CLW-2012.09.30-10Q
Table of Contents

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 September 30, 2012
or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number: 001-34146
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.
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
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 October 24, 2012 was 23,203,668.


Table of Contents

CLEARWATER PAPER CORPORATION
Index to Form 10-Q
 
 
 
 
 
 
Page Number
 
 
 
PART I.
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
6 - 20
 
 
 
ITEM 2.
21 - 31
 
 
 
ITEM 3.
31 - 32
 
 
 
ITEM 4.
 
 
 
PART II.
 
 
 
 
ITEM 1.
32 - 33
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 6.
 
 
 
 

1

Table of Contents

Part I
ITEM 1.
 
Condensed Consolidated Financial Statements
Clearwater Paper Corporation
Condensed Consolidated Statements of Operations
Unaudited (Dollars in thousands - except per-share amounts)
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Net sales
$
480,233

 
$
501,125

 
$
1,411,603

 
$
1,461,582

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
(409,822
)
 
(448,927
)
 
(1,211,444
)
 
(1,297,205
)
Selling, general and administrative expenses
(30,649
)
 
(26,815
)
 
(90,252
)
 
(81,655
)
Total operating costs and expenses
(440,471
)
 
(475,742
)
 
(1,301,696
)
 
(1,378,860
)
Income from operations
39,762

 
25,383

 
109,907

 
82,722

Interest expense, net
(7,900
)
 
(12,100
)
 
(26,775
)
 
(34,425
)
Other, net

 
1,290

 

 
585

Earnings before income taxes
31,862

 
14,573

 
83,132

 
48,882

Income tax provision
(12,798
)
 
(5,928
)
 
(38,853
)
 
(20,710
)
Net earnings
$
19,064

 
$
8,645

 
$
44,279

 
$
28,172

Net earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.82

 
$
0.38

 
$
1.90

 
$
1.23

Diluted
0.80

 
0.37

 
1.87

 
1.19

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

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Table of Contents

Clearwater Paper Corporation
Condensed Consolidated Statements of Comprehensive Income
Unaudited (Dollars in thousands)
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
Net earnings
$
19,064

 
$
8,645

 
$
44,279

 
$
28,172

Other comprehensive income:
 
 
 
 
 
 
 
Defined benefit pension and other postretirement
  employee benefits:
 
 
 
 
 
 
 
Amortization of actuarial loss included in net
  periodic cost, net of tax expense of $1,190,
  $818, $3,571 and $2,452
1,831

 
1,278

 
5,493

 
3,834

Amortization of prior service credit included in net
  periodic cost, net of tax benefit of $202, $59,
  $605 and $176
(310
)
 
(91
)
 
(930
)
 
(275
)
Foreign currency translation adjustment

 
(3,666
)
 

 
(2,377
)
Amortization of deferred taxes related to actuarial
  gain on other postretirement employee benefit
  obligations

 
(58
)
 

 
(173
)
Other comprehensive income (loss), net of tax
1,521

 
(2,537
)
 
4,563

 
1,009

Comprehensive income
$
20,585

 
$
6,108

 
$
48,842

 
$
29,181

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

3

Table of Contents

Clearwater Paper Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands – except per-share amounts)
 
 
September 30,
2012
 
December 31,
2011
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
19,564

 
$
8,439

Restricted cash

 
769

Short-term investments
37,000

 
55,001

Receivables, net
175,587

 
176,189

Taxes receivable
11,918

 
10,000

Inventories
224,435

 
244,071

Deferred tax assets
24,857

 
39,466

Prepaid expenses
8,570

 
11,396

Total current assets
501,931

 
545,331

Property, plant and equipment, net
840,981

 
735,566

Goodwill
229,533

 
229,533

Intangible assets, net
44,854

 
49,748

Other assets, net
9,603

 
11,140

TOTAL ASSETS
$
1,626,902

 
$
1,571,318

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
171,195

 
$
144,631

Current liability for pensions and other postretirement employee benefits
9,861

 
9,861

Total current liabilities
181,056

 
154,492

Long-term debt
523,872

 
523,694

Liability for pensions and other postretirement employee benefits
197,222

 
215,932

Other long-term obligations
48,560

 
48,474

Accrued taxes
78,625

 
74,464

Deferred tax liabilities
70,972

 
69,358

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,
  23,825,750 and 23,101,710 shares issued
2

 
2

Additional paid-in capital
318,168

 
315,964

Retained earnings
339,832

 
295,553

Treasury stock, at cost, common shares-622,082 and 333,300 shares
  repurchased
(20,705
)
 
(11,350
)
Accumulated other comprehensive loss, net of tax
(110,702
)
 
(115,265
)
Total stockholders’ equity
526,595

 
484,904

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
1,626,902

 
$
1,571,318

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

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Table of Contents

Clearwater Paper Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
 
 
Nine Months Ended
 
September 30,
 
2012
 
2011
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net earnings
$
44,279

 
$
28,172

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
58,477

 
57,108

Deferred tax expense
13,257

 
12,311

Equity-based compensation expense
7,681

 
5,117

Employee benefit plans
6,697

 
6,252

Changes in working capital, net
51,434

 
(32,621
)
Change in taxes receivable, net
(1,918
)
 
(2,028
)
Excess tax benefits from equity-based payment arrangements
(9,193
)
 

Change in non-current accrued taxes
4,161

 
1,873

Funding of qualified pension plans
(17,625
)
 
(9,800
)
Change in restricted cash, net
769

 
4,429

Other, net
2,564

 
1,490

Net cash provided by operating activities
160,583

 
72,303

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Change in short-term investments, net
18,001

 
41,094

Additions to plant and equipment
(155,365
)
 
(87,251
)
Proceeds from sale of assets
1,035

 

Net cash used for investing activities
(136,329
)
 
(46,157
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Repayment of Cellu Tissue debt

 
(15,595
)
Purchase of treasury stock
(9,355
)
 
(10,003
)
Excess tax benefits from equity-based payment arrangements
9,193

 

Payment of tax withholdings on equity-based payment arrangements
(12,965
)
 
(1,498
)
Other, net
(2
)
 
2,940

Net cash used for financing activities
(13,129
)
 
(24,156
)
Effect of exchange rate changes

 
153

Increase in cash
11,125

 
2,143

Cash at beginning of period
8,439

 
18,928

Cash at end of period
$
19,564

 
$
21,071

 
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 
 
 
Cash paid for interest, net of amounts capitalized
$
12,366

 
$
22,303

Cash paid for income taxes
17,740

 
40,045

Cash received from income tax refunds
1,607

 
29,282

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES:
 
 
 
Increase in accrued plant and equipment
$
3,258

 
$
5,087

Property acquired under capital lease

 
12,687

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

5

Table of Contents

Clearwater Paper Corporation
Notes to Condensed Consolidated Financial Statements
Unaudited
NOTE 1 Nature of Operations and Basis of Presentation
GENERAL
We manufacture and sell pulp-based products. We currently manufacture quality consumer tissue, away-from-home tissue, parent roll tissue, machine-glazed tissue, bleached paperboard and pulp at 15 manufacturing locations in the U.S. and Canada. Our private label tissue products, such as 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 and is ultimately used by our customers to make packaging for products ranging from liquids to pharmaceuticals to consumer goods packaging, all of which demand high quality construction and print surfaces for graphics. Our products primarily utilize pulp made from wood fiber. In addition to wood fiber, other major cost categories include chemicals, transportation, energy, packaging, and costs associated with our manufacturing facilities.
On December 27, 2010, we acquired Cellu Tissue Holdings, Inc., or Cellu Tissue, and consolidated the acquisition in our financial statements as of that date. The financial position and results of Cellu Tissue’s operations and cash flows are fully reflected in these condensed consolidated financial statements.
On November 28, 2011, we sold our Lewiston, Idaho sawmill to Idaho Forest Group of Coeur d’Alene, Idaho. The transaction included the sale of our sawmill, planer mill, dry kilns and related assets along with log and finished goods inventories and timber under contract, in the aggregate amount of approximately $30 million. This sawmill was our only wood products facility.
FINANCIAL STATEMENT PREPARATION AND PRESENTATION
The accompanying Condensed Consolidated Balance Sheets at September 30, 2012 and December 31, 2011, the related Condensed Consolidated Statements of Operations and Comprehensive Income for the three months and nine months ended September 30, 2012 and 2011, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011, 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, 2011, as filed with the Securities and Exchange Commission, or SEC, on February 24, 2012.
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 period. Significant areas requiring the use of estimates and measurement of uncertainty include determination of net realizable value for deferred tax assets, assessment of impairment of long-lived assets and goodwill, assessment of environmental matters, equity-based compensation and pension and postretirement obligation assumptions. Actual results could differ from those estimates and assumptions.
RESTRICTED CASH AND SHORT-TERM INVESTMENTS
At September 30, 2012, we had no restricted cash balance. At December 31, 2011, all restricted cash was classified as current and included in “Restricted cash” on our Condensed Consolidated Balance Sheet. Our short-term investments are invested largely in demand deposits, which have very short maturity periods, and they therefore earn an interest rate commensurate with low-risk instruments.


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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 September 30, 2012 and December 31, 2011, we had an allowance for doubtful accounts of $1.8 million and $1.7 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 $1,395.4 million and $1,342.7 million at September 30, 2012 and December 31, 2011, respectively.
For the three months and nine months ended September 30, 2012, we capitalized $4.1 million and $9.0 million, respectively, of interest expense associated with the construction of our new tissue manufacturing and converting facilities in Shelby, North Carolina, and improvements to our tissue manufacturing facility in Las Vegas, Nevada, compared to $0.8 million and $2.3 million for the same periods in 2011, respectively.
STOCKHOLDERS’ EQUITY
On July 28, 2011, our Board of Directors authorized the repurchase of up to $30.0 million of our common stock. Under our stock repurchase program, we may repurchase shares in the open market or as otherwise may be determined by management, subject to market conditions, business opportunities and other factors. During the three and nine months ended September 30, 2012, we repurchased 50,300 and 288,782 shares, respectively, of our outstanding common stock. As of September 30, 2012, we had $9.3 million of authorization remaining pursuant to our share repurchase program. 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 nine months ended September 30, 2012 and 2011 that required hedge or derivative accounting treatment. However, to partially mitigate our exposure to market risk for changes in utility commodity pricing, we use firm price contracts to supply a portion of the natural gas requirements for our manufacturing facilities. As of September 30, 2012, these contracts covered approximately 18% of our expected average monthly natural gas requirements for the remainder of 2012, plus lesser amounts for 2013.
We also have agreements with suppliers to purchase pulp and chemicals at market-based prices covering approximately 33% and 42%, respectively, of our current expected remaining 2012 pulp and chemical needs. These contracts for natural gas, pulp and chemicals qualify for treatment as “normal purchases or normal sales” under authoritative guidance and thus require no mark-to-market adjustment.
NOTE 2 Recently Adopted and New Accounting Standards
There were no new accounting standards adopted during the three months ended September 30, 2012. We reviewed all new accounting pronouncements issued in the period and concluded that there are none that we believe will have a significant or material impact to our current or future financial statements or disclosures.
NOTE 3 Inventories
Inventories at the balance sheet dates consist of:
 
(In thousands)
September 30,
2012
 
December 31,
2011
Pulp, paperboard and tissue products
$
142,631

 
$
162,426

Materials and supplies
64,181

 
62,376

Logs, pulpwood, chips and sawdust
17,623

 
17,713

Lumber

 
1,556

 
$
224,435

 
$
244,071


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Table of Contents

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 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:
 
 
September 30, 2012
(Dollars in thousands, lives in years)
Useful
Life
 
Historical
Cost
 
Accumulated
Amortization
 
Net
Balance
Customer relationships
9.0
 
$
50,000

 
$
(9,849
)
 
$
40,151

Trade names and trademarks
10.0
 
5,300

 
(927
)
 
4,373

Non-compete agreements
2.5
 
1,100

 
(770
)
 
330

Total intangible assets
 
 
$
56,400

 
$
(11,546
)
 
$
44,854

 
 
 
 
 
 
 
 
  
December 31, 2011
(Dollars in thousands, lives in years)
Useful
Life
 
Historical
Cost
 
Accumulated
Amortization
 
Net
Balance
Customer relationships
9.0
 
$
50,000

 
$
(5,682
)
 
$
44,318

Trade names and trademarks
10.0
 
5,300

 
(530
)
 
4,770

Non-compete agreements
2.5
 
1,100

 
(440
)
 
660

Total intangible assets
 
 
$
56,400

 
$
(6,652
)
 
$
49,748

NOTE 5 Taxes
Consistent with authoritative guidance, our estimated annual effective tax rate is used to allocate expected annual income tax expense to interim periods. The rate is the ratio of estimated annual income tax expense to estimated pre-tax ordinary income, and excludes “discrete items”, which are significant, unusual or infrequent items reported separately net of their related tax effect. The estimated annual effective tax rate is applied to the current interim period’s ordinary income to determine the income tax expense allocated to the interim period. The income tax effects of discrete items are then determined separately and recognized in the interim period in which the income or expense items arise.
We recorded income tax expense of $12.8 million and $38.9 million in the three and nine months ended September 30, 2012 compared to $5.9 million and $20.7 million in the three and nine months ended September 30, 2011. The effective rates for the three months and nine months ended September 30, 2012 were 40.2% and 46.7%, respectively, compared to rates of 40.7% and 42.4% for the same periods of 2011. As discussed below, the rates for the nine month periods included the net impact of reporting discrete items in each reporting period totaling net expense of $9.7 million and $4.0 million, respectively.
The net increase to our tax expense and effective tax rate for the nine months ended September 30, 2012 was primarily the result of $6.5 million in tax expense related to our decision to convert certain gallons of alternative fuel originally claimed in 2009 under the Alternative Fuel Mixture Tax Credit, or AFMTC, which had been converted by us in 2010 to the Cellulosic Biofuel Producer Credit, or CBPC, back to gallons under the AFMTC. The tax expense attributable to the AFMTC conversion was comprised of $3.4 million relating to the conversion back to the AFMTC and a resulting additional $3.1 million increase in our liabilities for uncertain tax positions. The remaining discrete expense of $3.2 million recorded in the nine months ended September 30, 2012 was primarily interest accrued on uncertain tax positions.
The net increase to our tax expense and effective tax rate in the nine months ended September 30, 2011 was primarily the result of discrete expenses for interest accrued on uncertain tax positions and the impact of reevaluating our state tax structure as Cellu Tissue was being integrated into our operations, partially offset by a benefit associated with certain transaction costs relating to the Cellu Tissue acquisition that were determined to be deductible under the Internal Revenue Code, or IRC.

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We have tax benefits relating to excess equity-based compensation that are being utilized to reduce our U.S. taxable income. Our Condensed Consolidated Balance Sheets reflect deferred tax assets comprised of net operating losses and tax credit carryforwards excluding amounts impacted by excess equity-based compensation. We have historically elected to follow the “with-and-without” or “incremental” method for ordering tax benefits derived from employee equity-based compensation awards. As a result of this method, net operating loss carryforwards and tax credit carryforwards not generated from equity-based compensation are utilized before the current period’s equity-based tax deduction (excess tax benefits from equity-based compensation awards are recognized last). Excess tax benefits from equity-based compensation awards that are determined to reduce U.S. taxable income following this method are recognized when realized as increases to additional paid-in capital as a component of stockholders’ equity. During the nine months ended September 30, 2012, we generated additional excess tax benefits of $13.9 million relating to the release of vested performance share and restricted stock unit awards to employees. For the nine months ended September 30, 2012, $9.2 million of excess tax benefits have been allocated to additional paid-in capital and reduced income taxes payable based on the incremental method. As of September 30, 2012, we had a total amount of excess tax benefits that are not recognized on our condensed consolidated balance sheet of $8.0 million.
Subsequent to September 30, 2012, the Internal Revenue Service has undertaken an audit of the company for the 2009 through 2011 tax years. Other audits opened during the third quarter of 2012 include a Canada Revenue Agency audit of our Canadian subsidiary, which we acquired in the Cellu Tissue acquisition, for the fiscal year ended February 2010 and calendar years 2010 and 2011.
NOTE 6 Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at the balance sheet dates consist of:
 
(In thousands)
September 30, 2012
 
December 31, 2011
Trade accounts payable
$
78,704

 
$
65,040

Accrued wages, salaries and employee benefits
40,805

 
37,430

Accrued interest
15,879

 
5,245

Accrued taxes other than income taxes payable
9,158

 
11,257

Accrued discounts and allowances
7,564

 
5,588

Accrued utilities
7,225

 
7,265

Accrued transportation
4,380

 
3,801

Other
7,480

 
9,005

 
$
171,195

 
$
144,631

NOTE 7 Debt
$375 MILLION SENIOR NOTES DUE 2018
On October 22, 2010, we sold $375.0 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 2010 Notes are guaranteed by certain of our existing and future direct and indirect domestic subsidiaries. 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.

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Table of Contents

$150 MILLION SENIOR NOTES DUE 2016
In June 2009, we issued senior unsecured notes, which we refer to as the 2009 Notes, in the aggregate principal amount of $150.0 million. The 2009 Notes are due on June 15, 2016 and have an interest rate of 10.625%. The 2009 Notes were issued at a price equal to 98.792% of their face value.
The 2009 Notes are guaranteed by each of our existing and future direct and indirect domestic subsidiaries. The 2009 Notes are general unsecured obligations and are therefore not secured by our assets and 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 2009 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.
We have 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 or after June 15, 2013, we may redeem all or a portion of the 2009 Notes at specified redemption prices plus accrued and unpaid interest. In addition, we may be required to make an offer to purchase the 2009 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 revolving credit facility with certain financial institutions. On September 28, 2011, we amended our revolving credit facility, among other things, (i) to extend the term of the revolving loan to the earlier of September 30, 2016 or 90 days prior to the maturity date of the 2009 Notes; (ii) to increase permitted capital expenditures limits; and (iii) to change the interest rate margins applicable to base rate loans and LIBOR loans in circumstances based on our fixed charge coverage ratio from time to time, and to reduce the fees paid by us on undrawn amounts. 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.
As of September 30, 2012, there were no borrowings outstanding under the credit facility, but approximately $5.9 million of the credit facility was being used to support outstanding standby letters of credit. Loans under the credit facility bear interest at LIBOR plus between 1.75% and 2.25% for LIBOR loans, and a base rate effectively equal to the agent bank’s prime rate plus between 0.25% and 0.75% for other loans. The percentage margin on all loans is based on our fixed charge coverage ratio for the last twelve months, which is recalculated on a quarterly basis. As of September 30, 2012, we would have been permitted to draw approximately $119.1 million under the credit facility at LIBOR plus 1.75%.
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 September 30, 2012, the fixed charge coverage ratio for the last twelve months was 3.4-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 agreement 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 in amounts in excess of those permitted under the revolving credit agreement; enter into certain affiliate transactions; enter into certain hedging arrangements; and consolidate with or merge with another entity.
NOTE 8 Other Long-Term Obligations
Other long-term obligations at the balance sheet dates consist of:
 
(In thousands)
September 30, 2012
 
December 31, 2011
Long-term lease obligations, net of current portion
$
25,336

 
$
25,546

Deferred proceeds
11,411

 
13,040

Deferred compensation
10,254

 
8,100

Other
1,559

 
1,788

 
$
48,560

 
$
48,474


10

Table of Contents

NOTE 9 Pension and Other Postretirement Employee Benefit Plans
The following table details the components of net periodic cost of our pension and other postretirement employee benefit, or OPEB, plans for the periods presented:
 
 
Three months ended September 30:
 
 
 
 
 
Other Postretirement
 
Pension Benefit Plans
 
Employee Benefit Plans
(In thousands)
2012
 
2011
 
2012
 
2011
Service cost
$
622

 
$
1,931

 
$
173

 
$
175

Interest cost
3,673

 
3,773

 
1,454

 
1,714

Expected return on plan assets
(4,921
)
 
(4,883
)
 

 

Amortization of prior service cost (credit)
158

 
299

 
(670
)
 
(449
)
Amortization of actuarial loss
3,021

 
2,096

 

 

Net periodic cost
$
2,553

 
$
3,216

 
$
957

 
$
1,440

 
 
Nine months ended September 30:
 
Pension Benefit Plans
 
Other Postretirement
Employee  Benefit Plans
(In thousands)
2012
 
2011
 
2012
 
2011
Service cost
$
1,864

 
$
5,794

 
$
520

 
$
526

Interest cost
11,020

 
11,319

 
4,361

 
5,143

Expected return on plan assets
(14,764
)
 
(14,649
)
 

 

Amortization of prior service cost (credit)
475

 
895

 
(2,010
)
 
(1,346
)
Amortization of actuarial loss
9,064

 
6,286

 

 

Net periodic cost
$
7,659

 
$
9,645

 
$
2,871

 
$
4,323

As discussed in the notes to our consolidated financial statements in our 2011 Form 10-K, our company-sponsored pension plans were underfunded by $89.1 million at December 31, 2011. The underfunded status as of December 31, 2011 increased by $33.7 million over the underfunded status as of December 31, 2010, primarily due to lower discount rates and low returns on pension asset investments. As a result of being underfunded, we are required to make contributions to our qualified pension plans. During the nine months ended September 30, 2012, we contributed $17.6 million to these pension plans. In October 2012, we contributed an additional $3.0 million, which was the remaining contribution we were required to make in 2012.
During the nine months ended September 30, 2012, we made contributions of approximately $0.2 million to our non-qualified pension plan, which substantially fulfills our estimated 2012 annual contributions to our non-qualified pension plan. We do not anticipate funding our OPEB plans in 2012 except to pay benefit costs as incurred during the year by plan participants.

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Table of Contents

NOTE 10 Earnings per Common Share
Earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding in accordance with accounting guidance related to earnings per share. The following table reconciles the number of common shares used in calculating basic and diluted net earnings per share:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Basic average common shares outstanding1
23,360,967

 
22,865,233

 
23,337,323

 
22,975,847

Incremental shares due to:
 
 
 
 
 
 
 
Restricted stock units
51,230

 
281,782

 
43,580

 
273,821

Performance shares
287,491

 
444,161

 
264,021

 
442,124

Diluted average common shares outstanding
23,699,688

 
23,591,176

 
23,644,924

 
23,691,792

 
 
 
 
 
 
 
 
Basic net earnings per common share
$
0.82

 
$
0.38

 
$
1.90

 
$
1.23

Diluted net earnings per common share
0.80

 
0.37

 
1.87

 
1.19

 
 
 
 
 
 
 
 
Anti-dilutive shares excluded from calculation
29,382

 
88,674

 
132,273

 
104,212


1 
 Basic average common shares outstanding include restricted stock awards that are fully vested, but are deferred for future issuance. See Note 11 "Equity-Based Compensation" for further discussion.
NOTE 11 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 equity-based compensation expense was recognized as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
2012
 
2011
 
2012
 
2011
Restricted stock units
$
297

 
$
321

 
$
693

 
$
888

Performance shares
1,953

 
1,359

 
5,284

 
3,594

Total employee equity-based compensation
$
2,250

 
$
1,680

 
$
5,977

 
$
4,482

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 performance 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, 2011, the service and performance period for 499,680 outstanding performance shares granted in 2009 ended. Those performance shares were settled and distributed in the first quarter of 2012. The number of shares actually settled, as a percentage of the outstanding amount, was 200%. An additional 257,112 shares of restricted stock units vested in the first quarter of 2012, of which 90,856 shares were settled and distributed during the period and 166,256 shares that would have resulted in certain executive compensation being above the IRC section 162(m) threshold were deferred to preserve tax deductibility for the company. After adjusting for the related minimum tax withholdings, and excluding the deferred restricted stock units, a net 724,040 shares were issued in the first quarter of 2012. The related minimum tax withholdings payment made in the first quarter of 2012 in connection with issued shares was $13.0 million. Subsequent to the first quarter of 2012, no performance shares or restricted stock units have vested, and no related minimum tax withholding payments have been made.

12

Table of Contents

The following table summarizes the number of share-based awards granted under our 2008 Stock Incentive Plan during the nine months ended September 30, 2012 and the grant-date fair value of the awards:
 
 
Nine Months Ended September 30, 2012
 
Number of
awards
 
Average fair value of
award per share
Restricted stock units
52,294

 
$
34.59

Performance shares
150,865

 
40.24

DIRECTOR AWARDS
Each year our directors receive equity-based awards that are deferred, measured in units of our common stock and ultimately converted to cash at the time of payment. Accordingly, this compensation is subject to fluctuations based on mark-to-market adjustments at each reporting period in line with changes in the market price of our common stock. As a result of the mark-to-market adjustment, we recorded director equity-based compensation expense of $1.8 million and $1.7 million for the three and nine months ended September 30, 2012, compared to compensation expense of $0.5 million and $0.6 million for the same periods ended September 30, 2011.
NOTE 12 Fair Value Measurements
The estimated fair values of our financial instruments at the dates presented below are as follows:
 
 
September 30, 2012
 
December 31, 2011
 
Carrying
 
Fair
 
Carrying
 
Fair
(In thousands)
Amount
 
Value
 
Amount
 
Value
Cash, restricted cash, and short-term investments (Level 1)
$
56,564

 
$
56,564

 
$
64,209

 
$
64,209

Long-term debt (Level 1)
523,872

 
573,563

 
523,694

 
556,313

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.

13

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NOTE 13 Segment Information
The table below presents information about our reportable segments:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
2012
 
2011
 
2012
 
2011
Segment net sales:
 
 
 
 
 
 
 
Consumer Products
$
292,959

 
$
285,237

 
$
853,911

 
$
823,607

Pulp and Paperboard1
187,274

 
215,888

 
557,692

 
637,975

Total segment net sales
$
480,233

 
$
501,125

 
$
1,411,603

 
$
1,461,582

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Consumer Products
$
18,453

 
$
7,075

 
$
70,420

 
$
27,758

Pulp and Paperboard1
34,449

 
26,266

 
78,108

 
76,370

 
52,902

 
33,341

 
148,528

 
104,128

Corporate and eliminations
(13,140
)
 
(7,958
)
 
(38,621
)
 
(21,406
)
Income from operations
$
39,762

 
$
25,383

 
$
109,907

 
$
82,722

 
 
 
 
 
 
 
 
Depreciation and amortization:
 
 
 
 
 
 
 
Consumer Products
$
13,275

 
$
12,920

 
$
39,692

 
$
37,115

Pulp and Paperboard
5,525

 
6,536

 
17,547

 
19,646

Corporate
399

 
113

 
1,238

 
347

Total depreciation and amortization
$
19,199

 
$
19,569

 
$
58,477

 
$
57,108

 
1 
Results for Pulp and Paperboard for the nine months ended September 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.


14

Table of Contents

NOTE 14 Supplemental Guarantor Financial Information
On October 22, 2010 we issued the 2010 Notes. Certain of our 100% owned, domestic subsidiaries guarantee the 2010 Notes on a joint and several basis. The 2010 Notes are not guaranteed by Interlake Acquisition Corporation Limited or Cellu Tissue-CityForest, LLC. There are no significant restrictions on the ability of the guarantor subsidiaries to make distributions to Clearwater Paper, the issuer of the 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
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2012
 
 
 
Guarantor
 
Non-Guarantor
 
 
 
 
(In thousands)
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Total
Net sales
$
351,309

 
$
118,592

 
$
16,388

 
$
(6,056
)
 
$
480,233

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of sales
(287,715
)
 
(116,033
)
 
(12,130
)
 
6,056

 
(409,822
)
Selling, general and administrative expenses
(9,143
)
 
(16,638
)
 
(4,868
)
 

 
(30,649
)
Total operating costs and expenses
(296,858
)
 
(132,671
)
 
(16,998
)
 
6,056

 
(440,471
)
Income (loss) from operations
54,451

 
(14,079
)
 
(610
)
 

 
39,762

Interest expense, net
(7,900
)
 

 

 

 
(7,900
)
Earnings (loss) before income taxes
46,551

 
(14,079
)
 
(610
)
 

 
31,862

Income tax provision
(20,364
)
 
4,980

 
(1,523
)
 
4,109

 
(12,798
)
Equity in (loss) income of subsidiary
(11,232
)
 
(2,133
)
 

 
13,365

 

Net earnings (loss)
$
14,955

 
$
(11,232
)
 
$
(2,133
)
 
$
17,474

 
$
19,064

Other comprehensive income, net of tax
1,521

 

 

 

 
1,521

Comprehensive income (loss)
$
16,476

 
$
(11,232
)
 
$
(2,133
)
 
$
17,474

 
$
20,585

Clearwater Paper Corporation
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2012
 
 
 
Guarantor
 
Non-Guarantor
 
 
 
 
(In thousands)
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Total
Net sales
$
1,035,596

 
$
346,397

 
$
48,762

 
$
(19,152
)
 
$
1,411,603

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of sales
(866,127
)
 
(329,125
)
 
(35,344
)
 
19,152

 
(1,211,444
)
Selling, general and administrative expenses
(65,483
)
 
(19,463
)
 
(5,306
)
 

 
(90,252
)
Total operating costs and expenses
(931,610
)
 
(348,588
)
 
(40,650
)
 
19,152

 
(1,301,696
)
Income (loss) from operations
103,986

 
(2,191
)
 
8,112

 

 
109,907

Interest expense, net
(26,775
)
 

 

 

 
(26,775
)
Earnings before income (loss) taxes
77,211

 
(2,191
)
 
8,112

 

 
83,132

Income tax provision
(37,002
)
 
1,478

 
(3,545
)
 
216

 
(38,853
)
Equity in income (loss) of subsidiary
3,854

 
4,567

 

 
(8,421
)
 

Net earnings (loss)
$
44,063

 
$
3,854

 
$
4,567

 
$
(8,205
)
 
$
44,279

Other comprehensive income, net of tax
4,563

 

 

 

 
4,563

Comprehensive income (loss)
$
48,626

 
$
3,854

 
$
4,567

 
$
(8,205
)
 
$
48,842


15

Table of Contents


Clearwater Paper Corporation
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2011
 
 
 
 
Guarantor
 
Non-Guarantor
 
 
 
 
(In thousands)
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Total
Net sales
$
362,347

 
$
123,524

 
$
15,254

 
$

 
$
501,125

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of sales
(313,942
)
 
(119,820
)
 
(15,165
)
 

 
(448,927
)
Selling, general and administrative expenses
(22,147
)
 
(3,933
)
 
(735
)
 

 
(26,815
)
Total operating costs and expenses
(336,089
)
 
(123,753
)
 
(15,900
)
 

 
(475,742
)
Income (loss) from operations
26,258

 
(229
)
 
(646
)
 

 
25,383

Interest expense, net
(11,927
)
 
(24
)
 
(149
)
 

 
(12,100
)
Other, net

 

 
1,290

 

 
1,290

Earnings (loss) before income taxes
14,331

 
(253
)
 
495

 

 
14,573

Income tax provision
(11,116
)
 
3,381

 
(341
)
 
2,148

 
(5,928
)
Equity in income (loss) of subsidiary
3,282

 
154

 

 
(3,436
)
 

Net earnings (loss)
$
6,497

 
$
3,282

 
$
154

 
$
(1,288
)
 
$
8,645

Other comprehensive loss, net of tax
(2,537
)
 

 

 

 
(2,537
)
Comprehensive income (loss)
$
3,960

 
$
3,282

 
$
154

 
$
(1,288
)
 
$
6,108

Clearwater Paper Corporation
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2011
 
 
 
 
Guarantor
 
Non-Guarantor
 
 
 
 
(In thousands)
Issuer
 
Subsidiaries
 
Subsidiaries
 
Eliminations
 
Total
Net sales
$
1,063,657

 
$
348,559

 
$
49,366

 
$

 
$
1,461,582

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of sales
(915,786
)
 
(335,018
)
 
(46,401
)
 

 
(1,297,205
)
Selling, general and administrative expenses
(64,699
)
 
(14,459
)
 
(2,497
)
 

 
(81,655
)
Total operating costs and expenses
(980,485
)
 
(349,477
)
 
(48,898
)
 

 
(1,378,860
)
Income (loss) from operations
83,172

 
(918
)
 
468

 

 
82,722

Interest expense, net
(33,805
)
 
(90
)
 
(530
)
 

 
(34,425
)
Other, net

 

 
585

 

 
585

Earnings (loss) before income taxes
49,367

 
(1,008
)
 
523

 

 
48,882

Income tax provision
(24,136
)
 
2,734

 
(1,456
)
 
2,148

 
(20,710
)
Equity in income (loss) of subsidiary
793

 
(933
)
 

 
140

 

Net earnings (loss)
$
26,024

 
$
793

 
$
(933
)
 
$
2,288

 
$
28,172

Other comprehensive income, net of tax
1,009

 

 

 

 
1,009

Comprehensive income (loss)
$
27,033

 
$
793

 
$
(933
)
 
$
2,288

 
$
29,181



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Table of Contents

Clearwater Paper Corporation
Condensed Consolidating Balance Sheet
At September 30, 2012
 
(In thousands)
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash
$
12,720

 
$
407

 
$
6,437

 
$

 
$
19,564

Restricted cash

 

 

 

 

Short-term investments
37,000

 

 

 

 
37,000

Receivables, net
125,117

 
42,902

 
9,414

 
(1,846
)
 
175,587

Taxes receivable
12,078

 
3,043

 
(3,636
)
 
433

 
11,918

Inventories
162,567

 
55,035

 
6,833

 

 
224,435

Deferred tax assets
28,505

 
4,627

 
438

 
(8,713
)
 
24,857

Prepaid expenses
7,555

 
843

 
172

 

 
8,570

Total current assets
385,542

 
106,857

 
19,658

 
(10,126
)
 
501,931

Property, plant and equipment, net
586,344

 
207,179

 
47,458

 

 
840,981

Goodwill
229,533

 

 

 

 
229,533

Intangible assets, net

 
38,635

 
6,219

 

 
44,854

Intercompany receivable (payable)
39,164

 
(106,958
)
 
45,265

 
22,529

 

Investment in subsidiary
257,563

 
94,285

 

 
(351,848
)
 

Other assets, net
9,225

 
378

 

 

 
9,603

TOTAL ASSETS
$
1,507,371

 
$
340,376

 
$
118,600

 
$
(339,445
)
 
$
1,626,902

LIABILITIES AND STOCKHOLDERS’
  EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued
  liabilities
$
132,911

 
$
32,741

 
$
7,389

 
$
(1,846
)
 
$
171,195

Current liability for pensions and
  other postretirement employee
  benefits
9,861

 

 

 

 
9,861

Total current liabilities
142,772

 
32,741

 
7,389

 
(1,846
)
 
181,056

Long-term debt
523,872

 

 

 

 
523,872

Liability for pensions and other
  postretirement employee benefits
197,222

 

 

 

 
197,222

Other long-term obligations
48,199

 
361

 

 

 
48,560

Accrued taxes
78,225

 
59

 
341

 

 
78,625

Deferred tax liabilities (assets)
(9,514
)
 
49,652

 
16,585

 
14,249

 
70,972

Accumulated other comprehensive loss,
  net of tax
(110,702
)
 

 

 

 
(110,702
)
Stockholders’ equity excluding
  accumulated other comprehensive loss
637,297

 
257,563

 
94,285

 
(351,848
)
 
637,297

TOTAL LIABILITIES AND
  STOCKHOLDERS’ EQUITY
$
1,507,371

 
$
340,376

 
$
118,600

 
$
(339,445
)
 
$
1,626,902




17

Table of Contents

Clearwater Paper Corporation
Condensed Consolidating Balance Sheet
At December 31, 2011
 
(In thousands)
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash
$
2,146

 
$
901

 
$
5,392

 
$

 
$
8,439

Restricted cash
769

 

 

 

 
769

Short-term investments
55,001

 

 

 

 
55,001

Receivables, net
100,600

 
66,580

 
9,009

 

 
176,189

Taxes receivable
8,957

 
709

 
334

 

 
10,000

Inventories
175,446

 
62,234

 
6,391

 

 
244,071

Deferred tax assets
27,801

 
2,950

 
194

 
8,521

 
39,466

Prepaid expenses
9,756

 
1,437

 
203

 

 
11,396

Total current assets
380,476

 
134,811

 
21,523

 
8,521

 
545,331

Property, plant and equipment, net
468,372

 
217,235

 
49,959

 

 
735,566

Goodwill
229,533

 

 

 

 
229,533

Intangible assets, net

 
42,873

 
6,875

 

 
49,748

Intercompany receivable (payable)
120,061

 
(155,395
)
 
35,334

 

 

Investment in subsidiary
249,142

 
89,718

 

 
(338,860
)
 

Other assets, net
10,815

 
325

 

 

 
11,140

TOTAL ASSETS
$
1,458,399

 
$
329,567

 
$
113,691

 
$
(330,339
)
 
$
1,571,318

LIABILITIES AND STOCKHOLDERS’
  EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued
  liabilities
$
109,549

 
$
28,838

 
$
6,244

 
$

 
$
144,631

Current liability for pensions and
  other postretirement employee
  benefits
9,861

 

 

 

 
9,861

Total current liabilities
119,410

 
28,838

 
6,244

 

 
154,492

Long-term debt
523,694

 

 

 

 
523,694

Liability for pensions and other
  postretirement employee benefits
215,932

 

 

 

 
215,932

Other long-term obligations
48,009

 
465

 

 

 
48,474

Accrued taxes
73,594

 

 
870

 

 
74,464

Deferred tax liabilities (assets)
(7,144
)
 
51,122

 
16,859

 
8,521

 
69,358

Accumulated other comprehensive loss,
  net of tax
(115,265
)
 

 

 

 
(115,265
)
Stockholders’ equity excluding
  accumulated other comprehensive loss
600,169

 
249,142

 
89,718

 
(338,860
)
 
600,169

TOTAL LIABILITIES AND
  STOCKHOLDERS’ EQUITY
$
1,458,399

 
$
329,567

 
$
113,691

 
$
(330,339
)
 
$
1,571,318




18

Table of Contents

Clearwater Paper Corporation
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2012
 
(In thousands)
Issuer
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
CASH FLOWS FROM OPERATING
  ACTIVITIES
 
 
 
 
 
 
 
 
 
Net earnings (loss)
$
44,063

 
$
3,854

 
$
4,567

 
$
(8,205
)
 
$
44,279

Adjustments to reconcile net earnings to net
  cash provided by operating
  activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
35,244

 
19,076

 
4,157

 

 
58,477

Deferred tax expense (benefit)
(6,040
)
 
(3,147
)
 
(518
)
 
22,962

 
13,257

Equity-based compensation expense
7,681

 

 

 

 
7,681

Employee benefit plans
6,697

 

 

 

 
6,697

Changes in working capital, net
16,641

 
34,698

 
95

 

 
51,434

Change in taxes receivable, net
(3,121
)
 
(2,334
)
 
3,970

 
(433
)
 
(1,918
)
Excess tax benefits from equity-based
  payment arrangements
(9,193
)
 

 

 

 
(9,193
)
Change in non-current accrued taxes
4,631

 
59

 
(529
)
 

 
4,161

Funding of qualified pension plans
(17,625
)
 

 

 

 
(17,625
)
Change in restricted cash, net
769

 

 

 

 
769

Other, net
1,757

 
807

 

 

 
2,564

Net cash provided by operating
  activities
81,504

 
53,013

 
11,742

 
14,324

 
160,583

CASH FLOWS FROM INVESTING
  ACTIVITIES