Edgar Filing: Clearwater Paper Corp

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

CLW-2013.06.30-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2013



¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-34146

CLEARWATER PAPER CORPORATION

(Exact name of registrant as specified in its charter)




Delaware		20-3594554
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

601 West Riverside, Suite 1100 Spokane, Washington		99201
(Address of principal executive offices)		(Zip Code)

(509) 344-5900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of shares of common stock of the registrant outstanding as of July 24, 2013 was 21,989,483.

CLEARWATER PAPER CORPORATION

Index to Form 10-Q




		Page Number

PART I.	FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements

Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012		2

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2013 and 2012		3

Consolidated Balance Sheets at June 30, 2013 and December 31, 2012		4

Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012		5

Condensed Notes to Consolidated Financial Statements		6 - 20

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21 - 33

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	34

ITEM 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	35

ITEM 1A.	Risk Factors	35

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

ITEM 6.	Exhibits	36

SIGNATURES		37

EXHIBIT INDEX		38

Part I



ITEM 1.
Consolidated Financial Statements

Clearwater Paper Corporation

Consolidated Statements of Operations

Unaudited (Dollars in thousands - except per-share amounts)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Net sales	$	471,002		$	473,572		$	931,826		$	931,370
Costs and expenses:
Cost of sales	(414,521		)	(398,546		)	(828,730		)	(801,622		)
Selling, general and administrative expenses	(26,767		)	(30,529		)	(60,899		)	(59,603		)
Total operating costs and expenses	(441,288		)	(429,075		)	(889,629		)	(861,225		)
Income from operations	29,714			44,497			42,197			70,145
Interest expense, net	(11,094		)	(9,147		)	(22,076		)	(18,875		)
Debt retirement costs	—			—			(17,058		)	—
Earnings before income taxes	18,620			35,350			3,063			51,270
Income tax (provision) benefit	(6,962		)	(13,861		)	7,713			(26,055		)
Net earnings	$	11,658		$	21,489		$	10,776		$	25,215
Net earnings per common share:
Basic	$	0.52		$	0.92		$	0.48		$	1.08
Diluted	0.52			0.91			0.47			1.07

The accompanying condensed notes are an integral part of these consolidated financial statements.

Clearwater Paper Corporation

Consolidated Statements of Comprehensive Income

Unaudited (Dollars in thousands)



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2013		2012			2013			2012
Net earnings	$	11,658	$	21,489		$	10,776		$	25,215
Other comprehensive income:
Defined benefit pension and other postretirement employee benefits:
Prior service credit arising during the period, net of tax of $303, $ -, $303 and $ -	466		—			466			—
Amortization of actuarial loss included in net periodic cost, net of tax of $1,217, $1,095, $2,923 and $2,381	1,872		1,684			4,496			3,662
Amortization of prior service cost (credit) included in net periodic cost, net of tax of $75, $(289), $(32) and $(403)	113		(444		)	(50		)	(620		)
Other comprehensive income, net of tax	2,451		1,240			4,912			3,042
Comprehensive income	$	14,109	$	22,729		$	15,688		$	28,257

The accompanying condensed notes are an integral part of these consolidated financial statements.

Clearwater Paper Corporation

Consolidated Balance Sheets

Unaudited (Dollars in thousands – except per-share amounts)



	June 30, 2013			December 31, 2012
ASSETS
Current assets:
Cash	$	1,180		$	12,579
Restricted cash	1,500			—
Short-term investments	80,000			20,000
Receivables, net	169,397			154,143
Taxes receivable	8,910			20,828
Inventories	251,334			231,466
Deferred tax assets	23,976			17,136
Prepaid expenses	10,159			12,314
Total current assets	546,456			468,466
Property, plant and equipment, net	868,365			877,377
Goodwill	229,533			229,533
Intangible assets, net	44,156			47,753
Other assets, net	10,398			10,327
TOTAL ASSETS	$	1,698,908		$	1,633,456
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	158,390		$	165,596
Current liability for pensions and other postretirement employee benefits	9,137			9,137
Total current liabilities	167,527			174,733
Long-term debt	650,000			523,933
Liability for pensions and other postretirement employee benefits	196,581			204,163
Other long-term obligations	50,437			50,910
Accrued taxes	75,936			78,699
Deferred tax liabilities	60,774			60,124
Stockholders’ equity:
Preferred stock, par value $0.0001 per share, 5,000,000 authorized shares, no shares issued	—			—
Common stock, par value $0.0001 per share, 100,000,000 authorized shares, 23,934,427 and 23,840,683 shares issued	2			2
Additional paid-in capital	318,791			326,901
Retained earnings	370,460			359,684
Treasury stock, at cost, common shares-1,888,669 and 853,470 shares repurchased	(80,819		)	(30,000		)
Accumulated other comprehensive loss, net of tax	(110,781		)	(115,693		)
Total stockholders’ equity	497,653			540,894
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,698,908		$	1,633,456

The accompanying condensed notes are an integral part of these consolidated financial statements.

Clearwater Paper Corporation

Consolidated Statements of Cash Flows

Unaudited (Dollars in thousands)



	Six Months Ended
	June 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	10,776		$	25,215
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	45,404			39,278
Deferred tax (benefit) provision	(9,384		)	12,780
Equity-based compensation expense	5,581			3,631
Employee benefit plans	5,098			4,040
Deferred issuance costs and discounts on long-term debt	4,017			1,121
Disposal of plant and equipment, net	—			1,501
Changes in working capital, net	(43,805		)	22,621
Changes in taxes receivable, net	11,918			(3,813		)
Excess tax benefits from equity-based payment arrangements	—			(5,793		)
Changes in non-current accrued taxes, net	(2,763		)	3,526
Funding of qualified pension plans	(4,633		)	(15,525		)
Other, net	(237		)	(282		)
Net cash provided by operating activities	21,972			88,300
CASH FLOWS FROM INVESTING ACTIVITIES
Changes in short-term investments, net	(60,000		)	35,001
Additions to plant and equipment	(31,413		)	(100,919		)
Proceeds from sale of assets	—			1,035
Net cash used for investing activities	(91,413		)	(64,883		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt	275,000			—
Repayment of long-term debt	(150,000		)	—
Purchase of treasury stock	(59,984		)	(7,469		)
Payments for long-term debt issuance costs	(4,779		)	—
Payment of tax withholdings on equity-based payment arrangements	(2,195		)	(12,965		)
Excess tax benefits from equity-based payment arrangements	—			5,793
Net cash provided by (used for) financing activities	58,042			(14,641		)
(Decrease) increase in cash	(11,399		)	8,776
Cash at beginning of period	12,579			8,439
Cash at end of period	$	1,180		$	17,215

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized	$	16,326		$	16,454
Cash paid for income taxes	2,080			11,440
Cash received from income tax refunds	796			1,607
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES
Increase in accrued plant and equipment	$	7,269		$	2,284

The accompanying condensed notes are an integral part of these consolidated financial statements.

Clearwater Paper Corporation

Condensed Notes to Consolidated Financial Statements

Unaudited

NOTE 1 Nature of Operations and Basis of Presentation

GENERAL

Clearwater Paper Corporation is a leading North American producer of private label tissue and paperboard products. We manufacture quality consumer tissue, away-from-home tissue, parent rolls (non-converted tissue product), machine-glazed tissue, bleached paperboard and pulp at 15 manufacturing locations in the U.S. and Canada. Our private label consumer tissue products - facial and bath tissue, paper towels and napkins - are used primarily at-home and are principally sold to major retailers and wholesale distributors, which include grocery, drug, mass-merchant and discount stores. Our paperboard is sold primarily in the high-end segment of the packaging industry, which demands high-quality construction and print surfaces for graphics. Our products are made primarily from wood fiber pulp.

On March 6, 2013, we announced the planned permanent closure of our Thomaston, Georgia converting and distribution facility. The shutdown is occurring gradually as converting lines are being relocated and installed at our other facilities, with some operations at Thomaston continuing to run into the first quarter of 2014.

FINANCIAL STATEMENT PREPARATION AND PRESENTATION

The accompanying Consolidated Balance Sheets at June 30, 2013 and December 31, 2012, the related Consolidated Statements of Operations and Comprehensive Income for the three months and six months ended June 30, 2013 and 2012, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012, 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 statement 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, 2012, as filed with the Securities and Exchange Commission, or SEC, on February 22, 2013.

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 requiring the use of estimates and measurement of uncertainty include determination of net realizable value for deferred tax assets, uncertain tax positions, assessment of impairment of long-lived assets, goodwill and intangibles, assessment of environmental matters, equity-based compensation and pension and postretirement obligation assumptions. Actual results could differ from those estimates and assumptions.

SHORT-TERM INVESTMENTS AND RESTRICTED CASH

Our short-term investments are invested primarily in demand deposits, which have very short maturity periods, and therefore earn an interest rate commensurate with low-risk instruments. We do not attempt to hedge our exposure to interest rate risk for our short-term investments. Our restricted cash in which the underlying instrument has a term of greater than twelve months from the balance sheet date is classified as non-current and is included in “Other assets, net” on our Consolidated Balance Sheet. As of June 30, 2013, substantially all restricted cash balances were classified as current and included in "Restricted cash" on our Consolidated Balance Sheet, compared to approximately $1.5 million of restricted cash classified as non-current and included in "Other assets, net" as of December 31, 2012.

TRADE ACCOUNTS RECEIVABLE

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 June 30, 2013 and December 31, 2012, we had allowances for doubtful accounts of $1.7 million and $1.6 million, respectively.

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 $1,442.8 million and $1,401.4 million at June 30, 2013 and December 31, 2012, respectively.

We did not capitalize interest for the three months and six months ended June 30, 2013. For the three months and six months ended June 30, 2012, we capitalized $2.8 million and $4.9 million, respectively, of interest expense associated with our through-air-dried, or TAD, tissue expansion project, which includes the construction of our new tissue manufacturing and converting facilities in Shelby, North Carolina, and upgrades to our tissue manufacturing facility in Las Vegas, Nevada.

STOCKHOLDERS’ EQUITY

On January 17, 2013, we announced that our Board of Directors had approved a new stock repurchase program authorizing the repurchase of up to $100 million of our common stock. The share repurchases are authorized to be carried out by the utilization of a number of different methods, including but not limited to, open market purchases, accelerated share buybacks and negotiated block purchases, and are expected to be completed in 2013.

On March 1, 2013, we entered into an accelerated share buyback, or ASB, agreement with a major financial institution to repurchase an aggregate of $50 million of our outstanding common stock. The total aggregate number of shares to be repurchased pursuant to this agreement will be determined by reference to average stock prices, less a fixed discount, over the term of the agreement. The share repurchase agreement is expected to be completed no later than approximately nine months after execution. Under the ASB agreement, we received 826,617 shares of common stock during the first quarter of 2013, and as of June 30, 2013, these shares are held as treasury stock and included in our Consolidated Balance Sheet. A total of approximately $40.8 million of the $50 million paid to the financial institution was used in the repurchase of these shares, which represent approximately 80% of the total shares expected to be repurchased under the agreement. We will receive any remaining shares upon the completion of the ASB agreement. For accounting purposes, the ASB agreement is considered a treasury stock purchase and a derivative contract indexed to our outstanding common shares for the future settlement provision. The derivative contract is accounted for as an equity instrument and does not require hedge or derivative accounting treatment.

We have also repurchased 208,582 shares of our outstanding common stock on the open market as of June 30, 2013, of which 205,433 shares were repurchased during the second quarter at an average price of $47.80 per share. As of June 30, 2013, approximately $49 million of the authorized repurchase program remains, including $9.2 million of the $50 million already paid to the financial institution as part of the ASB agreement. We account for share repurchases under the program as treasury stock and record the amounts paid to repurchase shares at cost as a component of stockholders' equity. We have not retired any treasury shares and may choose to reissue shares held in treasury stock in a future period.

DERIVATIVES

We had no activity during the three months and six months ended June 30, 2013 and 2012 that required hedge or derivative accounting treatment. To help mitigate our exposure to market risk for changes in utility commodity pricing, from time to time we have used firm price contracts to supply a portion of the natural gas requirements for our manufacturing facilities. As of June 30, 2013, these contracts covered approximately 13% of our expected average monthly natural gas requirements for the remainder of 2013, plus lesser amounts for 2014. Historically, these contracts have qualified for treatment as “normal purchases or normal sales” under authoritative guidance and thus required no mark-to-market adjustment.

NOTE 2 Recently Adopted and New Accounting Standards

In February 2013, the Financial Accounting Standards Board issued Accounting Standard Update, or ASU, 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which expands the disclosure requirements for amounts reclassified out of accumulated other comprehensive income. This ASU requires an entity to present, either parenthetically on the face of the financial statements where net income is presented or in the notes to the financial statements, the effect of significant items reclassified in their entirety from accumulated other comprehensive income and identification of the respective line items effecting net income for instances when reclassification is required under GAAP. For items that are not required by GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures as required by GAAP. This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements and is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. We have adopted this ASU, which did not affect our Consolidated Financial Statements.

NOTE 3 Inventories

Inventories at the balance sheet dates consist of:



(In thousands)	June 30, 2013		December 31, 2012
Pulp, paperboard and tissue products	$	172,515	$	147,627
Materials and supplies	69,636		67,889
Logs, pulpwood, chips and sawdust	9,183		15,950
	$	251,334	$	231,466

Inventories are stated at the lower of market or cost using the average cost method. The last-in, first-out, or LIFO, method was previously used to determine cost of logs, wood fiber and the majority of lumber until the sale of our Lewiston, Idaho sawmill in November 2011. During the three months ended March 31, 2012, the remaining lumber inventory from the sawmill was sold. The sale of this inventory, which was valued at costs prevailing in prior years under the LIFO method, had the effect of increasing earnings in the period ended March 31, 2012 by an immaterial amount.

NOTE 4 Intangible Assets

Intangible assets at the balance sheet dates are comprised of the following:



	June 30, 2013
(Dollars in thousands, lives in years)	Useful Life	Historical Cost		Accumulated Amortization			Net Balance
Customer relationships	9.0	$	53,957	$	(14,235	)	$	39,722
Trade names and trademarks	10.0	5,300		(1,325		)	3,975
Non-compete agreements	2.5 - 5.0	1,674		(1,215		)	459
		$	60,931	$	(16,775	)	$	44,156

	December 31, 2012
(Dollars in thousands, lives in years)	Useful Life	Historical Cost		Accumulated Amortization			Net Balance
Customer relationships	9.0	$	53,957	$	(11,237	)	$	42,720
Trade names and trademarks	10.0	5,300		(1,060		)	4,240
Non-compete agreements	2.5 - 5.0	1,674		(881		)	793
		$	60,931	$	(13,178	)	$	47,753

NOTE 5 Income Taxes

Consistent with authoritative guidance, our estimated annual effective tax rate is used to allocate our expected annual income tax provision to interim periods. The rate is the ratio of our estimated annual income tax provision to our 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 provision 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 for the second quarter of 2013 was 38.1%, compared to 35.1% for the second quarter of 2012 due to reduced permanent tax benefits related to the domestic production activities deduction. We recorded income tax provision of $7.0 million for the three months ended June 30, 2013, and an income tax benefit of $7.7 million for the six months ended June 30, 2013, compared to tax provisions of $13.9 million and $26.1 million for the three and six months ended June 30, 2012, respectively. The actual effective tax rates for the three and six months ended June 30, 2013 were approximately 37.4% and (251.8)%, respectively, compared to rates of 39.2% and 50.8% for the same periods ending in 2012.

The net decrease to our tax provision and effective tax rate for the six months ended June 30, 2013 was primarily the result of a $9.8 million tax benefit related to our decision to reverse our conversion made in the first quarter of 2012 of certain gallons of fuel claimed as Cellulosic Biofuel Producer Credit, or CBPC, back to gallons claimed under the Alternative Fuel Mixture Tax Credit, or AFMTC. The gallons had been converted by us in 2010 to the CBPC and in 2012 were converted back to AFMTC.

The net discrete benefit for the six months ended June 30, 2013 of $9.0 million was comprised of a $5.6 million benefit relating to the conversion back to the CBPC and a resulting additional benefit of $4.2 million due to a decrease in our liabilities for uncertain tax positions. The remaining discrete provision of $0.8 million recorded in the six months ended June 30, 2013 was primarily an increase in interest accrued on uncertain tax positions.

The tax provision and effective tax rate for the six months ended June 30, 2012 were primarily the result of net discrete expense of $5.5 million resulting from our decision to convert certain gallons of alternative fuel originally claimed in 2009 under the AFMTC, which had been converted by us in 2010 to the CBPC, back to gallons under the AFMTC. The $5.5 million is comprised of $2.5 million relating to the conversion back to the AFMTC and a resulting additional $3.0 million increase in our liabilities for uncertain tax positions. The remaining discrete expense of $2.6 million recorded in the six months ended June 30, 2012 was primarily interest accrued on uncertain tax positions.

During the fourth quarter of 2012, the IRS commenced an audit of our tax returns for the tax years ending December 31, 2008 through December 31, 2012. The audit is ongoing, with no defined conclusion date as of June 30, 2013.

NOTE 6 Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at the balance sheet dates consist of:



(In thousands)	June 30, 2013		December 31, 2012
Trade accounts payable	$	79,662	$	75,949
Accrued wages, salaries and employee benefits	36,072		42,491
Accrued interest	9,973		5,242
Accrued utilities	7,073		8,205
Accrued discounts and allowances	6,716		4,785
Accrued taxes other than income taxes payable	6,365		6,993
Accrued transportation	3,352		4,417
Other	9,177		17,514
	$	158,390	$	165,596

NOTE 7 Debt

$375 MILLION SENIOR NOTES DUE 2018

On October 22, 2010, we sold $375 million aggregate principal amount of senior notes, which we refer to as the 2010 Notes. The 2010 Notes mature on November 1, 2018, have an interest rate of 7.125% and were issued at their face value. The issuance of these notes generated net proceeds of $367.5 million after deducting offering expenses.

The 2010 Notes are guaranteed by all of our direct and indirect domestic subsidiaries. The 2010 Notes will also be guaranteed by each of our future direct and indirect domestic subsidiaries that we do not designate as an unrestricted subsidiary under the indenture governing the 2010 Notes. The 2010 Notes are equal in right of payment with all other existing and future unsecured senior indebtedness and are senior in right of payment to any future subordinated indebtedness. The 2010 Notes are effectively subordinated to all of our existing and future secured indebtedness, including borrowings under our secured revolving credit facility, which is secured by certain of our accounts receivable, inventory and cash. The terms of the 2010 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.

Prior to November 1, 2013, we may redeem up to 35% of the 2010 Notes at a redemption price equal to 107.125% of the principal amount plus accrued and unpaid interest with the proceeds from one or more qualified equity offerings. We have the option to redeem all or a portion of the 2010 Notes at any time before November 1, 2014 at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest and a “make whole” premium. On or after November 1, 2014, we may redeem all or a

portion of the 2010 Notes at specified redemption prices plus accrued and unpaid interest. In addition, we may be required to make an offer to purchase the 2010 Notes upon the sale of certain assets and upon a change of control.

REDEMPTION OF $150 MILLION SENIOR NOTES DUE 2016 AND ISSUANCE OF $275 MILLION SENIOR NOTES DUE 2023

In June 2009, we issued senior unsecured notes, which we refer to as the 2009 Notes, in the aggregate principal amount of $150 million. The 2009 Notes were due on June 15, 2016 and had an interest rate of 10.625%. The 2009 Notes were issued at a price equal to 98.792% of their face value.

We had the option to redeem all or a portion of the 2009 Notes at any time prior to June 15, 2013 at a redemption price equal to 100% of the principal amount thereof plus a “make whole” premium and accrued and unpaid interest. On February 22, 2013, we exercised our option to redeem all of the 2009 Notes at a redemption price equal to approximately $166 million, which consisted of 100% of the principal amount, plus a $12.6 million “make whole” premium and accrued and unpaid interest of approximately $3.0 million. The make whole premium and a portion of the unpaid interest, as well as an unamortized discount and deferred issuance costs associated with the 2009 Notes, were recorded as components of the debt retirement costs totaling $17.1 million in the first quarter of 2013, as included in the accompanying Consolidated Statement of Operations. Proceeds to fund the redemption of the 2009 Notes were made available through the sale of $275 million aggregate principal amount of senior notes on January 23, 2013, which we refer to as the 2013 Notes. The 2013 Notes mature on February 1, 2023, have an interest rate of 4.5% and were issued at their face value. The issuance of these notes generated net proceeds of approximately $271 million after deducting offering expenses.

The 2013 Notes are guaranteed by our existing and future direct and indirect domestic subsidiaries. The 2013 Notes will also be guaranteed by each of our future direct and indirect domestic subsidiaries that we do not designate as an unrestricted subsidiary under the indenture governing the 2013 Notes. The 2013 Notes are equal in right of payment with all other existing and future unsecured senior indebtedness and are senior in right of payment to any future subordinated indebtedness. The 2013 Notes are effectively subordinated to all of our existing and future secured indebtedness, including borrowings under our secured revolving credit facility, which is secured by certain of our accounts receivable, inventory and cash. 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.

Prior to February 1, 2016, we may redeem up to 35% of the 2013 Notes at a redemption price equal to 104.5% of the principal amount plus accrued and unpaid interest with the proceeds from one or more qualified equity offerings. We have the option to redeem all or a portion of the 2013 Notes at any time before February 1, 2018 at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest and a “make whole” premium. On or after February 1, 2018, we may redeem all or a portion of the 2013 Notes at specified redemption prices plus accrued and unpaid interest. In addition, we may be required to make an offer to purchase the 2013 Notes upon the sale of certain assets and upon a change of control.

REVOLVING CREDIT FACILITY

On November 26, 2008, we entered into a $125 million senior secured revolving credit facility with certain financial institutions. The amount available to us under the revolving credit facility is based on the lesser of 85% of our eligible accounts receivable plus approximately 65% of our eligible inventory, or $125 million. The revolving credit facility has been subsequently amended and expires on September 30, 2016.

As of June 30, 2013, there were no borrowings outstanding under the credit facility, but approximately $6.6 million of the credit facility was being used to support outstanding standby letters of credit. Loans under the credit facility bear interest (i) for LIBOR loans, LIBOR plus between 1.75% and 2.25% and (ii) for base rate loans, a per annum rate equal to the greater of (a) the prime rate for such day; (b) the federal funds effective rate for such day, plus 0.50%; or (c) LIBOR for a 30-day interest period as determined on such day, plus between 1.25% and 1.75%. The percentage margin on all loans is based on our fixed charge coverage ratio for the most recent four quarters. As of June 30, 2013, we would have been permitted to draw approximately $118.4 million under the credit facility at LIBOR plus 1.75%, or base rate plus 1.25%.

A minimum fixed charge coverage ratio is the only financial covenant requirement under our credit facility and is triggered when there are any commitments or obligations outstanding and availability falls below 12.5% or an event of default exists, at which time the minimum fixed charge coverage ratio must be at least 1.0-to-1.0. As of June 30, 2013, the fixed charge coverage ratio for the most recent four quarters was 3.7-to-1.0.

Our obligations under the revolving credit facility are secured by certain of our accounts receivable, inventory and cash. The terms of the credit facility contain various provisions that limit our discretion in the operations of our business by restricting our ability to, among other things, pay dividends; redeem or repurchase capital stock; create, incur or guarantee certain debt; incur liens on certain properties; make capital expenditures; enter into certain affiliate transactions; enter into certain hedging arrangements; and consolidate with or merge with another entity. The revolving credit facility contains usual and customary affirmative and negative covenants and usual and customary events of default.

NOTE 8 Other Long-Term Obligations

Other long-term obligations at the balance sheet dates consist of:



(In thousands)	June 30, 2013		December 31, 2012
Long-term lease obligations, net of current portion	$	25,046	$	25,240
Director and other deferred compensation	12,313		9,939
Deferred proceeds	10,642		11,668
Other	2,436		4,063
	$	50,437	$	50,910

NOTE 9 Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of tax, at the balance sheet dates is comprised of the following:



(In thousands)	Foreign Currency Translation Adjustments¹			Pension and Other Post Retirement Employee Benefit Plans Adjustments			Total
Balance at December 31, 2012	$	(874	)	$	(114,819	)	$	(115,693	)
Other comprehensive income, net of tax²	—			4,912			4,912
Balance at June 30, 2013	$	(874	)	$	(109,907	)	$	(110,781	)


¹	This balance consists of unrealized foreign currency translation adjustments related to the operations of our Canadian subsidiary before its functional currency was changed from Canadian dollars to U.S. dollars in 2012.

Net periodic costs associated with our pension and other postretirement employee benefit, or OPEB, plans included in other comprehensive income and reclassified from accumulated other comprehensive loss includes $7.4 million of actuarial loss amortization and $0.7 million related to prior service credit, net of tax of $3.2 million. These accumulated other comprehensive loss components are included in the computation of net periodic pension and OPEB costs in Note 10, “Pension and Other Postretirement Employee Benefit Plans.”

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 OPEB plans for the periods presented:



	Three Months Ended June 30,
(In thousands)	2013			2012			2013			2012
	Pension Benefit Plans						Other Postretirement Employee Benefit Plans
Service cost	$	384		$	642		$	70		$	145
Interest cost	3,329			3,684			1,047			1,274
Expected return on plan assets	(4,608		)	(4,943		)	—			—
Amortization of prior service cost (credit)	58			158			130			(891		)
Amortization of actuarial loss (gains)	3,545			3,095			(456		)	(316		)
Curtailments	769			—			—			—
Net periodic cost	$	3,477		$	2,636		$	791		$	212



	Six Months Ended June 30,
(In thousands)	2013			2012			2013			2012
	Pension Benefit Plans						Other Postretirement Employee Benefit Plans
Service cost	$	869		$	1,242		$	276		$	347
Interest cost	6,688			7,347			2,365			2,907
Expected return on plan assets	(9,176		)	(9,843		)	—			—
Amortization of prior service cost (credit)	169			317			(251		)	(1,340		)
Amortization of actuarial loss	7,419			6,043			—			—
Curtailments	769			—			—			—
Net periodic cost	$	6,738		$	5,106		$	2,390		$	1,914

As discussed in the notes to our Consolidated Financial Statements in our 2012 Form 10-K, our company-sponsored defined benefit pension plans were underfunded by $78.7 million at December 31, 2012. As a result of being underfunded, we are required to make contributions to our qualified pension plans. During the six months ended June 30, 2013, we contributed $4.6 million to these pension plans. In July 2013 we contributed an additional $5.2 million and expect to contribute an additional $7 million in the remainder of 2013.

During the six months ended June 30, 2013, we made contributions of approximately $0.1 million to our company-sponsored non-qualified pension plan, and we estimate contributions will total approximately $0.3 million in 2013. We do not anticipate funding our OPEB plans in 2013 except to pay benefit costs as incurred during the year by plan participants.

During the three and six months ended June 30, 2013, $3.4 million and $7.5 million, respectively, of net periodic pension and OPEB costs were charged to cost of sales, and $0.8 million and $1.6 million, respectively, were charged to selling, general and administrative expenses in the accompanying Consolidated Statements of Operations

During the second quarter of 2013, we recorded a curtailment loss of $0.8 million in net periodic cost, and a corresponding change in other comprehensive income, net of tax, due to the freezing of pension benefits for certain employees at our Lewiston, Idaho Pulp and Paperboard facility, effective June 30, 2013.

NOTE 11 Earnings per Common 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 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 June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Basic average common shares outstanding¹	22,279,056		23,459,784		22,574,300		23,325,406
Incremental shares due to:
Restricted stock units	61,192		40,522		53,208		37,802
Performance shares	217,602		196,938		205,927		184,608
Diluted average common shares outstanding	22,557,850		23,697,244		22,833,435		23,547,816

Basic net earnings per common share	$	0.52	$	0.92	$	0.48	$	1.08
Diluted net earnings per common share	0.52		0.91		0.47		1.07

Anti-dilutive shares excluded from calculation	36,212		199,859		150,492		203,159


¹	Basic average common shares outstanding include restricted stock awards that are fully vested, but are deferred for future issuance.

We evaluated the derivative contracts associated with the ASB agreement discussed in Note 1, "Nature of Operations and Basis of Presentation," which could result in the issuance of shares to the engaged financial institution at the settlement date, and determined there was no impact on earnings per share for the three and six months ended June 30, 2013.

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 and performance shares, based on estimated fair values.

EMPLOYEE AWARDS

Employee equity-based compensation expense was recognized as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2013		2012		2013		2012
Restricted stock units	$	489	$	240	$	864	$	396
Performance shares	1,449		1,984		2,387		3,331
Total employee equity-based compensation	$	1,938	$	2,224	$	3,251	$	3,727

As provided for in the Clearwater Paper Corporation 2008 Stock Incentive Plan, the performance measure used to determine the number of performance shares ultimately issued is a comparison of the percentile ranking of our total stockholder return compared to the total stockholder return of a selected peer group. The number of shares actually issued, as a percentage of the amount subject to the performance share award, could range from 0%-200%. On December 31, 2012, the service and performance period for 138,226 outstanding performance shares granted in 2010 ended. Those performance shares were settled and distributed in the first quarter of 2013. The number of shares actually settled, as a percentage of the outstanding amount, was 101.4%. After adjusting for the related minimum tax withholdings, a net 93,744 shares were issued in the first quarter of 2013. The related minimum tax withholdings payment made in the first quarter of 2013 in connection with issued shares was $2.2 million. Subsequent to the first quarter of 2013, no performance shares or restricted stock units have fully vested, and no related minimum tax withholding payments have been made.

The following table summarizes the number of share-based awards granted under our 2008 Stock Incentive Plan during the six months ended June 30, 2013 and the grant-date fair value of the awards:

DIRECTOR AWARDS

Each year, 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 a benefit from director equity-based compensation of $1.1 million for the three months ended June 30, 2013, compared to equity-based compensation expense of $0.3 million for the same period in 2012. For the six months ended June 30, 2013 and 2012 we recorded director equity-based compensation expense of $2.3 million and a benefit from director equity-based compensation of $0.1 million, respectively. At June 30, 2013 and December 31, 2012, the liability amounts associated with director equity-based compensation included in "Other long-term obligations" on the accompanying Consolidated Balance Sheets were $11.4 million and $9.1 million, respectively.

NOTE 13 Fair Value Measurements

The estimated fair values of our financial instruments at the dates presented below are as follows:



	June 30, 2013				December 31, 2012
	Carrying		Fair		Carrying		Fair
(In thousands)	Amount		Value		Amount		Value
Cash, restricted cash and short-term investments (Level 1)	$	82,711	$	82,711	$	34,079	$	34,079
Long-term debt (Level 1)	650,000		663,500		523,933		572,625

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, 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.

NOTE 14 Segment Information

The table below presents information about our reportable segments:



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2013			2012			2013			2012
Segment net sales:
Consumer Products	$	289,708		$	283,122		$	574,610		$	560,952
Pulp and Paperboard¹	181,294			190,450			357,216			370,418
Total segment net sales	$	471,002		$	473,572		$	931,826		$	931,370

Operating income:
Consumer Products	$	14,815		$	25,696		$	24,939		$	51,967
Pulp and Paperboard¹	24,772			32,001			42,325			43,659
	39,587			57,697			67,264			95,626
Corporate	(9,873		)	(13,200		)	(25,067		)	(25,481		)
Income from operations	$	29,714		$	44,497		$	42,197		$	70,145

Depreciation and amortization:
Consumer Products	$	17,030		$	13,252		$	33,122		$	26,417
Pulp and Paperboard	5,778			6,011			11,437			12,022
Corporate	445			467			845			839
Total depreciation and amortization	$	23,253		$	19,730		$	45,404		$	39,278


¹	Results for Pulp and Paperboard for the six months ended June 30, 2012 include income and expenses associated with the November 2011 sale of the Lewiston, Idaho sawmill, the effects of which were immaterial in the aggregate.

NOTE 15 Supplemental Guarantor Financial Information

All of our 100% owned, domestic subsidiaries guarantee the 2013 Notes and the 2010 Notes on a joint and several basis. As of June 30, 2013, the 2013 Notes and 2010 Notes were not guaranteed by Interlake Acquisition Corporation Limited, a foreign subsidiary. There are no significant restrictions on the ability of the guarantor subsidiaries to make distributions to Clearwater Paper, the issuer of the 2013 Notes and 2010 Notes. The following tables present the results of operations, financial position and cash flows of Clearwater Paper and its subsidiaries, the guarantor and non-guarantor entities, 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 (Loss)

Three Months Ended June 30, 2013



				Guarantor			Non-Guarantor
(In thousands)	Issuer			Subsidiaries			Subsidiary			Eliminations			Total
Net sales	$	348,075		$	120,636		$	7,286		$	(4,995	)	$	471,002
Cost and expenses:
Cost of sales	(295,589		)	(117,418		)	(6,509		)	4,995			(414,521		)
Selling, general and administrative expenses	(20,542		)	(5,734		)	(491		)	—			(26,767		)
Total operating costs and expenses	(316,131		)	(123,152		)	(7,000		)	4,995			(441,288		)
Income (loss) from operations	31,944			(2,516		)	286			—			29,714
Interest expense, net	(11,094		)	—			—			—			(11,094		)
Earnings (loss) before income taxes	20,850			(2,516		)	286			—			18,620
Income tax (provision) benefit	(9,187		)	5,279			1			(3,055		)	(6,962		)
Equity in income of subsidiary	3,050			287			—			(3,337		)	—
Net earnings	$	14,713		$	3,050		$	287		$	(6,392	)	$	11,658
Other comprehensive income, net of tax	2,451			—			—			—			2,451
Comprehensive income	$	17,164		$	3,050		$	287		$	(6,392	)	$	14,109

Clearwater Paper Corporation

Consolidating Statement of Operations and Comprehensive Income (Loss)

Six Months Ended June 30, 2013



				Guarantor			Non-Guarantor
(In thousands)	Issuer			Subsidiaries			Subsidiaries			Eliminations			Total
Net sales	$	692,323		$	235,352		$	14,141		$	(9,990	)	$	931,826
Cost and expenses:
Cost of sales	(597,940		)	(228,075		)	(12,705		)	9,990			(828,730		)
Selling, general and administrative expenses	(48,450		)	(11,468		)	(981		)	—			(60,899		)
Total operating costs and expenses	(646,390		)	(239,543		)	(13,686		)	9,990			(889,629		)
Income (loss) from operations	45,933			(4,191		)	455			—			42,197
Interest expense, net	(22,076		)	—			—			—			(22,076		)
Debt retirement costs	(17,058		)	—			—			—			(17,058		)
Earnings (loss) before income taxes	6,799			(4,191		)	455			—			3,063
Income tax benefit (provision)	5,155			6,492			(34		)	(3,900		)	7,713
Equity in income of subsidiary	2,722			421			—			(3,143		)	—
Net earnings	$	14,676		$	2,722		$	421		$	(7,043	)	$	10,776
Other comprehensive income, net of tax	4,912			—			—			—			4,912
Comprehensive income	$	19,588		$	2,722		$	421		$	(7,043	)	$	15,688

Clearwater Paper Corporation

Consolidating Statement of Operations and Comprehensive Income (Loss)

Three Months Ended June 30, 2012



				Guarantor			Non-Guarantor
(In thousands)	Issuer			Subsidiaries			Subsidiary			Eliminations			Total
Net sales	$	345,498		$	126,775		$	6,293		$	(4,994	)	$	473,572
Cost and expenses:
Cost of sales	(281,432		)	(116,426		)	(5,682		)	4,994			(398,546		)
Selling, general and administrative expenses	(24,472		)	(5,566		)	(491		)	—			(30,529		)
Total operating costs and expenses	(305,904		)	(121,992		)	(6,173		)	4,994			(429,075		)
Income from operations	39,594			4,783			120			—			44,497
Interest expense, net	(9,147		)	—			—			—			(9,147		)
Earnings before income taxes	30,447			4,783			120			—			35,350
Income tax provision	(7,266		)	(3,378		)	(309		)	(2,908		)	(13,861		)
Equity in income (loss) of subsidiary	1,216			(189		)	—			(1,027		)	—
Net earnings	$	24,397		$	1,216		$	(189	)	$	(3,935	)	$	21,489
Other comprehensive income, net of tax	1,240			—			—			—			1,240
Comprehensive income (loss)	$	25,637		$	1,216		$	(189	)	$	(3,935	)	$	22,729

Clearwater Paper Corporation

Consolidating Statement of Operations and Comprehensive Income (Loss)

Six Months Ended June 30, 2012



				Guarantor			Non-Guarantor
(In thousands)	Issuer			Subsidiaries			Subsidiaries			Eliminations			Total
Net sales	$	684,445		$	243,609		$	13,304		$	(9,988	)	$	931,370
Cost and expenses:
Cost of sales	(576,942		)	(222,729		)	(11,939		)	9,988			(801,622		)
Selling, general and administrative expenses	(47,489		)	(11,133		)	(981		)	—			(59,603		)
Total operating costs and expenses	(624,431		)	(233,862		)	(12,920		)	9,988			(861,225		)
Income from operations	60,014			9,747			384			—			70,145
Interest expense, net	(18,875		)	—			—			—			(18,875		)
Earnings before income taxes	41,139			9,747			384			—			51,270
Income tax provision	(16,638		)	(5,122		)	(402		)	(3,893		)	(26,055		)
Equity in (loss) income of subsidiary	4,607			(18		)	—			(4,589		)	—
Net earnings	$	29,108		$	4,607		$	(18	)	$	(8,482	)	$	25,215
Other comprehensive income, net of tax	3,042			—			—			—			3,042
Comprehensive income (loss)	$	32,150		$	4,607		$	(18	)	$	(8,482	)	$	28,257

Clearwater Paper Corporation

Consolidating Balance Sheet

At June 30, 2013



(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations			Total
ASSETS
Current assets:
Cash	$	(684	)	$	1		$	1,863		$	—		$	1,180
Restricted cash	1,500			—			—			—			1,500
Short-term investments	80,000			—			—			—			80,000
Receivables, net	119,875			44,394			5,384			(256		)	169,397
Taxes receivable	11,442			995			121			(3,648		)	8,910
Inventories	187,667			57,646			6,021			—			251,334
Deferred tax assets	15,035			9,193			—			(252		)	23,976
Prepaid expenses	9,457			608			94			—			10,159
Total current assets	424,292			112,837			13,483			(4,156		)	546,456
Property, plant and equipment, net	615,117			236,621			16,627			—			868,365
Goodwill	229,533			—			—			—			229,533
Intangible assets, net	—			42,889			1,267			—			44,156
Intercompany receivable (payable)	67,023			(57,796		)	(13,127		)	3,900			—
Investment in subsidiary	252,153			10,476			—			(262,629		)	—
Other assets, net	9,865			533			—			—			10,398
TOTAL ASSETS	$	1,597,983		$	345,560		$	18,250		$	(262,885	)	$	1,698,908
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	122,843		$	30,418		$	5,385		$	(256	)	$	158,390
Current liability for pensions and other postretirement employee benefits	9,137			—			—			—			9,137
Total current liabilities	131,980			30,418			5,385			(256		)	167,527
Long-term debt	650,000			—			—			—			650,000
Liability for pensions and other postretirement employee benefits	196,581			—			—			—			196,581
Other long-term obligations	50,215			222			—			—			50,437
Accrued taxes	73,842			1,781			313			—			75,936
Deferred tax liabilities (assets)	(2,288		)	60,986			2,076			—			60,774
Accumulated other comprehensive loss, net of tax	(110,781		)	—			—			—			(110,781		)
Stockholders’ equity excluding accumulated other comprehensive loss	608,434			252,153			10,476			(262,629		)	608,434
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,597,983		$	345,560		$	18,250		$	(262,885	)	$	1,698,908

Clearwater Paper Corporation

Consolidating Balance Sheet

At December 31, 2012



(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations			Total
ASSETS
Current assets:
Cash	$	11,105		$	5		$	1,469		$	—		$	12,579
Short-term investments	20,000			—			—			—			20,000
Receivables, net	109,129			41,431			5,612			(2,029		)	154,143
Taxes receivable	20,712			116			—			—			20,828
Inventories	163,422			63,476			4,568			—			231,466
Deferred tax assets	11,750			4,595			—			791			17,136
Prepaid expenses	11,441			708			165			—			12,314
Total current assets	347,559			110,331			11,814			(1,238		)	468,466
Property, plant and equipment, net	618,076			242,818			16,483			—			877,377
Goodwill	229,533			—			—			—			229,533
Intangible assets, net	—			46,379			1,374			—			47,753
Intercompany receivable (payable)	68,951			(56,153		)	(12,007		)	(791		)	—
Investment in subsidiary	249,010			10,055			—			(259,065		)	—
Other assets, net	9,948			379			—			—			10,327
TOTAL ASSETS	$	1,523,077		$	353,809		$	17,664		$	(261,094	)	$	1,633,456
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	132,360		$	30,630		$	4,635		$	(2,029	)	$	165,596
Current liability for pensions and other postretirement employee benefits	9,137			—			—			—			9,137
Total current liabilities	141,497			30,630			4,635			(2,029		)	174,733
Long-term debt	523,933			—			—			—			523,933
Liability for pensions and other postretirement employee benefits	204,163			—			—			—			204,163
Other long-term obligations	49,102			1,808			—			—			50,910
Accrued taxes	76,617			1,771			311			—			78,699
Deferred tax liabilities (assets)	(13,129		)	70,590			2,663			—			60,124
Accumulated other comprehensive loss, net of tax	(115,693		)	—			—			—			(115,693		)
Stockholders’ equity excluding accumulated other comprehensive loss	656,587			249,010			10,055			(259,065		)	656,587
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,523,077		$	353,809		$	17,664		$	(261,094	)	$	1,633,456

Clearwater Paper Corporation

Consolidating Statement of Cash Flows

Six Months Ended June 30, 2013



(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiary			Eliminations			Total
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	14,676		$	2,722		$	421		$	(7,043	)	$	10,776
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	27,153			17,144			1,107			—			45,404
Deferred tax provision (benefit)	4,362			(14,202		)	(587		)	1,043			(9,384		)
Equity-based compensation expense	5,581			—			—			—			5,581
Employee benefit plans	5,098			—			—			—			5,098
Deferred issuance costs and discounts on long-term debt	4,017			—			—			—			4,017
Changes in working capital, net	(43,863		)	392			(334		)	—			(43,805		)
Changes in taxes receivable, net	9,270			(879		)	(121		)	3,648			11,918
Changes in non-current accrued taxes, net	(2,775		)	10			2			—			(2,763		)
Funding of qualified pension plans	(4,633		)