8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

February 14, 2011

Date of Report (Date of earliest event reported)

KapStone Paper and Packaging Corporation

(Exact name of registrant as specified in its charter)

Delaware	001-33494	20-2699372
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1101 Skokie Boulevard, Suite 300
Northbrook, Illinois 60062

 (Address of principal executive offices)

(847) 239-8800

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On February 14, 2011, KapStone Paper and Packaging Corporation (“KapStone”) issued a press release reporting earnings for the quarter and year ended December 31, 2010.

Item 7.01 Regulation FD Disclosure

On February 15, 2011, the management of KapStone will participate in a conference call discussing KapStone’s earnings for the quarter and year ended December 31, 2010. A copy of the presentation materials used in the call is furnished as Exhibit 99.2 of this report.

Also, on February 17, 2011, Matthew Kaplan, President, and Andrea Tarbox, Vice President and Chief Financial Officer of Kapstone Paper and Packaging Corporation, will give a Company presentation at the Deutsche Bank 2011 Small and Mid Cap Conference in Naples, FL. A copy of the presentation materials to be used by Mr. Kaplan and Ms. Tarbox is furnished as Exhibit 99.3 of this report.

Item 9.01	Financial Statements and Exhibits
(d)	Exhibits
Exhibit 99.1	Fourth quarter and year to date 2010 Earnings Press Release dated February 14, 2011
Exhibit 99.2	Slides of KapStone Paper and Packaging Corporation dated February 14, 2011
Exhibit 99.3	Presentation materials to be used by Mr. Kaplan and Ms. Tarbox during their address to the Deutsche Bank 2011 Small and Mid Cap Conference in Naples, FL on February 17, 2011.

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SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  February 14, 2011
	KAPSTONE PAPER AND PACKAGING CORPORATION
	By:	/s/ Andrea K. Tarbox
	Name: Andrea K. Tarbox
	Title:   Vice President and Chief Financial Officer

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EX-99.1

Exhibit 99.1

FOR FURTHER INFORMATION:	FOR IMMEDIATE RELEASE
Andrea K. Tarbox	Monday, February 14, 2011
Vice President and Chief Financial Officer
847.239.8812

KAPSTONE PAPER AND PACKAGING CORPORATION REPORTS
FOURTH QUARTER AND FULL YEAR 2010 RESULTS

NORTHBROOK, IL — February 14, 2011 — KapStone Paper and Packaging Corporation

(NYSE: KS) today reported preliminary results for the fourth quarter and year ended December 31, 2010.

For the fourth quarter ended December 31, 2010:

·Record net sales of $200 million, up 21% versus 2009

·Diluted EPS of $0.28, down $0.27 per share versus prior year

·Record adjusted diluted EPS of $0.28, up $0.45 per share versus prior year

For the year ended December 31, 2010:

·Record net sales of $783 million, up 24% versus 2009

·Diluted EPS of $1.38, down $0.91 per share versus prior year

·Record adjusted diluted EPS of $0.67, up $1.48 versus prior year

·Net debt (total debt less cash) reduced by $102 million in the year to $48 million

Roger W. Stone, Chairman and Chief Executive Officer, stated, “This past year was an excellent period for our company.  Strong price recovery during the year pushed our average revenue per ton up from $503 per ton in the fourth quarter of 2009 to $611 per ton in the fourth quarter of 2010.  Higher selling prices helped to generate record sales of $783 million.  Our full year operating rate of 98.5 percent resulted in record production of 1.27 million tons of paper.  Continued strong cash flows from operations of $136 million enabled us to slash our net debt from over $470 million just 30 months ago to $48 million at year end.”

“Early in the fourth quarter of 2010 our Roanoke Rapids mill completed its annual planned maintenance outage at a cost of $6.6 million. In January 2011, we successfully negotiated a lower earn-out payment of $49.7 million with International Paper Company relating to our 2007 kraft paper business acquisition and saved over $5 million.”

Fourth Quarter Operating Highlights

Net sales for the quarter ended December 31, 2010, were $199.6 million, an increase of 20.9 percent, compared to fourth quarter of 2009 sales of $165.1 million. The increase in net sales was attributable primarily to $32.5 million from higher unit selling prices. Average revenue per ton increased to $611 versus $503 during the fourth quarter of 2009. Volume and mix gains accounted for $4.4 million of the sales increase. Sales in the fourth quarter of 2010 were negatively impacted by $2.4 million due to exchange rates reflecting a stronger US dollar.

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Operating income of $17.6 million for the fourth quarter exceeded the prior year’s results by $28.9 million after excluding the 2009 benefit from alternative fuel mixture tax credits of $56.5 million. The improvement resulted from higher selling prices, as well as $2.7 million from mix improvement and higher volume. Fourth quarter operating income was negatively impacted by $2.0 million in inflationary cost increases and $1.5 million for higher compensation and benefits costs that were curtailed in 2009, but reinstated for 2010. Additionally, foreign exchange rates reduced operating income by $2.4 million.

Interest expense was $0.7 million for the fourth quarter of 2010, down $0.6 million from a year ago as a result of year over year net debt reduction.   At December 31, 2010, the interest rate on the majority of the Company’s debt was 1.76 percent. Amortization of debt issuance costs of $0.4 million for the fourth quarter of 2010 was reduced by $1.4 million from a year ago due to a significantly lower amount of debt repayments in 2010.

The effective tax rate for the 2010 fourth quarter was 19.4 percent compared to 40.1 percent for the 2009 fourth quarter. The 2010 effective tax rate is lower due to a discrete adjustment relating to state income taxes, a higher than expected benefit related to the domestic manufacturing deduction and the recently announced extension of the federal research and development tax credit.

For income tax purposes, the Company has taken the position that the alternative fuel mixture tax credit is not taxable as it is similar to an excise tax refund. Since the IRS has issued no specific guidance in this area, the Company has recorded a $68 million liability for an unrecognized tax benefit.

Full Year Operating Highlights

Net sales for the year ended December 31, 2010, were $782.7 million, an increase of 23.7 percent, compared to 2009 sales of $632.5 million. The increase in net sales was attributable primarily to $60.8 million from higher unit selling prices. Average revenue per ton increased to $586 versus $524 in 2009. Volume and mix gains accounted for $101.2 million of the sales increase driven by an 11.8 percent increase in unit sales. Sales in 2010 were negatively impacted by $4.9 million due to exchange rates reflecting a stronger US dollar.

Operating income of $68.7 million for the year ended December 31, 2010 exceeded the prior year’s results by $75.5 million after excluding the net benefit from alternative fuel mixture tax credits of $141.8 million and $16.4 million for the gain on sale of the dunnage bag business. The improvement resulted from $60.8 million of higher selling prices, $33.6 million from mix improvement and higher volume, $9.7 million of lower amortization expenses and $5.1 million from lower transitional services. 2010 operating income was negatively impacted by $11.2 million for higher compensation and benefits costs that were curtailed in 2009, but reinstated for 2010, $9.8 million of inflationary increases on input and freight costs and $6.8 million for the Charleston mill’s tri-annual planned maintenance outage. Additionally, foreign exchange rates reduced operating income by $4.9 million.

Interest expense was $3.2 million for the year ended December 31, 2010, down $10.0 million from a year ago as a result of year over year net debt reduction.  Amortization of debt issuance costs of $2.2 million for 2010 was reduced by $3.7 million from a year ago due to a significantly lower amount of debt repayments in 2010.

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The effective tax rate for the year ended December 31, 2010 was (3.8) percent compared to 39.4 percent for 2009. The 2010 effective tax rate is lower due to the cellulosic biofuel producer’s tax credit, a higher expected benefit related to the domestic manufacturing deduction and lower state income taxes.

Cash Flow and Working Capital

Cash and cash equivalents increased by $25.7 million in the quarter ended December 31, 2010, reflecting $44.9 million provided by operating activities offset by $14.5 million used in investing activities and $4.7 million used in financing activities.

Cash and cash equivalents increased by $64.9 million in the year ended December 31, 2010, reflecting $136.1 million provided by operating activities offset by $35.2 million used in investing activities and $36.0 million used in financing activities.

Total net debt outstanding as of December 31, 2010, was $47.5 million and was reduced by $31.1 million during the fourth quarter of 2010. For the year, net debt was reduced by $102.3 million.

At December 31, 2010, the Company had approximately $67.4 million of cash, $106.7 million of working capital and $88.2 million of revolver borrowing capacity.

Capital expenditures for the quarter and year ended December 31, 2010 were $14.5 million and $38.3 million, respectively, of which about $25.0 million was spent on maintenance and upgrade projects at the mills. The Company expects capital expenditures to increase to approximately $41.0 million in 2011.

The Company was in compliance with all debt covenants at December 31, 2010.   Due to the significant debt reduction and the high EBITDA generated over the past two years, the Company’s debt to EBITDA ratio was 1.08 to 1 at December 31, 2010.

Conclusion

In summary, Stone commented, “2010 was a record year for KapStone and provides a strong foundation. Looking forward, we should benefit from a full year of the 2010 price increases for our products and improved product mix.  With our very low net debt and strong cash flows, we are very well positioned to take advantage of growth opportunities.”

Conference Call

KapStone will host a conference call at 11 a.m. Eastern Time, February 15, 2011 to discuss the Company’s financial results for the fourth quarter and full year 2010.  All interested parties are invited to listen and may do so by either accessing a simultaneous broadcast webcast on KapStone’s website, http://www.kapstonepaper.com, or for those unable to access the webcast, the following dial-in numbers are available:

Domestic: 800.561.2718

International: 617.614.3525

Participant Pass code: 49183955

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A presentation to be viewed in conjunction with the call will also be available on our website, http://www.kapstonepaper.com, in the “Investors” section.  The webcast is also being distributed through the Thomson StreetEvents Network.  Individual investors can listen to the call at http://earnings.com, Thomson’s individual investor portal, powered by StreetEvents.  Institutional investors can access the call via Thomson StreetEvents (http://streetevents.com) a password-protected event management site.

A replay of the webcast will be available for 30 days on the Company’s web site following the call.

About the Company

Headquartered in Northbrook, IL, KapStone Paper and Packaging Corporation is a leading North American producer of unbleached kraft paper products and linerboard.   The Company is the parent company of KapStone Kraft Paper Corporation which includes paper mills in Roanoke Rapids, NC and North Charleston, SC, a lumber mill in Summerville, SC, and five chip mills in South Carolina.  The business employs approximately 1,600 people.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures, including “EBITDA”, “Adjusted EBITDA”, “Adjusted Net Income”, and “Adjusted Diluted EPS” to measure our operating performance.  Management uses these measures to focus on the on-going operations, and believes it is useful to investors because they enable them to perform meaningful comparisons of past and present operating results. The Company believes that EBITDA and Adjusted EBITDA provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency to key measures used to evaluate the performance and liquidity of the Company.  Management uses EBITDA and Adjusted EBITDA for evaluating the Company’s performance against competitors and as a primary measure for employees’ incentive programs.  Reconc iliations of Net Income to EBITDA, EBITDA to Adjusted EBITDA, Net Income to Adjusted Net Income, Basic EPS to Adjusted Basic EPS, and Diluted EPS to Adjusted Diluted EPS are included in the financial schedules contained in this press release.  However, these measures should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.

Forward-Looking Statements

Statements in this news release that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by words such as  “may,” “will,” “should,” “would,’ “expect,” “project,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “potential,” “outlook,” or “continue,” the negative of these terms or other similar expressions.   These statements reflect management’s current views and are subject to risks, uncertainties and assumptions, many of which are beyond the Company’s control that could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to diffe r materially include, but are not limited to: (1)  industry conditions, including changes in cost, competition, changes in the Company’s product mix and demand and pricing for the Company’s products; (2) market and economic factors, including changes in raw material and healthcare costs, exchange rates and interest rates; (3) results of legal proceedings and compliance costs, including unanticipated expenditures related to the cost of compliance with environmental and other governmental regulations; (4) the ability to achieve and effectively manage growth; (5) the ability to pay the Company’s debt obligations;  (6) the ability to carry out the Company’s strategic initiatives and manage associated costs and (7)  the income tax impact of the

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federal incentive program for alternative fuel mixtures.  Further information on these and other risks and uncertainties is provided under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and elsewhere in reports that the Company files with the SEC. These filings can be found on KapStone’s Web site at www.kapstonepaper.com and the SEC’s Web site at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and the Company disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.

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KapStone Paper and Packaging Corporation

Consolidated Statements of Income

($ in thousands, except share and per share amounts)

(preliminary and unaudited)

							Fav / (Unfav)								Fav / (Unfav)
	Quarter Ended December 31,						Variance		Year Ended December 31,						Variance
	2010			2009			%		2010			2009			%
Net sales	$	199,565		$	165,066		20.9	%	$	782,676		$	632,478		23.7	%
Cost and expenses:
Cost of sales, excluding depreciation and amortization	145,988			83,438			-75.0	%	565,185			355,088			-59.2	%
Freight and distribution expenses	17,127			14,640			-17.0	%	73,406			57,395			-27.9	%
Selling, general and administrative expenses	7,457			8,085			7.8	%	31,129			31,377			0.8	%
Depreciation and amortization	11,621			13,906			16.4	%	45,245			54,667			17.2	%
Gain on sale of business	—			—			—		—			16,417			-100.0	%
Other operating income	232			261			-11.1	%	992			994			-0.2	%
Operating income	17,604			45,258			-61.1	%	68,703			151,362			-54.6	%
Foreign exchange gain /(loss)	(69		)	171			-140.4	%	(666		)	219			-404.1	%
Interest income	10			11			-9.1	%	37			12			208.3	%
Interest expense	743			1,309			43.2	%	3,203			13,196			75.7	%
Amortization of debt issuance costs	440			1,770			75.1	%	2,237			5,980			62.6	%
Income before provision (benefit) for income taxes	16,362			42,361			-61.4	%	62,634			132,417			-52.7	%
Provision (benefit) for income taxes	3,171			16,977			81.3	%	(2,407		)	52,137			104.6	%
Net income	$	13,191		$	25,384		-48.0	%	$	65,041		$	80,280		-19.0	%
Earnings per share:
Basic	$	0.29		$	0.56				$	1.42		$	2.32
Diluted	$	0.28		$	0.55				$	1.38		$	2.29
Weighted-average number of shares outstanding:
Basic	46,031,878			45,414,156					45,854,237			34,675,804
Diluted	47,238,832			46,203,677					46,979,060			35,067,923
Effective tax rate	19.4		%	40.1		%			-3.8		%	39.4		%

OPERATING SEGMENT DATA

($ In thousands)

							Fav / (Unfav)								Fav / (Unfav)
	Quarter Ended December 31,						Variance		Year Ended December 31,						Variance
	2010			2009			%		2010			2009			%
Net sales
Unbleached kraft	$	199,565		$	165,066		20.9	%	$	782,676		$	626,450		24.9	%
Other	—			—			—		—			6,927			-100.0	%
Intersegment sales elimination	—			—			—		—			(899		)	100.0	%
Total net sales	$	199,565		$	165,066		20.9	%	$	782,676		$	632,478		23.7	%
Operating income
Unbleached kraft	$	22,673		$	50,659		-55.2	%	$	89,521		$	155,904		-42.6	%
Other	—			—			—		—			748			-100.0	%
Gain on sale of dunnage bag business	—			—			—		—			16,417			-100.0	%
Corporate	(5,069		)	(5,401		)	6.1	%	(20,818		)	(21,707		)	4.1	%
Total operating income	$	17,604		$	45,258		-61.1	%	$	68,703		$	151,362		-54.6	%

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KapStone Paper and Packaging Corporation

Consolidated Balance Sheets

($ in thousands)

	December 31,
	2010			2009
	(preliminary and unaudited)
Assets
Current assets:
Cash and cash equivalents	$	67,358		$	2,440
Trade accounts receivable, net of allowances of $1,205 in 2010 and $1,217 in 2009	66,640			58,408
Other receivables	2,780			16,487
Inventories	73,324			61,377
Refundable and prepaid income taxes	348			13,757
Prepaid expenses and other current assets	2,403			1,690
Restricted cash	—			2,500
Deferred income taxes	9,394			5,604
Total current assets	222,247			162,263
Plant, property and equipment, net	466,019			470,278
Other assets	3,996			4,935
Intangible assets, net	22,654			26,198
Goodwill	4,811			5,449
Total assets	$	719,727		$	669,123
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	18,835		$	18,630
Borrowings under revolving credit facility	—			7,400
Accounts payable	55,504			52,147
Accrued expenses	22,986			20,800
Accrued compensation costs	18,229			7,719
Accrued income taxes	—			—
Total current liabilities	115,554			106,696
Long-term debt, less current portion	92,857			121,031
Pension and post retirement benefits	6,454			5,949
Deferred income taxes	17,917			38,577
Other liabilities	68,311			48,080
Total other liabilities	185,539			213,637
Stockholders’ equity:
Common stock $0.0001 par value	5			5
Additional paid-in capital	224,843			219,828
Retained earnings	194,087			129,046
Accumulated other comprehensive loss	(301		)	(89		)
Total stockholders’ equity	418,634			348,790
Total liabilities and stockholders’ equity	$	719,727		$	669,123

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KapStone Paper and Packaging Corporation

Consolidated Statements of Cash Flows

($ in thousands)

(preliminary and unaudited)

	Quarter Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Operating activities:
Net income	$	13,191		$	25,384		$	65,041		$	80,280
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	11,621			13,906			45,245			54,667
Stock based compensation expense	759			691			3,592			2,377
Amortization of debt issuance costs	440			1,770			2,237			5,980
Loss on disposal of assets	248			44			876			800
Deferred income taxes	(5,530		)	5,709			(24,260		)	19,459
Gain on sale of business	—			—			—			(16,417		)
Changes in operating assets and liabilities	24,211			29,941			43,345			54,089
Total cash provided by operating activities	$	44,940		$	77,445		$	136,076		$	201,235
Investing activities:
CKD acquisition	$	—		$	—		$	638		$	1,000
KPB acquisition earn-out due to sale of dunnage bag business	—			—			—			(3,977		)
Proceeds from sale of business	—			—			—			34,898
Restricted cash	—			—			2,500			(2,500		)
Capital expenditures	(14,489		)	(10,509		)	(38,318		)	(29,165		)
Total cash (used in) / provided by investing activities	$	(14,489	)	$	(10,509	)	$	(35,180	)	$	256
Financing activities:
Proceeds from revolving credit facility	$	—		$	15,700		$	76,700		$	80,000
Repayments on revolving credit facility	—			(8,300		)	(84,100		)	(85,000		)
Repayments of long-term debt	(4,709		)	(75,000		)	(30,002		)	(283,093		)
Proceeds from other current borrowings	—			—			2,564			—
Repayments on other current borrowings	(644		)	—			(2,564		)	—
Payment of withholding taxes on vested restricted stock awards	—			—			(624		)	—
Proceeds from exercises of stock warrants	—			—			—			85,217
Proceeds from exercises of stock options	505			30			1,282			30
Excess tax benefits from stock based compensation	138			—			585			—
Proceeds from employee stock purchase plan	—			—			70			—
Other	—			—			111			—
Debt issuance costs paid	—			—			—			(370		)
Total cash (used in) / provided by financing activities	$	(4,710	)	$	(67,570	)	$	(35,978	)	$	(203,216	)
Net increase / (decrease) in cash and cash equivalents	25,741			(634		)	64,918			(1,725		)
Cash and cash equivalents-beginning of period	41,617			3,074			2,440			4,165
Cash and cash equivalents-end of period	$	67,358		$	2,440		$	67,358		$	2,440

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KapStone Paper and Packaging Corporation

Supplemental Information

GAAP to Non-GAAP Reconciliations

($ in thousands, except share and per share amounts)

(preliminary and unaudited)

	Quarter Ended December 31,						Year Ended December 31,
	2010			2009			2010			2009
Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP):
Net income (GAAP)	$	13,191		$	25,384		$	65,041		$	80,280
Interest income	(10		)	(11		)	(37		)	(12		)
Interest expense	743			1,309			3,203			13,196
Amortization of debt issuance costs	440			1,770			2,237			5,980
Provision (benefit) for income taxes	3,171			16,977			(2,407		)	52,137
Depreciation and amortization	11,621			13,906			45,245			54,667
EBITDA (Non-GAAP)	$	29,156		$	59,335		$	113,282		$	206,248
Alternative fuel mixture tax credits	—			(56,534		)	(22,195		)	(163,998		)
Dunnage bag business	—			—			—			(17,165		)
Stock based compensation expense	759			691			3,592			2,377
Adjusted EBITDA (Non-GAAP)	$	29,915		$	3,492		$	94,679		$	27,462
Net Income (GAAP) to Adjusted Net Income (Non-GAAP):
Net income (GAAP)	$	13,191		$	25,384		$	65,041		$	80,280
Cellulosic Biofuel tax credit	(388		)	—			(21,048		)	—
Alternative fuel mixture tax credits	—			(33,877		)	(14,737		)	(99,427		)
Dunnage bag business	—			—			—			(10,407		)
Stock based compensation expense	612			414			2,385			1,441
Adjusted Net Income (Non-GAAP)	$	13,415		$	(8,079	)	$	31,641		$	(28,113	)
Basic EPS (GAAP) to Adjusted Basic EPS (Non-GAAP):
Basic EPS (GAAP)	$	0.29		$	0.56		$	1.42		$	2.32
Cellulosic Biofuel tax credit	(0.1		)	—			(0.46		)	—
Alternative fuel mixture tax credits	—			(0.75		)	(0.32		)	(2.87		)
Dunnage bag business	—			—			—			(0.30		)
Stock based compensation expense	0.01			0.01			0.05			0.04
Adjusted Basic EPS (Non-GAAP)	$	0.29		$	(0.18	)	$	0.69		$	(0.81	)
Diluted EPS (GAAP) to Adjusted Diluted EPS (Non-GAAP):
Diluted earnings per share (GAAP)	$	0.28		$	0.55		$	1.38		$	2.29
Cellulosic Biofuel tax credit	(0.01		)	—			(0.45		)	—
Alternative fuel mixture tax credits	—			(0.73		)	(0.31		)	(2.84		)
Dunnage bag business	—			—			—			(0.30		)
Stock based compensation expense	0.01			0.01			0.05			0.04
Adjusted Diluted EPS (Non-GAAP)	$	0.28		$	(0.17	)	$	0.67		$	(0.81	)

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KapStone Paper and Packaging Corporation

Supplemental Information

Net Debt and Debt to Equity Ratio

(preliminary and unaudited)

	Quarter Ended
	12/31/2010			9/30/2010			6/30/2010			3/31/2010			12/31/2009
Calculation of Net Debt
Cash and cash equivalents	$	67,358		$	41,617		$	21,888		$	3,851		$	2,440
Current portion of LT debt	(18,835		)	(18,835		)	(19,229		)	(18,267		)	(18,630		)
Other borrowings	—			(644		)	(1,285		)	(1,712		)	—
Borrowings on revolving line of credit	—			—			—			(4,500		)	(7,400		)
Long term debt, net	(92,857		)	(97,157		)	(103,570		)	(107,929		)	(121,031		)
Unamortized debt issuance costs	(3,203		)	(3,612		)	(4,112		)	(4,560		)	(5,236		)
Total Net Debt (non GAAP)	$	(47,537	)	$	(78,631	)	$	(106,308	)	$	(133,117	)	$	(149,857	)
Change during the quarter	$	31,094		$	27,677		$	26,809		$	16,740		$	66,966
Debt to Equity ratio calculation
Net debt	$	47,537
Equity	$	418,634
Ratio	11.4		%

10

EX-99.2

Exhibit 99.2

 2010 Fourth Quarter and Full Year Review Matt Kaplan President and Chief Operating Officer Andrea K. Tarbox Vice President and Chief Financial Officer February 14, 2011

Forward Looking Statements The information in this presentation and statements made during this presentation may contain certain forward-looking statements within the meaning of federal securities laws. These statements reflect management’s expectations regarding future events and operating performance. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to differ materially from those expressed in, or underlying, any forward-looking statements can be found in the Company’s filings with the Securities and Exchange Commission, such as its annual and quarterly reports. The Company disclaims any obligation to revise or update such statements to reflect the occurrence of events after the date of this presentation. This presentation refers to non-U.S. GAAP financial information. For a reconciliation to U.S. GAAP financial measures, please refer to the appendix. Forward-Looking Statements Non-GAAP Financial Measures Risk Factors 2

 Well Positioned for 2011 after 2010’s Accomplishments Tons produced: 1,268,000 Tons sold: 1,284,000 Operating rate: 98.5% Net sales: $783 million Adjusted EBITDA*: $95 million Adjusted net income*: $32 million Adjusted diluted EPS*: $0.67 Adjusted free cash flow*: $66 million In 2010, KapStone achieved annual records in the following: *Adjusted to exclude alternative fuel mixture and cellulosic biofuel tax credits and non-cash stock compensation 3 Net debt of $48 million Market cap of $705 million Ended 2010 with:

Full Year Financial Results *Adjusted to exclude alternative fuel mixture and cellulosic biofuel tax credits, non-cash stock compensation, and dunnage bag business sold in March 2009 -----See appendix for reconciliations----- 4 Years Ended December 31, ($ in Millions, except per share data) 2009 2010 Inc/(Dec Inc/Dec Net Sales $ 632 $ 783 $ 151 24% EBITDA $ 206 $ 113 $ (93) (45%) Adj. EBITDA* $ 27 $ 95 $ 68 252% Net Income $ 80 $ 65 $ (15) (19%) Adj. Net (Loss) Income* $ (28) $ 32 $ 60 214% Diluted EPS $ 2.29 $ 1.38 $ (0.91) (40%) Adj. Diluted EPS* $(0.81) $ 0.67 $ 1.48 183%

Net Sales Increase 24% Adjusted EBITDA* Surges 252% 5 Full Year 2010 Compared to 2009 *See appendix for reconciliation of adjusted EBITDA to net income

Planned Maintenance Outages Lost production and potential sale tons: 9,900 tons (mostly kraft paper) impacted EBITDA by approximately $3.6 million Out-of-pocket outage maintenance costs incurred: $7 million Roanoke Rapids Mill – Annual planned outage, typically in Q4 Charleston Mill – Planned total mill outage once every 3 years (next planned in 2013) Q4 2010 Lost production and potential sale tons: Approx. 16,700 tons (Linerboard, Durasorb ®, and KraftPak ®) Out-of-pocket outage maintenance costs incurred: $7 million Q1 2010 Charleston Mill – Annual Cogen outage, typically in Q4 Outage maintenance and higher energy costs incurred: $1 million Q4 2010 6

Fourth Quarter Financial Results *Adjusted to exclude alternative fuel mixture and cellulosic biofuel tax credits and non-cash stock compensation -----See appendix for reconciliations----- 7 Fourth Quarter ($ in Millions, except per share data) 2009 2010 Inc/(Dec) Inc/Dec Net Sales $ 165 $ 200 $ 35 21% EBITDA $ 59 $ 29 $ (30) (51%) Adj. EBITDA* $ 3 $ 30 $ 27 900% Net Income $ 25 $ 13 $ (12) (48%) Adj. Net (Loss) Income* $ (8) $ 13 $ 21 263% Diluted EPS $ 0.55 $ 0.28 $ (0.27) (49%) Adj. Diluted EPS* $(0.17) $ 0.28 $ 0.45 265%

Production and Tons Sold Produced 316,583 tons in Q4 2010 with operating rates at 98.8% At the end of Q4 2010, inventory tons were down 19,000 tons versus Q4 2009 *Outage quarter ** Record production Tons Produced /Sold 8 312 299 323 329 317 316 315 326 327 316 000s of tons 4Q 09* 1Q 10* 2Q 10 3Q 10** 4Q 10*

Higher Prices Increase Net Sales Q4 2010 net sales up $35 million, or 21%, to $200 million Higher prices: $33 million Average revenue per ton increased $108 from $503 in Q4 2009 to $611 in Q4 2010 Improved product mix: $3 million Primarily shift from export linerboard to domestic linerboard sales Partially offset by decline in Euro and Q4 2010’s extreme weather Net Sales 4Q Unit Sales by Product Line 9 Export Liner Export Liner Q4 2010 Total Tons Sold = 316,216 Q4 2009 Total Tons Sold = 315,790 2009 2010 Q4 2010 Compared to Q4 2009

Adjusted EBITDA* Q4 2010 Compared to Q4 2009 *See appendix for reconciliation of adjusted EBITDA to net income Adjusted EBITDA margin for Q4 2010 was 15% compared to 2% in Q4 2009 Adjusted EBITDA in Q4 2010 improved $27 million to $30 million Price Drives Increase in Adjusted EBITDA* Adjusted EBITDA* 10

Sequential Quarter Comparison **Adjusted to exclude alternative fuel mixture and cellulosic biofuel tax credits and non-cash stock compensation -----See appendix for reconciliations----- *Includes impact of RR’s annual planned maintenance outage which reduced production and tons available to be shipped by 9,900 tons and increased maintenance expense by $7 million 11 2010 ($ in Millions, except per share data) Q3 Q4* Inc/(Dec) Inc/Dec Net Sales $ 207 $ 200 $ (7) ( 3%) EBITDA $ 38 $ 29 $ (9) (24%) Adj. EBITDA** $ 39 $ 30 $ (9) (23%) Net Income $ 38 $ 13 $ (25) (66%) Adj. Net (Loss) Income* $ 18 $ 13 $ (5) (28%) Diluted EPS $ 0.82 $ 0.28 $ (0.54) (66%) Adj. Diluted EPS* $ 0.39 $ 0.28 $ (0.11) (28%)

Net Sales Q4 2010 Compared to Q3 2010 Price Increases More than Offset by Volume and Mix Net sales down $7 million, or 3%, to $200 million Lower volume: $ 6 million (due to planned outage) Less favorable product mix: $4 million, primarily from higher export linerboard sales and seasonal declines of DuraSorb® and Kraftpak® Other: $1 million, mostly unfavorable FX and shipment delays due to extreme December weather Offset by $4 million of higher prices Net Sales *Includes negative impacts of FX/hedging/ and weather 2010 Unit Sales by Product Line Q3 Total Tons Sold = 326,967 Q4 Total Tons Sold = 316,216 12 Q3 2010 Q4 2010 *

Increasing Average Revenue per Ton In Q4 2010, average revenue per ton, net of freight, increased $5 per ton to $557 per ton over Q3 2010 The increase was attributable to higher prices and a shift in Q4 2010 to export linerboard sales which typically have lower freight costs However, average revenue per ton of $611 for Q4 2010 was slightly lower than Q3 due to the mix Average Revenue per Ton and Average Revenue per Ton, Net of Freight 13

Adjusted EBITDA* Q4 2010 Compared to Q3 2010 *See appendix for reconciliation of adjusted EBITDA to net income Q4 2010 Annual Outages Decrease Adjusted EBITDA* Adjusted EBITDA decreased $9 million in Q4 2010 to $30 million primarily on Q4 planned maintenance outages which reduced EBITDA by approximately $12 million including: $8 million of outage costs consisted of: $7 million for Roanoke Rapids’ outage maintenance expense $1 million for Charleston Cogen’s outage which increased maintenance and energy costs $4 million from lost margin on 9,900 fewer tons produced due to Roanoke Rapids’ outage Seasonal slowdown for DuraSorb and Kraftpak delivered a less favorable product mix of $2 million Higher prices increased adjusted EBITDA by $4 million Lower wood costs added an additional $1 million Operating margin for Q4 was 15%; however, excluding the outage impact of $11 million, the operating margin would have been 20.5% 14 $39 $4 $1 $8 $4 $2 $30 $ in Millions

 Substantial cash generation Adjusted free cash flows were $66 million for the 2010 full year, or $1.41 per diluted share Capex for 2011 expected to be approximately $41 million *Calculated by adjusting EBITDA for AFTC, Capex, cash taxes and interest, non-cash stock compensation expense, and results of dunnage bag business sold in 2009 Includes $13 million of income tax refunds in 2010 and 2009 For the Years Ended December 31 Adjusted Free Cash Flows* 15 Well Positioned to Prosper -----See appendix for reconciliations----- $27 $34 $(10) $66 2007 2008 2009 2010 $ in millions

Strong Balance Sheet at December 31, 2010 Reduced net debt by $102 million, or 68% in 2010 Net debt/(cash): $48 million Debt to equity: 11.4% Debt to EBITDA ratio per bank agreement: 1.08 Net Debt at December 31, Strong earnings and cash position enabled KS to negotiate early payment of earn-out with International Paper Company (IP) related to 2007 acquisition of Roanoke Rapids mill Reduced $55 million payment due April 16, 2012 to $50 million Annualized discount of 8% Paid $50 million to IP in Jan. 2011 from cash on hand $50 million will be treated as an addition to goodwill on KS’s books 16 -----See appendix for reconciliations----- $436 $150 $48 2008 2009 2010 $ in millions

 Income tax provision for YE 2010 was a credit of $2.4 million, or a rate of negative 3.8% versus 39.4% a year ago. Primarily reflects: The $21 million benefit from the cellulosic biofuel credit (CBT) CBT credits will be utilized to reduce income taxes payable beginning in 2011 and will be used to offset future cash taxes payable. The credits expire in 2015 December 31, 2010 balance sheet includes $68 million accrued for taxes and interest on AFTC KS has been advised and doesn’t believe AFTC is taxable as it is similar to an excise tax refund No guidance received yet from IRS on the taxability of the AFTC 2009 tax year is currently under examination by the IRS Tax Notes 17

Summary of Key Assumptions for 2011 Comparing year over year net sales, approximately $40- $45 million of benefits from 2010 pricing actions should be realized Planned outages: Roanoke Rapids Mill – Q4 2011 Expected maintenance cost : $8 million Expected lost production and potential sale tons: 12,000 tons Duration extended slightly to replace steam drive with electric drive on one of the machines Charleston Mill – Q4 2011 Cogen maintenance outage: $1-2 million Input costs: At current levels, expect overall slight benefit Primarily driven by lower wood costs Partially offset by higher chemicals and energy CAPEX: Approximately $41 million FX: At current rates, should be benefit compared to 2010 Tax: Projected book tax rate to be approximately 37% Cash income taxes expected to be less than 10% 18

APPENDIX

20 Supplemental Information GAAP to Non-GAAP Reconciliations ($ in thousands, except share and per share amounts) (preliminary and unaudited) Quarter Ended December 31, Year Ended December 31, 2010 2009 2010 2009 Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP): Net income (GAAP) $ 13,191 $ 25,384 $ 65,041 $ 80,280 Interest income (10) (11) (37) (12) Interest expense 743 1,309 3,203 13,196 Amortization of debt issuance costs 440 1,770 2,237 5,980 Provision for income taxes 3,171 16,977 (2,407) 52,137 Depreciation and amortization 11,621 13,906 45,245 54,667 EBITDA (Non-GAAP) $ 29,156 $ 59,335 $ 113,282 $ 206,248 Alternative fuel mixture tax credits - (56,534) (22,195) (163,998) Dunnage bag business - - - (17,165) Stock based compensation expense 759 691 3,592 2,377 Adjusted EBITDA (Non-GAAP) $ 29,915 $ 3,492 $ 94,679 $ 27,462 Net Income (GAAP) to Adjusted Net Income (Non-GAAP): Net income (GAAP) $ 13,191 $ 25,384 $ 65,041 $ 80,280 Cellulosic Biofuel tax credit (388) - (21,048) - Alternative fuel mixture tax credits - (33,877) (14,737) (99,427) Dunnage bag business - - - (10,407) Stock based compensation expense 612 414 2,385 1,441 Adjusted Net Income (Non-GAAP) $ 13,415 $ (8,079) $ 31,641 $ (28,113)

21 Supplemental Information GAAP to Non-GAAP Reconciliations ($ in thousands, except share and per share amounts) (preliminary and unaudited) Quarter Ended December 31, Year Ended December 31, 2010 2009 2010 2009 Basic EPS (GAAP) to Adjusted Basic EPS (Non-GAAP): Basic EPS (GAAP) $ 0.29 $ 0.56 $ 1.42 $ 2.32 Cellulosic Biofuel tax credit (0.1) - ( 0.46) - Alternative fuel mixture tax credits - ( 0.75) ( 0.32) ( 2.87) Dunnage bag business - - - ( 0.30) Stock based compensation expense 0.01 0.01 0.05 0.04 Adjusted Basic EPS (Non-GAAP) $ 0.29 $ (0.18) $ 0.69 $ (0.81) Diluted EPS (GAAP) to Adjusted Diluted EPS (Non-GAAP): Diluted earnings per share (GAAP) $ 0.28 $ 0.55 $ 1.38 $ 2.29 Cellulosic Biofuel tax credit ( 0.01) - ( 0.45) - Alternative fuel mixture tax credits - ( 0.73) ( 0.31) ( 2.84) Dunnage bag business - - - ( 0.30) Stock based compensation expense 0.01 0.01 0.05 0.04 Adjusted Diluted EPS (Non-GAAP) $ 0.28 $ (0.17) $ 0.67 $ (0.81)

KapStone: 22 Supplemental Information GAAP to Non GAAP Reconciliations (preliminary and unaudited) Year ended $ 000s December 31, 2007 December 31, 2008 December 31, 2009 December 31, 2010 Net Income (GAAP) to EBITDA (Non-GAAP) Net income (GAAP) $ 26,963 $ 19,665 $ 80,280 $ 65,041 Interest income (2,096) (927) (12) (37) Interest expense 4,041 16,442 13,196 3,203 Amortization of debt issuance costs 254 2,007 5,980 2,237 Provision for income taxes 15,138 12,482 52,137 (2,407) Depreciation and amortization 11,327 31,683 54,667 45,245 EBITDA (Non-GAAP) $ 55,627 $ 81,352 $ 206,248 $ 113,282 Plus non cash stock compensation expense 697 1,754 2,377 3,592 Less capital expenditures (11,861) (23,170) (29,165) (38,318) Plus / (less ) cash income taxes received / (paid) (13,812) (11,441) 11,306 13,207 Less cash interest paid (4,041) (9,132) (19,952) (3,318) Free cash f low 26,610 39,363 170,814 88,445 Dunnage bag business - (5,248) (17,165) - Less Alternative fuel mixture tax credit - - (163,998) (22,195) Adjusted free cash flow (non GAAP) $ 26,610 $ 34,115 $ (10,349) $ 66,250

EX-99.3

Exhibit 99.3

February 2011 WELL POSITIONED TO PROSPER Matt Kaplan President and Chief Operating Officer Andrea K. Tarbox Vice President and Chief Financial Officer

2 FORWARD LOOKING STATEMENTS The information in this presentation and statements made during this presentation may contain certain forward-looking statements within the meaning of federal securities laws. These statements reflect management’s expectations regarding future events and operating performance. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to differ materially from those expressed in, or underlying, any forward-looking statements can be found in the Company’s filings with the Securities and Exchange Commission, such as its annual and quarterly reports. The Company disclaims any obligation to revise or update such statements to reflect the occurrence of events after the date of this presentation. This presentation refers to non-U.S. GAAP financial information. For a reconciliation to U.S. GAAP financial measures, please refer to the appendix. Forward-Looking Statements Non-GAAP Financial Measures Risk Factors

3 A UNIQUE BEGINNING In April 2005, KapStone was founded as a Special Purpose Acquisition Corp. Management team consisted of two paper and packaging industry veterans, Roger Stone and Matt Kaplan Successful record of managing paper and packaging assets History of identifying and acquiring assets at attractive valuations Outstanding long-term reputation in the credit markets Proven track record of growing shareholder value Collectively are largest stakeholders in stock $120 million raised in IPO Focus on paper, packaging, and forest products industries

4 Growth of Business In January 2007, KapStone acquired IP’s Kraft Papers Business for $151 million Purchase price multiple of 3.3 times based on 2007 EBITDA including 2 contingent earn-out payments subsequently earned: $4 million paid in 2009 $50 million pre-paid in Jan. 2011 at 8% annualized discount In July 2008, KapStone acquired MWV’s Charleston Kraft Division for $471 million Purchase price multiple of 5.8 times based on 2007 adjusted EBITDA OUR FACILITIES

5 OUR FACILITIES Two highly efficient and cost effective paper mills Capable of producing approximately 1.3 million tons of various paper grades annually Locations Both mills well located for domestic and export distribution Access to abundant, high quality, low cost wood Quality leader across product lines Moderate annual maintenance CAPEX of $25 to $30 million

6 OUR PRODUCTS DuraSorb® Saturating Kraft – Approximately 325,000 tons per year normalized mix Found in various high pressure laminates Product included in furniture, shelving, countertops, medical surfaces, flooring, and industrial laminates for siding and plywood overlays Market leader Kraft Linerboard – Approximately 565,000 tons per year normalized mix Surface facing on corrugated boxes Wide range of grades and basis weights High performance light weight grades

7 OUR PRODUCTS Kraft Papers – Approximately 300,000 tons per year normalized mix Approximately19% of market share Multiwall -Packaging for flour, sugar, pet food, cat litter, cement, dry chemicals, minerals, and dunnage Converting-Tape and label backing, wrapping paper, wax paper packaging, coating and laminating, roll wrap, and dunnage Bag & Sack-Bags and sacks for retail, lawn & leaf, fast food carryout, and grocery

8 OUR PRODUCTS Kraftpak ® – Approximately 110,000 tons per year normalized mix A virgin fiber, unbleached, uncoated folding carton board Uses include beverage, gift boxes, take out cartons, retail food, and quick serve cartons Strong position in niche market

9 OUR INDUSTRY A CHANGING INDUSTRY Consolidation Sale of timber assets Behavioral changes in industry Capacity closures

WELL POSITIONED FOR 2011 AFTER 2010’S ACCOMPLISHMENTS Tons produced: 1,268,000 Tons sold: 1,284,000 Operating rate: 98.5% Net sales: $783 million Adjusted EBITDA*: $95 million Adjusted net income*: $32 million Adjusted diluted EPS*: $0.67 Adjusted free cash flow*: $66 million In 2010, KapStone achieved annual records in the following: *Adjusted to exclude alternative fuel mixture and cellulosic biofuel tax credits and non-cash stock compensation 10 Net debt of $48 million Market cap of $705 million Ended 2010 with: -----See appendix for reconciliations-----

11 Well Positioned to Prosper Avg. Revenue per Ton Adjusted EBITDA – More than Tripled in Past Year Net Sales and Avg. Revenue per Ton Growing- 52 % CAGR for Net Sales Since 2007 Net Sales Adj. EBITDA -----See appendix for reconciliations----- $ in Millions Acquisitions and higher prices have driven substantial sales and EBITDA growth during our 4 year history Roanoke Rapids mill acquired January 1, 2007 Charleston mill acquired July 1, 2008 Average revenue per ton was $611 in Q4 2010 2011 should benefit from complete roll-out of 2010 price increases *Adjusted to exclude AFTC, non-cash stock compensation, and results of dunnage bag business sold in 2009

Substantial cash generation Adjusted free cash flows were $66 million for the 2010 full year, or $1.41 per diluted share Capex for 2011 expected to be approximately $41 million *Calculated by adjusting EBITDA for AFTC, Capex, cash taxes and interest, non-cash stock compensation expense, and results of dunnage bag business sold in 2009 Includes $13 million of income tax refunds in 2010 and 2009 For the Years Ended December 31 Adjusted Free Cash Flows* 12 Well Positioned to Prosper -----See appendix for reconciliations----- $27 $34 $(10) $66 2007 2008 2009 2010 $ in millions

13 Net debt/(cash) at December 31, 2010 - $48 million Aggressive debt and interest expense reduction Net debt reduced approximately $400 million since December 31, 2011 Debt to equity at December 31, 2011 – 11.4% Rapid Debt Reduction Strong earnings and cash position enabled KS to negotiate early payment of earn-out with International Paper Company (IP) related to 2007 acquisition of Roanoke Rapids mill Reduced $55 million payment due April 16, 2012 to $50 million Annualized discount of 8% Paid $50 million to IP in Jan. 2011 from cash on hand $50 million will be treated as an addition to goodwill on KS’s books Net Debt at December 31 Well Positioned to Prosper -----See appendix for reconciliations-----

Inventories are low Supply and demand are in balance Anticipate increased demand as worldwide economies improve Average revenue per ton fell from peak of $621 per ton in 4Q 2008 to low of $495 per ton in 3Q 2009 Average revenue per ton in 4Q 2011 was $611 Expect approximately $40 - $45 million of carryover as a result of 2010 price increases FUTURE OPPORTUNITIES - PRICE IMPROVEMENT 14

15 Future Opportunities - Acquisitions Experienced management team with successful track record of identifying and acquiring assets at attractive valuations Strong balance sheet to support growth Focus on value opportunities

16 Summary Positive effects of economic recovery Demand rebounded significantly providing healthy backlogs at maximum operating rates Paper prices rebounded rapidly from previously depressed levels Product mix improved as demand for saturating kraft, domestic linerboard and kraft paper increase Benefits from industry consolidation Unprecedented level of supply discipline and inventory management KapStone’s low cost mills use 100% virgin pulpwood Both mills located in excellent wood baskets No exposure to variability of OCC pricing

17 Summary Further industry consolidation will result in the availability of high quality, attractively priced assets Strong balance sheet will allow us to take advantage of acquisition opportunities Strong cash flows KapStone led by experienced management team with proven track record of growing shareholder value Strong company very well situated in an improving, dynamically changing industry

18 Track Record of Providing Return to Our Shareholders Closing Price of $17.47 Feb. 8, 2011 Ranked 5th by Fortune in 2010 annual list of 100 Fastest Growing Companies on: Growth in revenue, EPS and total stock market return over past 3 years Ranked 1st for industrial companies FORTUNE

Appendix

20 Facilities Headquarters Northbrook, IL Roanoke Rapids, NC Paper mill with two paper machines, capacity 420,000 tons Charleston, SC area Paper mill with 3 paper machines, capacity 882,000 tons 100 megawatt power generating facility Lumber mill and five chip mills

Roanoke Rapids Mill The Roanoke Rapids Mill is an integrated pulp and paper mill, consisting of two paper machines Broad range of basis weights, manufacturing flexibility Leading edge technology as a result of $70 million in capital investments since 1998 Prime Location On I-95 corridor in North Carolina, excellent geographic location In low cost S.E. fiber region Annual maintenance CAPEX estimated to be approximately $5 - $6 million 21 Facilities Paper Machine Available Product Year Built Most Recent Upgrade Capacity (tons) No. 3 Kraft paper 1953 1998 205,000 Linerboard No. 4 Kraft paper / Specialty 1959 1999 / 2004 120,000 Linerboard 100,000 Total Tons 425,000

Charleston Mill The Charleston Mill operates three paper machines, all of which have been upgraded within the past 11 years The assets also include: A 100 megawatt power-generating facility (“Cogen”) located adjacent to the Charleston Mill A lumber mill in Summerville, SC Five chip mills, including one on-site at the Summerville lumber mill Prime Location On Charleston Harbor with excellent world-wide freight rates In low cost S.E. fiber region Annual maintenance CAPEX estimated to be approximately $15 to $17 million 22 Facilities Paper Machine Available Product Year Built Most Recent Upgrade Capacity (tons) No. 1 Saturating Kraft 1937 2004 275,000 Kraftpak® 316,000 Linerboard 324,000 No. 2 Saturating Kraft 1947 2007 248,000 No. 3 Linerboard 1957 1998 310,000 Total Tons 833,000-882,000

23 Reconciliation of Non-GAAP Financial Measures The non-GAAP financial measures are used in the presentation materials in addition to, and in conjunction with, results presented in accordance with GAAP. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

24 Supplemental Information KapStone Paper and Packaging Corporation ($ in thousands, except share and per share amounts) (preliminary and unaudited) Year Ended December 31, 2007 2008 2009 2010 Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP): Net income (GAAP) $ 26,963 $ 19,665 $ 80,280 $ 65,041 Interest income (2,096) (927) (12) (37) Interest expense 4,041 16,442 13,196 3,203 Amortization of debt issuance costs 254 2,007 5,980 2,237 Provision (benefit) for income taxes 15,138 12,482 52,137 (2,407) Depreciation and amortization 11,327 31,683 54,667 45,245 EBITDA (Non-GAAP) $ 55,627 $ 81,352 $ 206,248 $ 113,282 Alternative fuel mixture tax credits - - (163,998) (22,195) Dunnage bag business (6,699) (5,248) (17,165) - Stock based compensation expense 697 1,754 2,377 3,592 Adjusted EBITDA (Non-GAAP) $ 49,625 $ 77,858 $ 27,462 $ 94,679 Net Income (GAAP) to Adjusted Net Income (Non-GAAP): Net income (GAAP) 26,963 19,665 80,280 65,041 Alternative fuel mixture tax credits - - (99,427) (21,048) Cellulosic Biofuel Producers tax credit - - - (14,737) Dunnage bag business (4,287) (3,210) (10,407) - Stock based compensation expense 446 1,073 1,441 2,385 Adjusted Net Income (Non-GAAP) $ 23,122 $ 17,528 $ (28,113) $ 31,641 Diluted EPS (GAAP) to Adjusted Diluted EPS (Non-GAAP): Diluted earnings per share (GAAP) $ 0.75 $ 0.57 $ 2.29 $ 1.38 Alternative fuel mixture tax credits - - (2.84) (0.45) Cellulosic Biofuel Producers tax credit - - - (0.31) Dunnage bag business (0.12) (0.09) (0.30) - Stock based compensation expense 0.01 0.03 0.04 0.05 Adjusted Diluted EPS (Non-GAAP) $ 0.64 $ 0.51 $ (0.81) $ 0.67

25 Supplemental Information GAAP to Non GAAP Reconciliations (preliminary and unaudited) Year ended $ 000's December 31, 2007 December 31, 2008 December 31, 2009 December 31, 2010 Net Income (GAAP) to EBITDA (Non-GAAP) Net income (GAAP) $ 26,963 $ 19,665 $ 80,280 $ 65,041 Interest income (2,096) (927) (12) (37) Interest expense 4,041 16,442 13,196 3,203 Amortization of debt issuance costs 254 2,007 5,980 2,237 Provision (benefit) for income taxes 15,138 12,482 52,137 (2,407) Depreciation and amortization 11,327 31,683 54,667 45,245 EBITDA (Non-GAAP) $ 55,627 $ 81,352 $ 206,248 $ 113,282 Plus non cash stock compensation expense 697 1,754 2,377 3,592 Less capital expenditures (11,861) (23,170) (29,165) (38,318) Plus / (less ) cash income taxes received / (paid) (13,812) (11,441) 11,306 13,207 Less cash interest paid (4,041) (9,132) (19,952) (3,318) Free cash flow 26,610 39,363 170,814 88,445 Dunnage bag business - (5,248) (17,165) - Less Alternative fuel mixture tax credit - - (163,998) (22,195) Adjusted free cash flow (non GAAP) $ 26,610 $ 34,115 $ (10,349) $ 66,250