NOTE 1

Nature of Operations and Basis of Presentation

On December 16, 2008, Potlatch Corporation, which we refer to in this report as Potlatch, distributed 100% of the issued and outstanding shares of our common stock to the holders of record of Potlatch common stock in a tax-free spin-off. Unless the context otherwise requires or unless otherwise indicates, references in this report to “Clearwater Paper Corporation,” “we,” “our,” “the company” and “us” refer:

for all periods prior to the spin-off, to the Consumer Products and Pulp and Paperboard businesses separated from Potlatch in the spin-off; and

for all periods following the spin-off, to Clearwater Paper Corporation and its subsidiaries.

On December 27, 2010, we acquired Cellu Tissue Holdings, Inc., or Cellu Tissue, for $247.0 million in cash. In connection with the acquisition of Cellu Tissue, we retired Cellu Tissue’s outstanding 11.50% senior secured notes for $272.2 million and repaid Cellu Tissue’s credit facility of $32.5 million. Cellu Tissue was an Alpharetta, Georgia-based integrated manufacturer of tissue products. Cellu Tissue’s operations from December 28, 2010 forward are reflected in our financial statements.

On November 28, 2011, we sold our Lewiston, Idaho, sawmill to Idaho Forest Group, or IFG, of Coeur d’Alene, Idaho. The transaction included the sale of our sawmill, planer mill, dry kilns and related assets along with log and finished goods inventories and timber under contract, in the aggregate amount of approximately $30 million. This sawmill was our only wood products facility and we therefore no longer produce or sell wood products.

These consolidated financial statements include the financial condition and results of operations of Clearwater Paper Corporation and its wholly-owned subsidiaries. All intercompany transactions and balances between operations within the company have been eliminated.