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 13, 2013

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 13, 2013, KapStone Paper and Packaging Corporation (“KapStone”) issued a press release reporting earnings for the quarter and year ended December 31, 2012.

Item 7.01               Regulation FD Disclosure

On February 14, 2013, the management of KapStone will participate in a conference call discussing KapStone’s earnings for the fourth quarter and year ended December 31, 2012. A copy of the presentation materials to be used in the call is furnished as exhibit 99.2 of this report.

Item 9.01               Financial Statements and Exhibits

(d)           Exhibits

Exhibit 99.1     Fourth quarter 2012 Earnings Press Release dated February 13, 2013

Exhibit 99.2     Slides of KapStone Paper and Packaging Corporation dated February 13, 2013

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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 13, 2013
	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	Wednesday, February 13, 2013
Vice President and Chief Financial Officer
847.239.8812

KAPSTONE REPORTS

FOURTH QUARTER AND FULL YEAR RESULTS

Full Year Operating Cash Flows of $158 Million

$95 Million Special Dividend Paid

NORTHBROOK, IL — February 13, 2013 — KapStone Paper and Packaging Corporation (NYSE: KS) today reported preliminary results for the fourth quarter and year ended December 31, 2012.

For the fourth quarter ended December 31, 2012:

·Record net sales of $301 million, up 12% versus 2011

·Diluted EPS of $0.22, down $1.34 per share versus prior year

·Adjusted Diluted EPS of $0.28, down $0.01 per share versus prior year

·Adjusted EBITDA of $38 million, flat with prior year

For the year ended December 31, 2012:

·Record net sales of $1,217 million, up $311 million versus 2011, or 34%

·Diluted EPS of $1.31, down $1.30 per share versus 2011

·Record Adjusted Diluted EPS of $1.48, up $0.07 per share versus prior year

·Record Adjusted EBITDA of $183 million, up $18 million, or 11% versus prior year

Roger W. Stone, Chairman and Chief Executive Officer, stated, “Fourth quarter completed a transformational year for KapStone as we successfully integrated our 2011 acquisition of U.S. Corrugated.  The acquisition has been a significant contributor to KapStone’s earnings this year, and we expect additional benefits in 2013.

“Average mill revenue per ton increased during the quarter by approximately $14 to $634 as our fall domestic containerboard price increase was fully implemented by the end of the quarter. Our corrugated operations realized the benefits from their fall price increase with most of the increase implemented by December. In the fourth quarter, we completed major planned maintenance at two of our mills which resulted in the loss of 12,500 tons of production.  For the year, our mills ran very well, and our legacy mills achieved an all-time production record for the year of 1.32 million tons.

“Cash flow from operations for 2012 reached $158 million, a $21 million increase over 2011. Given the strength of our cash flows and the uncertain tax environment, we paid a special dividend of $2.00 per share on over 47 million shares in late December.”

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Fourth Quarter Operating Highlights

Net sales for the quarter ended December 31, 2012 were $301.0 million, an increase of 12 percent, when compared to the 2011 fourth quarter sales of $268.8 million. The increase in net sales was attributable primarily to the USC acquisition (the 2012 quarter included three months of results for USC compared to only two months in 2011’s fourth quarter due to the acquisition being completed on October 31, 2011) and higher selling prices, partially offset by lower external sales volume as more tons were used internally by our corrugated operations. Average mill revenue per ton increased to $634 in the current quarter versus $620 during the fourth quarter of 2011, reflecting the partial realization of the $50 per ton domestic containerboard increase.

Operating income of $18.6 million for the 2012 quarter declined from the prior year’s results by $2.0 million, or 10 percent.  Operating income improved due to the USC acquisition and higher prices.  Fourth quarter operating income was negatively impacted by increases in input costs and higher planned maintenance outage costs.

Interest expense was $1.8 million for the fourth quarter of 2012, which increased by $0.1 million versus the comparable quarter in 2011 as a result of increased borrowings partially offset by lower interest rates. In addition, amortization of debt issuance costs of $0.7 million for the 2012 quarter declined by $0.5 million compared to the 2011 quarter. At December 31, 2012, the interest rate on the Company’s term loan was 1.71 percent.

The effective income tax rate for the 2012 fourth quarter was 36.9 percent compared to 35.7 percent for the first nine months of 2012. The higher tax rate in the fourth quarter of 2012 includes a lower expected benefit from the domestic manufacturing deduction. The effective income tax rate in the 2011 quarter was negative as it included the benefit from the reversal of tax reserves of $63.0 million related to alternative mixture tax credits.  The 2011 effective income tax rate, excluding the impact of the tax credit reversal, was 35.8 percent.

Full Year Operating Highlights

Net sales for the year ended December 31, 2012, were $1,216.6 million, an increase of 34 percent, compared to 2011 sales of $906.1 million. The increase in net sales was attributable primarily to the USC acquisition (twelve months included in 2012 compared to two months in 2011) partially offset by lower selling prices and less favorable foreign exchange rates on the euro. Average mill revenue per ton decreased to $622 versus $627 in 2011.

Operating income of $109.6 million for the year ended December 31, 2012 exceeded the prior year’s results by $2.8 million. The improvement resulted from the full year impact of the USC acquisition partially offset by higher input costs, lower selling prices, and the less favorable euro.

Interest expense was $8.3 million for the year ended December 31, 2012, up $4.7 million from a year ago as a result of increased borrowings relating to the USC acquisition.  Amortization of debt issuance costs of $3.5 million for 2012 increased by $1.0 million from a year ago due to a full year of amortization on the $13.8 million of debt issuance costs paid for the new credit agreement.

The effective income tax rate for the year ended December 31, 2012 was 35.9 percent compared to (23.6) percent for 2011. The 2012 effective income tax rate includes a lower expected benefit from the domestic manufacturing deduction. The 2011 effective income tax rate was negative due to the reversal of tax reserves related to the alternative fuel mixture credits upon completion of the 2009 IRS examination in the fourth quarter of 2011. The adjusted effective income tax rate in 2011 was 38.0

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percent when the alternative fuel mixture tax credit is excluded.  We expect our effective income tax rate for 2013 to be 35.0 percent excluding any discrete adjustments.

Cash Flow and Working Capital

Cash and cash equivalents decreased by $19.8 million in the quarter ended December 31, 2012, to $16.5 million. For the fourth quarter of 2012, operating activities provided $40.3 million, investing activities used $25.8 million for capital expenditures and financing activities used $34.3 million.

In the fourth quarter of 2012, due to the strength of our cash flows and the uncertain tax environment, the Company’s Board of Directors approved a $2.00 per share special cash dividend which totaled $94.9 million.  In addition, employees elected cashless exercises of 1.3 million stock options.  To pay for their related payroll taxes, the employees surrendered 0.4 million shares, and the Company then used $8.3 million of cash to pay the taxes.  In addition, operating cash flows were reduced by $6.7 million as the Company accelerated payment of approximately 80 percent of 2012 incentive compensation which typically would be paid in the following year.

For the full 2012 year, capital expenditures totaled $67.2 million including approximately $25.0 million for maintenance capital and the remainder for strategic projects such as $10.0 million for information systems projects and $4.0 million for the Charleston paper machine upgrade.   The Company expects total capital expenditures to increase to $73.0 million in 2013 including $19.0 million for the Charleston upgrade project and $9.0 million for the opening of the Company’s new manufacturing facility in Aurora, Illinois.

Total net debt outstanding as of December 31, 2012, was $352.3 million and increased by $82.7 million during the fourth quarter of 2012 primarily due to the short-term borrowings for the payment of the special dividend.  For the year, net debt increased by $5.0 million.

At December 31, 2012, the Company had approximately $16.5 million of cash, $68.7 million of working capital and $79.6 million of revolver borrowing capacity.

The Company was in compliance with all debt covenants at December 31, 2012.

Conclusion

In summary, Stone commented, “We have positive momentum as we move into 2013 with higher containerboard and corrugated prices, the $50 per ton kraft paper increase announced in January, and the realization of additional acquisition synergies. In early January 2013, we announced the opening of our new 192,000 square foot Aurora, Illinois manufacturing facility. The plant should be operational in March. We are confident that we are in an excellent position to continue to grow the company profitably.”

Conference Call

KapStone will host a conference call at 11 a.m. ET, February 14, 2013 to discuss the Company’s financial results for the 2012 year and fourth quarter.  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:

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Domestic:  800.901.5241

International:  617.786.2963

Participant Passcode:  25259805

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 (https://www.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 containerboard, unbleached kraft paper and corrugated products. The Company is the parent company of KapStone Kraft Paper Corporation and KapStone Container Corporation which includes three paper mills and 15 converting plants across the eastern and Midwestern US. The business employs approximately 2,700 people.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures.  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 for evaluating the Company’s performance against competitors and as a primary measure for employees’ incentive programs. Reconciliations 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.

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Factors that could cause actual results to differ 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 including the integration of the US Corrugated acquisition; (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; (7)  the income tax impact of the federal incentive program for cellulosic biofuel producers.  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, 2011 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
	2012			2011			%		2012			2011			%
Net sales	$	300,991		$	268,753		12.0	%	$	1,216,637		$	906,119		34.3	%
Cost and expenses:
Cost of sales, excluding depreciation and amortization	219,624			196,781			-11.6	%	866,124			628,613			-37.8	%
Depreciation and amortization	17,016			14,507			-17.3	%	63,124			51,036			-23.7	%
Freight and distribution expenses	26,814			22,814			-17.5	%	108,438			79,643			-36.2	%
Selling, general and administrative expenses	19,008			14,373			-32.2	%	70,055			41,265			-69.8	%
Other operating income	36			309			-88.3	%	664			1,179			-43.7	%
Operating income	18,565			20,587			-9.8	%	109,560			106,741			2.6	%
Foreign exchange gain / (loss)	96			(198		)	148.5	%	(303		)	(319		)	5.0	%
Interest expense, net	1,769			1,655			-6.9	%	8,295			3,599			-130.5	%
Amortization of debt issuance costs	740			1,216			39.1	%	3,479			2,482			-40.2	%
Income before provision for income taxes	16,152			17,518			-7.8	%	97,483			100,341			-2.8	%
Provision for income taxes	5,959			(56,678		)	-110.5	%	34,978			(23,640		)	-248.0	%
Net income	$	10,193		$	74,196		-86.3	%	$	62,505		$	123,981		-49.6	%
Net income per share:
Basic	$	0.22		$	1.60				$	1.34		$	2.68
Diluted	$	0.22		$	1.56				$	1.31		$	2.61
Weighted-average number of shares outstanding:
Basic	46,994,747			46,424,982					46,713,456			46,287,183
Diluted	47,404,980			47,585,093					47,726,439			47,487,623
Effective income tax rate	36.9		%	-323.5		%			35.9		%	-23.6		%
Net Income (GAAP) to EBITDA (Non-GAAP) to Adjusted EBITDA (Non-GAAP):
Net income (GAAP)	$	10,193		$	74,196		-86.3	%	$	62,505		$	123,981		-49.6	%
Interest expense, net	1,769			1,655			-6.9	%	8,295			3,599			-130.5	%
Amortization of debt issuance costs	740			1,216			39.1	%	3,479			2,482			-40.2	%
Provision for income taxes	5,959			(56,678		)	110.5	%	34,978			(23,640		)	248.0	%
Depreciation and amortization	17,016			14,507			-17.3	%	63,124			51,036			-23.7	%
EBITDA (Non-GAAP)	$	35,677		$	34,896		2.2	%	$	172,381		$	157,458		9.5	%
Acquisition, start up and other expenses	1,091			2,441			55.3	%	5,049			3,540			-42.6	%
Stock-based compensation expense	920			759			-21.2	%	5,242			3,985			-31.5	%
Adjusted EBITDA (Non-GAAP)	$	37,688		$	38,096		-1.1	%	$	182,672		$	164,983		10.7	%
Net Income (GAAP) to Adjusted Net Income (Non-GAAP):
Net income (GAAP)	$	10,193		$	74,196				$	62,505		$	123,981
Realization of unrecognized tax benefit	—			(63,026		)			—			(63,026		)
Income tax adjustments	1,657			—					1,657			1,228
Acquisition, start up and other expenses	685			1,877					3,171			2,483
Stock-based compensation expense	578			490					3,292			2,471
Adjusted Net Income (Non-GAAP)	$	13,113		$	13,537				$	70,625		$	67,137
Basic EPS (GAAP) to Adjusted Basic EPS (Non-GAAP):
Basic EPS (GAAP)	$	0.22		$	1.60				$	1.34		$	2.68
Realization of unrecognized tax benefit	—			(1.36		)			—			(1.36		)
Income tax adjustments	0.04			—					0.04			0.03
Acquisition, start up and other expenses	0.01			0.04					0.07			0.05
Stock-based compensation expense	0.01			0.01					0.07			0.05
Adjusted Basic EPS (Non-GAAP)	$	0.28		$	0.29				$	1.52		$	1.45
Diluted EPS (GAAP) to Adjusted Diluted EPS (Non-GAAP):
Diluted earnings per share (GAAP)	$	0.22		$	1.56				$	1.31		$	2.61
Realization of unrecognized tax benefit	—			(1.32		)			—			(1.33		)
Income tax adjustments	0.04			—					0.03			0.03
Acquisition, start up and other expenses	0.01			0.04					0.07			0.05
Stock-based compensation expense	0.01			0.01					0.07			0.05
Adjusted Diluted EPS (Non-GAAP)	$	0.28		$	0.29				$	1.48		$	1.41

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KapStone Paper and Packaging Corporation

Consolidated Balance Sheets

(In thousands)

	December 31,			December 31,
	2012			2011
	(preliminary and unaudited)
Assets
Current assets:
Cash and cash equivalents	$	16,488		$	8,062
Trade accounts receivable, net of allowances	111,592			108,320
Other receivables	10,061			11,247
Inventories	113,511			110,054
Prepaid expenses and other current assets	9,808			4,207
Deferred income taxes	5,864			10,048
Total current assets	267,324			251,938
Plant, property and equipment, net	576,115			567,195
Other assets	4,412			4,313
Intangible assets, net	57,027			63,715
Goodwill	226,289			237,193
Total assets	$	1,131,167		$	1,124,354
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	—		$	6,094
Short-term borrowings	63,500			—
Accounts payable	89,638			81,051
Accrued expenses	25,032			21,217
Accrued compensation costs	20,421			27,445
Total current liabilities	198,591			135,807
Long-term debt, net of current portion	294,310			335,635
Pension and post-retirement benefits	13,193			10,676
Deferred income taxes	96,459			84,316
Other liabilities	10,666			11,642
Total other liabilities	414,628			442,269
Stockholders’ equity:
Common stock $0.0001 par value	5			5
Additional paid-in capital	236,034			230,665
Retained earnings	285,011			318,068
Accumulated other comprehensive loss	(3,102		)	(2,460		)
Total stockholders’ equity	517,948			546,278
Total liabilities and stockholders’ equity	$	1,131,167		$	1,124,354

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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,
	2012			2011			2012			2011
Operating activities:
Net income	$	10,193		$	74,196		$	62,505		$	123,981
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization	17,016			14,507			63,124			51,036
Stock-based compensation expense	920			759			5,242			3,985
Excess tax benefits from stock-based compensation	(6,159		)	(151		)	(8,037		)	(1,332		)
Amortization of debt issuance costs	740			1,216			3,479			2,482
Loss on disposal of fixed assets	329			287			1,202			910
Deferred income taxes	547			11,551			23,128			41,766
Changes in operating assets and liabilities	16,789			(70,033		)	7,186			(86,452		)
Net cash provided by operating activities	$	40,377		$	32,332		$	157,829		$	136,376
Investing activities:
KPB acquisition earn-out payment	$	—		$	—		$	—		$	(49,700	)
USC acquisition	—			(331,632		)	(314		)	(331,632		)
Restricted cash	—			15,000			—			—
Capital expenditures	(25,838		)	(16,269		)	(67,237		)	(42,531		)
Net cash used in investing activities	$	(25,838	)	$	(332,901	)	$	(67,551	)	$	(423,863	)
Financing activities:
Proceeds from revolving credit facility	$	63,500		$	—		$	142,900		$	7,600
Repayments on revolving credit facility	—			—			(79,400		)	(7,600		)
Proceeds from long-term debt	—			375,000			—			375,000
Repayments of long-term debt	—			(120,455		)	(50,000		)	(134,582		)
Debt issuance costs for new credit facility	—			(13,031		)	—			(13,819		)
Proceeds from other current borrowings	—			—			3,398			2,273
Repayments of other current borrowings	(622		)	(623		)	(3,398		)	(2,273		)
Cash dividends paid	(94,910		)	—			(94,910		)	—
Payment of withholding taxes on stock awards	(8,317		)	—			(9,496		)	(952		)
Proceeds from exercises of stock options	272			247			1,345			1,264
Excess tax benefits from stock-based compensation	6,159			151			8,037			1,332
Proceeds from issuance of shares to ESPP	—			—			241			192
Loan amendment costs	(437		)	—			(569		)	(244		)
Net cash provided by (used in) financing activities	$	(34,355	)	$	241,289		$	(81,852	)	$	228,191
Net increase / (decrease) in cash and cash equivalents	(19,816		)	(59,280		)	8,426			(59,296		)
Cash and cash equivalents-beginning of period	36,304			67,342			8,062			67,358
Cash and cash equivalents-end of period	$	16,488		$	8,062		$	16,488		$	8,062

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EX-99.2

Exhibit 99.2

 2012 Fourth Quarter and Full Year Review Roger W. Stone Chairman and Chief Executive Officer Andrea K. Tarbox Vice President and Chief Financial Officer February 13, 2013

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

Strong, Profitable Growth in Net Sales, Adjusted EBITDA, and Free Cash Flows 3 $s in Millions CAGR of 30% CAGR of 40% KapStone’s Growth Story Net Sales Adj. EBITDA* *Adjusted to exclude alternative fuel mixture credits, non-cash stock compensation, acquisition, start up and other costs, and dunnage bag business sold in March 2009 Enabled KapStone to Return to Shareholders on Dec. 20 $95 Million of Cash As a Special Dividend $2 per share dividend equaled 9% of the stock price on the announcement date KapStone remains well capitalized with a net debt to EBITDA ratio of 1.9 and well positioned to continue to pursue additional growth opportunities

Full Year Financial Results *Adjusted to exclude non-cash stock compensation, and acquisition, start up and other costs **Adjusted to exclude items above, realization of uncertain tax benefit relating to AFTC in 2011 and other income tax adjustments in 2012 and 2011 Years Ended December 31, ($ in Millions, except per share data) 20122012 2011 2011 Inc / (Dec) Inc / (Dec) Inc / (Dec) Inc / (Dec) Net Sales $1,217 $ 906 $ 311 34% EBITDAEBITDA $ 172$ 172 $ 157$ 157 $ 15 $ 15 10%10% Adj. EBITDA* $ 183 $ 165 $ 18 11% Net Income Net Income $ 63$ 63 $ 124$ 124 $ (61)$ (61) (49%)(49%) Adj. Net Income** $ 71 $ 67 $ 4 6% Diluted EPS Diluted EPS $1.31 $ 1.31 $2.61 $ 2.61 $ (1.30) $ (1.30) (50%)(50%) Adj. Diluted EPS** $ 1.48 $ 1.41 $ 0.07 5% 4

5 Thousands of Tons Thousands of Tons Annual Production Mill Production Increases Record production achieved for FYE 2012 on sustained high operating rates from legacy mills and inclusion of USC for full year Q4 2012 includes three months of USC production of 59,000 tons compared to two months in Q4 2011 Tons lost due to outages totaled 12,500 tons in Q4 2012 and 14,400 tons in Q4 2011 2012 year-end mill finished goods essentially unchanged Quarterly Production

6 Full Year 2012 Compared to 2011 *Adjusted to exclude non-cash stock compensation and acquisition related costs Acquisition Drives Increased Sales and Adjusted EBITDA* USC acquisition added $331 million in revenues and $35 million of adjusted EBITDA as 2012 includes twelve months of operations compared to two months in 2011 Average selling prices for 2012 declined from $627 per ton in 2011 to $622 per ton mainly reflecting lower export containerboard prices, which averaged $44 less during the year However, export prices at the end of 2012 were $54 per ton higher than the end of 2011 Partially offsetting lower export prices was the $50 per ton domestic containerboard price increase fully implemented by the end of Q4 2012 FX reflects the weaker Euro ($1.29 in 2012 versus $1.39 in 2011) negatively impacting sales and adjusted EBITDA Inflation driven by higher material costs ($7 million primarily for wood) and compensation ($5 million) Net Sales Adjusted EBITDA*

Net sales increased by $331 million to $389 million due to: Twelve months of operations in 2012 compared to two months in 2011 Sales reflects 6.155 bsf of sales volume Box price increase of 8 percent and sheet price increases of 10 percent were substantially implemented by the end of Q4 2012 with a few contractual increases to be realized in 2013 2012 adjusted EBITDA of $41 million increased by $35 million due to: Twelve months of operations in 2012 compared to two months in 2011 USC corporate overhead reduction of $8 million realized during 2012 Operational synergies of $8 million on target Added $0.02 and $0.27 of adjusted diluted EPS for 2011 and 2012, respectively Contributed $37 million of acquired pre-tax NOL’s used to reduce KapStone’s cash taxes Provides stability and flexibility over economic cycle 7 USC Acquisition Delivers *USC Acquired Oct.31, 2011 7 **Adjusted to exclude one time acquisition costs and includes all interest expense and amortization of related financing fees

Fourth Quarter Financial Results 8 *Adjusted to exclude non-cash stock compensation and acquisition, start up and other costs **Adjusted to exclude items above, realization of unrecognized tax benefit in 2011 and income tax adjustments in 2012 ($ in Millions, except per share data) Q4 2012 Q4 2011 Inc/(Dec) Q3 2012 Inc/(Dec) Net Sales $ 301 $ 269 12% $ 310 (3%) EBITDA $ 36 $ 35 3% $ 47 (23%) Adj EBITDA*Adj. EBITDA $ 38$ 38 $38 $ 38 --%% $ 49$ 49 (22%)(22%) Net Income $ 10 $ 74 (86%) $ 18 (44%) Adj. Net Income** $ 13 $ 14 (7%) $ 20 (35%) Diluted EPS $ 0.22 $ 1.56 (86%) $ 0.38 (42%) Adj. Diluted EPS** $ 0.28 $ 0.29 (3%) $ 0.41 (32%)

Adjusted EBITDA $269 $40 $2 $10 $301 $38 $5 $2 $5 $2 $38 Q4 2011 Acquisition Price Other Q4 2012 Acquisition Gains offset by Inflation and Outages 9 Q4 2012 Compared to Q4 2011 The acquisition increased net sales and adjusted EBITDA as 2012 includes three months of operations compared to two months in 2011 Price reflects average revenue per ton up $14 to $634 On partial realization of $50 per ton domestic containerboard price increase announced in August and fully realized by the end of Q4 2012 Continued price recovery in export containerboard markets; nets up $23 per ton Other includes lower external sales volume due to increased internal shipments to corrugating plants Inflation mainly on higher wood costs, compensation and benefit increases Outage expense higher due to Roanoke Rapids’ annual outage extended due to additional turbine and recovery boiler maintenance Net Sales $ in Millions

Adjusted EBITDA $310 $5 $10 $2 $2 $301 $49 $5 $13 $3 $2 $2 $38 Q3 2012 Price Outages Volume Mix Other Q4 2012 Planned Outages Drive Lower Sales Volume and Reduce Adj. EBITDA 10 Q4 2012 Compared to Q3 2012 Sales down $9 million reflecting: Higher prices due to full realization of $50 per ton domestic containerboard price increase by end of Q4 2012 Lower paper volume of 16,482 tons mainly due to lower production resulting from Roanoke’s and Cowpens’ annual outages Seasonally weaker Durasorb volume (down 6,800 tons) Seasonal slow down in corrugating plants’ results Mix slightly unfavorable mainly reflecting lower kraft paper sales Outage costs up $13 million mainly due to Roanoke Rapids’ and Cowpens planned maintenance outages Net Sales

 KapStone Board of Directors approved special dividend in November 2012 $2.00 per share paid in December 2012 totaling $95 million Shareholder funds invested 2005 $120 million from IPO 2007/2009 $102 million from warrant exercises Total investment $222 million Returned $ 95 million, or 43% Potential changes in tax rates for future years and the stock dividend triggered significant 2012 year end stock option activity 1.3 million employee options exercised. CEO and COO increased ownership in KS by 439,000 shares, collectively Company paid $8 million of withholding taxes on option exercises in lieu of issuing 361,000 shares Option exercises generated $6 million excess tax benefit for KS Accelerated vesting of 71,877 restricted stock units excluding CEO and President Special Dividend and Related Share Activity 11

Adjusted Free Operating Cash Flows* and Taxes Adjusted free operating cash flow was $91 million for the 2012 full year, or $1.90 per diluted share Q4 2012 included $7 million of employee incentive payments accelerated from Q1 2013 due to tax law changes Capex for 2012 was $67 million of which approximately $25 million was maintenance related Spending for 2012 includes $4 million for $29 million Charleston upgrade Spending for USC IT migration was $10 million *Calculated by adjusting cash flow from operations for capital expenditures, AFTC in 2009 and 2010, and results of dunnage bag business sold in 2009 For the Years Ended December 31 12 **Includes $13 million of income tax refunds in 2010 and 2009 The adjusted income tax rate for the 2012 year was 34.2% compared to an adjusted rate of 38.0% for 2011 Cash tax rate for the 2012 year was 7%

Strong Balance Sheet at December 31, 2012 13 Net debt $352 million Current interest rate on debt 1.71% Net debt to EBITDA ratio 1.93 Amended credit agreement in Q4 2012 Reduced interest rate grid by 25 bps Allowed special dividend to be paid Extended agreement by one year to November 2017 At Dec. 31, 2012, KapStone had $17 million of cash and $80 million of revolver borrowing capacity In addition, KapStone’s credit facility has a $450 million accordion provision to provide for future borrowing under the same terms and conditions

Summary of Key Assumptions for Q1 2013 Full quarter of $50 per ton domestic containerboard price increase and 8% to 10% price increases for corrugating products Increases partially realized in Q4 2012 Some increases for corrugating customers tied to January and mid-year contract changes Export prices running over $50 per ton higher than a year ago Q1 2013 has 2 less production days than Q4 2012 and 1 less than Q1 2012 Q1 2013 current planned outages and major maintenance $4 million expense, loss of 2,000 production tons Expect some upward cost pressure on input costs primarily driven by wood prices (2012 extremely dry year) with seasonal conditions currently impacting Q1 Q1 payroll taxes approximately $1 million higher than Q4 2012 14

Summary of Key Assumptions for Full Year 2013 Pricing Full year of domestic containerboard and corrugated price increases Some benefit from announced $50 per ton kraft paper price increase Export containerboard prices running over $50 per ton higher than a year ago Increase in tons used for internal consumption Expect upward cost pressure primarily driven by wood prices (2012 extremely dry year) Current planned outages and major maintenance Q1- $4 million expense, loss of 2,000 production tons Q2 - $8 million expense, loss of 6,000 production tons (tri-annual Charleston outage) Q3 - $3 million expense, no loss in production tons Q4 - $9 million expense, 10,000 loss in production tons Estimated tax rate from operations of 35%. Cash tax rate of 15% 2012 average FX rate was 1.29 compared to current rate 1.32 15

Appendix

17 Components of Annual Net Sales Domestic CB DuraSorb Kraft Paper Kraftpak Product Mix

18 Components of Quarterly Net Sales Avg. Revenue per Ton Domestic CB DuraSorb Kraft Paper Kraftpak Product Mix Desktop.lnk