Boise Inc. Announces Financial Results for First Quarter 2009



    BOISE, Idaho, May 5 /CNW/ -- Boise Inc. (NYSE:   BZ) today reported a net
loss of $0.9 million or ($0.01) per diluted share for first quarter 2009,
compared with fourth quarter net loss of $15.5 million or ($0.20) per diluted
share.  Boise Inc. first quarter 2008 net loss was $16.4 million or ($0.26)
per diluted share.

    EBITDA, excluding special items, was $58.6 million for first quarter
2009, compared with $76.0 million for fourth quarter 2008, and $53.1 million
for the combined first quarter 2008 for the packaging and paper assets of
Boise Cascade, L.L.C. (the "Predecessor") and Boise Inc.

    Net covenant debt was $949.0 million at March 31, 2009, a decline of
$65.9 million from $1,014.9 million at December 31, 2008.
    



    

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

    
                              Boise Inc.   Combined(a) Boise Inc.  Predecessor
                            -------------- ----------- ----------  -----------
                                                                      Jan 1 -
                             1Q        4Q         1Q         1Q        Feb 21,
                            2009      2008       2008       2008        2008
                            ----      ----       ----       ----      --------
    Sales                  $500.3    $591.1     $587.9    $228.0       $359.9
    Income from
     operations             $21.4     $11.4                $(9.3)       $23.1
    Net income (loss)       $(0.9)   $(15.5)              $(16.4)       $22.8
    Net income (loss)
     per share basic and
     diluted               $(0.01)   $(0.20)              $(0.26)
    EBITDA (b)              $52.7     $41.4      $26.3      $2.6        $23.7
    EBITDA excluding
     special items (b)      $58.6     $76.0      $53.1     $28.7        $24.4
    

    
    Interest expense        $22.2     $26.2                $11.4
    Depreciation and
     amortization (c)       $32.0     $33.1                $12.7         $0.5
    Net covenant
     debt (d)              $949.0  $1,014.9             $1,005.7
    

    
    (a) Includes combined results for Predecessor and Boise Inc.
    (b) 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."
    (c) Predecessor period excludes $16.7 million of depreciation due to
        classification of property as assets held for sale in first quarter
        2008.
    (d) Net covenant debt is calculated in accordance with credit agreements.
        For reconciliation of total debt to net covenant debt, see "Summary
        Notes to Consolidated Financial Statements and Segment Information."



    
    "In the first quarter 2009, we generated strong cash flow and improved
EBITDA over last year despite very challenging markets for all our products. 
We also made good progress reducing our covenant debt by nearly $66 million
dollars," said Alexander Toeldte, President and Chief Executive Officer of
Boise Inc.  "We reduced financial risk in our newsprint business by
terminating our contract with AbitibiBowater to sell directly to customers and
took significant downtime to match production to demand.  We managed our
working capital levels well and will continue to balance production with
demand and focus on cash generation."
    

    Sales
    
    Total sales for first quarter 2009 were $500.3 million, a decrease of
$87.6 million, or 15%, from $587.9 million during the combined first quarter
2008 and down 15% from fourth quarter 2008 sales of $591.1 million.

    Paper segment sales decreased $73.7 million, or 17%, during first quarter
2009 compared with the combined first quarter 2008, driven by 22% lower
uncoated freesheet sales volumes.  This was due to market downtime and the St.
Helens mill downsizing, which eliminated 200,000 tons, or 13%, of our annual
uncoated freesheet capacity.  Reduced sales volumes were partially offset by
higher net sales prices.  Paper segment sales in first quarter 2009 declined
by $37.6 million, or 10%, from fourth quarter 2008 due to lower sales volumes,
partially offset by higher net selling prices.

    Packaging segment sales decreased $16.3 million, or 9%, to $157.1 million
from $173.4 million during first quarter 2009 compared with the combined first
quarter 2008.  The decrease was driven mainly by lower newsprint and segment
linerboard sales volumes as we balanced production to match lower demand. 
Newsprint volumes were also reduced in first quarter 2009 by the transition
from selling all of our output to AbitibiBowater to selling directly to
customers, which began in March.  Sequentially, from fourth quarter 2008 to
first quarter 2009, Packaging segment sales decreased $56.7 million, or 27%,
due to lower volumes and lower net selling prices.
    

    Prices and Volumes
    
    Average net selling prices of uncoated freesheet papers improved $104 per
ton, or 12%, to $981 per ton during first quarter 2009 compared with the
combined first quarter 2008 and improved $12 per ton, or 1%, over fourth
quarter 2008.  Uncoated freesheet sales volumes were 303,000 tons during first
quarter 2009, a decline of 22% versus the combined prior year period and down
9% from fourth quarter 2008 due to market downtime as a result of lower demand
and reduced capacity as a result of the St. Helens mill downsizing.  Combined
sales volumes of premium office, label and release, and flexible packaging
papers, which represented 26% of our first quarter 2009 uncoated freesheet
sales volumes, increased by 1% from the prior year.

    Linerboard net selling prices to third parties declined $44 per ton, or
11%, to $352 per ton in first quarter 2009 from $396 per ton in the combined
first quarter 2008 and declined $54 per ton, or 13%, from fourth quarter 2008,
due to softening demand, particularly in export markets.  Linerboard sales
volumes to third parties were 38,000 tons, a decrease of 21% compared with the
combined first quarter 2008 and down 30% from fourth quarter 2008 due to soft
market conditions.  We took downtime late in fourth quarter 2008 and first
quarter 2009 to match supply to demand.

    Corrugated container and sheet prices improved $5 per thousand square
feet (msf), or 9%, to $60 per msf in first quarter 2009 over prices for these
products during the combined first quarter 2008 and decreased $1 per msf, or
2%, compared with fourth quarter 2008 prices.  Sales volumes for corrugated
containers and sheets were 1.4 thousand msf in first quarter 2009, a decline
of 9% versus the combined first quarter 2008 and down 7% from fourth quarter
2008, driven mainly by lower volumes from our sheet feeder plant in Texas as a
result of slowing industrial markets.  Sales volumes for corrugated containers
and sheets from our plants in the Pacific Northwest experienced more modest
declines due to more stable demand in agricultural and food sectors.

    Newsprint pricing in first quarter 2009 increased by $88 per ton, or 18%,
to $588 per ton over the combined first quarter 2008 and declined $55 per ton,
or 9%, from fourth quarter 2008.  Newsprint sales volumes were 60,000 tons, a
decline of 30% compared with the combined first quarter 2008 and down 36% from
fourth quarter 2008 due to weak demand and the start-up of our direct
marketing efforts.
    

    Input Costs
    
    Total fiber, energy, and chemical costs for first quarter 2009 were
$205.7 million, a decrease of $66.5 million, or 24%, over costs of $272.2
million for the combined first quarter 2008, and a decrease of $61.3 million,
or 23%, from costs of $267.0 million for fourth quarter 2008.
    



    

    INPUT COST SUMMARY

    
                                                   Boise
                       Boise Inc.    Combined(a)    Inc.   Predecessor
                     --------------  -----------   -----   -----------
                                                               Jan 1 -
                                                               Feb 21,
                    1Q 2009  4Q 2008    1Q 2008    1Q 2008      2008
                    -------  -------    -------    -------    --------
    (in millions)
    Fiber             $94.1  $124.0      $127.3     $51.3       $76.0
    Energy            $60.8   $77.5       $82.8     $34.8       $48.1
    Chemicals         $50.8   $65.5       $62.0     $25.5       $36.5
    

    Total            $205.7  $267.0      $272.2    $111.5      $160.7

    
    (a) Includes combined results for Predecessor and Boise Inc.



    
    Total fiber costs during first quarter 2009 were $94.1 million, a
decrease of $33.2 million, or 26%, from $127.3 million incurred for fiber in
the combined first quarter 2008 and a decrease of $29.9 million, or 24%, from
$124.0 million for fourth quarter 2008.  This decrease was due primarily to
lower prices for purchased pulp, wood and recycled fiber, and reduced
consumption of wood fiber as a result of lower production capacity due to the
St. Helens mill downsizing and market downtime.

    Energy costs in first quarter 2009 decreased $22.0 million, or 27%, to
$60.8 million compared with $82.8 million in the same quarter a year ago. 
Lower overall energy consumption and lower prices for natural gas and fuel
were the primary drivers, partially offset by higher electricity prices. 
Energy costs in first quarter 2009 decreased $16.7 million, or 22%, from $77.5
million in fourth quarter 2008, due to lower total consumption and prices for
natural gas.

    Chemical costs in first quarter 2009 were $50.8 million, a decrease of
$11.2 million, or 18%, compared with $62.0 million in the prior year's first
quarter and down $14.7 million, or 22%, compared with $65.5 million in fourth
quarter 2008, driven by reduced consumption partially offset by higher prices.
    

    Alternative Fuel Tax Credit
    
    The U.S. Internal Revenue Code allows an excise tax for taxpayers who use
alternative fuels in the taxpayer's trade or business.  Each year, under
normal operating conditions, we produce and use approximately 500 million
gallons of fuel produced from biomass to provide energy to four of our five
paper mills.  During the first quarter, we filed to be registered as an
alternative fuel mixer and, in late 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.  Through April 30,
2009, we had filed for approximately $37 million in tax credits, before the
effect of income taxes.  To date, we have received $3.9 million of cash
related to these credits.  Our first quarter 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 Tuesday, May 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 866-841-1001
(international callers should dial 832-445-1689).  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 May 5 at 12:00 p.m. Eastern through June 5 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 95734398.
    

    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 4,120 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
    
    On February 22, 2008, we completed the acquisition of Boise Cascade,
L.L.C.'s packaging and paper manufacturing businesses (the Acquisition).  The
Acquisition was accounted for in accordance with SFAS No. 141, Business
Combinations, resulting in a new basis of accounting from that previously
reported by the Predecessor.  However, sales and most operating cost items are
substantially consistent with those reported by the Predecessor.  Finished
goods inventory was revalued to estimated selling prices less costs of
disposal and a reasonable profit on the disposal.  Depreciation changed as a
result of adjustments to the fair values of property and equipment due to our
purchase price allocation.

    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.  Factors that could
cause actual results to differ materially from the forward-looking statements
include, among others, our substantial level of indebtedness; our continued
ability to comply with our financial covenants and debt service obligations;
our ability to comply with the continued listing requirements of the NYSE;
changes in the supply of, demand for, or prices of our products; the
activities of competitors; changes in significant operating expenses,
including raw material and energy costs; our success at marketing newsprint
directly to customers; our ability to weather the current economic downturn in
the United States and elsewhere; changes in the regulatory environment,
including requirements for enhanced environmental compliance; and other risks
and uncertainties that are detailed in 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)
    

    
                                        Boise Inc.               Predecessor
                             --------------------------------    -----------
                              Three        Three       Three
                              Months       Months      Months      January 1
                              Ended        Ended       Ended       Through
                             March 31,  December 31,  March 31,   February 21,
                               2009         2008        2008         2008
                               ----         ----        ----         ----
    Sales
    Trade                    $484,868     $566,671    $226,044     $258,430
    Related parties            15,417       24,448       1,944      101,490
                               ------       ------       -----      -------
                              500,285      591,119     227,988      359,920
                              -------      -------     -------      -------
    Costs and expenses
    Materials, labor,
     and other operating
     expenses                 413,139      490,576     195,429      313,931
    Fiber costs from
     related parties            5,703        7,771      18,629        7,662
    Depreciation,
     amortization, and
     depletion                 31,972       33,126      12,747          477
    Selling and
     distribution
     expenses                  13,782       13,715       5,943        9,097
    General and
     administrative
     expenses                  10,373        7,556       4,549        6,606
    St. Helens mill
     restructuring              3,648       29,780           -            -
    Other (income)
     expense, net                 239       (2,820)        (28)        (989)
                               ------       ------      ------       ------
                              478,856      579,704     237,269      336,784
                              -------      -------     -------      -------
    

    
    Income (loss) from
     operations                21,429       11,415      (9,281)      23,136
                               ------       ------      ------       ------
    

    
    Foreign exchange gain
     (loss)                      (678)      (3,185)       (853)          54
    Change in fair value
     of interest rate
     derivatives                 (132)        (683)          -            -
    Interest expense          (22,154)     (26,156)    (11,435)          (2)
    Interest income                54           94       1,821          161
                                -----        -----       -----        -----
                              (22,910)     (29,930)    (10,467)         213
                              -------      -------     -------      -------
    

    
    Income (loss) before
     income taxes              (1,481)     (18,515)    (19,748)      23,349
    Income tax (provision)
     benefit                      565        3,030       3,377         (563)
                                -----        -----       -----        -----
    Net income (loss)           $(916)    $(15,485)   $(16,371)     $22,786
                                =====     ========    ========      =======
    

    
    Weighted average
     common shares
     outstanding:
    Basic and diluted      77,491,233   77,260,274  62,682,834            -
    

    
    Net income (loss) per
     common share:
    Basic and diluted          $(0.01)      $(0.20)     $(0.26)          $-



    

    
                                 Segment Information
                              (unaudited, in thousands)
    

    
                                        Boise Inc.              Predecessor
                            ---------------------------------   -----------
                             Three         Three      Three
                             Months        Months     Months      January 1
                             Ended         Ended      Ended        Through
                            March 31,   December 31, March 31,    February 21,
                              2009          2008       2008          2008
                              ----          ----       ----          ----
    Segment sales
    Paper                   $351,995      $389,644   $172,203      $253,508
    Packaging                157,132       213,788     59,885       113,485
    Intersegment
     eliminations and
     other                    (8,842)      (12,313)    (4,100)       (7,073)
                              ------       -------     ------        ------
                            $500,285      $591,119   $227,988      $359,920
                            ========      ========   ========      ========
    

    
    Segment income (loss)
    Paper                    $24,776      $(12,303)   $11,849       $20,718
    Packaging                  1,125        26,075    (19,761)        5,685
    Corporate and Other       (5,150)       (5,542)    (2,222)       (3,213)
                              ------        ------     ------        ------
                              20,751         8,230    (10,134)       23,190
                              ------        ------    -------        ------
    

    
    Change in fair value
     of interest rate
     derivatives                (132)         (683)         -             -
    Interest expense         (22,154)      (26,156)   (11,435)           (2)
    Interest income               54            94      1,821           161
                               -----         -----      -----         -----
    Income (loss) before
     income taxes            $(1,481)     $(18,515)  $(19,748)      $23,349
                             =======      ========   ========       =======
    

    
    EBITDA (a)
    Paper                    $46,122        $9,222    $18,969       $21,066
    Packaging                 10,781        36,660    (14,548)        5,738
    Corporate and Other       (4,180)       (4,526)    (1,808)       (3,137)
                              ------        ------     ------        ------
                             $52,723       $41,356     $2,613       $23,667
                             =======       =======     ======       =======



    

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

    
                                                 Boise Inc.
                                      ---------------------------------
                                      March 31, 2009  December 31, 2008
                                      --------------  -----------------
    ASSETS
    

    
    Current
    Cash and cash equivalents              $27,510           $22,518
    Receivables
      Trade, less allowances of $979
       and $961                            183,606           220,204
      Related parties                        2,532             1,796
      Other                                  5,805             4,937
    Inventories                            309,952           335,004
    Deferred income taxes                    8,791             5,318
    Prepaid and other                        7,638             6,289
                                             -----             -----
                                           545,834           596,066
                                           -------           -------
    Property
    Property and equipment, net          1,250,219         1,262,810
    Fiber farms and deposits                14,496            14,651
                                            ------            ------
                                         1,264,715         1,277,461
                                         ---------         ---------
    

    
    Deferred financing costs                69,718            72,570
    Intangible assets, net                  34,425            35,075
    Other assets                             6,454             7,114
                                             -----             -----
    Total assets                        $1,921,146        $1,988,286
                                        ==========        ==========



    

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

    
                                                    Boise Inc.
                                          ---------------------------------
                                          March 31, 2009  December 31, 2008
                                          --------------  -----------------
    LIABILITIES AND STOCKHOLDERS'
     EQUITY
    

    
    Current
    Current portion of long-term debt          $7,479            $25,822
    Income taxes payable                          804                841
    Accounts payable
      Trade                                   157,871            177,157
      Related parties                           1,492              3,107
    Accrued liabilities
      Compensation and benefits                45,248             44,488
      Interest payable                            168                184
      Other                                    21,167             17,402
                                               ------             ------
                                              234,229            269,001
                                              -------            -------
    Debt
    Long-term debt, less current
     portion                                  967,340          1,011,628
    Notes payable                              69,229             66,606
                                               ------             ------
                                            1,036,569          1,078,234
                                            ---------          ---------
    Other
    Deferred income taxes                      15,208              8,907
    Compensation and benefits                 152,177            149,691
    Other long-term liabilities                33,583             33,007
                                               ------             ------
                                              200,968            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;
      79,879,372 shares and 79,716,130
       shares issued and outstanding
    Additional paid-in capital                576,008            575,151
    Accumulated other comprehensive
     loss                                     (85,689)           (85,682)
    Accumulated deficit                       (40,947)           (40,031)
                                              -------            -------
    Total stockholders' equity                449,380            449,446
                                              -------            -------
    

    
    Total liabilities and
     stockholders' equity                  $1,921,146         $1,988,286
                                           ==========         ==========



    

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

    
                                              Boise Inc.         Predecessor
                                          ------------------     -----------
                                           Three     Three
                                           Months    Months        January 1
                                           Ended     Ended          Through
                                          March 31, March 31,     February 21,
                                            2009      2008           2008
                                            ----      ----           ----
    Cash provided by (used for)
     operations
    Net income (loss)                      $(916)   $(16,371)      $22,786
    Items in net income (loss) not
     using (providing) cash
      Depreciation, depletion, and
       amortization
       of deferred financing
       costs and other                    35,030      13,554           477
      Share-based compensation
       expense                               857           -             -
      Related-party interest expense          -          986             -
      Notes payable interest expense       2,623           -             -
      Pension and other
       postretirement benefit
       expense                             2,450       1,237         1,826
      Deferred income taxes                 (844)     (3,377)           11
      Change in fair value of energy
       derivatives                         2,191        (204)          (37)
      Change in fair value of
       interest rate derivatives             132           -             -
      (Gain) loss on sales of
       assets, net                           (20)         (3)         (943)
      Other                                  678         853           (54)
    Decrease (increase) in working
     capital, net of acquisitions
      Receivables                         38,800      23,485       (23,522)
      Inventories                         25,258      (5,158)        5,343
      Prepaid expenses                       256      (7,451)          875
      Accounts payable and accrued
       liabilities                       (19,577)     23,654       (10,718)
    Current and deferred income taxes        (39)      1,806           335
    Pension and other postretirement
     benefit payments                     (1,319)        (47)       (1,826)
    Other                                    128      (1,155)        2,326
                                          ------      ------         -----
      Cash provided by (used for)
       operations                         85,688      31,809        (3,121)
                                          ------      ------        ------
    Cash provided by (used for)
     investment
    Acquisitions of businesses and
     facilities                             (543) (1,219,421)            -
    Cash released from (held in)
     trust, net                                -     403,989             -
    Expenditures for property and
     equipment                           (17,171)    (10,224)      (10,168)
    Sales of assets                           61           -        17,662
    Other                                   (412)      2,410           863
                                           -----       -----         -----
      Cash provided by (used for)
       investment                        (18,065)   (823,246)        8,357
                                         -------    --------         -----
    Cash provided by (used for)
     financing
    Issuances of long-term debt           10,000   1,065,700             -
    Payments of long-term debt           (72,631)    (35,000)            -
    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                         (62,631)    816,212        (5,237)
                                         -------     -------        ------
    Increase (decrease) in cash and
     cash equivalents                      4,992      24,775            (1)
    Balance at beginning of the period    22,518         186             8
                                          ------      ------        ------
    Balance at end of the period         $27,510     $24,961            $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 10-K and the
Company's Quarterly Report on Form 10-Q for the period ended March 31, 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 three months ended March 31, 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 March 31, 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 March 31, 2009 and 2008, the three months ended December 31, 2008, and
the Predecessor period of January 1 through February 21, 2008 (unaudited, in
thousands):


    
                                           Boise Inc.             Predecessor
                              ----------------------------------- -----------
                               Three         Three       Three
                               Months        Months      Months    January 1
                               Ended         Ended       Ended      Through
                              March 31,   December 31,  March 31, February 21,
                                2009          2008        2008        2008
                                ----          ----        ----        ----
    

    
    Net income (loss)           $(916)     $(15,485)   $(16,371)    $22,786
    Change in fair value
     of interest rate
     derivatives                  132           683           -           -
    Interest expense           22,154        26,156      11,435           2
    Interest income               (54)          (94)     (1,821)       (161)
    Income tax provision
     (benefit)                   (565)       (3,030)     (3,377)        563
    Depreciation,
     amortization,
     and depletion             31,972        33,126      12,747         477
                               ------        ------      ------      ------
    EBITDA                    $52,723       $41,356      $2,613     $23,667
                              =======       =======      ======     =======



    
    The following table reconciles EBITDA to EBITDA excluding special items
for Boise Inc. for the three months ended March 31, 2009 and 2008, and the
three months ended December 31, 2008.  The table also reconciles the
Predecessor period of January 1 through February 21, 2008, and the combined
three months ended March 31, 2008 (unaudited, in thousands):


    
                                 Boise Inc.            Predecessor   Combined
                       ------------------------------- -----------   --------
                        Three       Three      Three                   Three
                        Months      Months     Months    January 1     Months
                        Ended       Ended      Ended      Through      Ended
                       March 31, December 31, March 31, February 21, March 31,
                         2009        2008       2008        2008        2008
                         ----        ----       ----        ----        ----
    

    
    EBITDA             $52,723     $41,356     $2,613    $23,667      $26,280
    St. Helens
     mill
     restructuring (a)   3,648      37,568          -          -            -
    Impact of
     energy hedges       2,191         (26)      (204)       (37)        (241)
    Gain on
     changes in
     supplemental
     pension plans           -      (2,914)         -          -            -
    Inventory
     purchase
     accounting
     expense                 -           -      6,555          -        6,555
    Impact of
     DeRidder
     outage                  -           -     19,776        732       20,508
                        ------      ------     ------     ------       ------
    EBITDA
     excluding
     special
     items             $58,562     $75,984    $28,740    $24,362      $53,102
                       =======     =======    =======    =======      =======



    
    (a) In November 2008, we announced the restructuring of our St. Helens,
Oregon, paper mill.  During the three months ended March 31, 2009, we recorded
$3.6 million of restructuring charges in "St. Helens mill restructuring."  Of
the $37.6 million restructuring charge recorded during the three months ended
December 31, 2008, $29.8 million is included in "St. Helens mill
restructuring" and $7.8 million related to inventory write-downs is included
in "Materials, labor, and other operating expenses."

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



    

    
                                                      Boise Inc.
                                          -----------------------------------
                                          March 31,   December 31,  March 31,
                                            2009          2008        2008
                                            ----          ----        ----
    

    
    Current portion of long-term debt      $7,479       $25,822     $11,000
    Long-term debt, less current
     portion                              967,340     1,011,628   1,019,700
    Notes payable                          69,229        66,606      58,793
                                           ------        ------      ------
    Total debt                          1,044,048     1,104,056   1,089,493
    Less cash and cash equivalents        (27,510)      (22,518)    (24,961)
                                          -------       -------     -------
    Net debt                            1,016,538     1,081,538   1,064,532
    Less notes payable                    (69,229)      (66,606)    (58,793)
    Other                                   1,729             -           -
                                           ------        ------      ------
    Net covenant debt                    $949,038    $1,014,932  $1,005,739
                                         ========    ==========  ==========




    




For further information:

For further information: Media, Virginia Aulin, +1-208-384-7837, or
Investors, Jason Bowman, +1-208-384-7456, both of Boise Inc. Web Site:
http://www.BoiseInc.com

Organization Profile

BOISE INC.

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