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Boise Inc. Announces Financial Results for Third Quarter 2009

November 3, 2009

BOISE, Idaho, Nov. 3 /PRNewswire-FirstCall/ — Boise Inc. (NYSE: BZ) today reported net income of $48.2 million or $0.57 per diluted share for third quarter 2009, compared with third quarter 2008 net income of $4.4 million or $0.06 per diluted share and second quarter 2009 net income of $50.9 million or $0.60 per diluted share.

EBITDA excluding special items was $66.2 million for third quarter 2009, compared with $77.9 million for third quarter 2008 and $53.0 million for second quarter 2009.

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

                                                   -------  ------- -------
                                                   3Q 2009  3Q 2008 2Q 2009
                                                   -------  ------- -------

    Sales                                           $508.3   $633.1  $479.4
    Income from operations                           $93.5    $30.1   $96.6
    Net income (loss)                                $48.2     $4.4   $50.9
    Net income (loss) per share basic                $0.61    $0.06   $0.65
    Net income (loss) per share diluted              $0.57    $0.06   $0.60
    EBITDA (a)                                      $128.0    $61.1  $130.6
    EBITDA excluding special items (a)               $66.2    $77.9   $53.0

    (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."

“We continued to deliver solid earnings and cash flow in the third quarter and strengthened our balance sheet through our debt restructuring in October,” said Alexander Toeldte, President and Chief Executive Officer of Boise Inc. “We experienced moderating costs, good demand in our core office papers and agricultural-based packaging products, and continued to see growth in our label and release, flexible packaging, and premium office paper markets. We are now in compliance with the NYSE listing standards, have a more flexible debt structure, and have a clear focus on our continued mission to generate earnings and cash.”

Sales

Total sales for third quarter 2009 were $508.3 million, a decrease of $124.8 million, or 20%, from $633.1 million for third quarter 2008 and up 6% from second quarter 2009 sales of $479.4 million.

Paper segment sales during third quarter 2009 decreased $65.0 million, or 15%, to $366.0 million from $431.0 million for third quarter 2008, driven by 11% lower sales volumes and 1% lower net sales prices for uncoated freesheet. In first quarter 2009, we completed the downsizing of our mill in St. Helens, Oregon, which eliminated 13% of our annual uncoated freesheet capacity. Paper segment sales in third quarter 2009 increased by $9.6 million, or 3%, from second quarter 2009, driven by higher sales volumes, offset partially by lower net sales prices.

Packaging segment sales during third quarter 2009 decreased $62.4 million, or 29%, to $150.5 million from $212.9 million for third quarter 2008. Lower newsprint volumes due to the indefinite idling of our DeRidder #2 newsprint machine and lower net sales prices for newsprint and linerboard contributed to the decline. This was offset partially by increased linerboard sales volumes to third parties. Packaging segment sales increased $20.2 million, or 16%, from second quarter 2009 due to higher sales volumes across all products, offset partially by lower net selling prices for newsprint, linerboard, and corrugated products.

Prices and Volumes

Average net selling prices of uncoated freesheet papers declined $14 per ton, or 1%, to $941 per ton during third quarter 2009 compared with third quarter 2008 and declined $17 per ton, or 2%, from second quarter 2009. Uncoated freesheet sales volumes were 325,000 tons during third quarter 2009, a decline of 11% versus the prior year period, due to reduced capacity and lower demand. Uncoated freesheet sales volumes increased 3% from second quarter 2009 on reduced market downtime, improved demand, and higher sales volumes of office and printing and converting papers. Combined sales volumes of premium office, label and release, and flexible packaging papers (which represented 27% of our third quarter 2009 uncoated freesheet sales volumes) increased by 2% from the prior year.

Corrugated container and sheet prices were flat at $58 per msf in third quarter 2009 over prices for these products during the third quarter 2008 and decreased $1 per msf, or 2%, compared with second quarter 2009 prices. Sales volumes for corrugated containers and sheets were 1.6 million msf in third quarter 2009, a decline of 4% from third quarter 2008, due primarily to sluggish industrial markets, which resulted in lower sales volumes from our sheet feeder plant in Texas. Corrugated products sales volumes increased 8% from second quarter 2009 on improving seasonal agricultural and food sector demand in our Pacific Northwest corrugated plants.

Linerboard net selling prices to third parties declined $108 per ton, or 28%, to $284 per ton in third quarter 2009 from $392 per ton in the third quarter 2008 and declined $18 per ton, or 6%, from second quarter 2009, due to soft demand, particularly in export markets. Linerboard sales volumes to third parties were 77,000 tons, an increase of 24% compared with the third quarter 2008 and an increase of 41% from second quarter 2009. In the third quarter 2008, we took production downtime as a result of hurricanes Gustav and Ike, which reduced sales volumes during that period. In the second quarter 2009, we took market downtime to balance production with lower demand at our mill in DeRidder, Louisiana.

Input Costs

Total fiber, energy, and chemical costs for third quarter 2009 were $205.8 million, a decrease of $97.9 million, or 32%, from costs of $303.7 million for third 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 the idling of our DeRidder #2 machine at our mill in DeRidder, Louisiana. Total fiber, energy, and chemical costs for third quarter 2009 increased $22.1 million, or 12%, from costs of $183.7 million for second quarter 2009.


            INPUT COST SUMMARY
               (in millions)

               ------- ------- -------
               3Q 2009 3Q 2008 2Q 2009
               ------- ------- -------

    Fiber       $108.2  $136.4   $92.2
    Energy       $41.9   $95.6   $40.5
    Chemicals    $55.7   $71.7   $51.0

    Total       $205.8  $303.7  $183.7

Fiber costs during third quarter 2009 were $108.2 million, a decrease of $28.2 million, or 21%, from $136.4 million in third quarter 2008; this was due to lower fiber prices and reduced consumption due to lower demand and production capacity as a result of the St. Helens mill downsizing. Fiber costs increased $16.0 million, or 17%, from second quarter 2009 due primarily to increased consumption as a result of higher production volumes.

Energy costs in third quarter 2009 decreased $53.7 million, or 56%, to $41.9 million compared with $95.6 million in the same quarter a year ago and were flat from second quarter 2009.

Chemical costs in third quarter 2009 were $55.7 million, a decrease of $16.0 million, or 22%, compared with $71.7 million in the same quarter a year ago due to lower consumption and prices and increased $4.6 million, or 9% compared with second quarter 2009 due to increased sales volumes, offset partially by lower chemical prices.

Debt Restructuring

In October, we amended our secured debt credit agreements and issued $300.0 million of senior unsecured notes in an offering as part of a debt restructuring to increase financial flexibility, extend debt maturities, simplify our capital structure, and reduce overall debt. The notes are due in November 2017 and bear interest at a rate of 9%. The proceeds from this offering and cash on hand were used to repay $75.0 million of our Tranche A and Tranche B term loan facilities at par; repurchase all of our $260.7 million second lien term loans at 113% of face value; and exercise the option we entered into on August 4, 2009, to repurchase and retire the $74.8 million notes payable at 70% of face value.

Alternative Fuel Mixture Credit

During the three months ended September 30, 2009, we recorded $59.6 million of alternative fuel mixture credits, net of associated fees and expenses and before taxes. As of September 30, 2009, we recorded a receivable of $29.2 million for alternative fuel mixture credits. Our first quarter 2009 results do not include any effects of the alternative fuel mixture credits. These credits are scheduled to expire December 31, 2009.

Webcast and Conference Call

Boise Inc. will host a webcast and conference call on Tuesday, November 3, 2009, at 12:00 p.m. Eastern, at which time we will review the company’s recent performance. To participate in the conference call, dial 866-841-1001 (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 November 3 at 1:00 p.m. Eastern through December 3 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 37025622.

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 4,100 employees is committed to delivering excellent value while managing our businesses to sustain environmental resources for future generations. Visit our Web site 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 contains 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 further 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
                                                      ------------------
                                                 September 30        June 30,
                                                 ------------        --------
                                               2009        2008        2009
                                               ----        ----        ----
    Sales
    Trade                                   $498,812    $610,909    $469,877
    Related parties                            9,453      22,209       9,490
                                               -----      ------       -----
                                             508,265     633,118     479,367
                                             -------     -------     -------
    Costs and expenses
    Materials, labor, and other
     operating expenses                      401,607     526,731     386,013
    Fiber costs from related parties          10,325      21,213       8,933
    Depreciation, amortization, and
     depletion                                32,916      31,426      32,892
    Selling and distribution expenses         13,588      13,803      14,024
    General and administrative expenses       12,813       9,891      12,691
    St. Helens mill restructuring              1,402           -       1,133
    Alternative fuel mixture credits, net    (59,572)          -     (75,337)
    Other (income) expense, net                1,710         (36)      2,434
                                               -----         ---       -----
                                             414,789     603,028     382,783
                                             -------     -------     -------

    Income from operations                    93,476      30,090      96,584
                                              ------      ------      ------

    Foreign exchange gain (loss)               1,597        (449)      1,157
    Change in fair value of interest
     rate derivatives                            125        (306)        627
    Interest expense                         (21,436)    (27,484)    (21,389)
    Interest income                              130         153          91
                                                 ---         ---          --
                                             (19,584)    (28,086)    (19,514)
                                             -------     -------     -------

    Income before income taxes                73,892       2,004      77,070
    Income tax (provision) benefit           (25,737)      2,379     (26,187)
                                             -------       -----     -------
    Net income                               $48,155      $4,383     $50,883
                                             =======      ======     =======

    Weighted average common shares
     outstanding:
    Basic                                 78,634,920  77,259,947  78,141,637
    Diluted                               84,240,582  78,438,847  84,253,862

    Net income per common share:
    Basic                                      $0.61       $0.06       $0.65
    Diluted                                    $0.57       $0.06       $0.60

                               Segment Information
                            (unaudited, in thousands)

                                   Three Months Ended
                                   -------------------
                               September 30       June 30,
                               ------------       -------
                              2009      2008       2009
                              ----      ----       ----
    Segment sales
    Paper                  $365,963  $430,973   $356,401
    Packaging               150,462   212,886    130,237
    Intersegment
     eliminations and
     other                   (8,160)  (10,741)    (7,271)
                             ------   -------     ------
                           $508,265  $633,118   $479,367
                           ========  ========   ========

    Segment income (loss)
    Paper*                  $78,272   $25,304    $84,505
    Packaging*               22,290    10,148     20,330
    Corporate and Other*     (5,489)   (5,811)    (7,094)
                             ------    ------     ------
                             95,073    29,641     97,741
                             ------    ------     ------

    Change in fair value of
     interest rate
     derivatives                125      (306)       627
    Interest expense        (21,436)  (27,484)   (21,389)
    Interest income             130       153         91
                                ---       ---        ---
    Income (loss) before
     income taxes           $73,892    $2,004    $77,070
                            =======    ======    =======

    EBITDA (a)
    Paper*                  $99,443   $49,378   $105,604
    Packaging*               32,966    16,422     31,108
    Corporate and Other *    (4,420)   (4,733)    (6,079)
                             ------    ------     ------
                           $127,989   $61,067   $130,633
                           ========   =======   ========

    * The three months ended September 30, 2009, and June 30, 2009, included
      $42.9 million and $57.0 million of income recorded in the Paper segment,
      $19.4 million and $19.9 million of income recorded in the Packaging
      segment, and $2.7 million and $1.6 million of expenses recorded in the
      Corporate and Other segment relating to alternative fuel mixture
      credits, respectively. 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
                                       ----------             -----------
                                    Nine Months Ended          January 1
                                       September 30             Through
                                       ------------           February 21,
                                    2009        2008              2008
                                    ----        ----              ----
    Sales
    Trade                       $1,453,557  $1,423,536         $258,430
    Related parties                 34,360      55,977          101,490
                                    ------      ------          -------
                                 1,487,917   1,479,513          359,920
                                 ---------   ---------          -------
    Costs and expenses
    Materials, labor, and
     other operating expenses    1,200,759   1,266,250          313,931
    Fiber costs from related
     parties                        24,961      46,857            7,662
    Depreciation,
     amortization, and
     depletion                      97,780      76,862              477
    Selling and distribution
     expenses                       41,394      34,563            9,097
    General and administrative
     expenses                       35,877      26,702            6,606
    St. Helens mill
     restructuring                   6,183           -                -
    Alternative fuel mixture
     credits, net                 (134,909)          -                -
    Other (income) expense, net      4,383        (160)            (989)
                                     -----        ----             ----
                                 1,276,428   1,451,074          336,784
                                 ---------   ---------          -------

    Income from operations         211,489      28,439           23,136
                                   -------      ------           ------

    Foreign exchange gain
     (loss)                          2,076      (1,511)              54
    Change in fair value of
     interest rate derivatives         620         204                -
    Interest expense               (64,979)    (65,064)              (2)
    Interest income                    275       2,152              161
                                       ---       -----              ---
                                   (62,008)    (64,219)             213
                                   -------     -------              ---

    Income (loss) before
     income taxes                  149,481     (35,780)          23,349
    Income tax (provision)
     benefit                       (51,359)      5,742             (563)
                                   -------       -----             ----
    Net income (loss)              $98,122    $(30,038)         $22,786
                                   =======    ========          =======

    Weighted average common
     shares outstanding:
    Basic                       78,093,453  72,418,643                -
    Diluted                     82,692,945  72,418,643                -

    Net income (loss) per common
     share:
    Basic                            $1.26      $(0.41)              $-
    Diluted                          $1.19      $(0.41)              $-

                               Segment Information
                            (unaudited, in thousands)

                                  Boise Inc.           Predecessor
                                  -----------          -----------
                               Nine Months Ended     January 1 Through
                                  September 30         February 21,
                                  ------------
                                2009        2008          2008
                                ----        ----          ----
    Segment sales
    Paper                  $1,074,359  $1,014,053      $253,508
    Packaging                 437,831     489,918       113,485
    Intersegment
     eliminations and
     other                    (24,273)    (24,458)       (7,073)
                              -------     -------        ------
                           $1,487,917  $1,479,513      $359,920
                           ==========  ==========      ========

    Segment income (loss)
    Paper*                   $187,553     $44,988       $20,718
    Packaging*                 43,745      (4,971)        5,685
    Corporate and Other*      (17,733)    (13,089)       (3,213)
                              -------     -------        ------
                              213,565      26,928        23,190
                              -------      ------        ------

    Change in fair value of
     interest rate
     derivatives                  620         204             -
    Interest expense          (64,979)    (65,064)           (2)
    Interest income               275       2,152           161
                                  ---       -----           ---
    Income (loss) before
     income taxes            $149,481    $(35,780)      $23,349
                             ========    ========       =======

    EBITDA (a)
    Paper*                   $251,169     $95,124       $21,066
    Packaging*                 74,855      19,511         5,738
    Corporate and Other*      (14,679)    (10,845)       (3,137)
                              -------     -------        ------
                             $311,345    $103,790       $23,667
                             ========    ========       =======

    * The nine months ended September 30, 2009, included $99.9 million of
      income recorded in the Paper segment, $39.3 million of income recorded
      in the Packaging segment, and $4.3 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)

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

    Current
    Cash and cash equivalents               $237,604       $22,518
    Short-term investments                    10,010             -
    Receivables
       Trade, less allowances of $1,074
        and $961                             190,561       220,204
       Related parties                         2,037         1,796
       Other*                                 36,547         4,937
    Inventories                              256,206       335,004
    Deferred income taxes                          -         5,318
    Prepaid and other                          7,648         6,289
                                               -----         -----
                                             740,613       596,066
                                             -------       -------
    Property
    Property and equipment, net            1,218,759     1,262,810
    Fiber farms and deposits                  17,208        14,651
                                              ------        ------
                                           1,235,967     1,277,461
                                           ---------     ---------

    Deferred financing costs                  63,851        72,570
    Intangible assets, net                    33,047        35,075
    Other assets                               7,881         7,114
                                               -----         -----
    Total assets                          $2,081,359    $1,988,286
                                          ==========    ==========

    * September 30, 2009, includes a $29.2 million receivable for alternative
      fuel mixture credits.

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

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

    Current
    Current portion of long-term debt                 $22,235        $25,822
    Income taxes payable                                  340            841
    Accounts payable
       Trade                                          165,780        177,157
       Related parties                                  3,512          3,107
    Accrued liabilities
       Compensation and benefits                       67,573         44,488
       Interest payable                                   163            184
       Other                                           22,679         17,402
                                                       ------         ------
                                                      282,282        269,001
                                                      -------        -------
    Debt
    Long-term debt, less current portion              932,517      1,011,628
    Notes payable                                      74,788         66,606
                                                       ------         ------
                                                    1,007,305      1,078,234
                                                    ---------      ---------
    Other
    Deferred income taxes                              44,481          8,907
    Compensation and benefits                         151,428        149,691
    Other long-term liabilities                        45,618         33,007
                                                       ------         ------
                                                      241,527        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                        577,782        575,151
    Accumulated other comprehensive income
     (loss)                                           (85,636)       (85,682)
    Retained earnings (accumulated deficit)            58,091        (40,031)
                                                       ------        -------
    Total stockholders' equity                        550,245        449,446
                                                      -------        -------

    Total liabilities and stockholders' equity     $2,081,359     $1,988,286
                                                   ==========     ==========

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

                                       Boise Inc.           Predecessor
                                       ----------           -----------
                                                            January 1
                                   Nine Months Ended          Through
                                       September 30         February 21,
                                       ------------
                                     2009        2008          2008
                                     ----        ----          ----
    Cash provided by (used for)
     operations
    Net income (loss)              $98,122    $(30,038)      $22,786
    Items in net income (loss) not
     using (providing) cash
       Depreciation, depletion,
        and amortization
        of deferred financing costs
        and other                  107,471      83,803           477
       Share-based compensation
        expense                      2,631       1,934             -
       Related-party interest
        expense                          -       2,760             -
       Notes payable interest
        expense                      8,182       2,989             -
       Pension and other
        postretirement benefit
        expense                      6,605       7,128         1,826
       Deferred income taxes        42,667      (5,742)           11
       Change in fair value of
        energy derivatives          (4,902)      7,471           (37)
       Change in fair value of
        interest rate derivatives     (620)       (204)            -
       (Gain) loss on sales of
        assets, net                    395           4          (943)
       Other                        (2,076)      1,511           (54)
    Decrease (increase) in working
     capital, net of acquisitions
       Receivables                   1,628      (1,851)      (23,522)
       Inventories                  79,004     (20,660)        5,343
       Prepaid expenses               (462)     (5,400)          875
       Accounts payable and accrued
        liabilities                 18,436      29,869       (10,718)
    Current and deferred income
     taxes                           7,991      (1,488)          335
    Pension and other
     postretirement benefit
     payments                       (7,204)       (291)       (1,826)
    Other                            1,779      (3,388)        2,326
                                     -----      ------         -----
       Cash provided by (used for)
        operations                 359,647      68,407        (3,121)
                                   -------      ------        ------
    Cash provided by (used for)
     investment
    Acquisitions of businesses
     and facilities                   (543) (1,215,641)            -
    Cash released from (held in)
     trust, net                          -     403,989             -
    Expenditures for property
     and equipment                 (53,562)    (58,928)      (10,168)
    Purchases of short-term
     investments                   (13,792)          -             -
    Maturities of short-term
     investments                     3,774
    Sales of assets                    639         241        17,662
    Other                            1,621      (1,838)          863
                                     -----      ------           ---
       Cash provided by (used for)
        investment                 (61,863)   (872,177)        8,357
                                   -------    --------         -----
    Cash provided by (used for)
     financing
    Issuances of long-term debt     10,000   1,105,700             -
    Payments of long-term debt     (92,698)    (60,500)            -
    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                  (82,698)    830,712        (5,237)
                                   -------     -------        ------
    Increase (decrease) in cash
     and cash equivalents          215,086      26,942            (1)
    Balance at beginning of the
     period                         22,518         186             8
                                    ------         ---             -
    Balance at end of the
     period                       $237,604     $27,128            $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 September 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 nine months ended September 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 September 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 to EBITDA for Boise Inc. for
        the three months ended September 30, 2009 and 2008, and the three
        months ended June 30, 2009 (unaudited, in thousands):

                                Three Months Ended
                                ------------------
                              September 30      June 30,
                              ------------      -------
                              2009     2008       2009
                              ----     ----       ----

    Net income              $48,155   $4,383    $50,883
    Change in fair value of
     interest rate
     derivatives               (125)     306       (627)
    Interest expense         21,436   27,484     21,389
    Interest income            (130)    (153)       (91)
    Income tax provision
     (benefit)               25,737   (2,379)    26,187
    Depreciation,
     amortization,
     and depletion           32,916   31,426     32,892
                             ------   ------     ------
    EBITDA                 $127,989  $61,067   $130,633
                           ========  =======   ========

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

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

    Net income (loss)       $98,122  $(30,038)           $22,786
    Change in fair value of
     interest rate
     derivatives               (620)     (204)                 -
    Interest expense         64,979    65,064                  2
    Interest income            (275)   (2,152)              (161)
    Income tax provision
     (benefit)               51,359    (5,742)               563
    Depreciation,
     amortization,
     and depletion           97,780    76,862                477
                             ------    ------                ---
    EBITDA                 $311,345  $103,790            $23,667
                           ========  ========            =======

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

                                         Three Months Ended
                                         ------------------
                                       September 30   June 30,
                                       ------------   -------
                                      2009     2008     2009
                                      ----     ----     ----

    EBITDA                         $127,989  $61,067 $130,633
    St. Helens mill
     restructuring (a)                1,402        -    1,133
    Alternative fuel mixture
     credits (b)                    (59,572)       -  (75,337)
    Impact of energy hedges          (3,624)  11,341   (3,468)
    Hurricane losses                      -    5,482        -
                                          -    -----        -
    EBITDA excluding special items  $66,195  $77,890  $52,961
                                    =======  =======  =======

    (a) In November 2008, we announced the restructuring of our St. Helens,
        Oregon, paper mill. During the three months ended September 30, 2009,
        and June 30, 2009, we recorded $1.4 million and $1.1 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 September 30, 2009, we recorded $59.6 million of
        alternative fuel mixture 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 September 30, 2009, we had $29.2 million recorded in
        "Receivables, other."

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

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

    EBITDA         $311,345  $103,790           $23,667           $127,457
    St. Helens
     mill
     restructuring
     (a)              6,183         -                 -                  -
    Alternative
     fuel mixture
     credits (b)   (134,909)        -                 -                  -
    Impact of
     energy hedges   (4,901)    7,471               (37)             7,434
    Hurricane
     losses               -     5,482                 -              5,482
    Inventory
     purchase
     accounting
     expense              -    10,259                 -             10,259
    Impact of
     DeRidder
     Outage               -    19,776               732             20,508
                          -    ------               ---             ------
    EBITDA
     excluding
     special items $177,718  $146,778           $24,362           $171,140
                   ========  ========           =======           ========

    (a) In November 2008, we announced the restructuring of our St. Helens,
        Oregon, paper mill. During the nine months ended September 30, 2009,
        we recorded $6.2 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 nine months ended September 30, 2009, we recorded
        $134.9 million of alternative fuel mixture 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 September 30, 2009, we had
        $29.2 million recorded in "Receivables, other."

SOURCE Boise Inc.


Source: newswire



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