Please standby. Good day. And welcome to the Clearwater Paper Corporation First Quarter 2010 Earnings Conference Call. As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Linda Massman, Chief Financial Officer; and Gordon Jones, CEO. Please go ahead.

Thank you. Good morning. And welcome to Clearwater Paper’s first quarter 2010 conference call. A press release this morning includes the detail regarding our first quarter and you’ll find a presentation of supplemental information posted on the Investor Relations area of our website at www.clearwaterpaper.com. Additionally, we provide certain non-GAAP information in this morning’s discussion. A reconciliation of the non-GAAP information to comparable GAAP information is included in the supplemental material provided on our website. Before we get started, I would like to remind you that this presentation may 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 by 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, 2009. 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 today’s call with financial highlights for the quarter and will be followed by Gordon, who will provide commentary on the different business segments and comment on the 2010 outlook for the business before we take questions. We’re pleased with our performance for the first quarter of 2010. Before reviewing our results, I want to call to your attention two items that are included in our results that might be confusing. First, we’ve a one-time charge related to the recent passage of healthcare reform legislation. And secondly, we completed significant major maintenance during the quarter, which impacted our results versus last year. We reported…

Thanks Linda. We continue to have strong fundamental performance in both of our segments. Our consumer products segment continued to show revenue growth driven by a 3.8% increase in volume shipped, which was partially offset by a 2.5% reduction in net selling prices. We maintained very high production levels and shipped 1941 more tons than we did in the first quarter of 2009. Pricing has continued to remain relatively stable but with higher promotional spending as compared to last year. We experienced excellent production in paper making and converting, but experienced higher input costs for pulp and purchased paper. Our pulp and paperboard segment performed well in the first quarter when taking into consideration the impact of the scheduled major maintenance that was performed during the quarter. First quarter net sales were 26.4% higher than the same quarter last year, which was mostly attributable to significantly higher paperboard shipments with only slightly lower average net selling prices. Adding to these gains was a 37.1% increase in market pulp pricing accompanied by an increase of 10,878 tons of shipments to third parties versus the first quarter 2009. Also contributing to the pulp and paperboard business was a modest rebound in wood products, whose revenue increased 5.7% or $5.7 million from last year based on shipments that were up 55.1%. As it relates to our growth strategy, there are a couple of updates to provide today. First, we continue to move forward with final site selection for our future converting facility in the southeastern U.S. We are still negotiating tax and land incentives with local officials and are hopeful that these negotiations will be completed soon. As mentioned previously we are planning to build two converting lines for approximately $30 million that are expected to run both conventional and TAD paper. Second,…

Thank you. (Operator Instructions) And we will take our first question from Steve Chercover with D.A. Davidson.

Thanks and good morning.

Good morning, Steve.

Just wondering, can you discuss the implosion or the collapse of the pulp tank in Lewiston? What happened there? Was it a contractor error and I’m assuming that must have had a negative impact on first quarter results if you were buying spot pulp?

Well, it’s a good question. We didn’t really talk about it in the release because it’s one of those things that is unfortunate to have happen. But we sort of consider it in the normal course of business. Our folks at the mill did an outstanding job of, there were no injuries, no safety issues, nothing related to that. What happened was the blow tank collapsed and this is a tank that really received the chips coming out of the digester and we had a collapse. And we’ve heard of other instances where that has happened in the industry. But anyway, we jumped on it right away. It added to the down time associated with the pulp mill. The pulp mill was down for an extended period, longer than we thought but we came back up. It was an insured event and therefore the total cost of the project we thought was not material.

Okay. So basically it didn’t impact the dollar cost you took for the maintenance in the quarter because you’ll get it back?

Yeah. It has not. We’ve insurance covering that event and our deductible on that insurance is $1 million, so thereby relatively immaterial.

Okay. But you did have to buy pulp kind of aggressively in the open market, did you not?

We did, exactly. And in a difficult time to be buying that pulp and of course it was expensive, but that’s right.

Sure. But I guess not, again, not material enough then to call it out…

Exactly.

… as an impact for earnings.

Yeah. Exactly right.

Okay. And could you explain perhaps the rationale for no longer showing us the wood products business as a standalone segment because things were getting a lot better there too. That could be a needle mover, I should think?

Yeah. Steve. It’s something that we’ve been looking at internally now for a while. We really run that business in conjunction with our pulp and paperboard operation. And considering how we run that business and how we look at that part of the business as well as the materiality or lack thereof of the financial component of that business. We just decided it was easier to put it into two segments, focus on the two main parts of the business. And obviously if there’s anything material that comes up in that part of the business we’ll call it out as part of our segment performance in pulp and paperboard.

Sure. But, I mean, I guess, when you lost, what, $18 million or something in wood products last year, given your share count that’s a couple of bucks a share almost.

Yeah.

So it is material.

Yeah. Last year was considered somewhat of an aberration from historical performance.

Okay.

If we had it as part of that segment last year, we would have called that out in the segment financials.

But things are getting a lot better, I trust, is there, can you differentiate between, are you doing more cedar there now or more commodity soft wood?

It’s the same basic mix that we’ve been doing for an extended time, Steve and it is getting better. We did drop a line in about wood products and the revenue differences quarter-to-quarter to just kind of give folks the insight and hopefully be able to see that. But yeah, it’s the same basic mix, cedar and dimensional lumber and the markets have improved, particularly on the dimensional side. So we feel good about where that’s going. But we really feel like that we want to think of that as one segment. Total pulp and paperboard and wood products kind of all combined. And the fact that it’s all at one site, it seems to make a lot of sense for us. If you’d look back at our supplemental, you can get a real good feel for what’s happen relative to the volumes coming out of the lumber operation. In fact, on our supplemental with volume and sales and price, you could see that the lumber volume is up significantly quarter one ‘09 to quarter one 2010. So you’re right, that business seems to be doing better. I don’t know that anybody is ready to call the housing slump over at this point. That would certainly be a heroic statement but things seem to have gotten better for us and we feel much better about where that business is today than where it was a year ago.

Okay. I’ll get back in the queue. Thank you.

Okay. Thanks Steve.

And our next question will come from Ian Zaffino with Oppenheimer. Mr. Zaffino, please go ahead, your line is open. And hearing no response, we’ll move on to Eric Hollowaty with Stephens Incorporated.

Good morning, guys.

Good morning, Eric.

A few questions. And several of your competitors both on the branded, as well as private-label tissue providers, have reported a tough first quarter for sales volumes. And you guys obviously seem to have outperformed the industry there. I was wondering if you had any thoughts that you could share on what you think accounted for that?

Well, it’s really I think it just the good blocking and tackling of our consumer products division. I mean, they’ve really done a very nice job and spent a lot of time and attention on customer needs and I think that’s paying off, Eric. It’s -- we feel very comfortable in our business model, we’ve been working hard of course to control costs, but at the same time, our sales folks have been working very hard to take care of those customers and fit their need. And as you know, the tissue market continues to be a good market. The long-haul kind of growth there is nice and steady, so there is -- the forecast of tissue business looks good, that’s one of the reasons we feel so good about it and our sales folks are doing a great job of staying with our customers and meeting their needs. So I don’t know that it’s any kind of magic board other than just a lot of hard work, effort and attention to the business.

Okay. On the paperboard side, it seems like from a macro standpoint demand is coming back pretty robustly in terms of demand for consumer packaging. And you guys, if I recall correctly, have about 765,000 tons of annual capacity on the paperboard side, which if you straight line it by quarter, you get about 191,000 tons per quarter. Although looking back to the third quarter of last year you did north of that. But I’m wondering, could you comment on capacity utilization and how much further do you have to push the envelope on volumes, if we continue to see demand pick up on the paperboard side?

Well, I think you’ve got our capacity correct and that that’s the way to look at it. We’re always trying to find just a little bit of extra capacity. We have been running well, we ran quite well in the first quarter, right up until the outage. And both of our divisions, both of our facilities, our two large facilities in paperboard, did very well. We had some challenges in the Southeast relative to wood supply but they did a great job of working through that. And as far as I know, pulp and paper, again, they were running well right up until the outage. So we’re running well, creating capacity and filling the heavy demand that we’re getting in the market. Our backlogs are significantly higher than they were a year ago and that’s shown right there in the tonnage. But being able to predict how much more is out there from a capacity basis, it’s very hard. Because we’re trying to find those incremental increases on those machines every single day. So it, but I think if you look at our capacity, as you mentioned and take that as sort of the normal nominal capacity that’s a good number if you are modeling.

Any sense you can give us for the extent of the backlogs in weeks or other measure, just for perspective?

Yeah. I think it’s very competitive. But still those backlogs are growing as, if you’ve heard some of these other conference calls, as we’ve here, about people have picked up backlogs in the anywhere from three to six week range or four to six week range and I would say that we’re in that range.

Okay. Great. I’ve a follow-up or two but I’ll get back in the queue and queue up later.

Okay. Thanks Eric.

Once again, our next question is from Ian Zaffino with Oppenheimer.

Sorry about that. The question would be, what are you seeing from the pricing environment on the bath tissue side. Given this large run-up in pulp, I would imagine the branded players need to recoup some of that. But I don’t know if we’ve yet seen that. I mean, have you started to see that yet and if not, what’s going on that they really haven’t been able to do that? Thanks.

Yeah. I’ve, that’s, again, a very interesting question because it full market has run up because of the Chile situation and a number of other reasons. The market was already pretty strong prior to the earthquake in Chile, of course and that made pulp even tighter. But from our aspect here, just as a quick reminder, we’re a net buyer of pulp. We’re not that large a net buyer of pulp. We’ve annualized about 85,000 tons of market pulp, which on a net basis that we buy in, so that -- with selling some pulp, we’re actually a bigger buyer than that but we’re a net buyer of 85,000 tons. So we watch it, it’s important to us, it’s certainly in our opinion probably more important to our competitors than it is to us, particularly those competitors that don’t have pulp mills. So we just kind of interested also, wait and see what happens relative to the brands. We’ve heard of one company that has talked about raising the prices and I think that’s a public sort of announcement. We’ll see how all that works out. When we set our prices of course we take into account what the brands are doing. We also put into it our costs and our needs and as we negotiate with customers. So it’s kind of one of those things where we wait and see what the overall market looks like and we’ll, and my guess is folks are making their own assessments about the legs of this pulp market and how long it will last and how long it will stay up at high levels. Even if it were to go over the top and start heading back down, even heading down from today’s levels is still a high pulp price. So I’m sure that in different quarters of this country they are studying those pulp costs right now and trying to figure out what they want to do with tissue prices.

Okay. Great. Thank you very much.

Thanks Ian.

And next is Kevin Cohen with Imperial Capital.

Good morning. Thanks. Nice quarter, guys. I’m wondering if you could talk a little bit about the pricing dynamics, tissue maybe, as you look ahead to the second quarter and the second half with the industry leader out there with a price hike. And kind of how you guys think about the pulp pressure that the industry is facing and what that means for pricing for the industry, generally speaking and for you guys specifically?

Yeah. Not, Kevin, not a lot to add to what I was mentioning to Ian before about pricing. The pulp is a key variable, frankly, in our opinion probably more key to other companies than it is to us because we’ve our own pulping operations, but and we’re only a net buyer of 85,000 tons of pulp. But those kinds of things may feed price increases or they may not. We kind of are very interested also as we talk to customers about what the brands might be doing on the shelf but also other private label folks. We’re not afraid at all to raise prices as we need them and as we think appropriate, but we do these all on negotiations with individual customers. And I think this is just kind of one of those points in time where we’re all trying to figure out what is appropriate relative to the market conditions. And I think the high rise of pulp is going to drive folks either one way or the other but it’s certainly a big consideration to the entire tissue business of what’s the price of pulp.

And then, I guess, when you think about potentially that large CapEx program in 2011, is there sort of an absolute hurdle rate that you guys think about? Because I think clearly the return on that project exceeds your cost of capital, given where the bonds trade and how the stock is performing. But are there any thoughts in terms of just an absolute hurdle rate?

Yeah. We do look at all of our capital projects internally, looking at a lot of measures including internal rate of return. I’m, however, I’ve chosen not to disclose our specific hurdle rates to the market, but obviously looking for projects that create shareholder value and have pretty substantial IRR’s above and beyond our cost of capital.

And then lastly, any color in terms of the increase in volumes on the paperboard side and maybe what we should think about over the balance of the year, very strong shipment trends in the first quarter clearly?

Yes. It has been. We’ve strong shipments there the paperboard folks and paperboard sales folks, as well as, both mills are doing an excellent job on responding to the market change. There certainly has been a market change. When we look at that, paperboard sales a year ago, in our supplemental’s they’ll show 152,000 tons, and here in this quarter its 189,000 tons. That’s really a function in the difference of demand and the improving economy. And so the question is really what assumption do you make about where the economy is going? This is the time of year where this business also typically does a little bit better relative to demand. So it’s -- we’re still trying to figure out whether or not this is seasonal or economy-related. I think it’s just a general change in business conditions that allow for that. I think the economy is helping us. Our backlogs are stronger, we feel much better about the paperboard business this year than we did a year ago at this time. So it feels right and it feels very positive.

Great. Thanks for your thoughts. And good luck over the balance of the year.

Great. Thanks Kevin.

Next is Jerome Lande with Millbrook Capital.

Hi. It’s Craig Rosenblum here for Jerome. Just one question to clarify something you said earlier. You mentioned there was a 5% interest. Was that on your tax receivable or on the tax payable and where did that 5% come from?

Yeah. The 5% interest is the interest we’ve to pay on our uncertain tax position, which you see in our accrued tax liability and that interest charge will not be flowing through our interest expense but instead flowing through our tax expense line.

And that 5%, where does that the 5% number come from? Is that from the IRS or?

Yeah. It’s guidance within, the IRS isn’t exactly specific, but it’s within the general guidelines of what would be considered a market rate.

Okay. Thank you.

Thank you.

Next is Roger Spitz with Banc of America.

Thank you. Good morning.

Good morning, Roger.

Regarding the $62 million tax receivable related to the alternative fuel mixture tax credits, have you already received this cash and this is just a balance sheet item or will you receive this cash in the future?

Yeah. We actually have already received that cash and we’ll be disclosing that as well and the details around that, in our 10-Q, which will be released next week.

You mean you received it this quarter?

No. No, in…

You [receive last year]?

No. We received it after the quarter, after the first quarter, so we received

You received it in Q2. Got it. And -- okay. Regarding the Southeast expansion plan, will that be up and running in the second half of ‘11?

I believe last time when we did the call we talked about it -- trying to get it done under that kind of a schedule and we’re not giving up on that date. We still think that’s a reasonable kind of date. As we look at all of the things associated with that project along with our evaluation of a paper machine, there is linkage there relative to timing. So once we’re ready to talk and as I mentioned, we’re shooting very hard and are going to have some answer here before the next quarterly earnings call. But as we give that out then hopefully we can update some folks about what we think our timing is, not only for that project but if we were to do a paper machine, what the timing would be associated with that.

What would be the…

But you’re right, that’s about the timing it was.

Okay. Perfect. What would be the kind of revenue -- incremental revenue that on an annual basis that would produce, ballpark?

You know, you’re thinking about on the converting side?

Yeah. Just the converting portion. The Southeast expansion converting portion?

Yeah. What we had said on the last call was we expect it to be $10 million after the first full-year of operations of EBITDA.

Okay. And was that EBITDA based on a certain pulp price level, to the extent that the changes in pulp price would have an impact on that EBITDA?

Yeah. That’s an average type number, obviously, that’s going to fluctuate with our cost inputs.

Okay. Do you price your pulp, the pulp that you transfer internally from the pulp and paper segment to the consumer products segment, is that priced at a market price or priced at cost?

At market.

Okay. Great. Thank you very much.

Thank you, Roger.

Next is Tony Delserone with Federated Investors.

Gentleman, there have been a number of announcements in the trade press of tissue machines planned, many of them in the Southeast. Could you please give me an idea of what that does relative to the new type of tissue machines that you’re planning?

Sure. It’s, I guess, first of all, I’ll take a half a step back to kind of position my response here. When we think of the tissue market, we see it as about a 7.5 million ton market. And the long-term trend on that is that the growth associated with that 7.5 million tons is really going to be about 2%. So call it 150,000 tons of new capacity is going to be needed every year across the total tissue market. Remember, that’s not just bathroom tissue, that’s household towels and napkins and facial tissue, the whole nine yards. So if we’re going to go 2% as a demand requirement, 150,000 tons, the industry is going to need two new paper machines a year just to keep up with existing demand. And so, now those machines can get split a little bit, because we’ve away from home markets and we’ve at home markets. So if you took and if you said that market was roughly split in half, one machine might be for the away from home market, one might be for the at home market, we really don’t know where -- necessarily what these announcements mean about what market they’re going to run into. None of the announcements that have been made to date really scare us relative to having an overcapacity situation on tissue. I mean, all of the machines that we’re aware of that we’ve seen in the press and the markets that those people particularly focus on still feels right. And we don’t see any kind of impending problem with too much capacity all of a sudden coming on at one time. Most of those machines that are announced our TAD machines. There is one or two that aren’t and what we’re evaluating of course is a TAD machine. So as we look at it, there’s nothing in there that scares us relative to the announcement that we’ve heard to date about new capacity.

And the Georgia-Pacific machines that they have advanced with the or announced with the new technology. Does that compete with your TAD machine if they direct it toward either the away from home or the at-home market appropriately?

You know, honestly don’t know, really don’t know which way Georgia-Pacific is going with that. I’m not even sure, what site they are going to put those at and what their focus is going to be. Obviously, they are a big player and they have lots of resources to chase different market segments. but we really don’t know what they are going to do with those two machines.

Anything further Mr. Delserone.

No. Thank you.

Hey, Tony. Thank you.

And now we’ll take a follow-up from Eric Hollowaty with Stephens.

Okay. Yeah. Just wanted to go back to the paperboard business for a moment. You guys saw a slight increase in your paperboard net selling price sequentially from the fourth quarter. And I recall, it may have been in the trade press as opposed to something you guys issued on a call or via release. But regarding price increases in paperboard, did you implement anything during the first quarter and if so, do you think there’s additional upside from the further implementation of a price increase given that it often takes a quarter or two to fully push those through to your respective customers?

Yeah, Eric. We actually did. We implemented some price increases. For just a moment in history here, there was an effort that was launched for a January implementation date in bleached paperboard. And as you read correctly in the trade journals, there were a number of companies that were chasing in SBS a solid at least improvement in price and we were one of those. And that particular effort was minimally successful. It was successful for us in some grades and some parts of our book of business but not on others. And then the trade journals also reported that basically the SBS market is going after another increase, which would basically be those people that didn’t get that increase in place or any part of it in January are now chasing it here in the month of April. So basically I would like to think that we’re out in front of that situation and that we were able to implement some piece of that particular price increase early and then there were -- there’s other effort to gain price at even higher levels sort of across the board in the market in April. So bottom line is, yes, I think there is more upside in the paperboard price.

Great. Thanks Gordon. Thanks Eric.

Next is Jonathon Goldrath with Fortress Investment Group.

Hi, guys. I was wondering if you could speak a little bit to the inroads you’re making into the eastern or Southeastern markets ahead of building the two converting lines there, in terms of interaction or what you guys are doing in terms of consumer products in those markets currently?

Sure. We’re -- I’m happy to do that. The converting operation down there and one of the things we’re excited about that converting operation is that we already have a good customer base in the Southeast. I mean, we actually service that whole market already by taking our parent roles from Lewiston and taking them, as an example, to our Elwood, Illinois facility and then converting them to finished cases and shipping finished cases down there. So to the extent that we’ve a converting facility in the Southeast and can ship current roles from, let’s say Idaho or we could ship them from our Las Vegas paper machine. But either way, ship them to a southeastern facility really helps us relative to freight and logistics. So we have a great freight and logistics advantage. But we’re also then going to be right on site for an existing customer base. Now, we want to grow our business and we want to look at opportunities that we’ve there and we’re working hard on that, but we’re really moving our converting and positioning our converting into an already existing customer opportunity or customer base for us.

That’s great. And does the $10 million in incremental EBITDA take into account the savings you guys will see on freight and logistics?

Yeah. It does.

Yeah. It does.

Okay. Thanks guys. That’s it.

Yeah. Thanks Jonathon.

There are no further questions in the queue. I’d like to turn the conference back over to the presenters for closing remarks.

Okay. Well, thank you all very much for participating, we really appreciate your support and interest in our company and we look forward to talking to you on our next earnings call. Thank you very much.

This does conclude our conference call today. We’d like to thank you for your participation.