600 |\n| Interest expense, net | 8,486 | 8,020 |\n| Income tax provision (benefit) | 725 | (360 | ) |\n| Depreciation and amortization expense | 25,836 | 25,167 |\n| EBITDA | $ | 38,884 | $ | 35,427 |\n| Directors' equity-based compensation benefit | (350 | ) | (709 | ) |\n| Reorganization related expenses associated with SG&A cost control measures | — | 5,104 |\n| Non-operating pension and other postretirement benefit costs1 | 1,314 | 1,279 |\n| Adjusted EBITDA | $ | 39,848 | $ | 41,101 |\n", "| 1 | In 2018, we adopted Accounting Standards Update 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires all net periodic pension and postretirement costs other than service cost to be presented on a line outside of operating income. Beginning in the first quarter of 2019, we are excluding these non-operating costs from the calculation of Adjusted EBITDA. The corresponding prior period amounts have been reclassified to conform with the current period presentation. |\n", "", "LIQUIDITY AND CAPITAL RESOURCES", "The following table presents information regarding our cash flows for the nine months ended March 31, 2019 and 2018:", "| (In thousands) | 2019 | 2018 |\n| Net cash flows from operating activities | $ | (29,399 | ) | $ | 30,860 |\n| Net cash flows from investing activities | (71,588 | ) | (47,662 | ) |\n| Net cash flows from financing activities | 90,667 | 13,135 |\n", "Cash Flows Summary", "Net cash flows from operating activities for the three months ended March 31, 2019 decreased by $60.3 million compared to the same period in 2018. The decrease in operating cash flows was driven by a decrease of $63.4 million from changes in working capital primarily due to increases in accounts receivable and inventory and a decrease in accounts payable and accrued liabilities.", "Net cash flows used for investing activities for the three months ended March 31, 2019 increased by $23.9 million compared to the prior year period primarily due to an increase in cash paid for plant and equipment, which was primarily related to our Shelby expansion project.", "Net cash flows provided by financing activities were $90.7 million for the three months ended March 31, 2019, and were driven by net borrowings of $91.4 million on our short-term debt. Net cash flows provided by financing activities were $13.1 million for the same period of 2018, due to net borrowings of $13.5 million on our short-term debt.", "31", "Capital Resources", "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 senior secured revolving credit facilities will be adequate to fund our debt service requirements and provide cash required to support our ongoing operations, capital expenditures, and working capital needs for the next twelve months.", "We may choose to refinance all or a portion of our indebtedness on or before maturity. We cannot be certain that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.", "Capital Expenditures", "In addition to ongoing maintenance and repair costs, we make capital expenditures to increase our operating capacity and efficiency, improve safety at our facilities, and comply with environmental laws. For the three months ended March 31, 2019, excluding capitalized interest of $3.4 million, we incurred $39.8 million on capital expenditures, which included $36.4 million of capital spending on strategic projects and other projects designed to reduce future manufacturing costs and provide a positive return on investment. Including $28.4 million of capital expenditures that were incurred in 2018 and paid in the first quarter of 2019, as well as the capitalized interest of $3.4 million, cash paid for capital expenditures in the first quarter of 2019 totaled $71.6 million. During the three months ended March 31, 2018, we incurred $48.4 million on capital expenditures, excluding capitalized interest of $1.3 million, which included $44.8 million of capital spending on strategic projects and other projects expected to reduce future manufacturing costs and provide a positive return on investment.", "Debt Arrangements", "Our annual debt service obligation, consisting of cash payments for interest on the 2013 Notes and the 2014 Notes, is estimated to be $28.5 million for 2019. The terms of the 2013 Notes limit our ability and the ability of any restricted subsidiaries to borrow money, pay dividends, redeem or repurchase capital stock, make investments, sell assets, create restrictions on the payment of dividends or other amounts to us from any restricted subsidiaries, enter into transactions with affiliates, enter into sale and lease back transactions, create liens, and consolidate, merge or sell all or substantially all of our assets. The terms of the 2014 Notes limit our ability and the ability of any restricted subsidiaries to incur certain liens, engage in sale and leaseback transactions and consolidate, merge with, or convey, transfer, or lease substantially all of our or their assets to another person.", "Credit Arrangements", "Our revolving credit facilities contain various loan covenants that restrict our ability and that of our subsidiaries to take certain actions, including, incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, repurchase or redemption of capital stock, making certain investments, entering into certain transactions with affiliates or changing the nature of their business. In addition, the revolving credit facilities contain financial covenants that require us to maintain a consolidated secured leverage ratio in an amount not to exceed 2.00 to 1.00 in 2019, and 1.50 to 1.00 thereafter, a consolidated interest coverage ratio in an amount not less than 1.25 to 1.00, and a consolidated asset coverage ratio of not less than 1.00 to 1.00.", "As of both March 31, 2019 and December 31, 2018, we were in compliance with our debt covenants. Based on our current financial projections and also taking into account certain actions that are available to us to enhance our compliance with these covenants, we expect to remain in compliance with them. 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 these covenants. If we are unable to do so, it would be necessary to seek amendments to the affected covenants from our lenders, which, if obtained, could require payment of additional fees, increased interest rates or other conditions or restrictions.", "See Note 8, \"Debt,\" to the condensed notes to the consolidated financial statements included in this report for additional discussion of our revolving credit facilities.", "CONTRACTUAL OBLIGATIONS", "As of March 31, 2019, there were no significant changes to the contractual obligations table disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.", "OFF-BALANCE SHEET ARRANGEMENTS", "We currently are not a party to off-balance sheet arrangements that would require disclosure under this section.", "32", "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 March 31, 2019, 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, 2018.", "See Note 2, \"Recently Adopted and New Accounting Standards,\" to the Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding recently adopted and new accounting pronouncements.", "33", "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 secured revolving credit facilities. As of March 31, 2019, there were $302.0 million in borrowings outstanding under our revolving credit facilities. The interest rates applied to borrowings under the credit facilities are adjusted often and therefore react quickly to any movement in the general trend of market interest rates. For example, a one percentage point increase or decrease in interest rates, based on assumed outstanding credit facilities' borrowings of $302.0 million, would have an approximate $3.0 million annual effect on interest expense. We currently do not attempt to alleviate the effects of short-term interest rate fluctuations on our credit facility borrowings through the use of derivative financial instruments.", "Commodity Risk", "We are exposed to market risk for changes in natural gas commodity pricing, which we partially mitigate through the use of firm price contracts for a portion of our natural gas requirements for our manufacturing facilities. As of March 31, 2019, these contracts covered approximately 25% of our expected average monthly natural gas requirements for the remainder of 2019.", "Foreign Currency Risk", "We have minimal foreign currency exchange risk. Nearly all of our international sales are denominated in U.S. dollars.", "34", "ITEM 4.", "Controls and Procedures", "Controls and Procedures", "We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, or the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.", "Material Weaknesses In Internal Control Over Financial Reporting", "Subject to the limitations noted above, our management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the first quarter of 2019. Based on that evaluation, the CEO and CFO have concluded that, as of March 31, 2019, our disclosure controls and procedures were not effective to meet the objective for which they were designed as a result of the material weaknesses in our internal control over financial reporting previously disclosed under Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2018, or Annual Report.", "Remediation Efforts", "The material weaknesses in our internal control over financial reporting, which are described more fully in our Annual Report, continued to exist as of March 31, 2019. We are actively engaged in implementing the remediation efforts described in the Annual Report which are designed to address these material weaknesses, and subsequent to the filing of our Annual Report we are in the process of hiring additional accounting personnel, implementing enhanced controls governing our risk management committee, our disclosure committee and our sub-certifications, and designing additional controls over the documentation and application of technical accounting guidance with particular emphasis on events outside the ordinary course of business, including changes to payment arrangements with vendors. While progress has been made, additional time is needed to fully implement and demonstrate the effectiveness of the remediation efforts. We are committed to operating effective controls, and management continues to regularly assess the progress and sufficiency of the ongoing initiatives and make adjustments as and when necessary.", "Notwithstanding the identified material weaknesses, management has concluded that the consolidated financial statements included in this quarterly report on Form 10-Q fairly present in all material respects our financial position, results of operations and cash flows at and for the periods presented in accordance with U.S. generally accepted accounting principles.", "Changes in Internal Controls", "Other than the remediation efforts related to the material weaknesses described in our Annual Report, there was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.", "35", "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", "There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018. See Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, entitled “Risk Factors.”", "ITEM 6.", "Exhibits", "", "| EXHIBITNUMBER | DESCRIPTION |\n| 10(i)* | Employment Agreement between Linda K. Massman and the Company dated effective January 1, 2019. |\n| 10(ii)* | Offer Letter, dated March 18, 2019, with Robert G. Hrivnak. |\n| (31) | Rule 13a-14(a)/15d-14(a) Certifications. |\n| (32)** | Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C Section 1350. |\n| 101.INS | XBRL Instance Document |\n| 101.SCH | XBRL Taxonomy Extension Schema. |\n| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase. |\n| 101.DEF | XBRL Taxonomy Extension Definition Linkbase. |\n| 101.LAB | XBRL Taxonomy Extension Label Linkbase. |\n| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |\n| * | Management contract or compensatory plan, contract or arrangement. |\n| ** | 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. |\n", "36", "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 |\n| (Registrant) |\n| May 8, 2019 | By | /s/ ROBERT G. HRIVNAK |\n| Robert G. Hrivnak |\n| Senior Vice President, Finance and |\n| Chief Financial Officer |\n| (Duly Authorized Officer; Principal |\n| Financial Officer) |\n| May 8, 2019 | By | /s/ ROBERT N. DAMMARELL |\n| Robert N. Dammarell |\n| Vice President, Corporate Controller |\n| (Duly Authorized Officer; Principal |\n| Accounting Officer) |\n", "37" ]

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