Clearwater Paper Corporation

Thank you. Good afternoon.

And welcome to Clearwater Paper's first quarter 2012 conference call. I would like to take this opportunity to introduce John Hunter, our Interim Chief Financial Officer as of April 13.

John has been with Clearwater Paper since August of 2009 and will also continue in his role as Vice President and Corporate Controller for the company.

The company is currently engaged in the search for a permanent CFO. With John as Interim CFO, Linda Massman is now focusing full time on her Chief Operating Officer responsibilities.

John?

Thanks, Gordon. Our press release this afternoon includes the details regarding our first quarter results and you will find a presentation of supplemental information posted on the Investor Relations area of our website at clearwaterpaper.com.

Additionally, we provide certain non-GAAP information in this afternoon's discussion, a reconciliation of the non-GAAP information to comparable GAAP information is included in the press release and supplemental material provided on our website.

I would like to remind you that this presentation will contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements.

Factors that could cause actual results to differ materially include those expressed or implied risks and uncertainties described from time-to-time in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2011, and our quarterly filing on Form 10-Q. Any forward looking statements are made only as of this date, and we undertake no obligation to update any forward-looking statements.

I will begin the details of today's call with financial highlights for the quarter and then turn the call back to Gordon, who will provide commentary on the different business segments before we take questions.

We reported net earnings of $3.7 million or $0.16 per diluted share for the first quarter of 2012, compared to net earnings of $5.6 million or $0.24 per diluted share for the first quarter of 2011.

Excluding $6.7 million in discrete tax items mostly associated with converting Cellulosic Biofuel Producer Credits to Alternative Fuel Mixture Tax Credits, first quarter 2012 net earnings were $10.4 million or $0.44 per diluted common share.

Excluding a net tax charge of $1.9 million or $0.08 per diluted share, related to a combination of discrete tax items, first quarter 2011 net earnings were $7.5 million or $0.32 per diluted common share.

First quarter 2012 earnings before interest, taxes, depreciation and amortization, or EBITDA was $45.2 million, compared to $41.7 million in the first quarter of 2011.

Net sales in the Consumer Products segment were $277.8 million for first quarter 2012, compared to first quarter 2011 net sales of $269.3 million. The increase in net sales was primarily attributable to higher net selling prices.

Consumer products operating income was $26.3 million for the first quarter of 2012 was nearly double -- first quarter 2011 operating income of $13.8 million, primarily due to higher net sales and lower pulp costs in first quarter 2012.

Operating income in the first quarter of 2012 also included a $1.1 million benefit from our Shelby, North Carolina facility and an estimated $5.3 million in net cost savings from synergies associated with our acquisition of Cellu Tissue.

Net sales in the Pulp and Paperboard segment were $180 million for the first quarter of 2012, compared to first quarter of 2011 net sales of $196.6 million. The decrease in net sales was due to the sale of our sawmill in November 2011.

Excluding remaining lumber sales of $3.0 million in the first quarter of 2012 and full quarter of lumber sales of $22.6 million in the first quarter 2011, net sales were $177 million in first quarter 2012 and $174 million for the first quarter 2011. This increase was primarily due to higher paperboard volumes, partially offset by lower volumes of pulp sold externally and lower paperboard selling prices.

Operating income for the first quarter declined 25.5% to $11.7 million, compared to $15.6 million for first quarter 2011, primarily due to $15.5 million in scheduled maintenance costs incurred during the first quarter of 2012, compared to $11.4 million in the first quarter of 2011.

Net interest expense of $9.7 million in the first quarter of 2012 declined $1.6 million from the first quarter of 2011 due to $2.1 million in capitalized interest associated with our Shelby Project, compared to $0.5 million of capitalized interest in the first quarter of 2011.

We expect capitalized interest associated with Shelby to be approximately $3 million in the second quarter and $14 million total in 2012, bringing the total capitalized interest amount to $18.2 million for the project. We also settled our industrial revenue bonds in the third quarter of 2011.

Regarding taxes we recorded a 76.6% tax rate for the first quarter of 2012. The conversion of a portion of our Cellulosic Biofuels Tax Credits back into Alternative Fuel Mixture Tax Credits significantly contributed to this high quarterly tax rate.

Due to the uncertainty regarding proposed legislation which included a provision that would have eliminated our ability to use Cellulosic Biofuel Tax Credits, we elected to convert gallons back to Alternative Fuel Mixture of Credits. To safeguard these benefits and provide us flexibility in the future.

Excluding discrete tax items during the quarter our tax rate was 34.6%. We also expect the effective tax rate for 2012 and excluding discrete tax items to be approximately 34.6%.

We had capital expenditures of $50.2 million during the first quarter of 2012 which included $39.6 million related to the construction of our Shelby Converting and Paper making facility.

We continue to estimate that the TAD paper machine and Tissue converting facility will cost approximately $260 million to $280 million. Capital expenditures for the remainder of 2012 are expected to between $165 million and $170 million, which includes an estimated $125 million to $130 million associated to Shelby.

As reported in our 10-K, our company sponsored pension plans were underfunded by $89.1 million, during the first quarter of 2012, we contributed $15.5 million to these plants, we expect to contribute an additional $5 million to our company-sponsored pension plans during the remainder of 2012.

With regard to liquidity, we have $49.5 million of unrestricted cash and short-term investments at March 21, 2012 representing a decrease of $13.9 million from December 31, 2011.

This decrease was primarily due to capital expenditures associated with our Shelby facility and the contributions to our pension plans partially offset by positive cash flow generation from operations. Our long-term debt outstanding at March 31, 2012 was $523.8 million, which was consistent with the amount at December 31, 2011.

Our financial ratios remains strong. Our total debt to total capitalization excluding accumulated other comprehensive loss was 46.8% at March 31, 2012, compared to 46.6% at December 31, 2011.

EBITDA to net interest expense for the first quarter of 2012 was 4.6x.

We reported last quarter, on our $30 million share purchase program through the end of the year. Although, we were not in the market during the first quarter of this year, we have been participating in the market in the second quarter and have purchased an additional 111,248 shares through April 28, 2012 for $3.4 million.

We still have $15.2 million remaining under this program.

I'll now turn the call over to Gordon.

Thanks, John. With our solid quarterly results, 2012 is off to a good start.

Not only did we report excellent first quarter results but our new paper machine and converting lines in Shelby, North Carolina remain on time and on budget. I will now walk you through some of the operating segment details.

Consumer products net sales of $277.8 million were up 3.2% versus the first quarter of 2011, mainly due to a 3.8% increase in net selling prices to $2,158 per ton. The rise was driven by our 2.5% retail price increase and conversion of more parent rolls into finished cases.

The tissue price increase was primarily in place in the fourth quarter of 2011, with a small remaining amount in the first quarter of 2012. Tissue prices were down 1.1% compared to the fourth quarter of 2011, due to a slightly higher percentage of parent roll sales.

Tissue volumes decreased slightly to 128,768 tons in the first quarter of 2012 compared to the first quarter of 2011, primarily due to converting more parent rolls into finished cases.

Volumes, however, were up 5722 tons from the fourth quarter of 2011 due to increased parent roll sales and a return to more normal selling volumes, our consumer products retail business continues to be very solid.

As a reminder, these volume and pricing figures are available on our website, as supplemental materials in the event and presentation section of Investor Relations page.

Consumer products operating income for the first quarter of 2012 was $26.3 million up from first quarter 2011 operating income up $13.8 million, primarily due to higher net sales and lower operating cost including pulp and energy. Shelby made a solid contribution to operating income and our cost savings from synergies are proceeding as planned.

Pulp and paperboard net sales adjusted for the sale of our sawmill were up $3 million when comparing first quarter 2012 to first quarter 2011. Paperboard net sales increased 4.6% compared to the first quarter of 2011 due to 6.2% increase in paperboard volumes to a 182,198 tons, partially offset by a 1.5% decline in paperboard net selling price per ton to $968 per ton.

Pulp net sales of $0.6 million declined from $5.3 million in the first quarter of 2011, due primarily to using more pulp internally. Pulp and paperboard operating income for the declined $3.9 million from $15.6 million in the first quarter of 2011 to $11.7 million in the first quarter of 2012.

This was primarily due to scheduled major maintenance cost during the first quarter of 2012 being $4.1 million more than the first quarter of 2011 major maintenance cost.

Now I'd like to spend a few minutes on our outlook for 2012. As mentioned last quarter, we continue to expect the Consumer Product segment to sell approximately 128,000 to 130,000 tons per quarter on average during 2012 and we also expect selling prices to remain stable.

The initial 2 converting lines of Shelby are still expect to contribute approximately $8 million of operating income in 2012, which includes approximately $2 million of depreciation, offsetting some of those benefits will be an estimated $6 million of additional cost associated with the start-up of the paper machine and additional converting lines, mainly to be incurred in the second half of the year.

We continue to expect the paper machine to start-up in the fourth quarter of 2012 and expect that it will produce approximately 70,000 tons per year in 2014, and we expect it will be -- when we expect to be fully operational with approximately 75% of that amount estimated in 2013.

There's nothing new to report regarding the litigation involving Metso Paper, the manufacturer of the TAD paper machine for our Shelby facility and a competitor's attempt to prevent the delivery of the machine. The trial is scheduled for the week of May 7.

The lawsuit has not delayed the startup of our Shelby facility and construction is proceeding as planned and on schedule.

We are still expecting annual net cost savings from synergies from the Cellu Tissu acquisition to ramp up during 2012 to a $35 million to $40 million annual run rate by the end of this year.

Net cost savings from synergies are expected to be approximately as follows for 2012, that would be $4 million into the second quarter, $5 million in the third quarter and $8 million in the fourth quarter.

The second quarter 2012 figure is down from the $5.3 million we reported for the first quarter 2012, due to some additional cost associated with achieving our synergy goals.

As for Pulp and paperboard segment, we continue to expect 2012 paperboard volumes to be similar to 2011 levels. Our paperboard business remains stable as does demand.

We expect pulp sales to be minimal as we anticipate utilizing almost all of our pulp internally. We estimate our scheduled major maintenance expense in the Pulp and paperboard segment will be approximately $3.3 million during the fourth quarter of 2012.

Regarding total company cost of sales, we have benefitted from declining pulp prices over the last two quarter falling pulp prices peaking last summer. However, pulp prices have been gradually rising since the beginning of this year.

Accordingly we expect our pulp cost to begin to rise moderately in the second quarter of 2012 due to the lag in pulp cost showing up in cost of sales. Analysts have predicted the recent rise in pulp prices to be short-lived.

Lastly, while corporate expenses have been rising over the last few quarters with the addition of Cellu Tissue and the growth of the company, we expect them to generally level out our current rate of approximately $12 million per quarter going forward.

In summary, we had a solid first quarter, we expect more of the same through the rest of the year, our consumer products business continues with the integration of Cellu Tissue and the build out of our new site at Shelby, North Carolina, and we are on track to meet our objectives.

Our Paperboard business remains solid and we have successfully completed our scheduled major maintenance in Idaho. I want to continue to express my appreciation to our many stakeholders for their support.

Before we move to questions, I want to mention that we will be presenting at the 7th Annual Oppenheimer Industrial's Conference on Tuesday, May 15 in New York and the Stephens' Spring Investment Conference on June 5 also in New York. Details are provided on our website and if you're interested in meetings, please contact Sean Butson or Oppenheimer to arrange.

Thank you for listening to our prepared remarks and operator we'll now take some questions.

Couple of quick questions. First of all on the tissue price increase.

I thought you were going to get 1.5% rolling into this quarter and if I'm not mistaken, it was better than that, would you attribute that to mix?

If we go back and look at what we were saying in some of the other quarters, Steve, I believe we said, 1.25% in the fourth quarter and 1.25% in the first quarter, we've got a little better than 1.25% in the fourth quarter and we ultimately did get our 2.5%. Some of the difference in those numbers is the mix, I think that's a good conclusion to come to there.

I think the point we want to make is that that price increase is in, that's done and we've got everything we said we did.

So that's the reason why the realizations were down in Q1 versus Q4 was mix as opposed to competitive activity?

Yes. It's more of a mix because we also shift -- our production is doing quite well in both paperboard, as well as tissue and we had more parent rolls to sell, so we sold more parent rolls and that's what we say by mix.

It's more of a mix of higher degree of parent rolls in that quarter than anything. That's the things that takes it down a little bit.

But the retail side of the business that price increase is solid.

Okay. And then, could you talk a little bit about the trends for pricing from pulp and paperboard to tissue, was that part of the reason that, I guess, the results were down beyond what was a function of the maintenance in the quarter?

I'm not sure what you mean about -- well the transfer price, the only really transfer price that we have, as we have one fixed price on our internal transfer pulp, and that we set at the beginning of the year and lasts for the entire year. That would have been a little bit higher this year than last year for example, but that number gets locked in to the Consumer Products division from the Pulp and Paperboard division.

So it's established at the beginning of the year for 12 months regardless what happens to market pulp.

Exactly.

And if I am not mistaken, it's done at cost as opposed to price?

Yes. It is.

It's done at cost. And that's why as, for example, I mean, you've hit on a good point there, that particularly amount of pulp is a fair amount of pulp inside of our system.

So as a pulp market goes up or down, that doesn't impact that particular number on the transfer price to the consumer products division.

Okay. And this is perhaps kind of related.

You had $15 million of maintenance in Q1 in the Pulp and Paperboard segment. I think you said you've got another $3 million or so in Q4, but where does maintenance show up in the tissue business?

In the cost of goods sold?

Yes. John will take that.

Yes. Major maintenance is performed at pulp and paperboard, and that's generally we talk to and say major maintenance.

That's when they are taking the plant down for extended number of days. For example, first quarter was 16 machine days in the first quarter.

At consumer products, we don't take any major maintenance. So we don't take anything down for an extended period of time.

So we don't classify anything as major maintenance. Those costs flow through as cost of goods sold and if you look at the EBITDA bridges in the supplemental, you will see that maintenance cost is both PPD and CPD total maintenance cost, including the major maintenance.

And is the reason that it's always Pulp and Paperboard that takes the maintenance expense because those two facilities have the actual virgin pulp mills?

Yes. Exactly right.

That's where the major cost associated was maintained, recovery boilers at both places, things like that, large, huge large pulp mills. All of our sites that are pure consumer products division did not have the pulp mills.

I mean, they are in Lewiston of course as well collocated to the pulp and paperboard divisions pulp mill, but CPD wise, there is not a pure pulp mill inside the CPD division.

Okay. And last question and I will turn it over.

The maintenance was taken in Q1, was that at Lewiston or down in Cypress Bend because I assume it's hard to do maintenance in the winter?

Yes. That was done at Lewiston.

And the -- and what we talked about for the remainder of this year in my remarks about the extra spend, I think I said $3.3 million. That's a Arkansas spend later in the year, but Idaho was done for the year.

And that's obviously not a major maintenance spend down in Arkansas?

Well, we consider it major maintenances because it's related to pulp mill and that it doesn't go, it's not as big a maintenance ticket is. That's what we do in Idaho, but it's consistent with the levels of major maintenance we have to spend.

Remember of course that's the newest pulp mill in North America run on SBS. So some of the cost issue with that ought to be little less.

But is it like a periodic every 2 year or 3 year shut where you do the boilers?

Right. We have rotations 4 major maintenance that are currently about one year and Idaho in 18 months and Arkansas.

The boilers are part of that mix, but everything in the pulp mill has its own rotation which we put it on. That's why you might see in Idaho for instance last year in the first quarter we did $11 million.

This year we did $15 million. It changes depending upon what comes up on that list as needs, but it's always much more major and Lewiston -- and remember that Lewiston is supporting significantly more volume out of there than Arkansas.

That's one of the reasons that's the cost is higher.

First, I just want to say appreciate the bridge in the quarter-over-quarter and year-over-year in the supplemental. That's helpful for us clarifying quite a few points.

Just first question on tissue pricing and just want to clarify because last quarter you talked a little bit but increased promotional activity. And I understand the change in price quarter-over-quarter is due to higher parent rolls, but the retail price, can you just confirm that did stick this quarter and promotional activity was sort of as expected?

Yes. It’s, absolutely, Yes and Yes on both points.

It stuck, as I mentioned on the previous question. We've got a little more than half of the 2.5.

In the fourth quarter we got the rest of it. In the first quarter it's stuck, it's solid.

That's on the -- of course on the retail side of business which we have said earlier is about 60% of the consumer products businesses on retail, so that absolutely did stick. And from a competitive environment, normal promotional activity.

So there is nothing that causes us any concern about the pricing environment in tissue.

Okay. Great.

Second question on pulp costs and we have seen a less pricing bottom out in Q1. And in the past you've noted a 2 to 3 months a lag as it runs through the system.

Would you expect then lower externally purchased pulp cost in Q2 or would it be relatively flat?

Well, it's obviously going to depend on what grade, but overall, we have the lags that we had before. We would expect those rising pulp prices to start hitting us in the next quarter, but then based upon analyst expectations, that's a very short-lived increase, then it hits back the other way and hits back down.

So if you look across the year, I would think about pulp this way. I would say that pulp started up and let's call it roughly in a February kind of timeframe.

It started up very modestly and that modest increase is probably according to the analyst going to be heading back down here in late spring and then remain down through the end of the year. So, although, we feel good about some of those lower pulp cost flowing through the first quarter, we are going to have a little bit of impact in the second quarter, then it will swing back the other way.

And just the outlook for other costs, given transportation, chemicals, energy, there was a little bit of inflation through the end of the year. Is that sort of stabilized at this point?

Well, it's hard to say, I mean, obviously, what happens to fuel is an important thing to us. We have a lot of fuel service, fuel surcharge cost that hit us from time to time and we do of course a lot of miles by truck and a heck of a lot by rail.

So it's hard to predict exactly on the transportation cost where it's going. And but we are hit I think like every other paper company with the higher caustic cost, the higher starch cost, the higher resin cost, poly cost, those kinds of things.

We get the benefit of natural gas. We get hit with the changes associated with fuel surcharge.

So it's really a prediction about what do you think is going to happen with the oil increase. So what we tried to do this quarter and I appreciate you mentioning that, is to be able to lay out for our investors and our all interested parties, the quarter-to-quarter comparisons, year-over-year and also consecutive.

So you could see how those costs are changing and see what the impact is. And the one thing I would mention Graham is that, when we look at those kinds of things, take a close look at what the footnotes say on those bridges because those are really important.

As you see on some of them, for instance transportation costs might be favorable and you might wonder why is that favorable, that's because we are doing a heck of a good job on scheduling things and moving stuff around and we do think the number is shipping miles, but at the same time, our fuel costs are going up associated with diesel and fuel surcharges. So that's kind of balanced out.

If those things go away, we are going to continue to do a heck of a job on shipping and organizing and planning our products. If those costs associated with diesel and fuel charges go down, it's only to our benefits.

Got you. And then just last question on the box board markets.

Here we saw folding carton prices come down in January, but your realizations only dropped maybe just $2 a ton. Is that more of a lag as things go through there or are you sort of exposed to, I know you've got [indiscernible] plate as well, but are you less exposed on the folding carton ton?

Yes. Great question, Graham because I am glad to have the opportunity to mention that a little bit.

There was some sort of very late fourth quarter pressure on our SBS board business which kind of carried over a little bit into the early part of the first quarter. And those were mostly on commodity grades.

RISI [ph] picked up that a little bit with folding carton grade was under some pressure and I think they had on their price watch dropped that down $20. And then subsequently, they said that cups have gone down $20 million.

Frankly, we didn't see that pressure on the cup price. We saw a little bit of it on the commodity grade of folding carton.

But from a price standpoint, the difference for us is that we worked hard on mix and we ended up with a higher priced mix, so that that price as you see on the supplemental at 968 is only off $2 but yet folding carton which is 40% of our business was off significantly more than that. However, having said all that, that's history.

That was early in the first quarter, demand is back, seasonality of our business we think there is not much and there is not much, but it's a good demand characteristics hitting for us right now and we feel great about it. But if our mix did change some time in the second quarter, which we don't anticipate but we will see, that would take the price down a little bit even though the SBS market is not moving down.

That little dip was already in and done is our early first quarter move. Does that make sense?

The first question I have is, are there any pass-through provisions either on the tissue side or the boxboard side related to either energy pricing or pulp pricing that we should be aware of or is it just all market based?

Yes. It’s very market based I mean.

When we say market based, we have contracts that might have a delay clause in them, or something like that, but there is not. And if we do have some, they are very minimal.

We call that sort of non-material kind of things for you, James. And if it was, it might be more on parent rolls relating full prices as they relates to parent roll prices or something like that, but in general for the majority of our business, no.

We just move with the market and we negotiate the contracts and whatever up down mechanism is, it is.

Okay. Then switching gears, the corporate line jumped a good bit, could you help us understand what the few issues on that.

First, what were the eliminations in 2012 just as a reminder? And should we expect the run rate for corporate to rain [ph] about 12 million a quarter all else being equal?

Yes, James. Great question that.

To answer the second first, that $12 million is a good run rate going forward. We've definitely done some things in corporate to help the company.

Really it falls in a couple buckets. The biggest of which if you look year-over-year, last year we had just finished the acquisition of Cellu Tissue.

What that meant is we had a whole bunch of integration that we needed to do and continue to do today. So a lot of that cost increase is figuring out how we wanted to run the company, bringing in services into corporate figuring out systems, and we continue that today.

So this year the costs are up a little bit quarter-over-quarter from fourth quarter because we are continuing to push projects -- integration type projects around IT, around shared services. Things like that that are going to help the company in the long run where we are going to have to spend a little money to do.

So our run rate for this year at about 12 is perfect.

James, Gordon here. I just want to mention, I mean we absolutely are committed to driving out non-value added costs, I mean we are going to do that.

So when we are spending money on that corporate line, it's about trying to help us in the future, but that's a good run rate as John mentioned to think about through the rest of this year and that we are going to continue to try to push it down as we drive out any non-value things that we see and it can improve efficiencies.

Okay. That helps.

And lastly, once Shelby is up and running, what do you expect your maintenance CapEx and normalized depreciation would be?

For the last couple of years, our CapEx has been right about 50 for the non-Shelby. We do have maintenance cost that roll through our cost of goods sold for Shelby already.

So maintenance costs this year year-over-year are up, but we look at that every year, we look at the projects, it’s part of our budgeting process and we identified what's the best use of our capital. So that number could go up, but it's going to depend on the projects we've got before.

So that 50 is a pretty good ballpark to benchmark that off of.

Okay. That helps.

And depreciation?

Depreciation should be pretty consistent. And I don't have that number right in front of me, but it's going to go up year-over-year.

Let me get that number back to look that up. It would be in the Q, so it would be pretty consistent quarter-over-quarter to summarize.

We will put -- we will work on trying to get that display in the Q for you James.

As far as Lambda Shelby, I know you mentioned 75% in the first year. Is that going to be sort of 0 or just pure cash funds in the first quarter?

Or maybe just kind of walk us through the parts that's going to have that ramps up? And if you could roll that into maybe discussion on how your discussions with some of the customer had been related to the new Shelby plant.

Or can you really not get into these deep discussions until Shelby is actually producing?

Well, we are in discussions with customers all the time related to Shelby. So let me answer that first and I will come back on the sequence or ramp up, Ian.

The comments we have from customers continue to be that they are very, very excited and interested about getting that TAD paper off of that Shelby machine and we are going to have both TAD tissue and TAD towel off of that. We work with customers.

We are working right now on how that works for them and trying to integrate that into their business, but we don't sense any problem at all. And I can sure we have a home for the TAD paper that will come off of that machine.

We feel very, very comfortable about it and we have a lot of anxious customers. The second part of the ramp up of that, we started paper machine up, of course it just doesn't stay down and then come up at full speed.

What happens is we said that that we would get paper on the real as the paper making term here, before the end of the year. But as we get into 2013 and that first quarter, you typically start up a machine and there is maybe not at optimal speed.

So you may not be running it at the full speed until you line it out a little bit. So you've kind of bring it up in stages and I will let my engineers.

I don't want to get them too much in trouble here, but that's the way we will bring it. We won't bring it up to full speed right away.

We will bring it up, stage it in at different speeds and different control points as it comes up. And the sum of those control points, that's why we are trying to give the insight into what that paper machines looks like for 2013.

The sum of all that is if you took the 70,000 tons x 75%, that's how many tons will go off that machines some time during 2013. So that would be more succinctly they will be some tons coming off that thing in the first quarter, but it just won't be at the rate of 70,000 tons a year.

Okay. And then in the discussions you are having with your customers, I guess one of the concerns is that there is lot of TAD actually coming online.

How are you going out there differentiating yourself? What's your value proposition if you could kind of remind us there?

Yes. Also happy to do that.

I mean, we are company that after our acquisition of Cellu Tissue allows us to address every single category associated with the tissue business from the -- Shelby comes up the very high end ultra to take on the market leaders, the branded market leaders and all the way down into valuing economy levels of paper, so we can do it all. And what we are offering our customers is the opportunity to do those kind of things across the whole range of qualities based upon what their desires are about selling their brand.

As a reminder, we don't have our own brands. Our brands are our customer’s brands, and if a customer brand wants to run just to the high end, we can do that.

They want to run to the low end, we can do that. If they want the whole range, we can do that.

So we think that we have a lot to offer in that regard about different options. And remember also that Cellu Tissue gave us some recycled capacity that we've never had before under old Clearwater and we can use that to also extend our product offering wise.

I am wondering, can you talk a little bit about demand trends you are seeing broadly speaking for private label tissue versus branded and what sort of competitive response if any are you seeing from the branded guys and how do you sort of see that continuing to play out over the balance of the year?

Still very good characteristics for private label I mean, we're probably enjoying some advantages of people wanting to have high quality and pay a little less for it, because they're buying it of a grocery store shelves or out of some of the other categories of customers. So we still see private label growing.

With respect to brand response I mean they all -- they might -- each one might respond differently, one might be offering a lower grade of product for themselves, but still putting their old name on it. Another might be taking capacity out.

Another might be doing something else. I mean they're all kind of doing different things, but I could tell you from our point of view on private label we still feel very good about the growth aspects of private label.

And we feel especially good about it when Shelby comes up because then we'll be able to offer a very, very high in range and also as well and that very large differentiator for us in the market.

And then I guess separate from the market dynamics between private label and branded, within private label do you feel the company is gaining market share or do you think the market shares are relatively stable or what sort of color can you furnish on that front?

Yes. We think, our retail sales are up.

When we say retail, we're talking about case sales, I mean our case sales are up, so I mean we feel like we are growing and our data suggests us that we're growing our private label share that the private label market is also growing its -- it grows at a little bit different speeds, depending whether you're talking, napkins or towels or tissue or high-end tissue, low-end tissue -- you'll got a little bit different cases associated with that. But private label is not only here to stay private label continues to grow.

And the fun thing about that is that this market is continues to grow based upon population. So, there is demand for everybody.

There is demand for the brands. There is demand for us and there is increased demand for us because of the private label, so we get the basic demand plus the private label demand.

And then I guess on a separate topic I know it's sort of theoretical, but when you look at tissue pricing today and then inflation is just to determine, where do you think it sort of stands and I know it will vary various product by product. But broadly speaking where do you think tissue prices are today versus about 2 or 3 years ago and is there more sort of catch up industry ought to be able to achieve and do you think that's possible at this point, given the move in pulp prices down and natural gas to your earlier comments, but having sort of a benefit from that input being down?

Yes I think and it's just purely just in my opinion remark I want to go back for -- don't have history in front of me for 2 to 3 years ago, but tissue prices will -- will probably move based upon not just demand but also what happens to pulp prices remember that -- that 2 of the 3 large branded players buy all of their pulp. So pulp prices go up that puts pressure on and as pulp prices go down that's something else again.

But it's hard to predict what's really going to happen related to the tissue market, but again if you think of tissue as a solid demand up kind of business in the pulp and paper industry, and pick whatever number you want for population -- if it's 2% on an 8 plus million ton market, you've to get 160,000 and 170,000 tons a year just to keep up. That demand is going to be there.

There's going to be needs for paper machines to supply it or part of that, and there's enough demand for brands and enough demand for private label to go for both.

I too appreciate the extra disclosures, so kudos, including that. Gordon I wanted to go back just briefly to -- I think it was Graham's question on the SBS market.

I know in your outlook, you basically suggested a more or less stable market. We're reading about some industry trends that include some near term pressure of late on cup stock as well as export volumes that might be under pressure.

And I'm wondering if you're seeing any of that or perhaps, the trade sources are drawing on a generalization from may be other parts of the country.

It's good as those trade sources are -- I think the information is a little late. I think it's kind behind the current curve.

Our competitors, they will do of course, whatever they wanted to do. From our standpoint, we think that the cup stock increased or the cup stock decreased that just got briefly announced by one of the trade publications and is pressure that is just now that only being seen by somebody, but it happened more in the first part of the first quarter than it did now.

We don't feel that pressure on cup stock. We felt it on folding carton.

We felt on as kind of the end of the fourth quarter, first part of the first quarter, but our backlogs look good, our business is up. We heard on a call from public call from a competitor today that they had felt solid about the market.

I mean we feel in a similar situation about it. I mean our order book looks good.

Okay. Great.

And I know you reported that Shelby contributed, I think was $1 million in the quarter in operating income. Just would love some qualitative color -- if you could on how the two converting lines that you've running are up -- that you have up excuse me, how running and are they -- are they running at full capacity or can you give us a sense for just kind of how that's going so far?

Yes and they're not at full capacity yet. And but they're working hard at it.

I would tell you -- I also know they're probably listening on this call, so they're hearing for me one more time. They're not at full capacity yet, but they're doing very, very well and we feel very good about what's going on in Shelby.

We have a tissue line there, a towel line there. We know that there is some additional optimization opportunities and efficiency opportunities associated with that but it's gone quite well.

A quick reminder I mean when that facility is done, we'll have almost 1 million square feet under a roof and we have already -- active warehouse there, helping us with synergies and taking cost out. We have 2 lines there.

We're adding in more lines to that particular facility. So all in all, we think we are just all aces at this point about how to startup has gone and we're counting on it to continue.

Okay. Great.

And one more quick if I could -- in your outlook you mentioned that you thought that the net selling price for tissue for the remainder of the year expect to remain stable -- just to clarify did you mean your fully loaded net selling price or you referring to like-for-like business if that make sense?

No. I talked about -- I think if I understand your question.

Am I talking about just retail or am I talking about the whole consumer product division?

Correct.

Yes, I'm talking about the whole consumer product division, but what can happen of course inside of that -- I mean there be a nice stable normal promotional on the 60% retail, but parent rolls were quite likely move a bit relative to pulp prices. So parent rolls pricing might goes down a little bit as pulp prices go down and up a little bit as pulp prices go up.

So that's the variability in the price and to me that's all in the bandwidth stable.

Just a little bit more on the pricing, how long does it typically take to respond to cost increases. I mean if you have a product that's kind of retail I think those prices -- the retailers like to keep their price kind of stable and they don't let you see, a lot of movement there, so is there a significant lag between cost increases that you see in pricing -- pricing -- price increases.

Because I mean pulp prices peaked last June I believe and you didn't really get much price increase until later in the year?

Yes. There is a series of kind of built up delays that happened with that that Stewart, and again it's a good question, but the first is, the premise of private label is that you can't take the prices up on the grocery store shelf above the brands I mean that's why private label fails, as it's a high quality matching product that a bit of lesser price.

So there's no customers that are going to let you out run the brands on pricing. So what happens is brand have to announce, once the brand is announced then the grocery stores or whoever might be our customers say let's see if the brands are serious and the brands have to demonstrate that they're serious in taking the price up and private label moves after that.

That whole process can be as much as 3 to even 6 months depending upon customers and grades and agreements and all that. So that's why you see that lag -- that's why frustration comes on our part, too, when we see pulp prices going down in the mid-summer and we see a good first quarter the following year, and they say, "well, it’s about time".

We say that to ourselves, too. It takes a while for those things to happen and so yes there is lag time associated with that.

Okay and you said I guess you're going to produce about 128,000 to 130,000 tons of tissue per quarter, applying pretty much stable throughout the year and so I mean that's not showing any growth is that because you're pretty much at capacity at this point.

Yes that is -- what we can produce -- that's the 128 to 130 as what we produce on our machines and we sell it all and if we are above those kinds of numbers like I believe we reported in the third quarter 134,000 that would have been a quarter that we bought paper in where it make sense for us to buy paper at a price that we could turn around and resell that paper or buy it at low enough price to convert it into finished case is to make sense that's always just -- it's an economic decision for us. We're in this thing to make money.

If we can buy, something at a low price and sell it for high price, we will. If we can buy at low price and convert it into cases we will, but we want the market to know that what we produce is really about the equivalent of 128,000 to 130,000 tons that's what you can expect from us when we are not buying.

Okay. That make sense.

And is the, I mean you say that you produce for every category of tissue, but our margins, I mean, typically higher for the higher value, higher proceed value products?

They are, I mean, that the top-end products, there is no mystery that those have some better margins than the low-end products, but of course it all depends on how much did it cost you to make it because some of the low-end price, you might be able to make significantly cheaper depending on your mix of furnished on a higher-end products, so it varies. But if you go to a store shelve, you will find that the high-end products of course are going to cost more than the low-end products.

How much it make on each note, what the margins are. We really haven't reveal because that the furnish changes underneath can make that look a little bit different, but we typically expect for high price products to get high margin.

And I'm assuming that the TAD products are going to be aiming primarily at the higher end because that is a higher quality product.

Yes. Yes.

That is going to be our way to allow our customers to put on their shelves products, which compete against the market leaders.

Okay and one last one, I think if my math is right you had somewhere in the area of about $3 million of expense related to integration of Cellu Tissue in the current quarter and you said that corporate's going to be about $12 million per quarter, but wouldn't that $3 million be going down some as the year goes on?

Stuart, this is John. We never really broke out the detail of that $12 million in corporate.

Cellu Tissue integration cost are a component of that and as far as, what they'll do this year with Cellu Tissue, we pick the project that we are comfortable with the $12 million all year and this year because some of those projects because of the size then we will take [indiscernible] put in place. Next year if we change, we will update that number, but that's a good number for the whole year.

I have two quick questions. First on corporate, I guess I'm looking at last quarter's call and you guys actually one mention about $10 million quarter of give and take and as one as he -- what change to go to the $12 million level, was it the any incremental expenditures related to Shelby.

And then my other question would be on if there is any seasonality in sales of parent rolls, I think you guys mentioned that -- that all price went down a little because of mix -- is there anything we should look to in terms of seasonality as a movement of more or less parent rolls, thanks?

I'll speak to the corporate cost since startup with when we look every year we look at the projects and everything is roll over and lot of this again going back to the Cellu Tissue integration. We take some additional project into this year due to urgency.

So that number has gone up to that 12 and that's why it's a little bit higher than prior quarters. There is a lot of noise and there are other things in corporate going in and out between quarters whether it's reserves, it's stock or other things, but every year we look at those and decide, which projects we can afford to improve the bottom line -- there's cost to do it but long term we think it's worthwhile, so the higher rate of $12 million is a number we're going to run out this year.

Can I expect that you are spending a little bit more that maybe there is more to come on -- on synergies as relates to Shelby, I mean?

There could be as soon as there is we would certainly let the market know and absolutely those synergies we recorded are net, so we want to be very clear that those are net numbers, so that's a great thing. If we are spending my money with still clearing with the synergies, it is opportunity that will do the once that make sense.

And absolutely those synergies we reported are net. So I want to be very clear that those are net numbers so that's a great thing if we are spending my money we're still clearing them with the synergies, but that opportunities through that will we'll do the ones that makes sense.

Ted, on the second half of your question, the seasonality there of parent rolls very little, but there is some that happens in the holiday period because some of the customers of ours that buy those parent rolls might take holiday outage or something like that and not need as much in the fourth quarter. And those kind of things but generally not so much, I mean, again think of the business that we are in, I mean it might be a machine glaze, might do some of those kinds of things, maybe a little bit of tissue, but the demand for tissue for all the obvious reasons doesn't really go down at any particular time of the year.

I'm just sort of wondering in terms of capital allocation. What are the latest thoughts in terms of the stock repurchasing program and just giving the move in the stock recently if that perhaps create some opportunities?

And how you sort of prioritize that and in the capital allocation thought process these days?

Well it's, it's still an option and we tried to provide transparency to that on the call. We said that we had purchased nothing really.

We went in the market in the first quarter, but we wanted folks to know to know that we've been in the market in the second quarter and purchased an additional 111,248 shares that's through the April 20th and we did 3.4 million by those 111,248 shares. We still have $15.2 million remaining under the program.

So, we have our program going. We made all the appropriate filings 10b51 and all those kinds of thing, so that's still out there.

It's still an option but our focus right now is really to drive values through EBITDA increases across both of our business segments and that's really how we are trying to drive the stock price.

Okay. Thank you very much.

We really appreciated once attention this morning. As I mentioned earlier we feel like we had a very solid quarter and we expect more than same through the rest of the year and thank you for participating.