SPOKANE, Wash.--(BUSINESS WIRE)--October 28, 2010--Clearwater Paper Corporation (NYSE:CLW) today reported financial results for the third quarter ended September 30, 2010. Third quarter net sales increased 6.5% to $352.9 million from $331.5 million in the third quarter of 2009. Net earnings for the third quarter of 2010 were $15.0 million, or $1.27 per diluted share compared to net earnings of $46.2 million, or $3.92 per diluted share, for the third quarter of 2009. Third quarter 2009 results included income of $2.52 per diluted share for the alternative fuel mixture tax credit. Excluding the alternative fuel mixture tax credit, third quarter 2009 net earnings would have been $16.5 million or $1.40 per diluted share. After adjusting for $3.1 million in pre-tax transaction costs related to the pending acquisition of Cellu Tissue Holdings, Inc., third quarter 2010 net earnings were $16.9 million or $1.43 per diluted share. Additionally, the company had scheduled major maintenance costs of $4.0 million in the third quarter of 2010 compared to $1.1 million in the third quarter of 2009, representing an increase of $2.9 million or an estimated after-tax $0.15 per diluted share impact on third quarter results.

"We continued to experience sales growth in our Consumer Products and Pulp and Paperboard businesses and we have made progress on executing our growth initiatives. We recently completed the debt financing in anticipation of the Cellu Tissue acquisition at very attractive borrowing rates, and we continue to make good progress and remain on schedule with the construction of our new facilities in Shelby, North Carolina," said Gordon Jones, chairman, president and chief executive officer.

Net sales of $144.0 million for the third quarter of 2010 were 2.7% higher than third quarter 2009 net sales of $140.2 million. Operating income for the quarter was $10.8 million, compared with operating income of $32.1 million for the third quarter of 2009.

Net sales of $231.5 million for the third quarter of 2010 were up 13.3% compared to third quarter 2009 net sales of $204.2 million. Operating income for the quarter was $28.2 million, compared to operating income of $53.5 million for the third quarter of 2009, which included $47.1 million associated with the alternative fuel mixture tax credit.

The company's effective income tax rate for the third quarter of 2010 was 39.3% compared to 36.9% for the same period last year. The tax rate for the third quarter of 2010 includes interest expense related to our uncertain tax positions primarily related to whether our alternative fuel mixture tax credit is subject to income taxation. The annual estimated effective tax rate for 2010, excluding discrete items, is approximately 34.8%.

In this press release, the company presents its results for the third quarter of 2009, excluding income from the alternative fuel mixture tax credit, and its results for the third quarter of 2010, excluding Cellu Tissue transaction costs. These amounts are not in accordance with generally accepted accounting principles (GAAP) and accordingly a reconciliation of these amounts to net earnings determined in accordance with GAAP is included at the end of this press release.

A live audio Web cast and conference call will be held today, Thursday, October 28, 2010 at 8 a.m. Pacific time (11 a.m. Eastern time). Investors may access the conference call by dialing 877-303-9241 (for U.S./Canada investors) or 760-666-3575 (for international investors). The audio Web cast may be accessed on the company's Web site at http://ir.clearwaterpaper.com/events.cfm. An accompanying presentation will be available for downloading at the same site at 7 a.m. Pacific time (10:00 a.m. Eastern time). The Web cast will be audio only. Investors are recommended to download the accompanying presentation prior to the call.

For those unable to participate in the call, an archived recording will be available through the Clearwater Paper Corporation Web site www.clearwaterpaper.com under "Investor Relations" following the conference call.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding the company's growth initiatives and expected annual tax rates. 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, but are not limited to, unanticipated construction or manufacturing disruptions related to the Shelby manufacturing facility; the possibility that the conditions to closing of the Cellu Tissue acquisition may not be satisfied and that the closing may not occur or may be delayed; customers' product preferences, changes in the United States and international economies; changes in raw material and energy costs; cyclical industry conditions; loss of a large customer; changes in the alternative fuel mixture tax credit regulations and the company's eligibility for such tax credits; competitive pricing pressure for the company's products; changes in freight costs and disruptions in transportation services; unanticipated manufacturing disruptions; changes in general and industry-specific laws and regulations; unforeseen environmental liabilities or expenditures; labor disruptions; and other risks and uncertainties described from time to time in the company's public filings with the Securities and Exchange Commission. The forward-looking statements are made as of the date of this press release and the company does not undertake to update any forward-looking statements.

Cellu Tissue has filed with the SEC a preliminary proxy statement and intends to file with the SEC a definitive proxy statement and other relevant material in connection with the acquisition. The definitive proxy statement will be sent or given to the stockholders of Cellu Tissue. Before making any voting or investment decision with respect to the acquisition, investors and stockholders of Cellu Tissue are urged to read the proxy statement and the other relevant material when they become available because they will contain important information about the acquisition. The proxy statement and other relevant materials (when they become available), and any other documents filed by Cellu Tissue with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov, at Cellu Tissue’s Investor Relations website at cellutissue.com/investor (click “SEC filings”) or from Cellu Tissue by contacting Investor Relations by mail at 1855 Lockeway Drive, Suite 501, Alpharetta, Georgia 30004, Attention: Investor Relations, or by telephone at (678) 393-2651.

Clearwater Paper and Cellu Tissue and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Cellu Tissue stockholders in connection with the acquisition. Information about Clearwater Paper’s directors and executive officers is set forth in Clearwater Paper’s proxy statement on Schedule 14A filed with the SEC on March 29, 2010 and its Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on February 26, 2010, respectively. Information about Cellu Tissue’s directors and executive officers is set forth in its proxy statement on Schedule 14A filed with the SEC on June 25, 2010. Additional information regarding the interests of participants in the solicitation of proxies in connection with the acquisition is set forth in the preliminary proxy statement that Cellu Tissue filed with the SEC and will also be included in the definitive proxy statement that Cellu Tissue intends to file with the SEC.

For additional information on Clearwater Paper, please visit our Web site at www.clearwaterpaper.com.

Clearwater Paper Corporation manufactures premium consumer tissue, high-quality bleached paperboard and wood products at six facilities across the country. The company is a premier supplier of private label tissue to major retail grocery chains and also produces bleached paperboard used by quality-conscious printers and packaging converters. Clearwater Paper's 2,500 employees build shareholder value by developing strong customer partnerships through quality and service.

Clearwater Paper Corporation
Statements of Operations
Unaudited (Dollars in thousands - except per-share amounts)


		Three Months Ended										Nine Months Ended
		September 30,										September 30,
		2010					2009					2010					2009

Net sales		$	352,927		100	%	$	331,484		100	%	$	1,027,408		100	%	$	935,089		100	%
Costs and expenses:
	Cost of sales		303,542		86	%		282,485		85	%		891,921		87	%		795,152		85	%
	Selling, general and administrative expenses		20,886		6	%		18,627		6	%		59,124		6	%		52,655		6	%
			324,428		92	%		301,112		91	%		951,045		93	%		847,807		91	%
Alternative fuel mixture tax credit			-					47,137					-					123,510
Earnings before interest, debt retirement costs and income taxes			28,499		8	%		77,509		23	%		76,363		7	%		210,792		23	%
Interest expense, net			(3,819	)				(4,277	)				(12,236	)				(11,271	)
Debt retirement costs			-					-					-					(6,250	)
Earnings before income taxes			24,680		7	%		73,232		22	%		64,127		6	%		193,271		21	%
Income tax provision			9,692					27,023					28,113					57,967
Net earnings		$	14,988		4	%	$	46,209		14	%	$	36,014		4	%	$	135,304		14	%
Net earnings per common share:
	Basic	$	1.31				$	4.07				$	3.14				$	11.91
	Diluted		1.27					3.92					3.05					11.54
Average shares outstanding (in thousands):
	Basic		11,479					11,362					11,472					11,359
	Diluted		11,792					11,780					11,808					11,729

Clearwater Paper Corporation
Condensed Balance Sheets
Unaudited (Dollars in thousands)


			September 30,			December 31,
			2010			2009
Assets
Current assets:
	Cash		$	21,507		$	2,824
	Short-term investments			335,168			187,926
	Receivables, net			111,235			94,458
	Taxes receivable			2,936			101,343
	Inventories			145,276			169,761
	Deferred tax assets			11,419			12,926
	Prepaid expenses			3,970			3,053
		Total current assets		631,511			572,291

Land				5,228			4,729
Plant and equipment, net				349,012			359,295
Deferred tax assets				10,155			4,205
Other assets				7,427			6,943

			$	1,003,333		$	947,463

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities		$	122,939		$	109,775
	Current liability for pensions and other postretirement employee benefits			9,933			9,933
		Total current liabilities		132,872			119,708

Long-term debt				148,429			148,285
Liability for pensions and other postretirement employee benefits				224,438			236,422
Other long-term obligations				10,150			5,825
Accrued taxes				75,414			73,487
Accumulated other comprehensive loss				(117,242	)		(126,962	)
Stockholders' equity excluding accumulated other comprehensive loss				529,272			490,698

			$	1,003,333		$	947,463

Clearwater Paper Corporation
Segment Information
Unaudited (Dollars in thousands)

		Three Months Ended										Nine Months Ended
		September 30,										September 30,
		2010					2009					2010					2009
Segment net sales:
	Consumer Products	$	143,958		41	%	$	140,190		42	%	$	427,199		42	%	$	415,692		44	%
	Pulp and Paperboard		231,459		65	%		204,210		62	%		657,376		64	%		558,472		60	%
			375,417					344,400					1,084,575					974,164
Elimination of intersegment net sales			(22,490	)	-6	%		(12,916	)	-4	%		(57,167	)	-6	%		(39,075	)	-4	%
Total segment net sales		$	352,927		100	%	$	331,484		100	%	$	1,027,408		100	%	$	935,089		100	%

Operating income:
	Consumer Products	$	10,809		38	%	$	32,080		41	%	$	56,486		74	%	$	93,398		44	%
	Pulp and Paperboard (1)		28,155		99	%		53,462		69	%		48,851		64	%		138,949		66	%
			38,964					85,542					105,337					232,347
Corporate and eliminations			(10,465	)	-37	%		(8,033	)	-10	%		(28,974	)	-38	%		(21,555	)	-10	%
Earnings before interest, debt retirement costs and income taxes		$	28,499		100	%	$	77,509		100	%	$	76,363		100	%	$	210,792		100	%

(1) Operating income for the three and nine months ended September 30, 2009, for the Pulp and Paperboard segment included $47.1 million and $123.5 million, respectively, associated with the alternative fuel mixture tax credit.

Clearwater Paper Corporation
Reconciliation of Non-GAAP Financial Measures
Unaudited (Dollars in thousands, except per-share amounts)


		Three Months Ended September 30,
		2010		2009

GAAP net earnings		$	14,988	$	46,209
Special items, after-tax:
	Cellu Tissue acquisition related expenses		1,895		-
	Alternative fuel mixture tax credit		-		(29,744	)
Net earnings, excluding special items		$	16,883	$	16,465


GAAP net earnings per diluted share		$	1.27	$	3.92
Special items, after-tax:
	Cellu Tissue acquisition related expenses		0.16		-
	Alternative fuel mixture tax credit		-		(2.52	)
Net earnings per diluted share, excluding special items		$	1.43	$	1.40

Diluted average shares outstanding (in thousands)			11,792		11,780

CONTACT:
Clearwater Paper Corporation
News media:
Matt Van Vleet, 509-344-5912
or
CFO:
Linda Massman, 509-344-5905
or
Investors:
IR Sense
Sean Butson, 509-344-5906