Welcome to Clearwater Paper Corporation’s Fourth Quarter and Fiscal Year 2014 Earnings Conference Call. As a reminder this call is being recorded today, February 04, 2015. I would now like to turn the conference over to Ms. Robin Yim, Vice President, Investor Relations of Clearwater Paper. Please go ahead.

Thank you, Amanda. Good afternoon and thank you for joining Clearwater Paper’s fourth quarter and fiscal year 2014 earnings conference call. Joining me on the call today are Linda Massman, President and Chief Executive Officer and John Hertz, Chief Financial Officer. Financial results for the fourth quarter were released shortly after today’s market close. Posted on the Investor Relations page of our website at clearwaterpaper.com, you will find both the earnings press release and the presentation of supplemental information including outlook slide providing the company’s current expectations and estimates as to net sales, operating margin, and adjusted EBITDA for the first quarter of 2015. And certain cost, pricing, shipment, production, maintenance and repairs, and other factors for the first quarter and full year 2015. Additionally we will be providing 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 or in the supplemental material provided on our website. I would like to remind you that this presentation contains 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 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, 2013 and our quarterly filings on Form 10-Q. Any forward-looking statements are made only as of this date and the company assumes no obligation to update any forward-looking statement. John Hertz will begin today’s call with a review of the financial results for the fourth quarter and fiscal year 2014 and Linda Massman will provide an overview of the business environment and our outlook for the year and the first quarter of 2015. And then we will open up the call for the question-and-answer session. Now I’ll turn the call over to John.

Thank you, Robin. 2014 was a year of achievements and challenges for Clearwater Paper. We delivered record to net sales at $2 billion and adjusted EBITDA at $239 million and in adjusted EPS at $3.47 per share. Our Pulp and Paperboard division delivered record adjusted EBITDA of $173 million or 22% of net sales which is well above the Paperboard division cross cycle model of 19%. On the consumer product side, net sales increased 3% to a record $1.2 billion but the adjusted EBITDA margin of $116 million or a 10% of net sales was down from 11% in 2013, and well below the consumer divisions cross cycle model of 17% due to a combination of pricing pressure on conventional tissue and input cost inflation on pulp, energy, and transportation. From a capital structure and allocation perspective we further reduced our weighted average cost to capital with the issuance of $300 million in 5.38% 10 year senior notes in exchange for $375 million in 7.18% senior notes. If you combine the impact of the 2014 refinancing with that of the 2013 refinancing, we have reduced annual cash interest payments from $56 million to $29 million and we have reduced our cost of debt from 8.6% to 5%. We also returned $100 million to shareholders through our share buyback program at an average price of $63.50 per share. Since the 2012 inception of our stock buyback program, we have repurchased 4.5 million shares for $230 million, an average price of $51.13 and reduced shares outstanding by 20%. And on December 15th we announced another $100 million stock repurchase authorization which should enable us to return at least 50% of discretionary free cash flow to shareholders in 2015. Operationally we took actions on three fronts to address the market place pressures and…

Thank you John, hello everyone and thanks for joining us today. First I will start with 2014 highlights and then discuss our high level outlook for fiscal 2015 and more specifically for the first quarter of 2015. Our Pulp and Paperboard Division turned in a great year. The group exhibited excellent operational execution in all aspects of the business and fully leveraged the benefits of strong market. As a result we set new records in production, adjusted EBITDA dollars, and margin percentage. The consumer product side remained a challenge due to tough market conditions. In 2014 we were faced with ongoing competitive pressure from increased brand promotional activity and also went through a competitive bidding process with each of our largest customers. Those things together with higher input cost and a limited ability to pass through cost inflations led to margin compression. But despite that challenging environment, our CPD team had a great year. They achieved record net sales, maintained all of our major customers with longer-term arrangement, reached our full TAD shipment run rate in the third quarter, and shipped a record number of retail tissue cases in 2014. As we progressed through 2014 and it became clear that elevated competitive pressures and costing inflation [ph] within the consumer business would not likely abate. We determined that some significant and swift actions needed to be taken to reduce the consumer divisions cost structure to put us in the best position to achieve a 17% EBITDA margin model. Doing so has become our number one strategic priority. We are addressing that now and how we are organized, reducing the complexity of our supply chain, trimming the breadth of our product offerings, improving the cost competitiveness of our mill network, focusing on capital investments that we believe can really move the…

[Operator Instructions]. Our first question comes from Paul Quinn with RBC Capital Markets. Your line is open.

Yes, thanks very much and just couple of questions. One, versus your previous outlook versus exactly what you did in your actuals, looks like shipment volumes were down significantly in Paperboard, just wondering what happened there and whether you built -- is that the reason for the inventory build on the working capital side?

Hi, Paul this John. Yes, it is on the Paperboard side. A lot of it had to do with the labor slowdown in West Coast shipping ports and that relates to shipments that we are packaging [ph] that we have going to Japan. There was kind of in the last two weeks of December a fairly significant slowdown in shipments and it was more kind of aberration than a comment on what's going on Paperboard market. And some of that came from consignment customers and we think there is probably some inventory management going on in part of some of our customers. And that did contribute to the working capital increases as it relates to inventory. And in addition to that within Paperboard we’ve been fighting to get log supply down in Arkansas all year long with wet winter and supply is kind of freed up in the fourth quarter and they opportunistically kind of built up their log supply since we look into the 2015 year.

Okay, so we shouldn’t read into the 12% lower shipments in Paperboard as indicative of a weaker market, it is more of the shipping related issues that you encountered?

Yes, I think so. I mean I think when we look at the Paperboard market, the backlogs industry wide are not as strong as they were last year but last year it was seasonably strong. But as you look over period of time their backlogs are very healthy and there continues to be positive data points for example the New York City ban on phone going to hopefully all Paperboard but alternatives anyway by July of this year.

Okay and then just flipping a word to the tissue side, looks like congratulations on the sale of specialty side, I know there was some grief and expect margins to pick up there, you mentioned a number operational things that you’re working on. One of them was reducing SKUs which you’ve seen it at 13% reduction I think, what is your goal there and where are you in terms of number SKUs in that product line?

I’d say, Paul this is rough numbers because that means we are going to look for opportunities continually but I’d say we probably have about 70% to 80% of it captured already. I mean at least identified not executed, okay. And we’re still working with some of the customers to get that through and we’ll see that impact as we move into 2015. But we’ll continue to look at that because as we have those low volume SKUs it increases complexity which increases our cost of manufacturing and we need to ring that back in.

Okay and then just on the mentioned branded promotional activity, have we seen any sort of back off in that or has that been consistent all the way through 2014 and what’s your outlook for 2015 here?

In total, the promotions have actually picked up a little bit in Q4 I would say and is kind of across the board. We thought it might stabilize before we got into the back half of the year but it hasn’t. It actually increased in some key areas in the fourth quarter and obviously had impact on our results. So, it very likely might be the new normal. It’s hard to say. I tell you I think what we are doing internally is just focusing on what we control and that is servicing our customers well and I think we have done a great job with that through the year with regard to retaining businesses that have been out to bid or the accounts that have been up to bid and then setting the stage for a really strong 2015 for customer service.

Okay and the last question I had, you mentioned your cross cycle margin goal is 2 to 3 years away, what are the big levers there that would allow you to accelerate that, bring that forward?

Okay, so lot of those projects there is a big variety of projects in there. If there were any one project we probably would have done it long before now. I’d say supply chain is one area where we have some flexibility in how we deploy this that would include some of warehouse robotics. I would say some of the paper machine upgrades depending on how we deploy that capital, we’ve already moved forward some of the capital associated with the back end of our converting equipment with regard to beggars [ph] and wrappers. So those are probably the, I would say the biggest levers we have in moving us forward and being able to finagle how quickly that happens.

Great, that’s all I had, best of luck. Thanks.

Thanks Paul.

Our next question comes from Steven Chercover with D. A. Davidson. Your line is open.

Good afternoon and thanks for providing the slides about an hour earlier than normal.

You’re welcome Steve.

My first question is, I want to verify the volume that was sold by my calculations about 192,000 tons that drive with you?

Which business are we talking about?

I am talking about the tissue and machine glazed paper that you sold to Dunn?

Okay. I thought you met fold in the quarter.

Divested operational.

About 180,000 tons I would say give or take.

Okay, had there been something that have been shot in any of those facilities earlier.

No.

No.

Okay. So obviously given just almost 200,000 tons and about $200 million in sales, you are only getting just over $1000 a ton on that stuff so we should see the ASPs move up pretty substantially going forward?

Price mix will definitely improve, yes.

Great and then I might have just missed it but can your clarify how your pulp balance will change having sold those tons. As I recall you were short of about 400,000 tons of market pulp a year so is that almost cut in half?

Yes, I would say I think on the consumer side of our external purchases, about 40% presale was softwood pulp. We can now I guess repurpose what we are sending to some of those mills to make on a retained retail mills. And probably bring the percentage of external purchases down to 20%

And Steven our total basis we should probably be buying little over close to and around 230,000 tons externally and that would make up about 20% for the total company, 45% for CPD.

Great, thank you for that. And this is a loaded question because I actually like this position but considering that you’re selling almost more than half of what comprised Cellu Tissue, do you rethink how you might have even approached that whole business or the assets that remain sufficiently compelling that you are glad you did it.

I think Steven it’s always a little challenging when you go back in and play I am sure quarter back after the fact. But given the market dynamics we were faced with at the time of Cellu Tissue acquisition, I think we were able to bring onboard a broader mix of customers and channels that we didn’t previously have. And we have despite selling off these mills retained all of that business and have it managed across a smaller network of mills. So I would argue its optimized our productivity and brought us a much broader customer base than they otherwise would have had.

Great, okay. And then why would the SG&A be higher post divestiture. I mean you got rid of 5 facilities plus Long Island, is this part of the IT spend?

IT is a big contributor and we started on this journey kind of at the end of -- mid 2013 or end of 2012 I guess it was. And this is kind of our, I guess end of the line and there is some fairly decent IT spend that’s happening to kind of the complete the IT roadmap that we started on. I think you’re also probably seeing some incremental equity related expense associated with higher stock price and what that does to the stock comp number. And profit dependent expenses.

Okay and then you made a great effort to explain the maintenance impact and I just want to make sure that I am smart enough to understand what you are telling us. So we are 13 million to 15 million more expenditures in Q4 and the full year is 20 million to 23 million higher than 2014 with the remainder of that coming in Q2.

Correct.

That’s right.

Alright, very good, I’ll get back in the queue. Thank you.

[Operator Instructions]. Our next question comes from James Armstrong with Vertical Research. Your line is open.

Good afternoon. My first question is really around the Lewiston Pulp capacity, you mentioned in the call that you expect to debottleneck that mill, could you give us a range of how much debottlenecking you can do and the timing around it?

James, I don’t think we’re ready to do that right now. I would just say that it is part of the 300 to 400 basis point expansion that we think we can get, part of it contributed to the CPD business. As we move along and right now we’re studying the effectiveness of some of the different options we have and until we finalize I think it’s premature to make those estimates.

There is capital expenditures that mean to happen over a 2 to 3 year timeframe. So as it relates specifically to that, that’s more back end loaded versus front end loaded.

Okay, that helps. And then in the tissue business how much of your tissue is now sold as TAD and how much can of your tissue can you sell as TAD at going forward?

Well we have about a 100,000 tons of TAD currently and so that’s our full capacity. We’re running first full year at full rate for TAD so this will be the year that we get to see how much we can convert into to sell cases.

Okay and then just following up on the corporate expense line. As we go into 2016 and beyond, how much should corporate expense fall after the ERP system gets implemented?

Oh I want to make sure that I don’t mess up the capital side versus the expense side, but I think you should look for $1 million to $2 million reduction all else being equal related to IT.

Okay, that helps. Thank you very much.

And that was for the quarter.

Okay.

Our next question comes from Steven Chercover with D. A. Davidson. Your line is open.

I am back. Two little follow ups please, so you said in Pulp and Paperboard where your EBITDA margins are 21%, that’s about 200 basis points above the cycle expectation and I am just wondering why that is, is this kind of the costs are currently running below trend or the maintenance is below normal hopefully it’s not as prices are too high?

Well it is the strongest pricing environment we’ve had I think, definitely since I’ve been around and so the market just has been very, very strong for the last year to 9 months or so. That obviously helps. We did not have any major maintenance downtime in 2014 so that obviously helps. And then just from a production standpoint, recall we spend out a -- to focus at Paperboard was to really focus on operations and efficiency and that’s what we’ve done and we continue to. If you look at the slide in terms of our production output overtime you can see that continue to creep up. So I think it’s all those things.

Okay and then just finally to calibrate the EBITDA potential of the enterprise now. Years ago 300 million was the target you came close to a run rate, obviously you’ve divested just under 20 million of EBITDA and this year we’ve got $20 million more so. I know you don’t want to give full year guidance but should we be thinking in the vicinity of 260 million in EBITDA for 2015 and despite the divestiture when everything said and done you are still at $300 million full year target once you’re getting your cross cycle targets?

I don’t want to give a full year EBITDA dollar target at this point. I think if you probably noticed, our focus now is kind of more on the margin percentage side of the equation. You highlighted some things that you do need to take into account obviously, the lack of the specialty product, EBITDA dollars, the fact we are going to have 20 million to 23 million more in maintenance. I don’t know if there is other major items I would point out as you think about full year 2015.

Okay but once upon a time we had visibility that was run way beyond 300 million. So if we take away the 20 million, that 300 million target is still very much in place?

I think we are, from Linda’s comments on the consumer side from a input cost inflation standpoint and the pricing pressures that we saw last year from a competitive standpoint in the conventional space. And then just think about overall cost inflation since the 2011 timeframe that we had previously talked about going back to the time when we set the 300 million goal, that basically everything has kind of gone against us. So if everything stays like that, that makes it kind of harder to like stress we should have in 300 million. To extent that turns and we start to get some wind at our back, then that helps that.

Great, well let's hope for some wind. Alright, thank you.

Alright, thanks Steve.

Ladies and gentlemen that does conclude our question-and-answer session. At this time I will turn the call over to Ms. Massman for any closing or additional remarks.

Great, thank you. As you can hear we are very excited about the prospects of our business, the opportunities to increase operating efficiency across the company, and to continually improve and provide excellent service support and high quality products to our customers. Thank you for joining us today and for your continued interest in Clearwater Paper. On a final note, we will be presenting at the Bank of America Merrill Lynch Conference in March and we hope to see you there. Thank you.