CLEARWATER PAPER CORPORATION

Transcription

1 CLEARWATER PAPER CORPORATION FIRST QUARTER 06 SUPPLEMENTAL INFORMATION LINDA MASSMAN PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR JOHN HERTZ SENIOR VICE PRESIDENT FINANCE AND CHIEF FINANCIAL OFFICER

2 FORWARD-LOOKING STATEMENTS This supplemental information contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 995, including statements regarding financial models; the costs, timing and benefits associated with strategic capital investments and operational improvements; segment, corporate and consolidated outlook for Q 06; production; product volumes shipped; product pricing and sales mix; pulp and wood fiber costs and supply; chemical costs; operational and packaging supply costs; transportation costs; energy costs; cost and timing of major maintenance and repairs; cost of wages and benefits; selling, general, and administrative expenses; corporate expenses; estimated Q 06 EBITDA and adjusted EBITDA; and segment maintenance expense for 06. These forward-looking statements are based on management s current expectations, estimates, assumptions and projections that are subject to change. Our actual results of operations may differ materially from those expressed or implied by the forward-looking statements contained in this presentation. Important factors that could cause or contribute to such differences include the risks and uncertainties described from time to time in the company's public filings with the Securities and Exchange Commission, as well as the following: competitive pricing pressures for our products, including as a result of increased capacity as additional manufacturing facilities are operated by our competitors in North America and abroad; changes in the U.S. and international economies and in general economic conditions in the regions and industries in which we operate; changes in customer product preferences and competitors' product offerings; the loss of or changes in prices in regards to a significant customer; cyclical industry conditions; changes in the cost and availability of wood fiber and wood pulp; inability to successfully implement our operational efficiencies and expansion strategies; changes in transportation costs and disruptions in transportation services; customer acceptance in North America and abroad, timing and quantity of purchases of our tissue products; changes in costs for and availability of packaging supplies, chemicals, energy and maintenance and repairs; environmental liabilities or expenditures; labor disruptions; manufacturing or operating disruptions, including IT system and IT system implementation failures, equipment malfunction and damage to our manufacturing facilities; changes in expenses and required contributions associated with our pension plans; reliance on a limited number of third-party suppliers for raw materials; inability to fund our debt obligations; restrictions on our business from debt covenants and terms; and changes in laws, regulations or industry standards affecting our business. Forward-looking statements contained in this presentation present management s views only as of the date of this presentation. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

3 FIRST QUARTER FINANCIAL HIGHLIGHTS $437 MILLION NET SALES, UP.3% VS. Q4 5, VS. OUR OUTLOOK OF UP 0% TO % $38 MILLION GAAP OPERATING INCOME, UP 4% VS. Q4 5 $60 MILLION ADJUSTED EBITDA, UP % VS. Q4 5, AT HIGH END OF OUR OUTLOOK OF $5 TO $60 MILLION DILUTED GAAP EPS OF $.05, ADJUSTED DILUTED EPS OF $.09 $8 MILLION OF BENEFIT ACHIEVED FROM STRATEGIC CAPITAL AND OPERATIONAL EFFICIENCY INITIATIVES IN Q 6, $9 MILLION TOTAL SINCE Q 5 RETURNED $8 MILLION TO SHAREHOLDERS AS PART OF NEW $00 MILLION SHARE BUYBACK PROGRAM AT AVERAGE COST OF $39 PER SHARE Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure.

4 FINANCIAL SUMMARY (GAAP BASIS) (UNAUDITED) (Dollars in thousands - except per-share amounts) Net sales Selling, general and administrative expenses Q'5 Q'5 Q3'5 Q4'5 Q'6 $ 434,06 $ 444,558 $ 44, $ 43,595 $ 437,04 ($8,957) ($8,38) ($8,84) ($30,308) ($30,795) Operating income (loss) $ 5,37 $ 3,073 $ 40,046 $ 36,34 $ 37,76 Consumer Products,395 7,03 5,5 0,756 8,390 Pulp and Paperboard 6,94 7,754 37,446 39,467 35,63 Corporate (3,35) (,73) (,9) (3,909) (5,79) Operating margin Interest expense, net Income tax provision Net earnings Net earnings per diluted common share 3.5% 7.% 9.% 8.4% 8.6% ($7,78) ($7,774) ($7,88) ($7,744) ($7,643) ($,698) ($8,70) ($9,00) ($7,005) ($,673) $ 5,757 $ 5,597 $ 3,064 $,565 $ 8,446 $ 0.30 $ 0.8 $. $ 0.65 $.05 3

5 FINANCIAL SUMMARY (ADJUSTED BASIS) (UNAUDITED) (Dollars in thousands - except per-share amounts) Q'5 Q'5 Q3'5 Q4'5 Q'6 Q'6 Outlook 5 Net sales $ 434,06 $ 444,558 $ 44, $ 43,595 $ 437,04 %-3% higher Adjusted gross profit $ 46,478 $ 60,946 $ 69,70 $ 67,80 $ 68,989 Adjusted gross profit margin, 0.7% 3.7% 5.6% 5.6% 5.8% Adjusted selling, general and administrative expenses ($9,558) ($30,96) ($7,53) ($30,7) ($30,069) Adjusted operating income (loss) $ 6,90 $ 30,00 $ 4,07 $ 37,008 $ 38,90 Consumer Products 3,63 6,436 6,743,459 8,8 Pulp and Paperboard 7,0 7,754 37,685 39,647 35,63 Corporate (3,8) (4,70) (,4) (4,098) (5,065) Adjusted operating margin,3 3.9% 6.8% 9.5% 8.6% 8.9% 8.0%-9.5% Interest expense, net Adjusted income tax provision Adjusted net earnings ($7,78) ($7,774) ($7,88) ($7,744) ($7,643) ($,7) ($8,055) ($9,76) ($5,94) ($,089) $ 6,9 $ 4,9 $ 4,409 $ 3,340 $ 9,88 Depreciation and amortization expense $,008 $ 0,63 $,04 $,888 $,50 Adjusted EBITDA $ 37,98 $ 50,65 $ 63, $ 58,896 $ 60,070 $56,000-$64,000 Consumer Products 6,609 9,874 30,79 5,59 3,58 Pulp and Paperboard 4,4 34,49 44,0 46,68 4,530 Corporate (3,0) (3,73) (,790) (,963) (4,04) Adjusted EBITDA margin,4 8.7%.4% 4.3% 3.6% 3.7% Adjusted net earnings per diluted common share $ 0.36 $ 0.74 $.8 $ 0.75 $.09 Gross debt to rolling four quarter total Adjusted EBITDA Capital Expenditures $ 0,809 $ 9,54 $ 33,75 $ 50,478 $ 5,73 Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. Adjusted gross profit margin is defined as Adjusted gross profit divided by Net sales. 3 Adjusted operating margin is defined as Adjusted operating income divided by Net sales. 4 Adjusted EBITDA margin is defined as Adjusted EBITDA divided by Net sales. 5 This information is based upon management s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See Forward-Looking Statements on page.. 4

6 Q 6 VS. Q4 5 CONSOLIDATED ADJUSTED EBITDA BRIDGE PRICE/MIX Lower paperboard pricing, higher mix of tissue parent roll sales $70 ADJ. EBITDA (MILLIONS) VOLUME Higher tissue shipments, paperboard shipment volume $65 TRANSPORTATION ENERGY Network efficiency improvements and favorable rates due to increased carrier availability Lower natural gas prices $60 $58.9 $. $. $.0 $0.6 $3.0 $. $.5 $0. $60. MAINTENANCE Higher planned maintenance at Idaho in Q 6 $55 WAGES & BENEFITS SG&A Better absorption on increased production levels Timing of profit dependent accruals, lower bad debt expense $50 $45 Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 5

7 Q 6 VS. Q 5 CONSOLIDATED ADJUSTED EBITDA BRIDGE PRICE/MIX VOLUME Lower paperboard pricing, higher mix of commodity grade paperboard sales, higher mix of tissue parent roll sales, partly offset by tissue price increase Higher tissue shipments, higher paperboard shipments $65 $60 $55 ADJ. EBITDA (MILLIONS) $5. $. $.4 $60. PULP/WOOD FIBER TRANSPORTATION Lower external pulp pricing, higher internal pulp usage Lower fuel costs $50 $45 $9. $.0 CHEMICALS Lower negotiated polyethylene prices $40 $35 $37.9 $5.9 $4.8 ENERGY Lower natural gas and other energy prices $30 $4. $.0 $. OP. & PKG. SUPPLIES Lower negotiated prices $5 $0 MAINTENANCE Major maintenance at Idaho in Q 5, no major maintenance expense in Q 6 WAGES & BENEFITS Better absorption on increased production levels Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 6

8 STRATEGIC INVESTMENT AND OPERATIONAL IMPROVEMENT SCORECARD AS OF Q 6 FULL RUN-RATE EXPECTED ADJUSTED EBITDA IMPACT (MILLIONS $) Strategic plan announced in Q 5, expected capex of $37-$49 million Expected to yield a $5-$45 million Adjusted EBITDA increase by 08 In addition, assume an annual $0-$5 million of margin pressure 00% 80% 60% 40% 0% 0% $30-$35 $7-$3 $-$4 $37-$54 $7.0 $0.0 $- $.0 $.0 Continuous Digester 3 Warehouse Automation 4 Other Projects 5 Operational Improvements TOTAL STRATEGIC CAPEX $48-$58 $40-$4 $49 $0 05 ADJUSTED EBITDA ACHIEVED Q'6 ADJUSTED EBITDA ACHIEVED Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure Based on Q 5 prices, input costs, and market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See Forward-Looking Statements on page. 3 The Continuous Digester is expected to be completed in Q and Q 6 Adjusted EBITDA contributions were $.6M and $.4M, respectively and Q 6 Adjusted EBITDA contributions were $.4M and $.6M, respectively. 7

9 KEY SEGMENT RESULTS CONSUMER PRODUCTS (UNAUDITED) Q'5 Q 5 Q3 5 Q4 5 Q 6 CONSUMER PRODUCTS CROSS-CYCLE FINANCIAL MODEL Shipments Non-Retail (short tons),07 4,744,50 3,077 4,358 Retail (short tons) 7,0 7,476 76,856 73,004 75,07 Total Tissue Tons 9,09 96,0 98,06 96,08 99,385 Converted Products (cases in thousands) 3,05 3,5 3,375,64,990 Sales Price Non-Retail ($/short ton) $,475 $,430 $,530 $,448 $,477 Retail ($/short ton) $,864 $,846 $,787 $,805 $,784 Total Tissue ($/short ton) $,546 $,48 $,55 $,479 $,464 Segment net sales ($ in thousands) $35,76 $39,39 $47,039 $38,88 $45,08 Segment GAAP operating income ($ in thousands) $,395 $7,03 $5,5 $0,756 $8,390 Segment GAAP operating margin 5.3% 7.% 6.3% 4.5% 7.5% Segment Adjusted EBITDA 3 ($ in thousands) $6,609 $9,874 $30,79 $5,59 $3,58 Segment Adjusted EBITDA margin 4.3%.5%.5% 0.7% 3.3% 7.0% Includes away-from-home (AFH), contract and parent roll tissue products. Includes retail, AFH, and contract tissue case products. 3 Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 4 Non-GAAP measure Segment Adjusted EBITDA margin is defined as Segment Adjusted EBITDA divided by Segment net sales. 8

10 CLEARWATER PAPER TISSUE SHIPMENTS AND U.S. RETAIL TISSUE MARKET CLW Q 6 by Market Segment (% of Tons) CLW Q4 5 by Market Segment (% of Tons) U.S. Retail Tissue Market ($) (MultiOutlet) AFH 8 % Parent Rolls 5 % Other % AFH 8 % Parent Rolls 5 % Other % CATEGORY Total Retail Tissue Share ($) % Change Q 6 vs. Q4 5 PRIVATE LABEL BRANDS TOTAL 3 % 77 % 00 % (0.6) % 0.6 % - % Retail 76 % Retail 76 % Data Source: IRI Worldwide data through March 7, 06. 9

11 Q 6 VS. Q4 5 CONSUMER PRODUCTS ADJUSTED EBITDA BRIDGE SEGMENT ADJ. EBITDA (MILLIONS) $40 PRICE/MIX Higher mix of parent roll sales VOLUME PULP Higher retail and parent roll sales Lower external pulp pricing $35 $30 $5.6 $0.6 $. $. $.0 $. $.5 $0.5 $3.6 TRANSPORTATION Network efficiency improvements and favorable rates due to increased carrier availability $5 WAGES & BENEFITS Better absorption due to increased production levels $0 SG&A Timing of profit dependent accruals, lower bad debt expense $5 Previous Outlook vs. Segment Actual PRICE/MIX SHIPMENT VOLUMES EXTERNAL PULP CHEMICAL COSTS OP. & PKG. SUPPLIES TRANSPORTATION COSTS ENERGY COSTS MAINTENANCE SG&A Q 6 OUTLOOK VERSUS Q4 5 0-% higher 0-% higher lower Stable Stable Q 6 ACTUAL VERSUS Q4 5 0-% lower 0-% higher lower lower Stable Lower Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 0

12 KEY SEGMENT RESULTS PULP AND PAPERBOARD (UNAUDITED) Q 5 Q 5 Q3 5 Q4 5 Q 6 PULP AND PAPERBOARD CROSS-CYCLE FINANCIAL MODEL Shipments Paperboard (short tons) 9,635 04,983 98,535 0,580 0,340 Sales Price Paperboard ($/short ton) $,03 $997 $979 $956 $95 Segment net sales ($ in thousands) $98,850 $05,67 $95,83 $93,307 $9,86 Segment GAAP operating income ($ in thousands) $6,94 $7,754 $37,446 $39,467 $35,63 Segment GAAP operating margin 8.% 3.5% 9.% 0.4% 8.3% Segment Adjusted EBITDA ($ in thousands) $4,4 $34,49 $44,0 $46,68 $4,530 Segment Adjusted EBITDA margin.3% 6.8%.7% 3.9%.6% 9.0% Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. Non-GAAP measure Segment Adjusted EBITDA margin is defined as Segment Adjusted EBITDA divided by Segment net sales.

13 CLEARWATER PAPER PAPERBOARD SHIPMENTS AND U.S. PAPERBOARD MARKET CLW Q 6 by Market Segment (% of Tons) CLW Q4 5 by Market Segment (% of Tons) U.S. Paperboard Production 3 CATEGORY CLEARWATER PAPER OTHER Folding 55 % Folding 55 % Total Domestic SBS Market Share 4 % 86 % Folding 9 % 8 % Food Service 6 % 84 % Liquid Pkg 7 % Food Service 38 % Liquid Pkg 8 % Food Service 37 % Liquid Packaging 4 % 96 % Solid Bleached Sulfate. Food Service includes cup, plate, dish and tray products. 3 Data Source: American Forest and Paper Association Solid Bleached Domestic Production March YTD 06.

14 Q 6 VS. Q4 5 PULP AND PAPERBOARD ADJUSTED EBITDA BRIDGE SEGMENT ADJ. EBITDA (MILLIONS) $50 PRICE/MIX Lower paperboard pricing VOLUME WOOD FIBER Paperboard shipment volume Higher wood prices at Idaho due to higher regional demand $45 $46.3 $.6 $0.0 $. $0.6 $3.0 $0.4 $4.5 ENERGY Lower natural gas pricing $40 MAINTENANCE Higher planned maintenance at Idaho in Q 6 $35 Previous Outlook vs. Segment Actual PRICE/MIX SHIPMENT VOLUMES WOOD FIBER CHEMICAL COSTS OP. & PKG. SUPPLIES TRANSPORTATION COSTS ENERGY COSTS MAINTENANCE SG&A Q 6 OUTLOOK VERSUS Q4 5 Stable 0-% higher slightly higher Higher Stable Q 6 ACTUAL VERSUS Q4 5 % lower Stable slightly higher slightly lower Higher Stable Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 3

15 PROJECTED 06 PULP AND PAPERBOARD MAINTENANCE EXPENSE OF $65 MILLION (DIRECT AND INDIRECT COSTS) $30 Projected 06 Pulp and Paperboard Maintenance Expense (Millions $) $9 $0 $5 $ $0 $9 $- Q'6 Q'6 Q3'6 Q4'6 Major outage at Idaho, projected cost of $5-$8 million 4

16 CLEARWATER PAPER CROSS-CYCLE FINANCIAL MODEL (Dollars in thousands) Q'5 Q'5 Q3'5 Q4'5 Q'6 CLEARWATER PAPER CROSS-CYCLE FINANCIAL MODEL Net sales 00% 00% 00% 00% 00% 00% Adjusted gross profit margin 0.7% 3.7% 5.6% 5.6% 5.8% 7.0% Adjusted SG&A expenses as % of net sales (6.8%) (7.0%) (6.%) (7.0%) (6.9%) (6.0%) Adjusted operating margin 3.9% 6.8% 9.5% 8.6% 8.9%.0% Adjusted net earnings as % of net sales.6% 3.% 5.5% 3.% 4.4% 5.0% Adjusted EBITDA margin 8.7%.4% 4.3% 3.6% 3.7% 5.0% Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 5

17 ADJUSTED RETURN ON INVESTED CAPITAL (UNAUDITED) 5% 4% 3%.6%.9%.8% %.%.0% % 0.5% 0% 9% 8% LTM Ending 5 3/3/6 Adjusted ROIC,,3,4,5,6 4 Adjusted Return on Invested Capital (Adjusted ROIC) is defined as [Net Earnings + Interest Expense] / [Tangible Stockholders Equity 6 + Debt Excess (Deficit) Cash 6 ] adjusted for non-recurring discrete items. Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 03 Adjusted ROIC Net Earnings was adjusted to remove a benefit of $67.5 million from discrete tax items relating to release of uncertain tax positions. 03 Adjusted ROIC Interest Expense includes debt retirement costs of $7. million Adjusted ROIC Net Earnings was adjusted to remove a loss associated with the optimization and sale of the specialty mills totaling $37.0 million after-tax. 04 Adjusted ROIC Interest Expense includes debt retirement costs of $4.4 million Adjusted ROIC Net Earnings was adjusted to remove a gain associated with the optimization and sale of the specialty mills totaling $.9 million after-tax. 5 LTM Ending 3/3/6 Adjusted ROIC Net Earnings was adjusted to remove a gain associated with the optimization and sale of the specialty mills totaling $.8 million after-tax. 6 We recently adopted Accounting Standards Update 05-03, which requires us to retroactively include deferred issuance amounts in Debt for Adjusted ROIC amounts shown for 0-04 have been adjusted accordingly. 6

18 SECOND QUARTER 06 OUTLOOK (COMPARED TO Q 6) ARROWS REPRESENT ADJUSTED EBITDA IMPACT CONSUMER PRODUCTS PULP AND PAPERBOARD CORPORATE SHIPMENT VOLUME IMPACT ON ADJUSTED EBITDA PRICE/MIX IMPACT ON ADJUSTED EBITDA Slightly lower -4% lower Higher: 3-5% higher Slightly higher: -3% higher Slightly lower: 3% lower PULP/WOOD FIBER COSTS Cost/shipped ton: Cost/shipped ton: slightly higher CHEMICAL COSTS Cost/shipped ton: Cost/shipped ton: OP. & PKG. SUPPLIES Cost/shipped ton: Cost/shipped ton: TRANSPORTATION COSTS Cost/shipped ton: Cost/shipped ton: ENERGY COSTS Cost/shipped ton: Cost/shipped ton: lower MAINTENANCE & REPAIRS SG&A Stable Boiler water wash at Arkansas, higher planned maintenance at Idaho Slightly Higher Stable Slightly Lower This information is based upon management s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See Forward-Looking Statements on page. Non-GAAP measure See Appendix for the definition and reconciliation to the most comparable GAAP measure. 7

19 Q 6 OUTLOOK RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) FROM TO Earnings before interest, income taxes, and depreciation & amortization (EBITDA) : OUTLOOK THREE MONTHS ENDING JUNE 30, 06 RANGE OF ESTIMATE GAAP net earnings $7,000 $,000 Interest expense, net $7,500 $7,500 Income tax provision $9,500 $,500 Depreciation and amortization expense $,000 $,000 EBITDA $55,000 $63,000 Directors' equity-based compensation expense $500 $500 Costs associated with Long Island facility closure $500 $500 Adjusted EBITDA 3 $56,000 $64,000 This information is based upon management s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See Forward-Looking Statements on page. EBITDA is a non-gaap measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is net earnings (loss). EBITDA is net earnings adjusted for net interest expense (including debt retirement costs), income taxes, and depreciation and amortization. It should not be considered as an alternative to net earnings computed under GAAP. 3 Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance. 8

20 BRIDGE TO Q 6 ADJUSTED EBITDA OUTLOOK, $75 ADJ. EBITDA (MILLIONS) $65 $55 $60 $-($) $0-$ $-$3 $0-$ $-$4 $56-$64 $45 $35 $5 $5 Q'6 Adj. EBITDA Shipment Volumes Price/Mix Wood Fiber Energy Maintenance & Repairs Q'6 Adj. EBITDA, Outlook This information is based upon management s current expectations and estimates, which are in part based on market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See Forward-Looking Statements on page. Non-GAAP measure See prior slide for the definition and reconciliation to the most comparable GAAP measure. 9

21 APPENDIX 0

22 ADJUSTED GROSS PROFIT & ADJUSTED SG&A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q'5 Q'5 Q3'5 Q4'5 Q'6 Gross profit $ 44,94 $ 60, $ 68,330 $ 66,87 $ 68,557 Costs associated with Long Island facility closure Costs associated with labor agreement, Reorganization related expenses Adjusted gross profit $ 46,478 $ 60,946 $ 69,70 $ 67,80 $ 68,989 Selling, general and administrative expenses (SG&A) ($8,957) ($8,38) ($8,84) ($30,308) ($30,795) Directors' equity-based compensation (benefit) expense (470) (,457) (,94) (3) 76 (Gain) loss associated with optimization and sale of the specialty mills (3) (,33) Legal expenses and settlement costs - -, Reorganization related expenses - -, Adjusted selling, general and administrative expenses ($9,558) ($30,96) ($7,53) ($30,7) ($30,069) Gross profit is defined as net sales minus cost of sales. Adjusted gross profit and Adjusted selling, general and administrative expenses exclude the impact of the items listed that we do not believe are indicative of our core operating performance.

23 SEGMENT ADJUSTED OPERATING INCOME (LOSS) RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q'5 Q'5 Q3'5 Q4'5 Q'6 Consumer Products Operating income $,395 $ 7,03 $ 5,5 $ 0,756 $ 8,390 Costs associated with Long Island facility closure (Gain) loss associated with optimization and sale of the specialty mills (3) (,33) Costs associated with labor agreement Reorganization related expenses Adjusted Consumer Products operating income $ 3,63 $ 6,436 $ 6,743 $,459 $ 8,8 Pulp and Paperboard Operating Income $ 6,94 $ 7,754 $ 37,446 $ 39,467 $ 35,63 Costs associated with labor agreement Reorganization related expenses Adjusted Pulp and Paperboard operating income $ 7,0 $ 7,754 $ 37,685 $ 39,647 $ 35,63 Corporate Operating loss ($3,35) ($,73) ($,9) ($3,909) ($5,79) Directors' equity-based compensation (benefit) expense (470) (,457) (,94) (3) 76 Legal expenses and settlement costs - -, Reorganization related expenses Adjusted Corporate operating loss ($3,8) ($4,70) ($,4) ($4,098) ($5,065) Adjusted operating income (loss) excludes the impact of the items listed that we do not believe are indicative of our core operating performance.

24 ADJUSTED NET EARNINGS & ADJUSTED NET EARNINGS PER DILUTED COMMON SHARE RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands - except per-share amounts) Q'5 Q'5 Q3'5 Q4'5 Q'6 GAAP net earnings $ 5,757 $ 5,597 $ 3,064 $,565 $ 8,446 Special items, after tax: Directors' equity-based compensation (benefit) expense (35) (998) (,307) (55) 465 Costs associated with Long Island facility closure (Gain) loss associated with optimization and sale of the specialty mills (9) (9) Discrete tax item related to state tax rate changes Discrete tax items related to foreign tax credits - - -,309 - Costs associated with labor agreement, Legal expenses and settlement costs - -, Reorganization related expenses Adjusted net earnings $ 6,9 $ 4,9 $ 4,409 $ 3,340 $ 9,88 Net earnings per diluted common share $ 0.30 $ 0.8 $. $ 0.65 $.05 Special items, after tax: Directors' equity-based compensation (benefit) expense (0.0) (0.05) (0.07) (0.0) 0.03 Costs associated with Long Island facility closure (Gain) loss associated with optimization and sale of the specialty mills - (0.05) Discrete tax items related to foreign tax credits Costs associated with labor agreement Legal expenses and settlement costs Reorganization related expenses Adjusted net earnings per diluted common share $ 0.36 $ 0.74 $.8 $ 0.75 $.09 All non-tax items are tax effected at the expected annual rate for that period. Adjusted net earnings and Adjusted net earnings per diluted common share exclude the impact of the items listed that we do not believe are indicative of our core operating performance. 3

25 ADJUSTED INCOME TAX PROVISION RECONCILIATION OF NON-GAAP FINANCIAL MEASURE (UNAUDITED) (Dollars in thousands) Q'5 Q'5 Q3'5 Q4'5 Q'6 GAAP income tax provision ($,698) ($8,70) ($9,00) ($7,005) ($,673) Special items, tax impact: Directors' equity-based compensation benefit (expense) (6) Costs associated with Long Island facility closure (7) (3) (3) (47) (55) Gain (loss) associated with optimization and sale of the specialty mills (64) - Discrete tax items related to foreign tax credits - - -,309 - Costs associated with labor agreement (533) Legal expenses and settlement costs - - (66) - - Reorganization related expenses - - (376) (94) - Adjusted income tax provision ($,7) ($8,055) ($9,76) ($5,94) ($,089) Adjusted income tax provision excludes the impact of the items listed that we do not believe are indicative of our core operating performance. 4

26 EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q'5 Q'5 Q3'5 Q4'5 Q'6 Earnings before interest, income taxes, and depreciation & amortization (EBITDA) GAAP net earnings $ 5,757 $ 5,597 $ 3,064 $,565 $ 8,446 Interest expense, net 7,78 7,774 7,88 7,744 7,643 Income tax provision,698 8,70 9,00 7,005,673 Depreciation and amortization expense,008 0,63,04,888,50 EBITDA $ 36,45 $ 5,705 $ 6,50 $ 58,0 $ 58,9 Directors' equity-based compensation (benefit) expense (470) (,457) (,94) (3) 76 Costs associated with Long Island facility closure (Gain) loss associated with optimization and sale of the specialty mills (3) (,33) Costs associated with labor agreement, Legal expenses and settlement costs - -, Reorganization related expenses - -, Adjusted EBITDA $ 37,98 $ 50,65 $ 63, $ 58,896 $ 60,070 EBITDA is a non-gaap measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is net earnings (loss). EBITDA is net earnings (loss) adjusted for net interest expense (including debt retirement costs), income taxes, and depreciation and amortization. It should not be considered as an alternative to net earnings (loss) computed under GAAP. Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance. 5

27 SEGMENT EBITDA & ADJUSTED EBITDA RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Q'5 Q'5 Q3'5 Q4'5 Q'6 Consumer Products Operating income $,395 $ 7,03 $ 5,5 $ 0,756 $ 8,390 Depreciation and amortization expense,977 3,438 4,048 4,3 3,759 Segment EBITDA $ 5,37 $ 30,470 $ 9,569 $ 4,888 $ 3,49 Costs associated with Long Island facility closure (Gain) loss associated with optimization and sale of the specialty mills (3) (,33) Costs associated with labor agreement Reorganization related expenses Segment Adjusted EBITDA $ 6,609 $ 9,874 $ 30,79 $ 5,59 $ 3,58 Pulp and Paperboard Operating income $ 6,94 $ 7,754 $ 37,446 $ 39,467 $ 35,63 Depreciation and amortization expense 7,3 6,737 6,535 6,6 6,367 Segment EBITDA $ 3,505 $ 34,49 $ 43,98 $ 46,088 $ 4,530 Costs associated with labor agreement Reorganization related expenses Segment Adjusted EBITDA $ 4,4 $ 34,49 $ 44,0 $ 46,68 $ 4,530 Corporate Operating loss ($3,35) ($,73) ($,9) ($3,909) ($5,79) Depreciation and amortization expense ,35,04 Corporate EBITDA ($,63) ($,56) ($,300) ($,774) ($4,767) Directors' equity-based compensation (benefit) expense (470) (,457) (,94) (3) 76 Legal expenses and settlement costs - -, Reorganization related expenses Corporate Adjusted EBITDA ($3,0) ($3,73) ($,790) ($,963) ($4,04) Segment EBITDA is a non-gaap measure that management uses as a supplemental performance measure. The most directly comparable GAAP measure is segment operating income (loss). Segment EBITDA is segment operating income (loss) adjusted for depreciation and amortization. It should not be considered as an alternative to segment operating income (loss) computed under GAAP. Segment Adjusted EBITDA excludes the impact of the items listed that we do not believe are indicative of our core operating performance. 6

28 RETURN ON INVESTED CAPITAL, TANGIBLE STOCKHOLDERS EQUITY & EXCESS CASH RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) (Dollars in thousands) Twelve Months Ending March 3, 06 Net earnings (loss) $ 39,674 $ 64,3 $ 06,955 ($,35) $ 55,983 $ 68,67 Interest expense, net 44,809 33,796 44,036 39,50 3,8 3,043 Net earnings before interest $ 84,483 $ 97,97 $ 50,99 $ 36,835 $ 87,65 $ 99,75 Tangible stockholders' equity $ 05,63 $ 63,608 $ 334,783 $ 63,494 $ 45,789 $ 39,866 Debt 3 53,646 55, ,40 568, 568, ,84 Less excess cash 4 (48,440) (7,579) (78,675) (6,33) 9,40,77 Invested capital $ 670,89 $ 76,599 $ 896,58 $ 769,384 $ 83,96 $ 87,8 Return on Invested Capital (ROIC).6%.9% 6.8% 4.8% 0.6%.0% Stockholders' equity $ 484,904 $ 540,894 $ 605,094 $ 497,537 $ 474,866 $ 467,706 Goodwill (9,533) (9,533) (9,533) (09,087) (09,087) (09,087) Intangible assets, net (49,748) (47,753) (40,778) (4,956) (9,990) (8,753) Tangible stockholders' equity $ 05,63 $ 63,608 $ 334,783 $ 63,494 $ 45,789 $ 39,866 Cash $ 8,439 $,579 $ 3,675 $ 7,33 $ 5,60 $,8 Short-term investments 55,00 0,000 70,000 50, Operating cash 5 (5,000) (5,000) (5,000) (5,000) (5,000) (5,000) Excess cash 4 $ 48,440 $ 7,579 $ 78,675 $ 6,33 $ (9,40) $ (,77) Non-GAAP measure. Tangible stockholders' equity is defined as stockholders equity less Goodwill and Intangible assets, net. 3 We recently adopted Accounting Standards Update 05-03, which requires us to retroactively include deferred issuance amounts in Debt for Debt amounts shown for 0-04 in the table have been adjusted accordingly. 4 Excess cash is defined as the sum of Cash and Short-term investments less Operating cash. 5 Operating cash is defined as a minimum amount of available cash deemed by management to be sufficient to avoid operating disruptions due to a mismatch of cash inflows and outflows during an accounting period. Note: Balance sheet items are as of the end of each period presented. 7

29 RECONCILIATION OF GAAP TO NON-GAAP: STRATEGIC INVESTMENTS FULL RUN-RATE EXPECTED ADJUSTED EBITDA IMPACT OTHER PROJECTS OPERATIONAL IMPROVEMENTS (Dollars in millions) CONTINUOUS DIGESTER WAREHOUSE AUTOMATION PAPER MACHINE UPGRADES CONVERTING LINE OPERATIONAL EFFICIENCY SALES & MARKETING EFFICIENCY STRANDED OVERHEAD Operating income $.5 - $7.5 $.3 - $6.3 $7. - $8. $8.6 - $0.6 $0 - $3 $0 - $5 $ 7.0 Depreciation $ 7.5 $ 5.7 $ 3.9 $.4 $ - $ - $ - EBITDA $30 - $35 $7 - $3 $ - $ $0 - $ $0 - $3 $0 - $5 $ 7.0 Adjusted EBITDA $30 - $35 $7 - $3 $ - $ $0 - $ $0 - $3 $0 - $5 $ 7.0 (Dollars in millions) FY'5 TO Q'6 ADJUSTED EBITDA IMPACT CONTINUOUS DIGESTER WAREHOUSE AUTOMATION OTHER PROJECTS OPERATIONAL IMPROVEMENTS Operating income $ - $.0 $ 0.6 $ 7.0 Depreciation $ - $ - $ 0.4 $ - EBITDA $ - $.0 $.0 $ 7.0 Adjusted EBITDA $ - $.0 $.0 $ 7.0 Based on Q 5 prices, input costs, and market and industry data. Many factors are outside the control of management, including particularly input costs for commodity products, and actual results may differ materially from the information set forth above. See Forward-Looking Statements on page. Non-GAAP measure See Appendix for the definition. 8

30 FOR MORE INFORMATION: 9