Clearwater Paper (CLW) 8-K Regulation FD Disclosure

Clearwater Paper Corporation

March 2010

Exhibit 99.1

1

Forward-Looking Statements –

Our disclosure and analysis in this presentation 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 our plans to build additional converting and paper making capacity, the

financial

returns

on

capital

investments,

the

cost

and

timing

to

complete

new

facilities,

future

growth

opportunities,

future

revenues,

cash

flows,

capital

expenditures, liquidity, cost controls, capital structure, product pricing, sales volumes, input costs, and our financial condition and results of operations.

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 the risk factors described in Item 1A of

Part I of our Annual Report on Form 10-K for the year ended December 31, 2009, as well as the following:

•

our ability to implement our growth strategies;

•

changes in raw material costs and energy availability and costs;

•

changes in the United States and international economies;

•

changes in customer product preferences;

•

cyclical industry conditions;

•

our

qualification

to

retain

alternative

fuel

mixture

tax

credits

and

the

tax

treatment

associated

with

receipt

of

such

credits;

•

unanticipated manufacturing disruptions, including equipment malfunction and damage to our manufacturing facilities caused by fire or

weather related events;

•

the loss of business from any of our three largest Consumer Products segment customers or a large Pulp and Paperboard segment

customer;

•

competitive pricing pressures for our products;

•

changes in the relationship between supply and demand in the forest products industry, including the amount of available manufacturing

capacity and wood fiber used in manufacturing products;

•

changes in freight costs and disruptions in transportation services;

•

unforeseen environmental liabilities or expenditures;

•

changes in expenses and required contributions associated with our pension plans;

•

changes

in

laws,

regulations

or

industry

standards

affecting

our

business;

•

labor disruptions;

•

changes in the level of construction activity; and

•

changes in exchange rates between the U.S. dollar and other currencies.

Forward-looking statements contained in this report present management’s views only as of the date of this presentation. We undertake no obligation to

publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

2

Business Overview

3

Clearwater Paper Overview

Pulp &

Paperboard

(PPD)

Net

Sales

¹

EBITDA

²

EBITDA Margin

Capex

4

$686.8

$67.6

³

9.8%

$ 4.4

$554.0

$138.1

24.9%

$ 14.2

$ 70.3

$(16.4)

(23.3)%

$    -

%

of

Net

Sales

(2009)

¹

US $ in millions

Wood

Products

(WP)

Consumer

Products

(CPD)

WP

5.4%

CPD

42.3%

PPD

52.4%

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings. 

EBITDA, as we define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating

income (loss) plus depreciation.  See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

1

Includes intersegment sales.

2

See Appendix B for reconciliation to segment operating income (loss) in accordance with GAAP.

3

Excludes $170.6 million of alternative fuel mixture tax credits. 

4

Excludes corporate capital expenditures. 

Leading manufacturer and seller of private-label consumer tissue and pulp & paperboard, with

$1.25 billion in net sales and $174.2 million  of EBITDA for 2009

3

4

Current Clearwater Paper Facilities Overview

Spokane, WA

Headquarters Office

Lewiston, ID

Tissue Mill

189,000

(Capacity/Tons)

Tissue Converting

102,000

(Capacity/Tons)

Bleached Kraft Pulp Mill

540,000

(Capacity/Tons)

Bleached Paperboard Mill

435,000

(Capacity/Tons)

Sawmill

205,000

(Capacity/MBF)

Cypress Bend, AR

Bleached Kraft Pulp Mill

305,000

(Capacity/Tons)

Bleached Paperboard Mill

330,000

(Capacity/Tons)

Las Vegas, NV

Tissue Mill

36,000

(Capacity/Tons)

Tissue Converting

50,000

(Capacity/Tons)

Elwood, IL

Tissue Converting

61,000

(Capacity/Tons)

5

High-Quality, Premium Products

Consumer Products Segment

•

Committed to maintaining high-quality products that match

the quality of leading national brands

•

Only U.S. consumer tissue producer that manufactures solely

private label tissue

$2,357

$2,242

$2,553

$2,673

2,000

2,500

3,000

2006

2007

2008

2009

Price

per

Ton

(Tissue)

¹

1

Converted short tons.

6

Clearwater Paper Business Overview

Facilities

Key Competitors

•

~1,050

Consumer Products Segment

Products

Capacity

(2009)

Utilization

(2009)

Key Customers

•

Bath Tissue

•

Household Towels

•

Napkins

•

Facial Tissue

•

2 Tissue Mills (Idaho & Nevada)

•

3 Tissue Converting Facilities

(Idaho, Illinois, Nevada)

•

Tissue Production: 225,000 tons

•

Tissue Conversion: 213,000 tons

•

Tissue Mills: 99%

•

Tissue Converting Facilities: 98%

•

“Big 3”

grocery store chains

(~60% of total segment sales in

2009)

•

Premier regional grocery store

chains

•

Procter & Gamble, Georgia Pacific,

Kimberly-Clark

Full-Time Employees

(2009)

7

Attractive Industry Characteristics -Tissue

30.5%

30.9%

17.8%

13.0%

14.4%

20.2%

Facial tissue

Bath tissue

Paper towels

2002

2009

103

105

109

114

120

124

127

132

134

135

139

130

100

117

1.0%

2.0%

2.6%

2.8%

3.8%

2.3%

1.5%

0.8%

3.8%

4.5%

4.3%

4.5%

3.8%

2.5%

60

80

100

120

140

160

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0%

1%

2%

3%

4%

5%

U.S. Tissue Demand (Indexed)¹

U.S. GDP % Change

Private

label

tissue

market

share

continues

to

grow

in

key

products

²

Attractive and stable segment of the paper market

Source:  RISI, IRI

1

Based on converted short tons.

2

Represents market share as a % of sales.

8

Premier U.S. Private

Label Tissue Producer

•

Produced approximately 56% of private

label tissue products sold in grocery stores

in the U.S. in 2009

•

Well positioned to benefit from value-

oriented customers shifting to private label

products

•

Customers include top three national

grocery chains

Away-

from

Home

33%

Grocery

Stores

45%

Non-

Grocery

55%

Branded

73%

Private

Label

27%

Other

44%

Clearwater

Paper

56%

2009 U.S. Tissue

Market

(7.9mm tons)

2009 U.S. At-Home

Tissue Market

2009 Grocery Store

Product Mix

2009 U.S. Private Label

Grocery Tissue

Suppliers

¹

Top U.S. Grocery Tissue Suppliers

2009

Market

Share

Procter and Gamble

26.0%

Kimberly-Clark

22.3%

Georgia Pacific

20.6%

Clearwater Paper

15.2%

All Other Private Label

11.8%

All Other Brands

4.1%

Source: IRI Infoscan, IRI Panel Projections from the Consumer Insights Builder and RISI, Tissue World Magazine, April/May 2010

1

Total Private Label tissue products sold in grocery stores in the United States in 2009.

At-Home

67%

Market Statistics:

-

Bathroom tissue & towels represent 86% of 2009 tissue opportunity at grocery

-

Bathroom tissue alone represents 54% of category

9

US Grocery Bathroom Tissue Market

Ultra segment has grown to 32% from 19% in last 3 years

Data Source:

IRI.  Infoscan

52 Weeks Ending 02/10/2010.

2006 Total U.S. Grocery

Bathroom Tissue Segment Share

2009 Total U.S. Grocery

Bathroom Tissue Segment Share

Through-Air-Dried (TAD) driving ultra segment changes

10

US Grocery Ultra Bathroom Tissue Market

32% Conventional

68% TAD

Data Source:

IRI.  Infoscan

52 Weeks Ending 02/10/2010.

20% Conventional

80% TAD

2006 Total US Grocery Ultra

Bathroom Tissue Share

2009 Total US Grocery Ultra

Bathroom Tissue Share

A/O Corp

1%

Clearwater Paper

(Conv)

11%

Cottonelle

(TAD)

17%

Quilted Northern

(Conv)

20%

Charmin Ultra (TAD)

51%

Charmin Ultra

Strong (TAD)

11%

Clearwater Paper

(Conv)

7%

Cottonelle

(TAD)

20%

Quilted Northern

(Conv)

13%

Charmin Ultra Soft

(TAD)

49%

11

Approximately $149mm of capital expenditures in Consumer Products business

between 2000 and 2009

State-of-the-Art Consumer

Products Converting Facilities

Nevada

•

TAD machine completed in 2004

•

Two new converting lines

•

Tonnage produced up 39% from 2004

to 2009

Illinois

•

Began converting operations in 2004

•

Added six converting lines since 2004

with facial line scheduled to start in 2010

•

Cases produced up 654% since 2004

•

Serves as point of access to customers

in the Midwestern and Eastern U.S.

Idaho

•

Provides Clearwater with secure

pulp supply and significant freight

and drying cost savings

•

Well maintained assets

$177

$209

$268

$666

150

200

250

300

350

400

450

500

550

600

650

700

2006

2007

2008

2009

EBITDA

per

Ton

(Tissue)

¹

,

²

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings. 

EBITDA, as we define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating

income (loss) plus depreciation.  See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

1

Converted short tons. 

2

Segment EBITDA divided by total tons shipped.

12

High-Quality, Premium Products

•

Focus on high-end paperboard products, such as

pharmaceuticals and cosmetics packaging

–

Superior print surfaces and cleanliness for

discriminating domestic and international

markets

–

Valued industry consulting

–

Effective logistics to meet just-in-time customer

needs

Pulp and Paperboard Segment

13

Clearwater Paper Business Overview

Facilities

Key Competitors

Pulp and Paperboard Segment

Products

Capacity

(2009)

Utilization

(2009)

Key Customers

Full-Time Employees

(2009)

•

Folding Carton and Plate

•

Liquid Packaging and Cup

•

Commercial Print

•

Pulp Sales

•

2 Pulp Mills (Arkansas & Idaho)

•

2 Bleached Paperboard Mills

(Arkansas & Idaho)

•

Pulp Production: 845,000 tons

•

Paperboard: 765,000 tons

•

Pulp Mills: 93%

•

Bleached Paperboard Mills: 96%

•

Specialty mid-size paperboard

converters

•

International customers

(~17% of total segment sales in

2009)

•

International Paper,

MeadWestvaco, Georgia Pacific,

Rock-Tenn

•

~1,050

14

Attractive Industry Characteristics –

Paperboard

71%

85%

0%

20%

40%

60%

80%

100%

1998

2009

Source:  RISI

1

Top 5 manufacturers in 1998 were International Paper, Westvaco, Temple-Inland, Georgia-Pacific, and Potlatch; Top 5 manufacturers in 2009 were International Paper, MeadWestvaco, Georgia-

Pacific, Clearwater Paper, and Evergreen Packaging.

2

Based on tons produced.

3

Average price per short ton of 16 pt SBS folding carton C1S.

2009 North American Bleached

Paperboard (SBS) Production

Pulp

and

Paperboard

¹

Capacity

Top 5 Manufacturers

109

108

97

102

101

106

108

108

100

100

100

108

103

105

99

$1,031

$880

$760

$810

$740

$713

$773

$728

$700

$727

$713

$772

$718

$861

$961

60

80

100

120

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

600

800

1,000

1,200

U.S. Bleached Paperboard Demand (Indexed)²

U.S. Bleached Paperboard Price ($/short ton)³

0

Stable demand for U.S. paperboard products

Georgia Pacific, 12%

Evergreen Packaging,

12%

Rock-Tenn, 5%

Tembec Paperboard,

3%

Weyerhaeuser, 5%

MeadWestvaco, 24%

International Paper,

25%

Smurfit Stone, 2%

Clearwater Paper, 12%

15

Strategically Positioned

Pulp & Paperboard Facilities

Facilities positioned to provide broad geographic

reach and cost-efficient transportation points

•

Idaho Mill

–

Reduced transportation

costs to Asia versus East

Coast competitors

–

One of two bleached

paperboard mills in

Western U.S.

–

418,000 tons of bleached

paperboard produced

in 2009

•

Arkansas Mill

–

Central location reduces freight

costs to Midwest and East Coast

–

Most recently built bleached

paperboard mill in North

America

–

317,000 tons of bleached

paperboard produced in 2009

2009 PPD Sales

•

Approximately $138mm of capital

expenditures in Pulp & Paperboard

business between 2000 and 2009

resulting in increased quality, capacity

and efficiency

North

America,

83%

Europe,

1%

Asia,

16%

16

Clearwater Paper Business Overview

Facilities

Key Competitors

Wood Products Segment

Products

Capacity

(2009)

Utilization

(2009)

Key Customers

Full-Time Employees

(2009)

•

Dimensional Framing

Lumber

•

Specialty Appearance

Grade Cedar

•

1 Sawmill (Idaho)

•

Sawmill: 205mm board ft

•

Sawmill: 83%

•

Builders & lumber brokers

•

Regional lumber mills

•

~300

17

Strategic

Growth Initiatives

Consumer Products Growth -

Current

Announced Tissue Converting Expansion

•

Build two converting lines for approximately $30 million

•

Expected to generate more than $10 million in EBITDA in

first year of operation

•

Construction expected to be completed in Q2 2011

•

Still finalizing site selection, but will be in the Southeast

•

Expected to serve existing and new customers with both conventional and TAD paper

•

Evaluated buy-build-partner-outsource; build expected to have the highest long-term returns 

•

Would increase company’s capacity and provide significant freight savings for East Coast customers

18

Consumer Products

Consumer Products Growth -

Future

19

Potential Paper Machine

•

Potential new paper machine would produce TAD paper

•

TAD ultra tissue products continue to take market share from the conventional ultra, premium and

economy/value segments

•

Will not be pursued unless expected returns significantly exceed our WACC of 9%-10%

•

Would take approximately 2 years to complete and would be expected to generate positive EBITDA by the

end of the first year of production

•

Expected to cost over $120 million (not including land and building costs)

•

High capacity machine that would produce over 70,000 tons annually

•

Would also drive need for 5 more converting lines costing roughly $40 million

•

Not yet approved by the Board of Directors

20

Financial Information

21

Financial Objectives

We intend to actively manage our business through the cycles

•

Employ effective capital spending for maximum shareholder returns

–

Closely control capital expenditures and allocate to high ROI projects

•

Maintain a prudent capital structure

–

Modest leverage through the cycles

•

Ensure ample, through-the-cycle liquidity with flexible, low-cost revolver

•

Generate cash flows to support growth and provide additional liquidity

•

Apply stringent cost discipline at corporate and mill level

22

Financial Track Record

$375

$445

$452

$525

$565

$617

$672

$633

$79

$63

$504

$554

$114

$107

$92

2005

2006

2007

2008

2009

U.S. $ in millions

EBITDA

Net

Sales

1

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings.  EBITDA, as we

define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating income (loss) plus depreciation. 

See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

1

Net Sales excludes intersegment net sales and transfers.

2

Excludes

$170.6

million

of

alternative

fuel

mixture

tax

credits

for

the

period

late

January

through

December

31,

2009.

3

EBITDA margin for total Clearwater Paper business.

$993

$1,117

$1,183

$1,255

$1,250

$23

$41

$34

$53

$138

$36

$62

$48

$77

$(12)

$(16)

$2

$9

13.9%

5.4%

6.0%

8.8%

9.0%

2005

2006

2007

2008

2009

$53

$101

$104

$75

5 Yr Average: $1,160mm

$174

2

CPD

PPD

WP

   Margin

3

$68²

5 Yr Average: $101mm

23

Conservative Capital Structure

U.S. $ in millions

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings.  EBITDA, as

we

define

it,

is

net

earnings

adjusted

for

net

interest

expense,

income

taxes,

debt

retirement

costs,

depreciation

and

amortization.

Segment

EBITDA

represents

operating

income

(loss)

plus

depreciation.  See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

1

Excludes accumulated other comprehensive loss

2

As

of

December

31,

2009,

Clearwater

Paper

is

eligible

to

borrow

under

the

credit

facility

at

LIBOR

plus

2.75%.

As of

December 31, 2009

% of

Capitalization

x EBITDA

for 2009

x EBITDA

5-Yr Average

Cash and Short-Term Investments

$190.8

New Debt Issuance

148.3

Total Debt

$148.3

23.2

%

0.9

x

1.5

x

Book

Value

of

Equity

1

$490.7

76.8

%

2.8

x

4.9

x

Total Capitalization

$639.0

100.0

%

3.7

x

6.3

x

Cash and Short-Term Investments

$190.8

Available

Revolver

Amount

2

$106.8

24

Strong Cash Flow Generation

U.S. $ in millions

1

2009 amount excludes $170.6 m of alternative fuel mixture tax credits

2

Cash

taxes

paid

amount

for

2006

–

2008

represent

tax

provision

amounts

as

specific

amount

are

not

available

due

to

taxes

being

handled

as

part

of

Potlatch’s

centralized

approach.

3

Cash Net Interest Expense amounts for 2006-2008 represent total net interest expense as specific amounts are not available due to Potlatch’s centralized approach.

4

See Appendix B for a reconciliation to Cash Flow items in accordance with GAAP.

5

See Appendix B for a reconciliation to Net Cash provided by Operating Activities in accordance with GAAP.

2006

2007

2008

2009

EBITDA (excluding alternative

fuel

mixture

tax

credits)

$100.6

$103.7

$75.4

$174.3

Capital Expenditures

(27.5)

(20.5)

(21.3)

(19.3)

Cash

Taxes

Paid

2

(12.4)

(14.1)

(5.6)

(41.3)

Cash

Net

Interest

Expense

3

(13.0)

(13.0)

(13.1)

(15.1)

Working

Capital

Dec

(Inc)

4

13.9

37.6

(21.2)

(99.6)

Other

Cash

Flow

Items

4

6.9

(5.8)

6.5

88.2

Free Cash Flow

5

$68.5

$87.9

$20.7

$87.2

1

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings.  EBITDA, as

we define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating income (loss) plus

depreciation. See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

25

Business Outlook

26

Business Outlook

•

Pricing environment for Consumer Products and Pulp & Paperboard Segments appears stable

relative to fourth quarter of 2009

•

Consumer

Products

and

Pulp

&

Paperboard

Segment

volumes

expected

to

be

steady

in

2010

•

Input costs expected to increase modestly for pulp and energy

•

Major maintenance expense of $20-25 million planned for 2010, with over 80% of this expense

coming in the first quarter

•

Capital expenditures expected to be $40-45 million in 2010, which includes $12 million from 2

new Southeast converting lines

•

Tax rate expected to be approximately 35% for 2010

27

Key Investment Highlights

•

Leading Producer in Attractive Market Segments

–

#1 producer in at-home private label grocery tissue

–

High-quality, premium products

–

Long-standing customer relationships

•

Attractive Growth Profile

–

Potentially attractive returns in TAD bath tissue projects

–

High returns expected from efficiency improvement capital expenditures

•

Conservative Financial Profile

–

Strong balance sheet

–

Substantial free cash flow generation

28

Experienced Management Team

Gordon Jones, CEO and Director

•

Over

25

years

of

experience

in

the

paper

industry

in

both

operational

and

financial

roles

•

Vice President of Potlatch in 2008

•

CEO and Director of Blue Ridge Paper Products from 1999-2000

•

Served

in

increasing

roles

for

Smurfit

Stone

and

its

predecessor

companies

from

1983

to

2000,

including

in various executive officer roles. 

•

Held

a

series

of

positions

with

Procter

&

Gamble

from

1976

to

1983

Linda Massman, CFO

•

Over 11 years of experience in the consumer products retailing industries

•

Vice President of Potlatch in 2008

•

Group Vice President, Finance and Corporate Planning, for SUPERVALU from 2002-2008

•

Strategy consultant with Accenture, Finance and Treasury at Ralphs Grocery Company and Bank of America

Robert DeVleming, Vice President of Consumer Products

•

Over

30

years

of

experience

in

the

paper

industry

in

operations,

sales

and

strategic

growth

•

Vice President of Consumer Products for Potlatch from 2004-2008

•

Vice President of Consumer Products Sales for Potlatch from 2003-2004

•

Vice

President,

Tissue

Expansion

and

led

the

Las

Vegas

TAD

paper

machine

and

converting

lines

Thomas Colgrove, Vice President of Pulp and Paperboard

•

Over 25 years of experience in the paper industry in operations

•

Senior

Director

–

North

America

Product

Supply

for

Kimberly

Clark

Corporation

•

Mill Manager of Kimberly Clark’s largest mill in North America from 2003 to 2006

•

Numerous positions throughout Kimberly Clark

29

Thank you.

30

Appendix A: Financial Detail

31

Income Statement

U.S. $ in millions

2005

2006

2007

2008

2009

Net Sales

$992.7

$1,116.9

$1,183.0

$1,255.3

$1,250.1

Costs & Expenses

Materials, Labor, & Other Operating Expenses

$950.9

$1,033.6

$1,083.8

$1,179.4

$1,052.2

Selling, General, & Administrative

44.1

45.5

46.8

47.4

71.1

Income from Canadian Lumber Settlement

-

8.5

-

-

-

Alternative fuel mixture tax credit

-

-

-

-

170.6

Earnings (Loss) Before Interest,

Debt Retirement Costs and Income Taxes

$(2.2)

$46.3

$52.4

$28.5

$297.4

Margin (%)

(0.2)%

4.1

%

4.4

%

2.3

%

23.8

%

Depreciation and Amortization

54.9

54.3

51.3

47.0

47.4

EBITDA

¹

$52.7

$100.6

$103.7

$75.4

$174.2

Margin (%)

5.3

%

9.0

%

8.8

%

6.0

%

13.9

%

Interest Expense

12.6

13.0

13.0

13.1

15.5

Debt Retirement Cost

-

-

-

-

6.2

Earnings Before Income Taxes

$(14.8)

$33.3

$39.4

$15.3

$275.7

Income Tax provision

(6.1)

12.4

14.1

5.6

93.2

Net Earnings

$(8.7)

$20.9

$25.3

$9.7

$182.5

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings. 

EBITDA, as we define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating

income (loss) plus depreciation.  See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

1

EBITDA for 2009 excludes $170.6m related to the alternative fuel mixture tax credit.

32

Balance Sheet

1

Includes Land, Pension Assets & Other Long-Term Assets.

2

Includes Non-Current Pension and OPEB and Other Long-Term Liabilities.

U.S. $ in millions

2006

2007

2008

2009

Assets

Current Assets

Cash & Short-term investments

$0.2

-

$14.0

$190.8

Net Receivables

114.0

95.2

104.0

94.5

Taxes receivable

-

-

-

101.3

Inventories

135.3

142.5

154.4

169.8

Prepaid Expenses

1.8

1.4

2.4

3.0

Deferred Taxes

8.2

8.6

14.8

12.9

$259.4

$247.7

$289.6

$572.3

Long-Term Assets

Net Plant & Equipment

437.0

408.3

385.1

359.3

Other

44.6

41.9

8.5

15.9

481.6

450.2

393.7

375.2

Total Assets

$741.0

$697.9

$683.3

$947.5

Liabilities

Current Liabilities

Notes Payable

-

-

$50.0

-

Note Payable to Potlatch

-

-

100.0

-

Accounts Payable & Accrued Liabilities

84.2

111.2

116.5

109.8

Other

8.3

8.0

9.1

9.9

Long Term Liabilities

Note Payable to Potlatch

100.0

100.0

-

-

Long Term Debt

-

-

-

148.3

Deferred Taxes

83.3

74.8

1.8

-

Other

Long

Term

Obligations

2

136.4

135.9

224.9

242.3

Accrued Taxes

-

-

-

73.5

Total Liabilities

$412.2

$429.9

$502.3

$583.8

Total Stockholders' Equity

$328.8

$268.0

$181.0

$363.7

Total Stockholders' Equity & Liabilities

$741.0

$698.0

$683.3

$947.5

1

33

Cash Flow Statement

Note: Other Cash Flow Items represents the sum of adjustments made to the following accounts in order to reconcile Net Earnings (Loss) to Net Operating Cash Flows:  Deferred Taxes, Equity-

Based

Compensation

Expense,

Employee

Benefit

Plans,

and

(Gain)

Loss

on

Disposal

of

Plant

and

Equipment.

Other

Cash

Flow

Items

is

not

required

by

or

presented

in

accordance

with

generally

accepted accounting principles in the United States (GAAP).

1

Includes

$170.6

million

of

alternative

fuel

mixture

tax

credits

for

the

period

late

January

through

December

31,

2009.

U.S. $ in millions

2005

2006

2007

2008

2009

Cash

Flow

From

Operations

Net earnings¹

$(8.7)

$20.9

$25.3

$9.7

$182.5

Depreciation and Amortization

54.9

54.3

51.3

47.0

47.4

Deferred Taxes

(5.6)

8.3

(8.1)

4.9

(4.6)

Working Capital Decrease / (Increase)

(5.1)

13.9

37.6

(21.2)

(99.6)

Other Cash Flow Items

2.6

(1.4)

2.3

1.6

99.1

Net Cash Provided by Operations

$38.0

$96.0

$108.5

$42.1

$224.8

Cash

Flows

From

Investing

Additions to Plant & Equipment

$(43.4)

$(27.5)

$(20.5)

$(21.3)

$(19.3)

Change in Short-Term Investments

-

-

-

(10.8)

(177.1)

Other, Net

0.1

0.1

-

0.6

-

Net Cash Used for Investing

$(43.4)

$(27.4)

$(20.5)

$(31.5)

$(196.4)

Cash

Flows

From

Financing

Net Payments to Potlatch

$4.6

$(68.8)

$(88.5)

$(79.9)

-

Change in Book Overdrafts

-

-

-

8.8

-

Net Proceeds from long-term debt

-

-

-

-

$38.9

Increase (decerase) in notes payable

-

-

-

50.0

(50.0)

Repayment to Potlatch

-

-

-

16.5

(16.5)

Deferred Loan Fees

-

-

-

(2.8)

(1.2)

Other, Net

0.5

0.3

0.3

(0.1)

-

Net Cash Provided by (Used for) Financing

$5.1

$(68.6)

$(88.2)

$(7.3)

$(28.8)

Change in Cash

$(0.2)

$0.0

$(0.2)

$3.2

$(0.4)

34

Segment Financials –

Consumer Products

•

Net sales increased by $49.4M, or 10%

and operating income grew $84.8M, or

227%, from 2008 to 2009, driven by higher

net selling prices and increased shipments

coupled with lower input costs.

-

Average net selling prices were 5%

higher in 2009 when compared to the

average in 2008

-

Shipment volumes were also 5%

higher compared to the same period in

2008, primarily due to higher

production

•

Operating costs decreased $35.3M

compared to 2008 and were primarily

attributable to lower costs for pulp, freight

and energy

Comments

U.S. $ in millions

2005

2006

2007

2008

2009 

Net Sales

Consumer Products

$375.3

$445.0

$452.0

$504.6

$554.0

Intersegment Net

Sales or Transfer

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

Total

$375.2

$444.9

$451.9

$504.5

$553.9

Operating Income

$7.5

$25.7

$17.6

$37.3

$122.1

Depreciation

15.6

15.8

16.3

15.7

16.0

EBITDA

$23.0

$41.5

$33.9

$53.0

$138.1

% Margin

6.1

%

9.3

%

7.5

%

10.5

%

24.9

%

Assets

285.5

269.2

256.5

252.0

256.9

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings. 

EBITDA, as we define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating

income (loss) plus depreciation.  See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

35

Segment Financials –

Pulp & Paperboard

Comments

•

Net sales decreased by $38.9M, or 6%, but

operating income grew $191.3M, for 2009

compared to 2008, driven primarily by

$170.6M of pre-tax income related to

alternative fuel mixture tax credits.

•

Paperboard net sales were 5% lower in

2009 compared to 2008.

-

Paperboard net sales prices were up 3%

-

Paperboard shipments were down 7%

•

Pulp net sales were $18.4M lower, or 20%,

due almost entirely to lower pricing.

•

Operating costs decreased $71.4M

compared to 2008 and were primarily

attributable to lower costs for wood fiber,

chemicals and energy

U.S. $ in millions

2005

2006

2007

2008

2009 

Net Sales

Paperboard

$503.4

$538.2

$569.4

$644.4

$612.8

Pulp

64.6

77.7

102.6

92.3

73.9

Other

0.9

1.1

1.1

0.8

0.1

Intersegment Net

Sales or Transfer

(43.7)

(52.1)

(55.8)

(65.3)

(53.4)

Total

$525.2

$565.0

$617.2

$672.3

$633.4

Operating Income  (Loss)

$(0.3)

$26.1

$45.1

$18.9

$210.2

Depreciation

36.4

35.5

32.4

28.9

28.0

EBITDA¹

$36.1

$61.6

$77.5

$47.8

$67.6

% Margin

6.9

%

10.9

%

12.5

%

7.1

%

10.7

%

Assets

406.1

383.6

363.6

362.0

335.2

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings.  EBITDA,

as we define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating income (loss) plus

depreciation.  See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

1

Excludes $170.6 million of alternative fuel mixture tax credits for the period late January through December 31, 2009. 

36

Segment Financials –

Wood Products

•

Net sales decreased $18.7M, or 21%,

from 2008 to 2009, due primarily to 23%

decrease in net selling prices

•

Expenses decreased by $14.8M due

largely to lower log costs and lower

overall costs associated with decreased

lumber shipments during 2009

•

The operating loss for the segment

increased $3.8M during 2009 when

compared to 2008 and was due to the

prolonged housing market downturn

Comments

U.S. $ in millions

2005

2006

2007

2008

2009 

Net Sales

Wood Products

$97.6

$113.3

$121.4

$89.0

$70.3

Intersegment Net

Sales or Transfer

(5.3)

(6.3)

(7.4)

(10.5)

(7.6)

Total

$92.3

$107.1

$113.9

$78.6

$62.7

Operating Income (Loss)

$(0.0)

$6.1

$(0.1)

$(14.5)

$(18.3)

Depreciation

2.5

2.5

2.2

2.0

1.9

EBITDA

$2.5

$8.6

$2.1

$(12.5)

$(16.4)

% Margin

2.7

%

8.1

%

1.8

%

NM

NM

Assets

34.9

38.7

53.7

63.0

51.6

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings. 

EBITDA, as we define it, is net earnings adjusted for net interest expense, income taxes, debt retirement costs, depreciation and amortization.  Segment EBITDA represents operating

income (loss) plus depreciation.  See Appendix B for a reconciliation to net earnings or segment operating income (loss) in accordance with GAAP.

37

Total Cost:

% of Total

Cost of Sales

2008

2009

Key Historical Cost Drivers

Key cost drivers are wood fiber, energy, transportation and maintenance

Wood

Fiber

Energy

Transportation

2007

Total Cost:

% of Total

Cost of Sales

Total Cost:

% of Total

Cost of Sales

$163 / ton

NA

$89.8

8%

$113.7

9%

$96.2

9%

$124.7

11%

$142.8

12%

$116.8

10%

NA

NA

$88.1

7%

$96.9

9%

$203 / ton

34%

$178 / ton

30%

Maintenance

& Repair

Total Cost:

% of Total

Cost of Sales

38

Appendix B:

US GAAP Reconciliation

39

Reconciliation of Non-GAAP to GAAP:

EBITDA

U.S. $ in millions

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings.  EBITDA, as

we

define

it,

is

net

earnings

adjusted

for

net

interest

expense,

income

taxes,

debt

retirement

costs,

depreciation

and

amortization.

Segment

EBITDA

represents

operating

income

(loss)

plus

depreciation.

1

Excludes

$170.6

million

of

alternative

fuel

mixture

tax

credits

for

the

period

late

January

through

December

31,

2009.

2005

2006

2007

2008

2009

Net Earnings (Loss)

$(8.7)

$20.9

$25.3

$9.7

$182.5

Debt Retirement Costs

-

-

-

-

$6.3

Income Tax Provision (Benefit)

(6.1)

12.4

14.1

5.6

93.2

Interest Expense

12.6

13.0

13.0

13.1

15.5

Earnings (Loss) Before Interest

and Income Taxes

(2.2)

46.3

52.4

28.5

297.5

Depreciation & Amortization

54.9

54.3

51.3

47.0

47.4

EBITDA (including alternative

fuel mixture tax credits)

$52.7

$100.6

$103.7

$75.4

$344.9

EBITDA, as Adjusted¹

$52.7

$100.6

$103.7

$75.4

$174.2

40

Reconciliation of Non-GAAP to GAAP:

EBITDA by Segment

U.S. $ in millions

Note: EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company.  The most direct comparable GAAP measure is net earnings.  EBITDA, as

we

define

it,

is

net

earnings

adjusted

for

net

interest

expense,

income

taxes,

debt

retirement

costs,

depreciation

and

amortization.

Segment

EBITDA

represents

operating

income

(loss)

plus

depreciation.

1

Excludes

$170.6

million

of

alternative

fuel

mixture

tax

credits

for

the

period

late

January

through

December

31,

2009.

Reconciliation

-

EBITDA

by

Segment

2005

2006

2007

2008

2009

Consumer Products

Operating Income

$7.5

$25.7

$17.6

$37.3

$122.1

Depreciation

15.6

15.8

16.3

15.7

16.0

EBITDA

$23.0

$41.5

$33.9

$53.0

$138.1

Pulp & Paperboard

Operating Income (Loss)¹

$(0.3)

$26.1

$45.1

$18.9

$39.6

Depreciation

36.4

35.5

32.4

28.9

28.0

EBITDA¹

$36.1

$61.6

$77.5

$47.8

$67.6

Wood Products

Operating Income (Loss)

$(0.0)

$6.1

$(0.1)

$(14.5)

$(18.3)

Depreciation

2.5

2.5

2.2

2.0

1.9

EBITDA

$2.5

$8.6

$2.1

$(12.5)

$(16.4)

41

Reconciliation of Non-GAAP to GAAP:

Free Cash Flow

U.S. $ in millions

1

2009

amount

excludes

$170.6

million

of

alternative

fuel

mixture

tax

credits

for

the

period

late

January

through

December

31,

2009.

2006

2007

2008

2009

Net Cash Provided by Operating

Activities¹

$96.0

$108.5

$42.1

$54.2

Capital Expenditures

(27.5)

(20.5)

(21.3)

(19.3)

Non-cash Net Interest Expense

0.4

Non-cash Tax Expense

51.9

Free Cash Flow

$68.5

$88.0

$20.8

$87.2

42

Reconciliation of Working Capital Dec (Inc)

U.S. $ in millions

2006

2007

2008

2009

Dec (Inc) in Receivables

$(21.2)

$18.8

$(8.8)

$9.5

Inc in Tax Receivables

-

-

-

$(101.3)

Dec (Inc) in Inventories

32.1

(8.5)

(14.0)

(16.8)

Dec (Inc) in Prepaid Expenses

(0.7)

0.4

(0.5)

0.1

Inc (Dec) in Taxes Payable

4.6

18.1

0.8

(0.8)

Inc (Dec) in Accounts Payable

and Accrued Liabilities

(0.8)

8.9

1.3

9.7

Working Capital Dec (Inc)

$13.9

$37.6

$(21.2)

$(99.6)

43

Reconciliation of Other Cash Flow Items

U.S. $ in millions

2006

2007

2008

2009

Equity-Based Compensation

Expense

$1.4

$3.3

$2.3

$3.0

Employee Benefit Plans

3.0

(1.0)

1.1

16.7

(Gain) Loss on Disposal of Plant

and Equipment

0.3

0.1

(0.2)

0.2

Increase in Other Assets

-

-

(1.6)

(0.5)

Funding of Qualified Pension

Plans

(6.1)

-

-

-

Excess Tax Benefit from Share-

based Payment Arrangements

-

-

-

(0.1)

Change in Non-current Accrued

Taxes

-

-

-

73.5

Change in Deferred Taxes

8.3

(8.1)

4.9

(4.6)

Other Cash Flow Items

$6.9

$(5.8)

$6.5

$88.2

44

Appendix C:

Customer Relationships

45

Long-Standing Customer Relationships

Consumer Products Segment

Top 10 Customers

Length of Customer

Relationship

Customer 1

25+

Customer 2

25+

Customer 3

12

Customer 4

25+

Customer 5

25+

Customer 6

25+

Customer 7

10

Customer 8

10

Customer 9

20

Customer 10

10

Average Length of Customer Relationships

19 Years

46

Long-Standing Customer Relationships

Pulp and Paperboard Segment

Top 10 Customers

Length of Customer

Relationship

Customer 1

10

Customer 2

26

Customer 3

20

Customer 4

37

Customer 5

37

Customer 6

41

Customer 7

21

Customer 8

26

Customer 9

21

Customer 10

11

Average Length of Customer Relationships

25 Years