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Boise Inc. Announces Financial Results for Second Quarter 2009

August 5, 2009

BOISE, Idaho, Aug. 5 /PRNewswire-FirstCall/ — Boise Inc. (NYSE: BZ) today reported net income of $50.9 million or $0.60 per diluted share for second quarter 2009, compared with first quarter 2009 net loss of $0.9 million or ($0.01) per diluted share and second quarter 2008 net loss of $18.1 million or ($0.23) per diluted share.

EBITDA, excluding special items, was $53.0 million for second quarter 2009, compared with $58.6 million for first quarter 2009 and $40.1 million for second quarter 2008.

Net covenant debt(b) was $921.6 million at June 30, 2009, a decline of $27.4 million from $949.0 million at March 31, 2009. Net total debt was $901.7 million at June 30, 2009, a decline of $114.9 million from $1,016.5 million at March 31, 2009.

                                       FINANCIAL HIGHLIGHTS
                               (in millions, except per-share data)

                                  2Q 2009          2Q 2008          1Q 2009
                                  -------          -------          -------

    Sales                           $479.4          $618.4           $500.3
    Income from operations           $96.6            $7.6            $21.4
    Net income (loss)                $50.9          $(18.1)           $(0.9)
    Net income (loss) per share
     basic                           $0.65          $(0.23)          $(0.01)
    Net income (loss) per share
     diluted                         $0.60          $(0.23)          $(0.01)
    EBITDA (a)                      $130.6           $40.1            $52.7
    EBITDA excluding special
     items (a)                       $53.0           $40.1            $58.6

    Interest expense                 $21.4           $26.1            $22.2
    Depreciation and
     amortization                    $32.9           $32.7            $32.0
    Net covenant debt (b)           $921.6        $1,026.8           $949.0
    Total cash and cash
     equivalents and short-term
     investments                    $125.1           $21.1            $27.5

    (a) For reconciliation of net income (loss) to EBITDA and EBITDA to
        EBITDA excluding special items, see "Summary Notes to
        Consolidated Financial Statements and Segment Information."
    (b) Net covenant debt is calculated in accordance with credit
        agreements and excludes aggregate cash and cash equivalents and
        short-term investment balances in excess of $35.0 million.  For
        reconciliation of total debt and net total debt to net covenant
        debt, see "Summary Notes to Consolidated Financial Statements and
        Segment Information."

“Our core businesses delivered solid earnings and cash flow during second quarter 2009 as demand for our office papers, label and release papers, and agricultural-based packaging products held up well despite the sluggish economy,” said Alexander Toeldte, President and Chief Executive Officer of Boise Inc. “We reduced working capital and ended the quarter with a much strengthened liquidity position. We will continue to focus on controlling costs, balancing production with demand, and generating cash.”

Sales

Total sales for second quarter 2009 were $479.4 million, a decrease of $139.0 million, or 22%, from $618.4 million during second quarter 2008 and down 4% from first quarter 2009 sales of $500.3 million.

Paper segment sales during second quarter 2009 decreased $54.5 million, or 13%, to $356.4 million from $410.9 million compared with second quarter 2008, driven by 10% lower uncoated freesheet sales volumes. This was due primarily to the St. Helens, Oregon, mill downsizing, which eliminated 13% of our annual uncoated freesheet capacity. Reduced sales volumes were offset partially by higher net sales prices. Paper segment sales in second quarter 2009 increased by $4.4 million, or 1%, from first quarter 2009.

Packaging segment sales during second quarter 2009 decreased $86.9 million, or 40%, to $130.2 million from $217.1 million compared with second quarter 2008. Lower newsprint volumes due to the indefinite idling of our DeRidder #2 newsprint machine and a lower operating rate on our DeRidder #3 newsprint machine negatively impacted revenue. Reduced segment linerboard sales volumes also contributed to the decline as we balanced production to match lower demand. Packaging segment sales decreased $26.9 million, or 17%, from first quarter 2009 due to lower newsprint volumes and lower net selling prices for linerboard and newsprint.

Prices and Volumes

Average net selling prices of uncoated freesheet papers improved $33 per ton, or 4%, to $958 per ton during second quarter 2009 compared with second quarter 2008, and declined $23 per ton, or 2%, from first quarter 2009. Uncoated freesheet sales volumes were 315,000 tons during second quarter 2009, a decline of 10% versus the prior year period due to reduced capacity and market downtime as a result of lower demand. Uncoated freesheet sales volumes increased 4% from first quarter 2009 on reduced market downtime, improved demand, and higher sales volumes of label and release and office papers. Combined sales volumes of premium office, label and release, and flexible packaging papers, which represented 28% of our second quarter 2009 uncoated freesheet sales volumes, increased by 4% from the prior year.

Corrugated container and sheet prices improved $3 per thousand square feet (msf), or 5%, to $59 per msf in second quarter 2009 over prices for these products during the second quarter 2008 and decreased $1 per msf, or 2%, compared with first quarter 2009 prices. Sales volumes for corrugated containers and sheets were 1.4 million msf in second quarter 2009, a decline of 8% from second quarter 2008 due primarily to lower volumes from our sheet feeder plant in Texas as a result of slowing industrial markets. Corrugated products sales volumes increased 2% from first quarter 2009 on improving seasonal agricultural and food sector demand in our Pacific Northwest corrugated plants.

Linerboard net selling prices to third parties declined $92 per ton, or 23%, to $302 per ton in second quarter 2009 from $394 per ton in the second quarter 2008 and declined $50 per ton, or 14%, from first quarter 2009, due to softening demand, particularly in export markets. Linerboard sales volumes to third parties were 54,000 tons, a decrease of 18% compared with the second quarter 2008 and an increase of 42% from first quarter 2009. In the first quarter 2009, we performed our annual maintenance outage at our mill in DeRidder, Louisiana, which reduced production and sales during that period.

Newsprint pricing in second quarter 2009 decreased by $110 per ton, or 20%, to $434 per ton from the second quarter 2008 and declined $154 per ton, or 26%, from first quarter 2009. Newsprint sales volumes were 28,000 tons, a decline of 73% compared with the second quarter 2008 and down 53% from first quarter 2009 due to weak newsprint demand, coupled with a change in our approach to market as we exited our sales relationship with AbitibiBowater and began to sell directly to publishers.

Input Costs

Total fiber, energy, and chemical costs for second quarter 2009 were $183.7 million, a decrease of $106.3 million, or 37%, from costs of $290.0 million for second quarter 2008. Much of the decline was driven by reduced consumption as a result of the restructuring of our mill in St. Helens, Oregon, and market downtime at our mill in DeRidder, Louisiana. Total fiber, energy, and chemical costs for second quarter 2009 decreased $22.0 million, or 11%, from costs of $205.7 million for first quarter 2009.

                               INPUT COST SUMMARY
                                 (in millions)

                             2Q 2009        2Q 2008       1Q 2009
                             -------        -------       -------

    Fiber                        $92.2        $142.3        $94.1
    Energy                       $40.5         $84.3        $60.8
    Chemicals                    $51.0         $63.4        $50.8

    Total                       $183.7        $290.0       $205.7

Fiber costs during second quarter 2009 were $92.2 million, a decrease of $50.1 million, or 35%, from $142.3 million in second quarter 2008; this was due to lower fiber prices and reduced consumption as a result of lower production capacity due to the St. Helens mill downsizing and market downtime. Fiber costs decreased $1.9 million, or 2%, from first quarter 2009 due primarily to lower prices for purchased pulp, wood, and recycled fiber.

Energy costs in second quarter 2009 decreased $43.8 million, or 52%, to $40.5 million compared with $84.3 million in the same quarter a year ago, and decreased $20.3 million, or 33%, from first quarter 2009 due to lower overall energy consumption and lower prices for natural gas, fuel, and electricity.

Chemical costs in second quarter 2009 were $51.0 million, a decrease of $12.4 million, or 20%, compared with $63.4 million in the prior year’s second quarter due to lower consumption, offset partially by higher prices, and flat compared with first quarter 2009.

Alternative Fuel Tax Credit

We continue to invest in our assets and improve our operating practices to reduce consumption of fossil fuels. Between 2002 and 2008, our mills reduced their fossil fuel use by 21% per ton, primarily through conservation and increased use of biomass fuels. Each year, under normal operating conditions, we produce and use approximately 500 million gallons of liquid fuel produced from biomass to provide energy to four of our five paper mills. The U.S. Internal Revenue Code allows an excise tax credit of $0.50 per gallon for taxpayers who use alternative fuels in the taxpayer’s trade or business. During the first quarter, we filed to be registered as an alternative fuel mixer and, in April, received notification from the Internal Revenue Service that our registration was approved. We became eligible to receive the credit at our four pulp and paper mills beginning at various dates from late January to late March 2009. During the three months ended June 30, 2009, we recorded $75.3 million of alternative fuel mixture tax credits, net of associated fees and expenses and before taxes. As of June 30, 2009, we had received $58.7 million of alternative fuel mixture cash payments. Our first quarter 2009 results do not include any effects of the alternative fuel credits.

Webcast and Conference Call

Boise Inc. will host a webcast and conference call on Wednesday, August 5, 2009, at 11:00 a.m. Eastern, at which time we will review the company’s recent performance. To participate in the conference call, dial 866-743-6037 (international callers should dial 832-4451689). The webcast may be accessed through Boise’s Internet site and will be archived for one year following the call. Go to www.BoiseInc.com and click on the link to the webcast under Webcasts & Presentations on the Investors drop-down menu.

A replay of the conference call will be available in Webcasts & Presentations from August 5 at 12:00 p.m. Eastern through September 4 at 11:59 p.m. Eastern. Playback numbers are 800-642-1687 for U.S. callers and 706-645-9291 for international callers. The passcode is 20997497.

About Boise Inc.

Headquartered in Boise, Idaho, Boise Inc. (NYSE: BZ) manufactures packaging products and papers including corrugated containers, containerboard, label and release and flexible packaging papers, imaging papers for the office and home, printing and converting papers, newsprint, and market pulp. Our entire team of approximately 4,090 employees is committed to delivering excellent value while managing our businesses to sustain environmental resources for future generations. Visit our website at www.BoiseInc.com.

Basis of Presentation

We present our consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP). Our earnings release also supplements the GAAP presentations by reflecting EBITDA. EBITDA represents income (loss) before interest (change in fair value of interest rate derivatives, interest expense, and interest income), income taxes, and depreciation, amortization, and depletion. EBITDA is the primary measure used by our chief operating decision makers to evaluate segment operating performance and to decide how to allocate resources to segments. We believe EBITDA is useful to investors because it provides a means to evaluate the operating performance of our segments and our company on an ongoing basis using criteria that are used by our internal decision makers and because it is frequently used by investors and other interested parties in the evaluation of companies with substantial financial leverage. We believe EBITDA is a meaningful measure because it presents a transparent view of our recurring operating performance and allows management to readily view operating trends, perform analytical comparisons, and identify strategies to improve operating performance. For example, we believe that the inclusion of items such as taxes, interest expense, and interest income distorts management’s ability to assess and view the core operating trends in our segments. EBITDA, however, is not a measure of our liquidity or financial performance under GAAP and should not be considered as an alternative to net income (loss), income (loss) from operations, or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of EBITDA instead of net income (loss) or segment income (loss) has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest and associated significant cash requirements; and the exclusion of depreciation, amortization, and depletion, which represent significant and unavoidable operating costs, given the level of our indebtedness and the capital expenditures needed to maintain our businesses. Management compensates for these limitations by relying on our GAAP results. Our measures of EBITDA are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

Forward-Looking Statements

This news release may contain statements that are “forward looking” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements. Forward-looking statements involve risks and uncertainties, including but not limited to economic, competitive, and technological factors outside our control that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. For information about the risks and uncertainties associated with our business, please refer to our filings with the Securities and Exchange Commission. The company does not intend, and undertakes no obligation, to update any forward-looking statements.

                              Boise Inc.
              Consolidated Statements of Income (Loss)
          (unaudited, in thousands, except share and per-share data)

                                                  Three Months Ended
                                                  ------------------
                                               June 30              March 31,
                                               -------               -------
                                        2009           2008             2009
                                        ----           ----             ----
    Sales
    Trade                           $469,877       $586,583         $484,868
    Related parties                    9,490         31,824           15,417
                                       -----         ------           ------
                                     479,367        618,407          500,285
                                     -------        -------          -------
    Costs and expenses
    Materials, labor, and other
     operating expenses              386,013        544,090          413,139
    Fiber costs from related
     parties                           8,933          7,015            5,703
    Depreciation, amortization, and
     depletion                        32,892         32,689           31,972
    Selling and distribution
     expenses                         14,024         14,817           13,782
    General and administrative
     expenses                         12,691         12,262           10,373
    St. Helens mill restructuring      1,133              -            3,648
    Alternative fuel mixture
     credits, net                    (75,337)             -                -
    Other (income) expense, net        2,434            (96)             239
                                       -----            ---              ---
                                     382,783        610,777          478,856
                                     -------        -------          -------

    Income from operations            96,584          7,630           21,429
                                      ------          -----           ------

    Foreign exchange gain (loss)       1,157           (209)            (678)
    Change in fair value of
     interest rate derivatives           627            510             (132)
    Interest expense                 (21,389)       (26,145)         (22,154)
    Interest income                       91            178               54
                                         ---            ---              ---
                                     (19,514)       (25,666)         (22,910)
                                     -------        -------          -------

    Income (loss) before income
     taxes                            77,070        (18,036)          (1,481)
    Income tax (provision) benefit   (26,187)           (14)             565
                                     -------            ---              ---
    Net income (loss)                $50,883       $(18,050)           $(916)
                                     =======       ========            =====

    Weighted average common shares
     outstanding:
    Basic                         78,141,637     77,259,947       77,491,233
    Diluted                       84,253,862     77,259,947       77,491,233

    Net income (loss) per common
     share:
    Basic                              $0.65         $(0.23)          $(0.01)
    Diluted                            $0.60         $(0.23)          $(0.01)

                             Segment Information
                           (unaudited, in thousands)

                                                 Three Months Ended
                                                 ------------------
                                                June 30             March 31,
                                                -------              -------

                                         2009            2008           2009
                                         ----            ----           ----
    Segment sales
    Paper                            $356,401        $410,877       $351,995
    Packaging                         130,237         217,147        157,132
    Intersegment eliminations
     and other                         (7,271)         (9,617)        (8,842)
                                       ------          ------         ------
                                     $479,367        $618,407       $500,285
                                     ========        ========       ========

    Segment income (loss)
    Paper*                            $84,505          $7,835        $24,776
    Packaging*                         20,330           4,642          1,125
    Corporate and Other*               (7,094)         (5,056)        (5,150)
                                       ------          ------         ------
                                       97,741           7,421         20,751
                                       ------           -----         ------

    Change in fair value of
     interest rate
       derivatives                        627             510           (132)
    Interest expense                  (21,389)        (26,145)       (22,154)
    Interest income                        91             178             54
                                           --             ---             --
    Income (loss) before
     income taxes                     $77,070        $(18,036)       $(1,481)
                                      =======        ========        =======

    EBITDA (a)
    Paper*                           $105,604         $26,777        $46,122
    Packaging*                         31,108          17,637         10,781
    Corporate and Other*               (6,079)         (4,304)        (4,180)
                                       ------          ------         ------
                                     $130,633         $40,110        $52,723
                                     ========         =======        =======

    *The three months ended June 30, 2009, included $57.0 million of income
     recorded in the Paper segment, $19.9 million of income recorded in the
     Packaging segment, and $1.6 million of expenses recorded in the
     Corporate and Other segment relating to alternative fuel mixture
     credits. These amounts are net of fees and expenses and before taxes.

                                   Boise Inc.
                    Consolidated Statements of Income (Loss)
            (unaudited, in thousands, except share and per-share data)

                                        Boise Inc.              Predecessor
                                        ----------              -----------
                                      Six Months Ended       January 1 Through
                                           June 30              February 21,
                                    2009               2008          2008
                                    ----               ----          ----
    Sales
    Trade                       $954,745           $812,627        $258,430
    Related parties               24,907             33,768         101,490
                                  ------             ------         -------
                                 979,652            846,395         359,920
                                 -------            -------         -------
    Costs and expenses
    Materials, labor, and
     other operating expenses    799,152            739,519         313,931
    Fiber costs from related
     parties                      14,636             25,644           7,662
    Depreciation,
     amortization, and
     depletion                    64,864             45,436             477
    Selling and distribution
     expenses                     27,806             20,760           9,097
    General and
     administrative expenses      23,064             16,811           6,606
    St. Helens mill
     restructuring                 4,781                  -               -
    Alternative fuel mixture
     credits, net                (75,337)                 -               -
    Other (income) expense,
     net                           2,673               (124)           (989)
                                   -----               ----            ----
                                 861,639            848,046         336,784
                                 -------            -------         -------

    Income (loss) from
     operations                  118,013             (1,651)         23,136
                                 -------             ------          ------

    Foreign exchange gain
     (loss)                          479             (1,062)             54
    Change in fair value of
     interest rate
     derivatives                     495                510               -
    Interest expense             (43,543)           (37,580)             (2)
    Interest income                  145              1,999             161
                                     ---              -----             ---
                                 (42,424)           (36,133)            213
                                 -------            -------             ---

    Income (loss) before
     income taxes                 75,589            (37,784)         23,349
    Income tax (provision)
     benefit                     (25,622)             3,363            (563)
                                 -------              -----            ----
    Net income (loss)            $49,967           $(34,421)        $22,786
                                 =======           ========         =======

    Weighted average common
     shares outstanding:
    Basic                     77,818,233         69,971,391               -
    Diluted                   81,906,300         69,971,391               -

    Net income (loss) per
     common share:
    Basic                          $0.64             $(0.49)             $-
    Diluted                        $0.61             $(0.49)             $-

                              Segment Information
                            (unaudited, in thousands)

                                      Boise Inc.                Predecessor
                                      ----------                -----------
                                   Six Months Ended         January 1 Through
                                        June 30                 February 21,
                                  2009              2008            2008
                                  ----              ----            ----
    Segment sales
    Paper                     $708,396          $583,080           $253,508
    Packaging                  287,369           277,032            113,485
    Intersegment eliminations
     and other                 (16,113)          (13,717)            (7,073)
                               -------           -------             ------
                              $979,652          $846,395           $359,920
                              ========          ========           ========

    Segment income (loss)
    Paper*                    $109,281           $19,684            $20,718
    Packaging*                  21,455           (15,119)             5,685
    Corporate and Other*       (12,244)           (7,278)            (3,213)
                               -------            ------             ------
                               118,492            (2,713)            23,190
                               -------            ------             ------

    Change in fair value of
     interest rate
       derivatives                 495               510                  -
    Interest expense           (43,543)          (37,580)                (2)
    Interest income                145             1,999                161
                                   ---             -----                ---
    Income (loss) before
     income taxes              $75,589          $(37,784)           $23,349
                               =======          ========            =======

    EBITDA (a)
    Paper*                    $151,726           $45,746            $21,066
    Packaging*                  41,889             3,089              5,738
    Corporate and Other*       (10,259)           (6,112)            (3,137)
                               -------            ------             ------
                              $183,356           $42,723            $23,667
                              ========           =======            =======

    *The six months ended June 30, 2009, included $57.0 million of income
     recorded in the Paper segment, $19.9 million of income recorded in the
     Packaging segment, and $1.6 million of expenses recorded in the
     Corporate and Other segment relating to alternative fuel mixture
     credits. These amounts are net of fees and expenses and before taxes.

                              Boise Inc.
                       Consolidated Balance Sheets
                        (unaudited, in thousands)

                                            June 30, 2009   December 31, 2008
                                            -------------   -----------------
    ASSETS

    Current
    Cash and cash equivalents                      $115,107           $22,518
    Short-term investments                           10,001                 -
    Receivables
       Trade, less allowances of $1,280 and
        $961                                        186,968           220,204
       Related parties                                2,427             1,796
       Other*                                        27,604             4,937
    Inventories                                     266,973           335,004
    Deferred income taxes                                 -             5,318
    Prepaid and other                                10,738             6,289
                                                     ------             -----
                                                    619,818           596,066
                                                    -------           -------
    Property
    Property and equipment, net                   1,235,734         1,262,810
    Fiber farms and deposits                         15,504            14,651
                                                     ------            ------
                                                  1,251,238         1,277,461
                                                  ---------         ---------

    Deferred financing costs                         66,811            72,570
    Intangible assets, net                           33,735            35,075
    Other assets                                      7,729             7,114
                                                      -----             -----
    Total assets                                 $1,979,331        $1,988,286
                                                 ==========        ==========

    *June 30, 2009, includes a $20.4 million receivable for alternative fuel
     mixture credits.

                                Boise Inc.
                    Consolidated Balance Sheets (continued)
              (unaudited, in thousands, except share and per-share data)

                                           June 30, 2009    December 31, 2008
                                           -------------    -----------------
    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current
    Current portion of long-term debt              $14,890            $25,822
    Income taxes payable                               113                841
    Accounts payable
       Trade                                       163,540            177,157
       Related parties                               2,069              3,107
    Accrued liabilities
       Compensation and benefits                    50,999             44,488
       Interest payable                                165                184
       Other                                        23,503             17,402
                                                    ------             ------
                                                   255,279            269,001
                                                   -------            -------
    Debt
    Long-term debt, less current portion           939,929          1,011,628
    Notes payable                                   71,955             66,606
                                                    ------             ------
                                                 1,011,884          1,078,234
                                                 ---------          ---------
    Other
    Deferred income taxes                           18,011              8,907
    Compensation and benefits                      148,803            149,691
    Other long-term liabilities                     43,619             33,007
                                                    ------             ------
                                                   210,433            191,605
                                                   -------            -------

    Commitments and contingent
     liabilities

    Stockholders' Equity
    Preferred stock, $.0001 par value
     per share:                                          -                  -
         1,000,000 shares authorized; none
          issued
    Common stock, $.0001 par value per
     share:                                              8                  8
         250,000,000 shares authorized;
     84,434,691 shares and 79,716,130
      shares issued and outstanding
    Additional paid-in capital                     576,895            575,151
    Accumulated other comprehensive
     income (loss)                                 (85,104)           (85,682)
    Retained earnings (accumulated
     deficit)                                        9,936            (40,031)
                                                     -----            -------
    Total stockholders' equity                     501,735            449,446
                                                   -------            -------

    Total liabilities and stockholders'
     equity                                     $1,979,331         $1,988,286
                                                ==========         ==========

                                Boise Inc.
                   Consolidated Statements of Cash Flows
                           (unaudited, in thousands)

                                        Boise Inc.              Predecessor
                                        ----------              -----------
                                     Six Months Ended       January 1 Through
                                          June 30                February 21,
                                    2009            2008            2008
                                    ----            ----            ----
    Cash provided by (used
     for) operations
    Net income (loss)            $49,967        $(34,421)          $22,786
    Items in net income
     (loss) not using
     (providing) cash
       Depreciation,
        depletion, and
        amortization
          of deferred financing
           costs and other        71,178          48,453               477
       Share-based
        compensation expense       1,744             775                 -
       Related-party interest
        expense                        -           2,760                 -
       Notes payable interest
        expense                    5,349             561                 -
       Pension and other
        postretirement benefit
        expense                    4,877           4,180             1,826
       Deferred income taxes      16,593          (3,276)               11
       Change in fair value of
        energy derivatives        (1,277)         (3,870)              (37)
       Change in fair value of
        interest rate
        derivatives                 (495)           (510)                -
       (Gain) loss on sales of
        assets, net                   10             (20)             (943)
       Other                        (385)          1,062               (54)
    Decrease (increase) in
     working capital, net
     of acquisitions
       Receivables                12,982          10,278           (23,522)
       Inventories                68,237          (7,457)            5,343
       Prepaid expenses           (2,650)         (6,654)              875
       Accounts payable and
        accrued liabilities       (7,121)         26,033           (10,718)
    Current and deferred
     income taxes                  8,420            (976)              335
    Pension and other
     postretirement benefit
     payments                     (7,031)           (171)           (1,826)
    Other                            331            (902)            2,326
                                     ---            ----             -----
       Cash provided by (used
        for) operations          220,729          35,845            (3,121)
                                 -------          ------            ------
    Cash provided by (used
     for) investment
    Acquisitions of
     businesses and
     facilities                     (543)     (1,215,601)                -
    Cash released from
     (held in) trust, net              -         403,989                 -
    Expenditures for
     property and equipment      (35,854)        (35,853)          (10,168)
    Purchases of short-term
     investments                 (10,000)              -                 -
    Sales of assets                  317              37            17,662
    Other                            571            (941)              863
                                     ---            ----               ---
       Cash provided by (used
        for) investment          (45,509)       (848,369)            8,357
                                 -------        --------             -----
    Cash provided by (used
     for) financing
    Issuances of long-term
     debt                         10,000       1,085,700                 -
    Payments of long-term
     debt                        (92,631)        (37,749)                -
    Payments to
     stockholders for
     exercise of conversion
     rights                            -        (120,170)                -
    Payments of deferred
     financing fees                    -         (81,898)                -
    Payments of deferred
     underwriters fees                 -         (12,420)                -
    Net equity transactions
     with related parties              -               -            (5,237)
                                       -               -            ------
       Cash provided by (used
        for) financing           (82,631)        833,463            (5,237)
                                 -------         -------            ------
    Increase (decrease) in
     cash and cash
     equivalents                  92,589          20,939                (1)
    Balance at beginning of
     the period                   22,518             186                 8
                                  ------             ---                 -
    Balance at end of the
     period                     $115,107         $21,125                $7
                                ========         =======                ==

Summary Notes to Consolidated Financial Statements and Segment Information

The Consolidated Statements of Income (Loss), Consolidated Balance Sheets, Consolidated Statements of Cash Flows, and Segment Information do not include all Notes to Consolidated Financial Statements and should be read in conjunction with the Company’s 2008 Annual Report on Form 10K and the Company’s Quarterly Report on Form 10Q for the period ended June 30, 2009, as well as the other reports the Company files with the SEC. Net income (loss) for all periods presented involved estimates and accruals.

On February 22, 2008, Boise Inc. or “the Company,” “we,” “us,” or “our” completed the acquisition (the Acquisition) of Boise White Paper, L.L.C., Boise Packaging & Newsprint, L.L.C., Boise Cascade Transportation Holdings Corp. (collectively, the Paper Group), and other assets and liabilities related to the operation of the paper, packaging and newsprint, and transportation businesses of the Paper Group and part of the headquarters operations of Boise Cascade, L.L.C. (Boise Cascade). The business we acquired is referred to as the “Predecessor.”

The accompanying consolidated statement of income (loss) and cash flows for the six months ended June 30, 2008, include the activities of Aldabra 2 Acquisition Corp. prior to the Acquisition and the operations of the acquired businesses from February 22, 2008, through June 30, 2008. The consolidated statement of income (loss) and cash flows for the period of January 1 through February 21, 2008, of the Predecessor are presented for comparative purposes.

Boise Inc. operates its business in three reportable segments: Paper, Packaging, and Corporate and Other (support services). Boise Inc. manufactures commodity and premium office papers, a range of packaging papers, including label and release papers, flexible packaging papers, and printing and converting papers. Boise Inc. also manufactures corrugated containers, containerboard, newsprint, and market pulp.


    (a)   EBITDA represents income (loss) before interest (change in fair
          value of interest rate derivatives, interest expense, and interest
          income), income taxes, and depreciation amortization, and
          depletion.  The following table reconciles net income (loss) to
          EBITDA for Boise Inc. for the three months ended June 30, 2009 and
          2008, and the three months ended March 31, 2009 (unaudited, in
          thousands):

                                                Three Months Ended
                                                ------------------
                                           June 30                  March 31,
                                           -------                   -------
                                       2009            2008             2009
                                       ----            ----             ----

    Net income (loss)               $50,883        $(18,050)           $(916)
    Change in fair value of
     interest rate
       derivatives                     (627)           (510)             132
    Interest expense                 21,389          26,145           22,154
    Interest income                     (91)           (178)             (54)
    Income tax provision
     (benefit)                       26,187              14             (565)
    Depreciation,
     amortization,
       and depletion                 32,892          32,689           31,972
                                     ------          ------           ------
    EBITDA                         $130,633         $40,110          $52,723
                                   ========         =======          =======

    The following table reconciles net income (loss) to EBITDA for Boise Inc.
    for the six months ended June 30, 2009 and 2008, and for the Predecessor
    period of January 1 through February 21, 2008 (unaudited, in thousands):

                                    Boise Inc.               Predecessor
                                    ----------               -----------
                                 Six Months Ended          January 1 Through
                                      June 30                February 21,
                                2009              2008            2008
                                ----              ----            ----

    Net income (loss)        $49,967          $(34,421)        $22,786
    Change in fair value of
     interest rate
       derivatives              (495)             (510)              -
    Interest expense          43,543            37,580               2
    Interest income             (145)           (1,999)           (161)
    Income tax provision
     (benefit)                25,622            (3,363)            563
    Depreciation,
     amortization,
       and depletion          64,864            45,436             477
                              ------            ------             ---
    EBITDA                  $183,356           $42,723         $23,667
                            ========           =======         =======

    The following table reconciles EBITDA to EBITDA excluding special items
    for Boise Inc. for the three months ended June 30, 2009 and 2008, and
    the three months ended March 31, 2009 (unaudited, in thousands):

                                             Three Months Ended
                                             ------------------
                                               June 30           March 31,
                                               -------            -------
                                          2009         2008          2009
                                          ----         ----          ----

    EBITDA                            $130,633      $40,110       $52,723
    St. Helens mill restructuring (a)    1,133            -         3,648
    Alternative fuel mixture credits
     (b)                               (75,337)           -             -
    Impact of energy hedges             (3,468)      (3,666)        2,191
    Inventory purchase accounting
     expense                                 -        3,699             -
                                             -        -----             -
    EBITDA excluding special items     $52,961      $40,143       $58,562
                                       =======      =======       =======

    (a)  In November 2008, we announced the restructuring of our St. Helens,
         Oregon, paper mill. During the three months ended June 30, 2009, and
         March 31, 2009, we recorded $1.1 million and $3.6 million,
         respectively, of restructuring charges in "St. Helens mill
         restructuring."

    (b)  During first quarter 2009, we filed to be registered as an
         alternative fuel mixer and, in April, received notification from the
         Internal Revenue Service that our registration was approved. We
         became eligible to receive the tax credit at our four pulp and paper
         mills beginning at various dates from late January to late March
         2009. During the three months ended June 30, 2009, we recorded
         $75.3 million of alternative fuel mixture tax credits, net of
         associated fees and expenses and before taxes. We recorded these
         amounts in "Alternative fuel mixture credits, net" in our
         Consolidated Statement of Income (Loss), and at June 30, 2009, we
         Had $20.4 million recorded in "Receivables, other." As of June 30,
         2009, we had received $58.7 million of alternative fuel mixture cash
         payments. Our first quarter 2009 results do not include any effects
         of the alternative fuel mixture credits.

    The following table reconciles EBITDA to EBITDA excluding special items
    for Boise Inc. for the six months ended June 30, 2009 and 2008.  The
    table also reconciles the Predecessor period of January 1 through
    February 21, 2008, and the combined six months ended June 30, 2008
    (unaudited, in thousands):

                             Boise Inc.       Predecessor      Combined
                             ----------       -----------      --------
                        Six Months Ended  January 1 Through  Six Months Ended
                              June 30         February 21,        June 30,
                           2009      2008         2008             2008
                           ----      ----         ----             ----

    EBITDA                $183,356   $42,723      $23,667         $66,390
    St. Helens mill
     restructuring (a)       4,781         -            -               -
    Alternative fuel
     Mixture credits (b)   (75,337)        -            -               -
    Impact of energy
     hedges                 (1,277)   (3,870)         (37)         (3,907)
    Inventory purchase
     accounting expense          -    10,259            -          10,259
    Impact of DeRidder
     Outage                      -    19,776          732          20,508
                               ---    ------          ---          ------
    EBITDA excluding
     Special items        $111,523   $68,888      $24,362         $93,250
                          ========   =======      =======         =======

    (a)  In November 2008, we announced the restructuring of our St. Helens,
         Oregon, paper mill. During the six months ended June 30, 2009, we
         recorded $4.8 million of restructuring charges in "St. Helens mill
         restructuring."

    (b)  During first quarter 2009, we filed to be registered as an
         alternative fuel mixer and, in April, received notification from
         the Internal Revenue Service that our registration was approved. We
         became eligible to receive the tax credit at our four pulp and paper
         mills beginning at various dates from late January to late March
         2009. During the six months ended June 30, 2009, we recorded
         $75.3 million of alternative fuel mixture tax credits, net of
         associated fees and expenses and before taxes. We recorded these
         amounts in "Alternative fuel mixture credits, net" in our
         Consolidated Statement of Income (Loss), and at June 30, 2009, we
         had $20.4 million recorded in "Receivables, other." As of June 30,
         2009, we had received $58.7 million of alternative fuel mixture cash
         payments. Our first quarter 2009 results do not include any effects
         of the alternative fuel mixture credits.

    The following table reconciles total debt to net total debt and net
    covenant debt at June 30, 2009 and 2008, and March 31, 2009 (unaudited,
    in thousands):

                              June 30, 2009   March 31, 2009   June 30, 2008
                              -------------       ---------    -------------

    Current portion of long-term
     debt                           $14,890       $7,479        $12,563
    Long-term debt, less current
     portion                        939,929      967,340      1,035,388
    Notes payable                    71,955       69,229         61,655
                                     ------       ------         ------
    Total debt                    1,026,774    1,044,048      1,109,606
    Less cash and cash
     equivalents
     and short-term investments    (125,108)     (27,510)       (21,125)
                                   --------      -------        -------
    Net total debt                  901,666    1,016,538      1,088,481
    Plus cash and cash
     equivalents
     and short-term investments
      exceeding the covenant
      limit                          90,108            -              -
    Less notes payable              (71,955)     (69,229)       (61,655)
    Other                             1,766        1,729              -
                                      -----        -----            ---
    Net covenant debt              $921,585     $949,038     $1,026,826
                                   ========     ========     ==========

SOURCE Boise Inc.


Source: newswire



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